Last week Etsy, Inc. (NASDAQ: ETSY), an online marketplace and commerce platform for creative entrepreneurs, released its first quarter 2017 financials, including a $0.4 million net loss, a decrease of 135.3 percent compared to net income of $1.2 million from Q1 2016. Along with its financial report, the company also announced that Josh Silverman, who joined the Etsy board last November, would become CEO effective May 3. Silverman, who has two decades of product development, marketing and e-commerce experience, replaces Chad Dickerson who will stay on in an advisory role until May 31. Previously, Silverman served as CEO of Skype, Shopping.com, and Evite, Inc.
Fred Wilson, who joined the Etsy board in 2007, will serve as the new board chairman. John Allspaw, the company’s chief technology officer, is also leaving Etsy. He will be replaced by Mike Brittain, VP of engineering, who will serve as interim CTO. Allspaw will remain on as an advisor through the end of May.
“Etsy is very fortunate to have Josh stepping into the CEO role at this time. He brings 20 years of senior leadership in technology and marketplace businesses to Etsy. In the six months that Josh has been on our board, we have gotten to know him well, and he has gotten to know us well. That will make for an easier transition and faster execution. I am pleased to be appointed Chair of the Etsy Board, and I am looking forward to working closely with Josh and the leadership team to help Etsy capitalize on its significant growth opportunities,” said Wilson, chairman of the board.
Josh Silverman commented on his new role.
“I have a deep appreciation for the mission of Etsy and the unique role that it plays in global e-commerce. Our focus will remain on delivering value to our community, including our shareholders. Having worked at other marketplaces, I recognize how difficult it is to create a differentiated value proposition for buyers that provides a unique opportunity for sellers-and Etsy has done that. In the coming weeks, I look forward to listening and learning from our employees, sellers, buyers and shareholders to help ensure we are focusing on the most value-enhancing near- and long-term opportunities,” Silverman said.
Financial highlights for the first quarter of 2017 include:
- Total revenue was $96.9 million, an 18.4 percent increase year-over-year.
- Markets revenue grew 14.1 percent year-over-year.
- Seller Services revenue grew 23.9 percent year-over-year, driven by growth in Etsy Payments, Promoted Listings, Pattern by Etsy and Shipping Labels.
- Gross profit was $62.2 million, a 15.4 percent increase.
- Gross margin was 64.2 percent, compared to 65.9 percent in Q1 2016.
- Total operating expenses were $64.3 million, a 36.4 percent increase year-over-year. The company attributes the increase in employee-related expenses and marketing expenses from branding.
- Gross Merchandise Sales (GMS) were $719 million, a 14.2 percent increase year-over-year. Growth in GMS was supported by 12.4 percent growth in active sellers and 18.5 percent growth in active buyers.
- Mobile GMS was approximately 51 percent, compared to 47 percent in Q1 2016 and 49 percent in Q4 2016.
Operational highlights include:
- Mobile visits grew faster than desktop visits. Mobile visits represented 66 percent of traffic compared to 63 percent for the first quarter of 2016.
- Conversion rates on every device (desktop, mobile web and mobile app) increased for the sixth consecutive quarter.
- Company is reviewing cost-cutting measures and plans to eliminate about 80 jobs, representing about 8 percent of the company’s workforce.
- In early May, the company launched Etsy Studio.
- The company is using machine learning to make category-specific suggestions to improve the listing process and to collect more accurate data.
- Etsy has updated its Direct Checkout payment service and rebranded it Etsy Payments.
- Etsy launched Android for mobile in March.
- Etsy launched Shop Manager in February, a centralized hub for sellers to manage their Etsy businesses.
Due to management changes, Etsy will review its 2017 guidance and provide an update when it announces its second quarter results.
On May 5, Silverman wrote an email to Etsy sellers to introduce himself and tell sellers about the Q&A forums he plans to hold where he can listen to seller feedback and answer their questions.
“I believe deeply in the power of creativity and the unique role Etsy plays in reimagining commerce. Whether you’re a hobbyist or professional, I’m focused on making Etsy the best place for you to sell your products,” Silverman wrote. “I’ll build on Etsy’s strong foundation, with a singular focus on bringing more buyers to your shop. That’s my top priority. The best way to do that is by creating great buyer experiences and deeply understanding your needs.
In April 2016, Etsy launched its first subscription program – Pattern – a month-to-month seller service designed to help make selling easier on Etsy. Pattern allows sellers to create custom websites outside their Etsy shops. Based in Brooklyn, the company currently has 45 million items for sale from 1.8 million active sellers. Etsy estimates it has 29.7 million active buyers, and in 2016, it had GMS of $2.84 billion.
Despite a net loss of nearly half a million dollars, Etsy investors did not have a significant reaction to the quarterly finances. The company announced its quarterly financials on May 2. That day the value of company stock was $11.30 As of 4:32 PDT on May 11, stock was valued at $11.16. Compare that to the value of stock a year ago when it was priced at $8.28 per share (May 12, 2016).
Though the company is 12 years old, commerce platforms and internet marketplaces have changed dramatically in that time. Like other online companies, Etsy has had to continue to evolve to try to keep up. In the last two years alone, Etsy has added a number of services for sellers, new payment options and a better experience for buyers. This is particularly impressive because, as a Certified B Corporation, the company’s social, environmental and business goals are intertwined.