Etsy announced strong Q3 earnings results, with total revenue up 31.6 percent year over year, and gross profit increasing more than 24 percent.
“During the third quarter, we launched several transformative initiatives to serve as the building blocks for long-term, sustainable growth,” said Josh Silverman, CEO of Etsy, in the report. “The core Etsy marketplace continued to perform well, with third quarter [gross merchandise sales (GMS)] and revenue growth of approximately 22 percent and 28 percent, respectively. Through innovative solutions, such as Etsy Ads and our new free shipping initiative, we are continuing to improve the core marketplace for buyers, while enhancing value for sellers, and helping them grow. We are just beginning to see the impact of these initiatives, which we believe further our competitive advantages, and will have a more meaningful contribution to our results in 2020 and beyond.”
A key factor in the company’s Q3 earnings results was its recent acquisition of Reverb — a marketplace for new, used and vintage music gear that Etsy bought in August for $275 million in cash. Etsy reported that total revenue for Q3 was $197.9 million, which included $6 million related to the results of Reverb. Etsy has updated its 2019 financial guidance for the remainder of the year to incorporate the impact of Reverb’s business, which is expected to contribute approximately 5 percent to 6 percent for GMS growth and 2 percent to 3 percent for revenue growth.
In addition, the company has been working on a series of new initiatives over the past year, such as making its homepage more personalized and dynamic, and improving its mobile app. In July, Etsy launched a smart pricing tool to give sellers the “tools, education and support they need” to offer free shipping to U.S. buyers on orders of $35 or more. The company’s recent earnings results showed that, as of the end of Q3, 62 percent of items on the Etsy marketplace offered free shipping to U.S. buyers, and 74 percent of U.S. listing views were eligible to ship for free.
In August, it rolled out Etsy Ads, described as “a new unified ad platform,” designed to give sellers more opportunity to gain prominence, as well as drive visits and sales. The company explained that it has spent the third quarter migrating its sellers who previously used Promoted Listings and/or Google Shopping to Etsy Ads.
In addition during Q3, active buyers and active sellers increased 19.1 percent and 19.3 percent year over year, respectively, with the company gaining approximately 4.2 million new buyers during the period. Gross profit for the third quarter of 2019 was $129 million, up 24.7 percent year over year, while total operating expenses were $114.8 million, up 35.5 percent year over year and driven primarily by marketing expenses.
“During the third quarter of 2019, we delivered solid top- and bottom-line results, and generated another $47 million of operating cash flow,” said Rachel Glaser, CFO of Etsy. “Investments in our core business, significant new initiatives and the acquisition of Reverb are helping establish a great foundation for continued profitable growth.”