Etsy Q1 profit soars 144%, beats estimates

Etsy (NASDAQ: ETSY) reported a 144% jump in earnings for the first quarter of 2019 helped by the marketing recalibration, which temporarily paused certain of its marketing investments. The results exceeded analysts’ expectations. The company tightened its revenue outlook for the full year 2019.

Net income soared by 144% to $31.58 million and earnings surged by 140% to $0.24 per share. The company temporarily paused some of its marketing investments in order to closely test incrementality of its less mature channels and refine attribution models. Profitability in the quarter was especially high because of this marketing recalibration.

Total revenues grew by 40.1% year-over-year to $169.3 million helped by growth in both Marketplace and Services revenue. Gross merchandise sales increased by 18.9% to $1.02 billion.

Looking ahead into the full year 2019, the company narrowed its revenue outlook to the range of $785 million to $797 million from the prior range of $779 million to $797 million, and its revenue growth estimate to the range of 30% to 32% from the previous range of 29% to 32%.

Gross merchandise sales are now anticipated to rise 18% to 21% to the range of $4.6 billion to $4.8 billion, compared to the previous forecast to rise 17% to 20% to the range of $4.6 billion to $4.7 billion. Adjusted EBITDA is now predicted to increase by 23% to 25% to the range of $182 million to $198 million for the full year 2019.

During the first quarter, the product experiment velocity increased to an all-time high as its initiatives focused on search relevance, listing quality and landing page experience. This collectively improved customer experience and fueled gross merchandise sales (GMS) growth.

Also read: Office Depot Q1 earnings report

GMS per active buyer on a trailing 12-month basis was up nearly 2% and has generated growth of nearly 2% or higher for the past three consecutive quarters, which the company believes demonstrates continued progress in improving frequency.

International GMS was 38% of overall GMS and increased 33% year-over-year on a currency-neutral basis, Etsy’s highest international GMS growth since the beginning of 2015. The growth was driven by GMS between US buyers and international sellers and by its fastest growing international trade route, international domestic, which is GMS generated between a non-US buyer and a non-US seller both in the same country.

Active buyers grew 18.3% year-over-year in the first quarter, despite the company’s reduction in marketing spend across certain channels, and active sellers grew 13% year-over-year. GMS from paid channels was 15% of overall GMS, flat compared to last year and contracting 500 bps compared to the fourth quarter of 2018, due to its reduction in marketing spend across certain channels.

Shares of Etsy ended Wednesday’s regular session up 1.66% at $68.08 on the Nasdaq. The stock has risen over 116% in the past year and over 28% in the past three months.

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