Disclaimer

This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements relating to our financial guidance for the third second quarter of 2021 and key drivers thereof, the uncertain impact that the COVID-19 pandemic or its abatement may have on our business, strategy, operating results, key metrics, financial condition, profitability and cash flows, on our product delivery goals, on changes in the overall levels of consumer spending, on e-commerce generally and on volatility in the global economy; the impact of our strategy, marketing and product initiatives on our business and operating results; our future investments, our intended environmental, social and ecological impacts; and the size and our ability to capitalize on our large market opportunity; the anticipated impact of sharing expertise across Etsy’s House of Brands; and the potential impact of our acquisition of Depop and Elo7 on our market opportunity and on Etsy’s future consolidated financial results. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “aim,” “anticipate,” “believe,” “could,” “enable,” “estimate,” “expect,” “goal”, “intend,” “may,” “plan,” “potential,” “target,” “will,” or similar expressions and the negatives of those words. 

Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include: (1) our ability to continue our rapid growth; (2) risks related to the ongoing COVID-19 pandemic, which continues to impact our business and results of operations in numerous ways that remain volatile and unpredictable, and risks related to the pandemic’s abatement and return to pre-COVID consumer shopping behavior; (3) the fluctuation of our quarterly operating results; (4) our failure to meet our publicly announced guidance or market expectations; (5) our ability to successfully execute on our business strategy or if our strategy proves to be ineffective; (6) our ability to attract and retain an active and engaged community of sellers and buyers; (7) macroeconomic events that are outside of our control; (8) our ability to recruit and retain employees; (9) the importance to our success of the trustworthiness of our marketplaces and the connections within our community; (10) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers; (11) the effectiveness of our marketing efforts; (12) the effectiveness of our mobile solutions for sellers and buyers; (13) our ability to expand our business in our core geographic markets; (14) regulation in the area of privacy and protection of user data; (15) our dependence on third-party payment providers; (16) our ability to successfully integrate the Depop and Elo7 acquisitions and execute on our ‘House of Brands’ operating model; (17) acquisitions that may prove unsuccessful or divert management attention; and (18) the potential misuse or disclosure of sensitive information about members of our community and the potential for cyber-attacks. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, and in our Quarterly Report on Form 10-Q for the quarter ending March 31, 2021 and subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. 

Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

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Etsy, Inc. Reports 33% Revenue Growth in the Third Quarter 2016 and Raises Full Year Guidance

November 01, 2016
2016 Guidance Increased for GMS, Revenue, Gross Margin and Adjusted EBITDA Margin
Announces Plan for 5-Month CFO Transition

BROOKLYN, N.Y., Nov. 1, 2016 /PRNewswire/ -- Etsy, Inc., (NASDAQ: ETSY) which operates markets where people around the world connect, both online and offline, to make, sell and buy unique goods, today announced financial results for its third quarter, ended September 30, 2016.

"Our third quarter results reflect the strength of our markets that connect people around the world and our seller services platform that is specifically focused on helping creative entrepreneurs start, scale and manage their businesses," said Chad Dickerson, Etsy, Inc. CEO and Chair. "Based on our year-to-date performance, which has been strong across all of our key metrics, we are raising our full year guidance. We're excited about our progress this quarter and that we are laying more groundwork to deliver long-term results that will benefit our community, including our shareholders."

 

Third Quarter 2016 Financial Summary
(in thousands, unaudited)



Three Months Ended
 September 30,


% Growth

Y/Y


Nine Months Ended
 September 30,


% Growth

Y/Y


2015


2016




2015


2016















GMS

$

568,787



$

677,221



19.1

%


$

1,646,899



$

1,976,092



20.0

%

Revenue

$

65,696



$

87,562



33.3

%


$

185,604



$

254,758



37.3

%

Marketplace revenue

$

32,232



$

38,133



18.3

%


$

92,852



$

111,268



19.8

%

Seller Services revenue

$

32,329



$

48,511



50.1

%


$

89,378



$

139,113



55.6

%

Net loss

$

(6,891)



$

(2,399)



(65.2)

%


$

(49,831)



$

(8,518)



(82.9)

%

Adjusted EBITDA

$

6,224



$

13,056



109.8

%


$

16,958



$

41,847



146.8

%













Active sellers

1,533



1,706



11.3

%


1,533



1,706



11.3

%

Active buyers

22,603



27,140



20.1

%


22,603



27,140



20.1

%

Percent mobile visits

60

%


65

%


500

bps


60

%


64

%


400

bps

Percent mobile GMS

44

%


49

%


500

bps


43

%


48

%


500

bps

Percent international GMS

29.3

%


30.4

%


110

bps


30

%


30.4

%


40

bps

 

For information about how we define our key operating and financial metrics, see our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the SEC on August 4, 2016.


Third Quarter 2016 Operational Highlights

GMS was $677.2 million, up 19.1% compared with the third quarter of 2015. On a currency-neutral basis (excluding the direct impact of currency translation on GMS from goods that are not listed in U.S. dollars) GMS growth in the third quarter of 2016 would have been 20.1%, or approximately one percentage point higher than reported. Growth in GMS was supported by 11.3% year-over-year growth in active sellers and 20.1% year-over-year growth in active buyers.

