On November 1, 2023, Etsy Inc (ETSY, Financial) released its earnings report for the third quarter ended September 30, 2023. The company reported a consolidated net income of $87.9 million, reflecting a significant increase of $1.1 billion YoY. This increase was primarily due to an impairment charge in Q3 2022 of $1.0 billion in aggregate to the goodwill of Depop and former subsidiary, Elo7.
Financial Performance Highlights
Etsy's consolidated Gross Merchandise Sales (GMS) was $3.0 billion, up 1.2% YoY and largely flat on a currency-neutral basis. The Etsy marketplace GMS was $2.7 billion, up 1.0% YoY and down 0.3% on a currency-neutral basis. The growth in active buyers accelerated again this quarter with a 4% YoY increase, setting a new all-time high of 92 million.
Consolidated revenue was $636.3 million, up 7.0% versus the third quarter of 2022, with a take rate (i.e., consolidated revenue divided by consolidated GMS) of 20.9%. Solid revenue growth was primarily driven by growth in Etsy Ads, payments revenue, and transaction fee revenue from Offsite Ads.
Consolidated non-GAAP Adjusted EBITDA was $182.2 million, with a consolidated non-GAAP Adjusted EBITDA margin (i.e., consolidated non-GAAP Adjusted EBITDA divided by consolidated revenue) of approximately 28.6%. Etsy ended the third quarter with $1.1 billion in cash and cash equivalents and short- and long-term investments.
Company's Outlook
For Q4 2023, Etsy estimates GMS to decline in the low-single-digit range YoY. However, if trends worsen, that could become a mid-single-digit decline, and if trends improve GMS could be flat or even up slightly YoY. The company estimates Q4 2023 take rate to be approximately 20.8%, down slightly on a sequential basis due to normal seasonality. Adjusted EBITDA margin for Q4 2023 is currently estimated to be between 26-27%.
CEO's Commentary
“Etsy's consolidated results were in line with expectations for modest top line growth and very strong profitability," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "While we are undoubtedly operating in a challenging environment for spending on consumer discretionary items, we believe that we are at least holding our share gains in our top categories."
“There's no doubt that this is an incredibly challenging environment for spending on consumer discretionary items. It's therefore important to acknowledge that this volatile macro climate will make it challenging for us to grow this quarter. While there are many things we can't control, there is still a lot we can — so we are obsessively focused on those. All of us at Etsy feel a great responsibility to deliver profitable growth — growth for our millions of sellers, for our shareholders, and all of our stakeholders. Our team is working passionately and with the highest level of urgency; and I'm more excited about the current roadmap and the progress we've made this year, than at any time in my tenure. We are confident we are working on areas that will positively impact Etsy in the months and years ahead. We are keeping our eye on the prize and look forward to getting back to strong growth again as we move through this cycle.” Mr. Silverman added.
Explore the complete 8-K earnings release (here) from Etsy Inc for further details.
