Etsy 1st Quarter Results

Investment Analysis Clubs Saul’s Investing Discussions
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-Looks like another blowout earnings report by Etsy. Revenue was up 142%, GMS up 132%, Habitual buyers up 205%, despite the reopening. However, guidance was very weak and the stock is down 9% after hours. Revenue is predicted to rise only 15-25% as the tough Covid comps come in to play.

• Consolidated revenue was $550.6 million, up 141.5% versus the same period of 2020, with a take rate (i.e., Consolidated revenue divided by Consolidated GMS) of 17.5%.Consolidated GMS was $3.1 billion, up 132.3% year-over-year; while Etsy marketplace GMS was $2.9 billion, up 144.1% year-over-year.

? GMS per active buyer for the Etsy marketplace on a trailing twelve month basis grew 20% year-over-year.

? The Etsy marketplace acquired approximately 16.3 million new and reactivated buyers who haven’t purchased in a year or more.

?Habitual buyers, those with 6 or more purchase days and $200 or more in spend in the trailing twelve months, grew 205% year-over year, our highest ever growth for this buyer segment.

? GMS from paid channels was 21% of overall GMS, expanding 500 basis points compared to the first quarter of 2020.

• Net income was $143.8 million, up 1,048.1% year-over-year, with diluted earnings per share of $1.00.

• Non-GAAP Adjusted EBITDA was $184.1 million, with Non-GAAP Adjusted EBITDA margin (i.e., Non-GAAP Adjusted EBITDA divided by
Consolidated revenue) of 33%, up 900 basis points compared to the first quarter of 2020.

• We ended the first quarter with $1.7 billion in cash, cash equivalents, and short-term investments

Q2 Guidance:

GMS Year-Over-Year Growth 5% - 15%
GMS ~$2.8B - $3.1B
Revenue Year-Over-Year Growth 15% - 25%
Revenue ~$493M - $536M
Adjusted EBITDA Margin* 25% - 28%
Adjusted EBITDA ~$129M - $144M

Silverman noted “We currently expect Q2 2021 GMS to decelerate along with the rest of e-commerce as we lap the tremendous 2020 growth rates. That said, we’ll keep the pedal to the metal in 2021 to continue to improve our customer experiences, make Etsy top-of-mind for the millions of buyers who have found Etsy for the first time or are relying on us now more than ever, and further invest in our very large market opportunity.”

Press Release:

https://s22.q4cdn.com/941741262/files/doc_financials/2021/q1…

Presentation:

https://s22.q4cdn.com/941741262/files/doc_financials/2021/q1…

Webcast:

https://investors.etsy.com/home/default.aspx

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I did not like the guidance. If ETSY is returning to growth in 20s or so, there is no place for it in our portfolios… I sold out full position.

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Considering I was probably the biggest Etsy supporter here, I feel it is necessary to state my position. After reviewing their Q1 results and guidance, I have decided to exit my entire position.

Although their Q1 results were stellar (+142% revenue), blowing away my expectations, their Q2 guidance left me scratching my head. I knew going up against Q2 of last year would be a challenge due to the impact that masks had on their business. My investment thesis was that they would still have a sequential revenue increase, but it would slow down to the 35% to 40% growth range. Instead, they guided for revenue to be less than the quarter that was just completed(!?!), putting them in the 15% - 25% range. Although I felt their valuation would would still be low at the 35% - 40% range, it is no longer attractive with revenue decreasing so much. Because of this, I am out.

For the newer investors out there, these things sometimes happen. In fact, this isn’t the first time that my largest position did not perform up to my expectations. Last year I held Alteryx as my #1 and it was my worst performer.

I will sit on my cash for at least today as I wait to see what Fulgent Genetics and Square have to say at their earnings report today. I’ll also be watching some of the companies on my watchlist.

15 Likes
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Etsy was my #4 position and I had high conviction going into earnings. I felt that the growth of habitual buyers, the traffic, moat, continued lockdowns in many parts of the world, etc would drive growth at a decent pace. I expected to see growth guidance somewhere north of 30%+, even with the tough Covid comps. Guidance was a disaster. I sold out my entire position and am looking to add to others, such as Bandwidth or others that have excellent earnings reports.

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