Continuing the trend we've seen for multiple quarters, mobile visits once again grew faster than desktop visits. Percent mobile visits was approximately 65% compared with approximately 60% in the third quarter of 2015, and approximately 64% in the second quarter of 2016. Percent mobile GMS was approximately 49% compared with 44% in the third quarter of 2015, and 47% in the second quarter of 2016. Year-over-year conversion rates increased across desktop, mobile web, and mobile app for the fourth consecutive quarter. During the third quarter, the mobile app conversion rate expanded more than mobile web and desktop conversion rates resulting in a slight narrowing of the gap between mobile visits and mobile GMS. Mobile app and mobile web GMS each continued to grow significantly faster than desktop GMS during the third quarter.

Percent international GMS was 30.4% in the third quarter of 2016, up from 29.3% in the third quarter of 2015, and down sequentially from 30.7% in the second quarter of 2016. We continue to believe that we can grow international GMS, over time, to represent 50% of our total GMS.

The improved year-over-year performance in percent international GMS was largely driven by continued robust GMS growth between U.S. buyers and international sellers and GMS growth between buyers and sellers outside of the U.S., both in the same country and cross-border. GMS also improved between U.S. sellers and international buyers, for the third consecutive quarter, although GMS between U.S. sellers and international buyers decreased 7% in the third quarter. We continue to believe that the decline in this segment is indicative of the indirect impact of fluctuating currency exchange rates on international buyer behavior, which is difficult to estimate. GMS growth between international buyers and sellers in the same country remains the fastest growing category of international GMS. Excluding our French marketplace ALM, GMS between international buyers and sellers in the same country grew 65% year-over-year during the third quarter. This category has grown to be more similar in size to GMS between U.S. sellers and international buyers and GMS between international buyers and sellers in different countries, although it remains our smallest category of international GMS. We believe the robust growth in this segment demonstrates the progress we are making on our strategy to build local marketplaces, globally.

Recent Operational Highlights:

We remain focused on supporting creative entrepreneurs as they start, scale and manage their businesses and on enhancing the Etsy buyer experience. Recent developments include:

  • Acquired Blackbird Technologies, a machine learning company that complements and augments our existing search capabilities and also adds to our world-class team of talent. We believe that leveraging Blackbird's technology, which combines image recognition and natural language processing using advanced Deep Learning and Artificial Intelligence techniques, will help us improve the quality and relevance of search on Etsy.com.
  • Expanded marketing services options so that Etsy sellers can now easily set up and run Google Shopping Ad campaigns. This tool, launched in October, enables sellers to market their listings and target shoppers off of the Etsy marketplace at key moments when they are searching for items on Google.
  • Launched Direct Checkout in Hong Kong and Singapore, making it easier for sellers to streamline the payment process and transact with buyers around the world. Direct Checkout is now available in 36 countries and 12 currencies.
  • Further enhanced Pattern by Etsy, with new capabilities including guest checkout and new content features such as blogging and e-newsletter sign-up.
  • Entered a new partnership with Intuit that allows Etsy sellers in the U.S. and the U.K. to seamlessly export their Etsy sales and expenses directly into QuickBooks Self-Employed™, enabling them to spend less time on accounting-related tasks.
  • Launched our first-ever brand campaign, Difference Makes Us, to highlight Etsy.com as a go-to shopping destination across a wide variety of retail categories for buyers around the world.

Third Quarter 2016 Financial Highlights

Total revenue was $87.6 million, up 33.3% year-over-year, driven by growth in both Marketplace and Seller Services revenue. Marketplace revenue grew 18.3%, driven by growth in transaction fee revenue and, to a lesser extent, growth in listing fee revenue. Seller Services revenue grew 50.1% year-over-year and was driven primarily by revenue growth in Direct Checkout, which continued to benefit from the integration of PayPal. During the fourth quarter, we will anniversary the integration of Paypal into Direct Checkout, which has been a substantial driver of year-over-year Direct Checkout and overall seller services revenue growth, and therefore, we expect seller services revenue growth to decelerate. Seller Services revenue also benefited from revenue growth from Promoted Listings and to a lesser extent, Shipping Labels, as well as a modest contribution from Pattern by Etsy, our seller service that we launched in April. We continue to expect only modest contributions to GMS and revenue from Pattern over the next three years. Direct Checkout, Promoted Listings and Shipping Labels revenue each continued to grow faster than Marketplace revenue in the third quarter.

Gross profit for the third quarter was $58.2 million, up 40.3% year-over-year, and gross margin was 66.5%, up 330 bps compared with 63.2% in the third quarter of 2015. Gross margin was positively impacted by a one-time payment from a third-party payment processor of $1.1 million during the third quarter of 2016. Gross profit grew faster than revenue in the third quarter due to the leverage we achieved in technology infrastructure, the aforementioned one-time payment and employee-related costs.

