Etsy’s Earnings Call: Mixed Results Amid Challenges

Etsy Inc ((ETSY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Etsy’s recent earnings call painted a mixed picture of the company’s current standing and future prospects. While there were notable achievements in app performance and personalization initiatives, these were offset by declines in gross merchandise sales (GMS) and active buyer metrics, compounded by macroeconomic pressures. The company’s strategic initiatives hold promise for future growth, but present challenges in consumer spending and economic conditions weigh heavily on its performance.

App GMS Performance

Etsy’s app has reached new heights, with an all-time high of 44.5% of total marketplace GMS. This achievement was bolstered by a year-over-year increase in buyer conversion rates and app downloads, highlighting the app’s growing importance in Etsy’s marketplace strategy.

AI and Personalization Initiatives

The company has made significant strides in enhancing the shopping experience through AI-driven personalization. Etsy’s new Discovery Centric Shopping experience has nearly doubled engagement on personalized homepages compared to non-personalized ones, showcasing the potential of AI to drive user engagement.

Depop’s Strong Performance

Depop, a subsidiary of Etsy, delivered its best GMS quarterly performance since its acquisition, driven by strong growth in the U.S. market. This performance underscores Depop’s strategic value within Etsy’s portfolio.

Improved Take Rate

Etsy reported an improved consolidated take rate of 23.3%, up 170 basis points from the previous year. This improvement reflects the company’s ability to capture more value from each transaction on its platform.

Reactivation of Buyers

Etsy successfully reactivated over 6 million buyers, indicating a positive trend in its re-engagement strategies. This reactivation is crucial for maintaining a robust buyer base amid challenging market conditions.

Decline in GMS

The company faced a decline in consolidated GMS, which was $2.8 billion, down approximately 6.5% year-over-year. The Etsy marketplace specifically saw an 8.9% decline, highlighting the challenges in maintaining sales momentum.

Net Loss Due to Reverb Sale

Etsy reported a net loss for the quarter, primarily due to a non-cash impairment charge of $102 million associated with the anticipated Reverb transaction. This financial hit underscores the complexities involved in managing its diverse portfolio.

Decline in Active Buyers

Active buyer metrics for the Etsy marketplace remained muted, with a year-over-year decline largely attributed to macroeconomic conditions. This decline poses a significant challenge for the company in sustaining its growth trajectory.

Habitual Buyer Decline

There was a sharper decline in habitual buyers over the last few quarters, reflecting broader consumer discretionary spending trends. This trend is concerning as it impacts the frequency and volume of transactions on the platform.

Macro Challenges

Etsy continues to face external pressures on consumer discretionary spending and potential tariff impacts, which present ongoing challenges to its growth. These macroeconomic factors are critical in shaping the company’s strategic responses.

Forward-Looking Guidance

Looking ahead, Etsy anticipates a similar decline in GMS for Q2 2025 as seen in Q1, with a consolidated adjusted EBITDA margin of approximately 25%. Despite the decline in GMS, Etsy’s revenue increased by 1% year-over-year to $651 million, with a take rate improving to 23.3%. The company remains focused on personalization and machine learning as key drivers for future growth.

In summary, Etsy’s earnings call reflects a company navigating through a challenging economic landscape with a mix of strategic successes and hurdles. While app performance and personalization initiatives show promise, declines in GMS and active buyers, coupled with macroeconomic pressures, present significant challenges. The company’s focus on strategic initiatives and technology-driven growth remains crucial as it charts its path forward.