Etsy Earnings Report Q4 2021

Etsy Releases Q4 2021 Earnings Report and Announces 30% Seller Fee Increase

Etsy reported its financial results for its fourth quarter and full-year ended December 31, 2021 as well as included an announcement for a 30 percent seller fee increase from 5% to 6.5%.

For sellers, this item was tucked at the end of the press release, but we placed it upfront:

Etsy Marketplace Transaction Fee Increase

Etsy also announced today that its seller transaction fee is increasing from 5% to 6.5%. This fee change will go into effect on April 11, 2022.

The company said it’s planning to invest even more in making Etsy the best place to run a creative business. Etsy expects to invest most of the incremental revenue from this fee increase in marketing, seller tools, and creating world-class customer experiences.

“Etsy enables anyone with a creative idea to start a business and reach a built-in audience of more than 90 million shoppers. We have demonstrated our ability to make improvements that directly translate into more sales for our sellers, as evidenced by record sales per seller in 2021. Our new transaction fee will enable us to invest in key areas like marketing and support to further extend our strong momentum.”

Josh Silverman, Etsy, Inc. Chief Executive Officer

As far as the rest of the earnings report, Josh Silverman added the following:

“Even in a world of greatly expanded choice, Etsy remained top of mind for consumers, leading to our delivery of record levels of GMS, revenue, and adjusted EBITDA in the fourth quarter. During the holiday season, our sellers — most businesses of one and insulated from widespread supply shortages or complex fulfillment processes — brought the benefits of shopping small to scale. Shoppers continue to love their experiences with Etsy and are coming back for more.”

Etsy Fourth Quarter 2021 Financial Performance Highlights

  • Consolidated GMS was a record $4.2 billion, up 16.5% year-over-year; Etsy marketplace GMS was also a record $3.8 billion, up 11.8% year-over-year and 154% on a two-year basis.
  • Etsy’s record fourth quarter GMS performance was driven by an early and strong kick-off to the holiday season in October and extended strength through December.
  • Several exciting holiday records were set, including 8% year-over-year growth in GMS per buyer on Black Friday, a record 2,000 orders per minute on Cyber Monday, and nearly a half million seller shops participating in its Cyber sales, up 27% from last year.
  • Etsy marketplace’s GMS per active buyer on a trailing twelve month basis was $136, growing 16% year-over-year. On a two-year basis, this metric is up 31%.
  • The Etsy marketplace acquired approximately 10 million new buyers in the fourth quarter, its highest level of new buyer acquisition since the fourth quarter of 2020. The company reactivated 6.8 million buyers who had not purchased in a year or more. 
  • Habitual buyers, those with 6 or more purchase days and over $200 in spend in the trailing twelve months, grew 26% year-overyear, remaining its fastest growing cohort. On a two-year basis habitual buyers grew 224%. 
  • Non-US GMS for the Etsy marketplace was 44% of overall GMS, and increased 20% year-over-year on a currency-neutral basis. 
  • GMS from paid channels was 19% of overall GMS, decreasing 200 basis points compared to the fourth quarter of 2020 as the percentage of traffic from non-paid channels increased.
  • Consolidated revenue was a record $717.1 million, up 16.2% year-over-year, with a take rate (i.e., Consolidated revenue divided by Consolidated GMS) of 17.1%.
  • Net income was $161.6 million, up 8.8% year-over-year, with diluted earnings per share of $1.11.
  • Non-GAAP Adjusted EBITDA was a record $218.8 million, with Non-GAAP Adjusted EBITDA margin (i.e., Non-GAAP Adjusted EBITDA divided by Consolidated revenue) of 31%, flat year-over-year. 
  • Etsy ended the year with $1.1 billion in cash and cash equivalents, short- and long-term investments. Under Etsy’s stock repurchase program, during the quarter Etsy repurchased an aggregate of approximately $68 million, or 287,368 shares, of its common stock. 

Mr. Silverman added, “Reflecting on 2021, it is fair to say that Etsy has retained much of the positive impact we’ve seen from the dramatic adoption of e-commerce following the start of the COVID-19 pandemic. In fact, more than half of Etsy’s 2020 active buyers, and 37% of new buyers came back to make a purchase in 2021. In addition to gaining market share, driving excellent buyer engagement, building Etsy’s brand globally and helping our sellers grow, we continued to take care of our people, communities, and the planet. We’re also leveraging Etsy’s operational playbook for our most recent acquisitions — Depop and Elo7 — which, alongside Reverb, expand the reach of our overarching mission to ‘Keep Commerce Human’.”

“We capped off the year with top and bottom line fourth-quarter results ahead of our expectations, as Etsy’s capital-light business model drove high flow-through of incremental revenue,” said Rachel Glaser, Etsy’s Chief Financial Officer.

“We grew revenue and GMS over 30% for the full year, powered by product investments that improved conversion and repeat purchase rate, and by marketing investments that increased brand awareness and further drove buyer retention and frequency. Furthermore, we delivered full-year adjusted EBITDA margin of 31% even while adding two new companies to our “House of Brands” and increasing our team by 70%.”

