Etsy Q4 profit dips 8% but beats estimates

Etsy (ETSY) reported a 7.8% decline in earnings for the fourth quarter due to higher operating expenses. However, the results exceeded analysts’ expectations. In addition, the digital craft marketplace firm guided full-year revenue above the consensus estimates. Following this, the stock inched up over 10% in the after-market session.

Net income dropped by 7.8% to $41.3 million and earnings fell by 11.1% to $0.32 per share. The results were hurt by digital marketing spend focused on driving gross merchandise sales growth, and additional expense in connection with certain employee departures, including stock-based compensation expense, impacting product development.

Total revenue jumped by 46.8% year-over-year to $200 million driven by growth in both Marketplace and Services revenue. Gross merchandise sales increased by 22.3% year-over-year to $1.25 billion.

Looking ahead into the full year 2019, the company expects revenue to grow 29% to 32% to the range of $779 million to $797 million and adjusted EBITDA margin to rise by 23% to 25% to the range of $181 million to $197 million. Gross merchandise sales are anticipated to increase by 17% to 20% to the range of $4.6 billion to $4.7 billion.

In the fourth quarter, the company delivered a strong holiday shopping period. In particular, gross merchandise sales (GMS) from Thanksgiving through Cyber Monday was up 30% compared to last year, on product launches, marketing, and improved landing page experiences. Etsy also improved the browsing experience by utilizing discovery badges that guide buyers throughout the marketplace and through the Etsy Gift Finder for finding unique items based on personalized inputs.

International GMS increased 32% on a currency-neutral basis, helped by GMS between U.S. buyers and international sellers and by its international domestic trade route. During the holiday shopping period, nearly 80% of items were available to ship domestically at competitive prices, and 33% of those items were available to ship for free.

Active buyers grew 18.2% year-over-year in the fourth quarter, and trailing twelve-month GMS per active buyer accelerated for the fifth consecutive quarter. Active sellers grew 9.4% year-over-year.

“By making Etsy a great destination for holiday shopping, we delivered strong fourth quarter results to end an excellent year… We kept our focus on improving search and discovery, building trust in the marketplace, expanding our marketing channels, and investing in services that fuel our sellers’ success,” Chief Executive Josh Silverman said.

Shares of Etsy ended Monday’s regular session up 4.13% at $59.01 on the Nasdaq. The stock has risen over 180% in the past year and over 30% in the past three months. The stock is likely to reach a new all-time high on Tuesday from the current high of $60.58.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions