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A Look Inside The Q1 2018 Earnings Call by Etsy

Etsy had another great quarter beating Wall Street estimates by 5 cents per share and 1.59 million in revenue.

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The company continues to make good progress on turning around so-so financials of previous years and actually increasing seller, buyer and revenues.

For ending Q1 2018, Etsy reported 34,683 million buyers and 1,970 million sellers. That is an increase of 16.9 percent in buyers and 9.4 percent in sellers of the same period last year.

International GMS also jumped from 32 percent to 35 percent and mobile GMS is up from 54 percent to 51 percent.

Note: GMS (Gross Merchandise Sales is roughly the same metric as used by other companies that state GMV – Gross Merchandise Volume).

As always, we present basic financial data for simplicity to our readers to discuss the general state of relevant companies in eCommerce and how it may impact their business.

Those who wish to invest in Etsy can find more information here about their 2018 Q1 results.

Etsy Q1 – The Numbers

Net Revenue: $120.912 million (2017: $96.891 million)
Net Income (Non-GAAP): $12.967 million (2017: $ 0.421 million/loss)
Earnings per Share: $0.10 (2017: $0.00/loss)

Highlights from their Q1 Earnings Call Transcript

  • Josh Silverman, CEO: “Last week was my one year anniversary with Etsy and I’m extremely proud of what the team has accomplished. Three quarters ago, on our Q2 2017 earnings call, I stated our aspiration to own special.”
  • Etsy switched to Zendesk, a customer service software company, which allows the company to duplicate a homegrown platform that consumed resources and attention from the engineering team.
  • Etsy also partnered with Square to implement in-person payments, enabling Etsy sellers to sell their products at live venues and allowing the company to retire another homegrown product that consumed time and attention from the engineering team.
  • The company made progress and are on-track with their migration to Google Cloud, which they expect to enhance the overall infrastructure by providing faster processing speed, improved page load time, and more nimble fulfillment capacity on an as needed basis.
  • About privacy, Etsy has been preparing for the EU General Data Protection Regulation or GDPR. It goes into effect on May 25th. A cross-functional team has been updating their systems and policies and notifying the community to help ensure compliance.
  • The marketplace made progress enhancing search and discovery. Etsy’s machine learning and visual search capabilities have allowed them to collect more structured data attributes and better categorize in rank listings using context specific ranking, also known as CSR. Early results are encouraging, yet they’re still in the early stages of leveraging their capabilities to their full potential.
  • Etsy added CSR to Promoted Listings in order to surface more relevant ads for shoppers and to better utilize sellers’ budgets. 90% of purchases occur on the first few pages of search results, therefore more effectively ranking items based on their potential to convert is a large opportunity for the company.
  • The company has seen over 1 billion visits a quarter in recent quarters. And in Q1, visits grew approximately 13% compared to the prior year.
  • Paid marketing efforts were also a contributor to visit growth. In Q1, GMS from paid channels, primarily search engine marketing and Google Product Listing Ads was 16% of overall GMS compared to 12% in Q1 of last year.
  • Etsy launched Targeted Offers in April. This is a paid marketing tool that enables sellers to send discounts and offers directly to targeted buyers who have previously interacted with their shops by utilizing Etsy e-mails and push notifications. Early results are encouraging. Sellers with an active campaign are seeing a high return on spend.

READ MORE: Etsy Launches New Tool to Fight Shopping Cart Abandonment

  • In Q1, about 85% of the company’s GMS is now flowing through Etsy Payments…
  • Etsy marketing expenses in the quarter totaled $26 million, up 12%, representing 22% of total revenue compared to 24% last year. The majority of the marketing spend remains focused on digital acquisition marketing, primarily Google Product Listing Ads and search engine marketing, which generate a positive ROI based on the company’s attribution model.
  • Looking forward, Etsy warned of some macro events that may impact GMS growth. Specifically the company mentioned implementation of GDPR as it may limit the company’s ability to customize and personalize shopping experiences. It also mentioned other regulatory changes that are in motion such as new VAT and U.S. state tax requirements that could decrease conversion rates in the states and geographies in which they are implemented.

READ MORE: Full Transcript of Oral Arguments in Sales Tax South Dakota v. Wayfair, Inc. Now Available

What do you think of Etsy’s performance in Q1 2018? Head over to our Facebook Discussion Group or use the comments section below to let us know.

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