Etsy just released its financial results for 2019's third quarter (July to September) - here are the highlights:

  • marketplace sales up 30.1% to $1.2 billion - but note that these sales include sales on Reverb, the site they bought earlier this year. Reverb's GMS was $76.9 million.
  • Etsy's revenue was up 31.6%, to almost $198 million
  • gross profit was up 24.7% to $129.0 million
  • Etsy's net income was $14.8 million 
  • revenue from the marketplaces was nearly $141 million, versus revenue from seller services which was only $56 million.
  • active buyers and active sellers on Etsy increased 19.1% and 19.3% year-over-year, respectively. This is the first time in a few years that sellers increased at a faster rate than buyers, but note that there were still way more buyers added this quarter than sellers. 
  • active sellers for the whole company are up to 2.5 million (remember, that counts anyone who has listed anything in the past 12 months), while active buyers (anyone who bought in the past 12 months) are at 44.8 million. 
  • 59% of sales happened on mobile devices. 
  • "As of the end of the third quarter, 62% of items on the Etsy marketplace offered free shipping to U.S. buyers and 74% of U.S. listing views were eligible to ship for free."
  • they say they are continuing to optimize Etsy Ads, and "have seen negligible budget churn from sellers"
  • the amount spent by each active buyer in the past 12 months grew for the sixth quarter
  • Etsy's gross margin was down a bit, due to the purchase of Reverb, Etsy Payments fees and the introduction of Etsy Ads (I expect they will give more detail during the call)
  • they spent $50 million on marketing this quarter, up from $39 million last year

 

Press release here: https://investors.etsy.com/press-releases/press-release-details/2019/Etsy-Inc-Reports-Third-Quarter-2019-Financial-Results/default.aspx

and here are the slides that go with the presentation: https://s22.q4cdn.com/941741262/files/doc_financials/2019/q3/Etsy-3Q-2019-Earnings-Presentation.pdf (I haven't looked at them yet)

 

The stock is down because Etsy lowered its guidance: https://www.marketwatch.com/story/etsy-stock-down-10-after-company-lowers-guidance-2019-10-30  although I am seeing the usual rise, then drop, then rise happening: https://www.google.com/search?q=Etsy+stock&pws=0&gl=us&gws_rd=cr  As always, it will take a while for everyone to digest the full report and call. 

 

The investor phone call starts at 5 pm ET; I will try to listen in & post highlights afterwards. A transcript of that call will eventually be posted here: https://seekingalpha.com/symbol/ETSY?news=transcripts  and usually elsewhere, within the next 48 hours. 

 

I will mark any key updates as "solutions" so the posts will be highlighted, and will add to this OP in the next hour for as long as I can edit it. 

 

My previous threads on quarterly results, for comparison:

2nd Q 2019

1st Q 2019

4th Q 2018

3rd Q 2018

2nd Q 2018

1st Q 2018

4th Q 2017

3rd Q 2017

KLeighVintage
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Big news in November? That possible announcement and or change, has me feeling nervous. 

 

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BLaudineEminence
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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I just checked out slide #20 ... so they're expecting etsy sellers to DOUBLE the money they're spending on etsy ads? Lol that's pretty hopeful.

I think most people will keep the ads running for the Christmas shopping season. In the new year they'll be making decisions on whether those ads were financially worthwhile.

And then there's tax return season ... when sellers crunch all the numbers and finally see exactly what income they were actually getting from their shops. 

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DaysofYoreTreasures
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@BLaudineEminence 

In the transcript Rachel Glaser said "So part of the job is on us to demonstrate to them that they are leaving money on the table by not spending more."
If they haven't experienced a churn on ad budgets I guess that does mean they have taken the percentage of budgets that were unspent with PLs from the table already, and are now looking for more.

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MinxouriVintage
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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They have the ability to make it so you don’t sell if you don’t advertise.  

They already admitted they were willing to put less relevant lower converting listings on page 1 lowering overall site and conversion and profits for them.  

If theyre willing to penalize relevant listings from people who don’t do free shipping who’s to say they won’t penalize people who don’t use ads and place ALL listings paid and unpaid from shops who don’t do ads at the back of search?  

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OneHeartBeadSupply
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@MinxouriVintage 

I haven't offered the FSG and I do not use Etsy Ads and I've been invisible since Sept 1, so I guess whatever tools Etsy uses at this point to manipulate and threaten me into buying ads won't make much difference. I'm a very small shop and simply can't afford to do either one and never had to in the past.

