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Etsy Inc Crashes After Earnings Disappointment

Etsy released the earnings results from its first fiscal quarter after closing bell tonight, sending shares into a downward spiral. The company posted a surprise loss of 84 cents per share on $58.5 million in revenue, a 44.4% year over year increase. Analysts had been expecting Etsy to post earnings of 3 cents per share with revenue of $58 million. In the same quarter last year, the company posted a loss of 1 cent per share on $40.5 million in revenue.

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After tonight’s earnings report, shares of Etsy plunged, falling as much as 13.62% to $18.14 per share.

Key metrics from Etsy’s earnings report

The online marketplace posted Marketplace revenue of $30.15 million for the quarter, a 27.1% year over year increase from last year’s $23.73 million. Seller Services revenue climbed 72.3% year over year from $15.83 million last year to $27.28 million this year. Gross merchandise sales increased 28% compared to last year.

Etsy posted adjusted EBITDA of $6.67 million, a 9.3% increase from last year’s $6.1 million. Adjusted EBITDA margin fell 370 basis points to 11.4%. The company had 1.43 million active sellers at the end of the first quarter, an increase of 25.8% from last year’s 1.14 million active sellers.

The number of active buyers increased 36.5% year over year to 20.84 million. The percentage of mobile visits increased 750 basis points year over year to 57.7%, while the percentage of mobile GMs increased 620 basis points to 41.4%. Gross margin increased from 62% last year to 64.6% this year.

Etsy’s expenses surge

The company said expenses surged during the first quarter, with operating expenses climbing 72.6% from last year due to higher marketing and general and administrative expenses. Marketing expenses grew 63.5% due to increases in spending on product listing ads.

Etsy also recorded higher employee-related expenses and a 24.5% increase in product development expenses.

Etsy looks ahead to second quarter

Management also provided a number of factors they expect to impact Etsy’s results for the current quarter. As other companies have said, they also expect the strengthening of the U.S. dollar to “impact buyer behavior outside of the U.S.” They also plan to speed up hiring during the second quarter and continue to spend more on marketing.

Further, they noted that the second quarter earnings will include some one-time expenses, including about $300,000 related to Etsy’s initial public offering.