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Etsy (ETSY) Q3 Earnings Beat Estimates, Revenues Rise Y/Y

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·4 min read
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Etsy, Inc. ETSY delivered third-quarter 2021 earnings of 62 cents per share, which surpassed the Zacks Consensus Estimate by 24%. However, the bottom line was down 11.4% from the year-ago quarter.

Revenues advanced 17.9% year over year to $532.4 million. Notably, the figure beat the Zacks Consensus Estimate of $518.5 million.

Year-over-year revenue 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.

Etsy, Inc. Price, Consensus and EPS Surprise

Etsy, Inc. Price, Consensus and EPS Surprise
Etsy, Inc. Price, Consensus and EPS Surprise

Etsy, Inc. price-consensus-eps-surprise-chart | Etsy, Inc. Quote

Top Line in Detail

Marketplace revenues were $395.5 million (74.3% of total revenues), up 15.8% from the year-ago quarter. This was driven by solid momentum across buyers. The company witnessed the addition of 11.1 million new and reactivated buyers on its Marketplace platform in the reported quarter, out of which 7 million were new ones. Strong traction across habitual and repeat buyers, which grew 65% and 35%, respectively, contributed well.

Services revenues were $136.9 million (25.7% of total revenues), which rose 24.6% 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 37.8% from the prior-year quarter to 95.9 million. The active seller base stood at 7.5 million, which was up 102.7% year over year.

Notably, GMS of the company was $3.11 billion, which rose 17.9% year over year.

The ETSY marketplace’s GMS was at $2.7 billion, up 12.4% from the prior-year quarter.

However, GMS from paid channels, which accounted for 17% of total GMS, contracted 200 basis points (bps) year over year.

Operating Details

In third-quarter 2021, the gross margin was 71.1%, which contracted 230 bps year over year.

Total operating expenses were $295.03 million, reflecting a year-over-year increase of 38.4%. However, the figure, as a percentage of revenues, expanded 820 bps from the year-ago quarter to 55.4% in the reported quarter.

The operating margin was 15.7%, contracting from 26.2% in the year-ago quarter.

Balance Sheet & Cash Flows

As of Sep 30, 2021, cash and cash equivalents totaled $619.4 million, which decreased from $2.05 billion as of Jun 30, 2021. Short-term investments were $197.4 million, down from $430.7 million in the previous quarter.

Long-term debt stood at $2.274 billion at the end of the third quarter, up from $2.273 billion at the end of the previous quarter.

The company generated $90.9 million in cash from operations in the reported quarter compared with $121.7 million in the prior quarter.

Free cash flow in the reported quarter stood at $82.7 million compared with $116.4 million in the last reported quarter.

Guidance

For fourth-quarter 2021, it anticipates total revenues between $660 million and $690 million, suggesting year-over-year growth of 10% at the mid-point. The Zacks Consensus Estimate for the same is pegged at $676.15 million.

GMS is expected to be $3.9-$4.1 billion, indicating growth of 12% at the mid-point from the year-ago quarter’s reported figure.

The adjusted EBITDA margin is expected to be 26%.

Zacks Rank & Other Stocks to Consider

Etsy currently carries a Zacks Rank #2 (Buy).

Other similar-ranked stocks in the broader technology sector include Advanced Micro Devices AMD, PerkinElmer PKI and Mimecast Limited MIME. While Advanced Micro Devices sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Mimecast carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Advanced Micro Devices, PerkinElmer, and Mimecast are currently projected at 46.2%, 41.7%, and 35%, respectively.


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