Etsy Fourth Quarter 2021 Operating Highlights

Product: Etsy’s primary focus in 2021 was to improve customer experiences across the Etsy marketplace to engage and retain the millions of buyers who found Etsy for the first time or found us again during this period. These are just a few of the initiatives during the fourth quarter, aligned with its “Right to Win” strategy.

  • Etsy continued to engage buyers along their Etsy journey, including by improving pathways to show its breadth of inventory, enhancing the triggers for targeted buyer outreach, expanding post purchase coupons, and driving app downloads. App download initiatives included timely prompts, delivery tracking notifications, and app-exclusive Holiday sales, which, among other initiatives, drove a record setting year for app downloads, up 47% versus 2020.
  • The company launched several new product initiatives to highlight Etsy as a key gifting destination including an interactive Gift Finder Hub.
  • Etsy increased the amount of real-time data it can use to capture semantic meaning across all of its inventory by making further investments in XWalk, Etsy’s large-scale, real-time graph retrieval engine. XWalk ended the year utilizing 50% more data points than when it was launched in the second quarter of 2021, supporting its ability to serve buyers more personalized search results. During the fourth quarter, Etsy incorporated various additional data, such as estimated delivery dates, real-time in-session features, and listing information to improve organic search results. The company also began laying the foundation to apply XWalk to non-US searches.
  • Etsy’s international team improved seller onboarding, launched a non-US version of the gift finder experience, expanded estimated delivery date coverage, and launched installment payments in the United Kingdom, Spain, and Australia.
  • The company’s significant work around delivery transparency yielded strong results: nearly 100% of US listings in the fourth quarter included expected delivery date and origin zip code information and approximately 98% of US listings had tracking coverage. In addition, 90% of US domestic orders that were estimated to be delivered in time for the holidays arrived on time, up significantly from the 2020 holiday season. In addition, Etsy utilized sophisticated data models to anticipate holiday delays and dynamically adjust delivery dates.
  • Etsy Star Sellers, those who have achieved a newly-introduced badge aligned with certain customer service standards, represented 31% of its fourth quarter GMS. The company increased Star Seller visibility to buyers and added educational improvements to the seller dashboard. The company’s new “Sell on Etsy” app, with added features such as easy video uploading, saw increased engagement, and Etsy began to roll it out to international sellers.

Marketing: Etsy continued to optimize spending across its marketing channels, with particular focus on increasing the percentage of spending to upper- and mid-funnel channels, and launching creative new marketing campaigns that target frequency improvements.

  • For Holiday 2021, the company reinforced Etsy as the go-to destination to shop and gift meaningfully – including through initiatives that encouraged early shopping for holiday sales. Etsy promoted holidays that it hasn’t in the past, including Diwali, Singles Day, and Advent, and highlighted Etsy’s connection with creative entrepreneurs through on-site features such as “Seller Spotlights.”
  • Performance marketing highlights include improving chargeability for Offsite Ads with efforts to optimize seller sales, refining attribution models, and utilizing its CRM tools to reengage shoppers. Etsy also expanded performance marketing spend into seven non-core geographies.
  • The compan’s social marketing efforts to “celebrate small” broke through the noise of Cyber Week. For example, its posts during this peak holiday shopping weekend had tens of thousands of total engagements each. User-generated process and listing videos continued to drive strong engagement across Etsy’s social channels.
  • New buyer marketing initiatives included out of home campaigns in the United Kingdom, podcasts in the United States, and discounts and promotions on paid social channels. The company also focused on increasing Etsy’s awareness among male audiences, including through strategic placements on TV and YouTube and male-gifting focused influencer partnerships.

Impact Pillars: During 2021, Etsy continued to make progress on its Impact strategy to reflect the positive impact the company wants to have on the world while advancing and complementing its business strategy. Here are some highlights for the fourth quarter and full-year:

  • In 2021, Etsy sellers contributed $14.3 billion to the US economy, a 167% increase from the baseline of $5.37 billion in 2018. This created 3.8 million jobs in the independent worker economy, enough jobs to employ almost all of the city of Los Angeles, California, and generated $3.8 billion in income for sellers.
  • Etsy continued to attract and retain world-class talent in 2021, with a keen focus on diversity. In 2021, Etsy, including Reverb, grew its leadership level employee population who identify as a member of an underrepresented community (Black, Latinx, or Native American; collectively, “URC”) by 41.7%, and from 8.6% to 9.4% of its overall leadership level employee population. Hires from URCs constituted
  • 16.7% of US Etsy.com hires in 2021. The percentage of US Etsy.com employees who are from URCs has increased from 8.6% in 2018 to 12.9% in 2021.
  • To engage buyers in the positive impact they create by shopping on Etsy.com, it launched an Impact Tracker that creates a personalized digest of a buyer’s activities, such as the number of supported shops, environmental impact, and Uplift fund contribution.

Etsy is holding the fourth-quarter and full-year 2021 earnings call tonight. We will monitor it for other relevant news, including how the company will explain away such a hefty fee increase.

This is an edited financial press release. Please see Etsy’s investor relations site for more details on this release.

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