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

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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What annoys me most may be is they’re playing dumb about sellers not including the shipping cost.  We’re so surprised they didn’t just add it all on!  All we need to do is educate them a bit more. 

Etsy themselves converted all of our listings MONTH ONE this new ceo came on to display shipping included prices.

The results of the test were so catastrophic and slowed down sales so much, they stopped the test after 5 days.

Then they’re going to act dumb like sellers could just be adding on the shipping costs in every instance and we just need more education. 

 

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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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If they’re really going to increase ad revenue by 50%, then the next step is to penalize the listings (paid and unpaid) of all shops that aren’t spending enough on ads in search.   

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

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EcommerceBytes also, has the report, with a forum of comments. Glaser likes to say  the 'search' is made up of a cocktail of ingredients, nothing specific, as to whether anything is found!  As if we need more catch phrases as opposed to cold hard facts! !  Etsy did admit that the free shipping being shown in the first pages hurt conversion rates!

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

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Wow.  Etsy is getting pretty beat up in those comments.

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

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The comments forum is like a lot of news outlet comment forums - most of them the same old hacks that constantly complain, mixed with a few individuals who only post periodically or who actually have something constructive to say. They beat everyone up.

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

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Subtract sales from Reverb and you get a 20% increase in marketplace sales on Etsy, not 30%.  Meanwhile, the number of Etsy sellers increased 19%.

A near-zero increase in sales per seller is unsustainable.

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EnergyisMagic
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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 Cindy!

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CustomPortraitArt
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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 did free shipping for my portraits shop and it didn't help me any.  I get very few relevant clicks via regular search since my portraits aren't shown in the first pages with search terms actual buyers use.  Instead, I get things that have nothing to do with what I sell.  While it's nice to get those "accidental" views, they have a very low conversion rate.  

I get about one search view a day for the terms that have brought me buyers for 16 years.  Via regular search. 

With the ads, I get lots of them but they are so expensive!  30- 40 cents a click!  This seems to be intentional.  I've always paid for ads since they started, they know I'm open to advertising, so they put me to the back of the pack UNLESS I pay up.

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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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Thank you everyone! 

I will go over the transcript one last time & post another summary in a few hours, but in the meantime, a few helpful folks have posted some other interesting snippets from the call: https://community.etsy.com/t5/Pricing-and-Finance/Etsy-3rd-Quarter-2019-Financial-Results-Sales-Up-3...
https://community.etsy.com/t5/Pricing-and-Finance/Etsy-3rd-Quarter-2019-Financial-Results-Sales-Up-3...

Here is a public (no login required) version of the transcript: https://www.fool.com/earnings/call-transcripts/2019/10/31/etsy-inc-etsy-q3-2019-earnings-call-transc...

For those who missed it, there is a post here: https://community.etsy.com/t5/Pricing-and-Finance/Etsy-3rd-Quarter-2019-Financial-Results-Sales-Up-3... on what the search algorithm change was (I will discuss that more in my final summary)

 

As others have noted, the stock dropped a lot & is currently down 15%, but seems to be stabilizing at the moment. It's been on a downward slide for a while, so this isn't a surprise. It's not easy to predict what will happen next, and that might be at least partly determined by the expected big swings in the stock market. 

 

Here is some of the news coverage:

https://www.retaildive.com/news/etsy-margins-take-a-hit-amid-solid-revenue-growth/566315/  (probably the best short summary of why the guidance was adjusted downward and the stock tanked)

https://www.crainsnewyork.com/markets/etsys-stock-sinks-merchants-balk-free-shipping (blames free shipping entirely, which will make some of you happy 😉. Also notes that "the retailer reported $78 million in net income last year, and its $5 billion market value is larger than Macy's.")

https://www.barrons.com/articles/etsy-stock-solid-earnings-report-51572475088

https://www.schaeffersresearch.com/content/news/2019/10/31/analysts-bash-etsy-with-post-earnings-bea... (explains that some market analysts have changed their recommendations on Etsy)

 

I'll be back later with a final run through the transcript! 

