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Etsy, Inc. ETSY delivered second-quarter 2021 earnings of 68 cents per share, which surpassed the Zacks Consensus Estimate by 15.2%. However, the bottom line was down 9.4% from the year-ago quarter and 32% from the prior quarter.
Revenues advanced 23.4% year over yearbut declined 3.9% sequentially to $528.9 million. Notably, the figure missed the Zacks Consensus Estimate of $531.5 million.
Year-over-year top-line growth was driven by accelerating Marketplace and Services revenues. Solid momentum across both buyers and sellers contributed well. Strengthening gross merchandise sales (“GMS”) were other tailwinds.
The company remains optimistic about its acquisitions of Reverb, Depop, and Elo7. Its growing investments across marketing channels remain positives. Advancing search algorithms, robust Etsy Ads and the integration with Etsy Payments are other positives.
Top Line in Detail
Marketplace revenues were $395.5 million (74.8% of total revenues), which went up 19.1% from the year-ago quarter. This was driven by strong momentum across buyers. The company witnessed the addition of 11.9 million new and reactivated buyers on its Marketplace platform in the reported quarter. Strong traction across habitual and repeat buyers, which grew 115% and 61%, respectively, contributed well.
Services revenues were $133.4 million (25.2% of total revenues), which rose38% on a year-over-year basis. Solid momentum across sellers, owing to the robust Etsy Ads program, remained a major positive.
Quarter in Detail
Etsy’s active buyer base grew 50.1% from the prior-year quarter to 90.5 million. The active seller base stood at 5.2 million, which was up 66.7% year over year.
Notably, GMS of the company was $3.04 billion, which rose 13.1% year over year.
The ETSY marketplace’s GMS was at $2.8 billion, up 14.2% from the prior-year quarter.
However, GMS from paid channels, which accounted for 19% of total GMS, contracted200 basis points (bps) year over year.
In second-quarter 2021, gross margin was 71.8%, which contracted 220 bps year over year.
Further, total operating expenses were $290.8 million, reflecting an increase of 46.7% year over year. However, the figure, as a percentage of revenues, expanded 870 bps from the year-ago quarter to 54.9% in the reported quarter.
Per the company, operating margin was 16.8%, contracting from 27.8% in the year-ago quarter.
Balance Sheet & Cash Flows
As of Jun 30, 2021, cash and cash equivalents totaled $2.05 billion, which increased from $1.16 billion as of Mar 31, 2021. Short-term investments were $430.7 million, down from $502.6 million in the previous quarter.
Long-term debt stood at $2.3 billion at the end of the second quarter, up from $1.3 billion at the end of the previous quarter.
The company generated $121.7 million in cash from operations inthe reported quarter compared with $148.5 million in the prior quarter.
Free cash flow in the reported quarter stood at $116.4 million compared with $144.7 million in the last quarter
For third-quarter 2021, it anticipates total revenues between $500 million and $525 million, suggesting year-over-year growth of 13.5% at the mid-point. The Zacks Consensus Estimate for the same is pegged at $534.03 million.
Further, GMS is expected to be $2.9-$3 billion, indicating growth of 12.5% at the mid-point from the year-ago quarter’s reported figure.
Adjusted EBITDA margin is expected to be 25%, including the impacts of the Depop and Elo7 buyouts.
Zacks Rank & Stocks to Consider
Currently, Etsy has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Carrier Global CARR, Ametek AME and Agilent Technologies A. All companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rates for Carrier, Ametek and Agilent are currently projected at 14.5%, 10.18% and 13%, respectively.
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