Etsy Inc ((ETSY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Etsy Inc. painted a balanced picture of the company’s current standing and future prospects. While there were notable achievements, such as surpassing financial expectations and impressive growth in Depop, there were also challenges, including a decline in Etsy’s marketplace gross merchandise sales (GMS) and a decrease in the active buyer count. The leadership transition was highlighted positively, with confidence expressed in the company’s growth under the new CEO.
Leadership Transition
Josh Silverman announced his transition from CEO to Executive Chair, with Kruti Patel Goyal set to take over as CEO effective January 1. The Board of Directors has expressed full support for this transition, indicating a smooth changeover and continued strategic direction for Etsy.
Third Quarter Financial Metrics Exceed Expectations
Etsy’s financial performance in the third quarter exceeded expectations, with GMS, revenue, and adjusted EBITDA all surpassing forecasts. Notably, GMS for Etsy and Depop combined returned to year-over-year growth, showing a sequential improvement of approximately 300 basis points.
Depop’s Strong Growth
Depop, a subsidiary of Etsy, demonstrated remarkable growth with a 39.4% year-over-year increase in GMS. This growth was driven by new user acquisition and enhancements in buyer conversion, leading to a 59% year-over-year growth in Depop’s U.S. GMS.
App Engagement Increases
Etsy experienced a significant increase in engagement on its app home screen, with app home GMS growing 20% year-over-year in the third quarter. This indicates successful efforts in enhancing the user experience on the app.
Machine Learning Enhancements
Advancements in AI and machine learning have led to double-digit increases in engagement metrics, improving conversion rates across search and ads. These technological improvements are a key driver in Etsy’s strategy to enhance user interaction and sales.
Successful Capital Allocation
Etsy has been active in capital allocation, repurchasing 2.1 million shares and reducing the share count by 17% since December 2023. This move reflects the company’s confidence in its financial health and future prospects.
Etsy Marketplace GMS Decline
Despite other successes, Etsy’s marketplace GMS saw a decline of 2.4% year-over-year and 3.2% on an FX-neutral basis. This decline highlights some of the challenges the company faces in maintaining growth in its core marketplace.
Active Buyer Count Decline
Etsy’s active buyer count decreased by 5% year-over-year to 86.6 million. This decline is a concern as it indicates potential challenges in retaining and attracting buyers.
Potential Tariff and Trade Lane Pressure
The company faced some pressure on U.S. import trade routes, resulting in a modest headwind to quarterly results due to the expiration of the de minimis exemption. This external factor could continue to impact Etsy’s operations.
Forward-Looking Guidance
Etsy’s guidance for the future remains positive, with expectations of further sequential improvement in GMS growth. The company projects Q4 consolidated GMS between $3.5 billion and $3.65 billion. Additionally, Etsy’s subsidiary Depop is expected to continue its strong performance, driven by new user growth and buyer conversion improvements.
In summary, Etsy’s earnings call highlighted a mix of achievements and challenges. While the company exceeded financial expectations and saw strong growth in Depop, it also faced declines in its marketplace GMS and active buyer count. The leadership transition is viewed positively, and the company remains optimistic about future growth, supported by advancements in technology and strategic capital allocation.