Etsy Inc ((ETSY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Etsy’s 2024 Earnings Call Reveals Mixed Sentiment
The recent earnings call for Etsy Inc. painted a mixed picture of its 2024 financial performance. While the company celebrated record revenue and substantial profitability, it also faced significant hurdles such as declining Gross Merchandise Sales (GMS) and a decrease in active sellers. Noteworthy positives included robust growth in Depop and improvements in Etsy Ads. The company remains optimistic about its strategic shift towards long-term growth and differentiation, despite persistent near-term challenges.
Record Revenue in 2024
Etsy reported a record revenue of $2.8 billion for 2024, marking a modest 2% increase from the previous year. This achievement underscores Etsy’s ability to generate substantial income, despite facing broader market challenges.
Strong Profitability
The company showcased strong profitability with an adjusted EBITDA of $782 million and a margin of 27.8%. This level of profitability highlights Etsy’s effective cost management and operational efficiency.
Depop’s Significant Growth
Depop, Etsy’s fashion resale segment, experienced remarkable growth, with a 32% year-over-year increase in GMS. The US market, in particular, saw a 60% surge, positioning Depop as the fastest-growing player in the US fashion resale sector.
Etsy Ads Contribution
Etsy Ads significantly contributed to the company’s services revenue growth, resulting in a consolidated take rate of 22.8% in the fourth quarter, an improvement from the previous year.
2025 Product Development Strategy
Looking forward, Etsy plans to rebalance its product development strategy. The focus will be on accelerating product experimentation and addressing near-term growth, while also continuing to pursue long-term improvements.
Decline in Consolidated GMS
Etsy faced a 4% decline in consolidated GMS, dropping to $12.6 billion in 2024. The fourth quarter alone saw a 6.8% decline year-over-year, indicating challenges in maintaining sales momentum.
Core Etsy Marketplace Performance
The core Etsy marketplace experienced an 8.6% decline in GMS year-over-year, contributing to the overall softness in consolidated GMS. This decline highlights the challenges within Etsy’s primary business segment.
Decrease in Active Sellers
The number of active sellers on Etsy decreased, attributed to new seller setup fees and enhanced trust and safety efforts. While this resulted in a healthier seller base, it was smaller compared to previous years.
Reverb’s Performance Challenges
Reverb, Etsy’s musical instrument marketplace, saw a 2.6% decline in GMS year-over-year. However, it managed to perform slightly better than the broader musical instrument industry.
Lower GMS Per Active Buyer
Etsy reported a 3.5% decline in GMS per active buyer, with average spending at $121. This decrease was more pronounced among buyers with lower household incomes.
Guidance for 2025
Etsy’s forward-looking guidance for 2025 focuses on strategic pivots to return to growth. The company intends to enhance the Etsy app’s conversion rates and expand the use of Large Language Models for improving item quality evaluation and personalization. Etsy aims for a take rate of approximately 23% in the first quarter of 2025 and anticipates adjusted EBITDA margins of 25-26%. The company is poised for easier comparisons in the latter half of 2025, with a balanced focus on immediate GMS initiatives and long-term investments.
In conclusion, Etsy’s 2024 earnings call highlighted a blend of achievements and challenges. The company celebrated record revenue and profitability while grappling with declining GMS and a reduced active seller base. Despite these challenges, Etsy remains optimistic about its strategic direction and growth prospects. Investors will be keenly watching Etsy’s efforts to capitalize on its strengths and navigate the hurdles ahead.