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

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Impressive report ! Thanks. Glad someone is making big money! I'm certainly not.

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ModernSwitch
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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'm downright confused by some of the stuff they are saying. They blame that Free Shipping has skewed conversion rates on search...but if Free Shipping is only for page 1 of search results, wouldn't that mean that page 2 should then be showing most relevant listings? Are they insinuating that Etsy buyers are too dumb to figure out how to get to page 2 of search results to find the things they really want? 

Or does that mean search really is broken and everything that is 'free shipping' on pages 2+ shouldn't actually be there but gets there because they can't figure out how to code a decent search algorithm ?

I guess the best way to fix a broken search is just make sure to raise the rate of 60% off sellers offering free shipping to 100% because then if everyone is 100% free shipping the search algorithm can go back to being not broken? Right? Easy fix!

And honestly what exactly is the 'conversion rate' they are speaking of. Is it number of people buying off first page? Number of buying off 2nd page? Number of sales all toegether? Are we averaging the conversion rate on a daily basis? Hourly basis? Monthly Basis? Smoke and mirrors. They can't give out too much information because more people will put puzzle pieces together and realize just how broken things really are. 

Also 500 tests running at any given time is so absurd! How do you not know if one test is ruining the metrics of another test? 

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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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@ModernSwitch  they've previously stated that over 80% of sales from search come from the first page. Since all but the smallest searches now have a first page of free shipping in the US, it does make sense that conversions would go down a bit. (Conversion rate from search is the number of sales vs. clicks on a listing. Conversion rate in your shop for Etsy Stats purposes means the number of sales vs. visits.)

Not 500 tests running at once; 500 in a month. Some tests are very short & others run longer. It's not difficult to do a statistical analysis separating out different effects on a site this big, with the computing power they have. Remember, not all tests are going to interact (although some obviously will). One test could be on Etsy home page clicks, while another would be on search filters, and still another could be a shop home page layout. Those could easily all run at the same time without impacting each other. And that's not even counting the tests they run on us! 

 

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BlackSheepDyeworks
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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'd like to hear thoughts on some of the rosy statements in the transcript regarding the rewrite of the stats page:

First:

"The new shop analytics feature give visibility to visits, conversion rates, orders and revenue, details on traffic sources that show sellers where their buyers are coming from by channel and improved listing performance metrics, detailing sources of traffic and success metrics by channel."

Where in the new stats do we see where our buyers are coming from?  I see where visitors come from, or perhaps as the header on the stats page says, "How shoppers found [me]", meaning, to me, potential buyers.  But actually linking any of the data to sales?  I'm just not seeing it.  Can anyone offer thoughts on how this statement could be true?

Second:

"At a glance, sellers are now able to know the next one or two actions they can take to be more successful."

Huh?  Can anyone give examples of actions they would take upon glancing at the new stats page?  I might see some interesting (vs actionable) data there, but again, I'm just not seeing it as stated.

Thoughts?

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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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@BlackSheepDyeworks   honestly, you do not want to hear my thoughts on that load LOL

I am sure you can guess them, though! 

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BlackSheepDyeworks
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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, hahaha.  I know I'm not alone in my long running disappointment (to put it politely) in Etsy's stats.  But to sell it on the investor call like that - well, I just had to comment.

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

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 @BlackSheepDyeworks  I've tried in vain to use Etsy stats to find out how an actual buyer found me. Knowing that would be quite useful. But no.

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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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Personally, I thought that was a beautiful bouquet of words :) I'll bet that when we get Premium it'll be presented in the call as such...

"We've been hearing from our amazing long-time sellers about the desire to really be able to dig deep into the data that we collect. With the launch of Etsy Premium, these sellers, for $XX per month will be able to have an enhanced stats page that give greater visibility to visits, conversion rates, orders and revenue. At a glance, our Premium sellers will now able to know the next one to two actions they can take to be more successful. Based on testing, we're very excited about the large number of sellers interacting with Premium stats."