These are different times and I'm not sure whether I can or will keep my shop open in 2020. (Million dollar question!!) I feel sad just thinking about it. I've been here 10 years (both of my two shops) and just can't imagine a future without Etsy.

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DaysofYoreTreasures
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@cindylouwho2 

May I please ask what "rollers" means? Both Josh and Rachel used the term when talking about the Etsy Ads eg
"We're making progress improving the Rollers and Google Shopping to match the levels of Promoted Listings"

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cindylouwho2
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@DaysofYoreTreasures  without context, I can't say for sure, but that looks like a typo/mishear for ROAS - return on ad spend. 

There are always lots of typos in the transcripts. 

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DaysofYoreTreasures
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@cindylouwho2 

Ah, yes, ROAS makes perfect sense, thank you!

Here's another quote where ROAS would be appropriate
As Rollers improves, we will expand to the second phase, which is to help sellers grow their budgets with positive returns.

(unless it's the Rockers & the Rollers :)

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Gokojo
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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I was thrown off by that as well. I'm usually pretty good at translating corporate jargon but I was lost on rollers. I THINK, rollers means new sellers finding success adopting the new FSG and EA. My brain is fried though (I'm on the questions portion now), can you tell me what page that rollers segment was on? 

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DaysofYoreTreasures
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@Gokojo 

Cindy thinks it should be ROAS, which makes sense. I think it was about page 5 but I didn't mark it. I ended up expanding it to a single page and using browser search for roller.

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Reasonabledreams
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@cindylouwho2   thanks for the  complete rundown on Etsy earnings quarter

as I expected, they are showing an increase in buyers, sellers, gross sales.  without really telling us what's going on within the site.  As I've said, increase in sales from FS- is bec as a seller, we, I am forced to add FS where reasonable (absorbed in my price if flat fee) bec without reasonable visibility, I cannot sell.  they spent 50 million on advertising- I can't say I approve of their campaign focus.  It should be- a place for the unique, hard to find, original art, working artists and artisans.  I am aware that it cost to manage the software and bandwidth for a big site. Even with FS- if it's a big category, I still can't find my items often.   I don't get enough direct to my shop buyers.

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Gokojo
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Going to post a few smaller things here that are my opinions on what was said in the transcript:

Quote: Since our buy on Etsy app is the method with which our most loyal buyers shop on Etsy we see investments here as a way to deepen the connection between buyers and sellers. 2019 has been a big year for improving the app, continuing to create a more rewarding and engaging experience tailored to our best buyers. This explains the update to the re-designed conversation interface. If people are using their phones, it makes sense that you message in a more texting, phone friendly way. Though I hate that there's still no line break when using it. 

 

On Etsy Ads: Last quarter the conversation was around sellers having a larger budget than Etsy could spend. Now with Etsy Ads, the conversation is that sellers budgets are too low and Etsy is going to work on ways to help guide us to increase our ad spend? My opinion, Etsy is in the weeds right now with ads. Investor questions start on page 8 of the transcript that Cindy linked. Worth noting here that the first question expressed concerns of seller sentiment towards Etsy Ads. There's a lot of info in Josh's response that's too long to quote here but definitely worth reading. It does seem that Etsy is hoping we'll pick up the Google Ad portion of their expenses so they can focus on TV ads. Given many of us for years have been begging for more mainstream advertising, this may be the cost to us for Etsy to do such things. 

 

Sales tax is proving to be an issue for Etsy and it make sense. The time and resources needed to be spent collecting and remitting tax for 30+ states is no joke. Not to mention the hoops they need to jump through to now carry a business license in every state that's collecting sales tax from Etsy sales. 

 

Last one for tonight: A lot of talk about habitual buyers. Of all the transcripts I've read from past quarters, I've never heard Josh come back to this group as much as he did this time around. I think a lot of user interface changes will be focusing on retaining buyers and doing what's necessary to keep them coming back. This makes sense as so many of Etsy's changes over the last few years have been similar to what Amazon does. As we all know, Amazon KILLS in buyer retention so I don't think it would be a surprise if Etsy becomes super focused on keeping buyers on this platform and making it a major priority. I've seen a lot of things looking more like Amazon Handmade here and won't be surprised if they copy more in 2020.