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BlackSheepDyeworks
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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- or perhaps soon we'll hear how sellers find stats "confusing and intimidating" like we did with 2 ad platforms, so they'll simplify it for us.  Maybe just a thumbs up or thumbs down graphic, indicating how we're doing?  Then of course a suggestion that the next action we can take to be more successful is to give Etsy more money.

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

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By adding shipping cost into the item price you’ve increase the total sales revenue. Example, $28.00 item plus $8.50= $36.50. Up over 30%.  $8.50 may seem like a lot , but I include packaging (box, bubble wrap and tape).  So how much of that 30.1% increase is because of sellers adding the shipping cost into the item price?

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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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@Gokojo near future  "We've been hearing from our amazing long-time sellers about the desire to really be able to dig deep into the data that we collect. With the launch of Etsy Premium, these sellers, for $XX per month will be able to have an enhanced stats page that give greater visibility to visits, conversion rates, orders and revenue. At a glance, our Premium sellers will now able to know the next one to two actions they can take to be more successful. Based on testing, we're very excited about the large number of sellers interacting with Premium stats."

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ZhennelandTreasures
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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, that was quite a word salad...an antipasto...too much for me...I just went for the olives & sardines...my big question regards the "SALES up 30%  YOY...":  would the word SALES here mean REVENUE and thus be padded with all the free~shipping costs that sellers have been encouraged to add to item prices?  

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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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@ScenicRiversNets  not as much as they expected, apparently; sellers who switched last quarter are only adding 60% of the shipping cost into the item price, according to Etsy. That's one of the reasons they had to reduce their projected revenue for the rest of the year a bit. 

(Most items that sell to the US ship for less than that; my own US shipping rates are $6.29, & I am shipping from Canada. So while I agree we do need to consider this, the average amount added so far has likely ended up being way less than your $8.50 per sale. Of course, it is a wide range, with some costing a lot more as well, but those items tend to sell less often, it would seem from Etsy's comments.)

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

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Quoting @cindylouwho2  initial post:

"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."

I guess there is no way of knowing, but my assumption would be that this 62% of items would be predominantly from US sellers - for reasons of shipping cost (although I know these have increased and vary greatly across US states), and also because the majority of items on Etsy would be from US sellers anyway (can't find a way to know the US vs non-US proportion of sellers).

If the remaining 38% of items are predominantly from non-US sellers (and I am one), I am more than intrigued to see what 'carrots and sticks' will be used with us to 'incentivize' free shipping adoption. Given Etsy's total lack of interest in and understanding of the additional barriers faced by non-US sellers, I'm expecting a blunderbuss approach, no consultation and zero carrots.

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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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@maplemist  - it's not possible to get the exact number because some US sellers do not have their locations set, but here are the current figures tonight:

Items that ship to the US64,114,997

Items that ship free to the US (or have the guarantee)42,045,511 

Percentage of items that ship free to the US:  65.6%

 

Items from US sellers43,440,040

Items from US sellers that ship free or have the guarantee30,880,089 

Percentage of free ship items that are from US sellers: 73.4% (possibly really over 75%, given the shops without locations)

 

So potentially over 25% of the free shipping items are from non-US sellers. Remember, Canada is the 4th biggest country on Etsy & many big sellers here have access to USPS shipping. (There are two different companies locally that would do that for me, but since I can't drive or take public transit, & since they are nowhere near my home, the additional pick up or courier costs mean that they aren't really any cheaper for me than the discounted rates I now get from Canada Post.)

 

But hey, they are giving us non-US sellers our own free shipping tools next year, sometime. They probably won't work correctly at first, will have key parts missing that they say they will add later but never get to, and we will be overcharged  for them, which will take 6 months to get sorted out, but there's your carrots!    /s

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maplemist
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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 @cindylouwho2 

So great that you crunched those numbers.

That carrot scenario you outlined sounds a bit optimistic to me. We can hope that the strategists learn from the FS/FSG introduction as well as their AI does I guess.

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