 

I'm sure Cindy will give a much better, in depth (and far better spellchecked) breakdown of the larger topics so a huge thank you!!! to @cindylouwho2. All the research, testing and compiling you do has got to be a full time job alone. 

 

 

 

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cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@Gokojo   thanks for this! I don't do completely in-depth summaries, because I just do not have the time to write from scratch, & the transcripts technically have copyright so you can't quote too much at once. I really appreciate you highlighting things you thought were important! 

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GielDesigns
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@cindylouwho2 

Quite an interesting read. Thanks for the info, Cindy. :-)

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Bookity
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Thanks so much for this, Cindy! I really appreciate the time you put into translating it for us :)

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TwiLdCapitHog
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Thank you so much for all the work you do Cindy, truly appreciated.

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ArtistiKat
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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Yes, thanks so much Cindy for all the work you've done on this.

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Kitschosaurus
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@cindylouwho2 

Thanks Cindy Lou, your time on this is much appreciated.

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MemoryLnAntiques
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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How does this statement from your earlier post make sense than?

"active buyers and active sellers on Etsy increased 19.1% and 19.3% year-over-year, respectively. This is the first time in a few years that sellers increased at a faster rate than buyers, but note that there were still way more buyers added this quarter than sellers."

Sounds like double talk

I have no doubt you a far more informed that any of us here, but I still feel that mentioning things in their third quarter report, about free shipping and ads, that could not have a huge affect on the third quarter, but yet your lead to believe it has actually made the third quarter as profitable as it was.

If they are already guiding down, which is why you feel the stock tanked, (and is still down this morning) than if they were doing so great with these new changes you would think they would continue to grow more as they also state that 19% more sellers have joined and I'm sure even more will continue to join.  Did they mention how many left or are inactive? I just feel company's skew things or just leave things out that make earnings look better. I will wait for 4th quarter results as that will be a much better quarter to judge the new changes. Thank you for the in depth report for earnings greatly appreciated.

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BloomingOak
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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There are always more buyers than sellers. One is noting percentages and one is whole numbers. The statement makes sense.

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Gokojo
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@BloomingOak  is correct. There were approximately 44,000,000 buyers and 2,500,000 sellers. The part you have in bold is simply saying that the increase on a percentage level of new sellers was higher this quarter than the increase of buyers.

If you check out the transcript, it looks like a big reason for them lowering the guidance is A: they grossly underestimated how many sellers absorbed shipping costs versus adding it to the item price and B: dealing with all the new sales tax laws. Sales were still up but they're facing more "headwinds" than expected so their lowering their expectations for Q4 while they figure out these issues. 

You're not wrong that companies will skew things to look better however that's why it's so important to read the transcripts. Investors are going to ask questions to dig deeper into any issues they think is there. The person who asked the first question CLEARLY was well aware that seller sentiment is pretty low on the new Etsy Ads. 

 

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cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@MemoryLnAntiques   I am sorry that the percentages are so confusing for you! Etsy did not pick up 19% more sellers overall. They gained 19% more sellers in the 3rd quarter 2019 than they did in the 3rd quarter 2018. Buyers also went up about the same percentage, but since they pick up way more buyers than sellers all the time, the raw totals are much higher for buyers than sellers. They are talking about the rate of increase, not the raw numbers. 

The number of buyers & sellers that did not continue is already included in that total. So for example if they had 150 new sellers & 50 old ones left, that would be 100 new sellers in total - the latter is the number they are using. 

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EventsEclectic
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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"Their next push will be getting more sellers to use ads; they have identified a group of small to medium sized sellers who they feel will benefit. This will be a slow push over 2020 and beyond." 

So they've already chosen a select group they'll be pushing this on, so not only if you don't offer free shipping but if you also don't use ads then you aren't going to get any good exposure in search?

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PUREWHITEDECO
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@EventsEclectic REALLY TİRED ! THEY WANT THİS THEY WANT THAT. THERE ARE NO ENDİNG

So they've already chosen a select group they'll be pushing this on, so not only if you don't offer free shipping but if you also don't use ads then you aren't going to get any good exposure in search?

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cindylouwho2
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Re: Etsy 3rd Quarter 2019 Financial Results: Sales Up 30.1% YOY to $1.2 billion

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@EventsEclectic  they expressly stated that they have many ways to incentivise sellers to make changes. Search ranking was one they used with free shipping, but they even stated that could change in the future. I wouldn't assume they will automatically use search to push ads on people. 

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