Total operating expenses were $55.6 million in the third quarter, up 28.7% year-over-year, and represented 63.5% of revenue, down from 65.8% of revenue in the third quarter of 2015. The decrease in operating expenses as a percent of revenue is primarily due to leverage in digital marketing spend, which excludes brand marketing-related spend on YouTube and Facebook. Digital Marketing spend declined 6.2% year-over-year while paid GMS grew close to three times our overall GMS growth rate. The decrease was also driven, to a lesser extent, by leverage in employee-related costs.

During the third quarter, we continued to gain leverage in our marketing expenses, which, for the third quarter in a row, grew more slowly than revenue. Marketing expenses grew 13.3% year-over-year and were driven by brand marketing spend, particularly on YouTube and Facebook and, to a lesser extent, employee-related costs.

Product development expenses grew 30.6% year-over-year, primarily due to higher employee-related costs. Product development slightly decreased as a percentage of revenue to 17.0% compared with 17.4% in the third quarter of 2015.

G&A expenses increased 43.9% year-over-year driven by increased employee-related costs and overhead expenses, including depreciation expense related to our new Brooklyn headquarters. G&A expenses increased as a percentage of revenue to 25.1% compared with roughly 23.2% in the third quarter of 2015.

Based on build-to-suit accounting requirements, we recognized $0.8 million and $2.0 million in incremental depreciation and non-cash interest expense, respectively, in the third quarter related to our new headquarters, as expected. For more information on the cash impact of our build-to-suit lease agreement, please refer to "Note 14—Commitments and Contingencies" in the Notes to Consolidated Financial Statements in our 2015 Form 10-K filing with the Securities and Exchange Commission. The build out of our new Brooklyn headquarters is complete and we invested approximately $40 million, lower than our original planned investment of up to $50 million in build-out costs.

Net loss for the third quarter of 2016 was $2.4 million, compared with a net loss of $6.9 million in the third quarter of 2015. Etsy's net loss in the third quarter of 2016 included an income tax provision of $4.4 million, a $1.3 million foreign exchange gain, and interest expense associated with the build-to-suit lease accounting related to our new headquarters, all primarily non-cash.

Non-GAAP Adjusted EBITDA for the third quarter was $13.1 million, and grew 109.8% year-over-year. Non-GAAP Adjusted EBITDA margin (i.e., non-GAAP Adjusted EBITDA divided by revenue) was 14.9%, up from 9.5% in the third quarter of 2015. Non-GAAP Adjusted EBITDA performance was driven by revenue growth, and leverage in digital marketing expenses, which excludes brand marketing-related spend on YouTube and Facebook, employee related costs, and technology infrastructure.

Net cash provided by operating activities was $9.2 million in the third quarter of 2016 compared with net cash generated of $5.4 million in the third quarter of 2015. The increase in net cash from operations for the quarter was mainly driven by revenue growth and leverage in operating expenses.

Cash, marketable securities and short-term investments were $270.4 million as of September 30, 2016.

Increasing 2016 Financial Guidance

We are raising our 2016 guidance and reiterating our three-year guidance:

 



2016-2018 CAGR Range


2016 Guidance

GMS Growth


13-17%


at least 17%

Revenue Growth


20-25%


at least 30%

Gross Margin

(by end of 2018)


Mid 60s (%)


at least 65%

Adjusted EBITDA Margin

(by end of 2018)


High teens (%)


at least 14%

 

  • Based on year-to-date growth and our expectations for the fourth quarter, we now expect to achieve the following for 2016:
    • GMS growth of at least 17%
    • Revenue growth of at least 30%
    • Gross margin of at least 65%
    • Adjusted EBITDA margin of at least 14%
  • We continue to anticipate that the key factors impacting revenue and GMS growth over the next three years will include:
    • Further narrowing of the gap between mobile visits and mobile GMS
    • Stable percent international GMS, assuming that currency remains stable compared to average levels in December 2015
    • Continued revenue growth from our existing Seller Services, driven by both adoption and product enhancements
    • Modest contributions from new product launches, such as Google Shopping Ads, which launched in early October, and new Seller Services, including Pattern by Etsy which we launched in April.
  • We continue to anticipate that the key factors impacting our gross margin forecast over the next three years will include:
    • Continued revenue growth from our existing Seller Services, driven by both adoption and product enhancements,
    • The impact from new Seller Services, including Pattern by Etsy
  • We also continue to expect to gain leverage in our operating expense structure over the next three years, particularly within marketing spend.
    • In 2016, we expect operating expenses as a percent of revenue to decline.
    • We expect marketing expense as a percent of revenue to decrease in 2016.
    • We now expect G&A expense to decline as a percent of revenue for the full year.
    • Also, as a result of the acquisition of Blackbird Technologies, product development expense as a percent of revenue will be in line with 2015. We will recognize additional product development expenses of approximately $2 million per quarter over the next three years related to the acquisition. This amount will consist of contingent consideration, in the form of both stock and cash compensation expense, of approximately $1.4 million and amortization expense related to the acquired intangible asset of approximately $0.6 million, which is subject to change upon finalization of our purchase price allocation.
  • In the fourth quarter of 2016, we will anniversary our integration of PayPal into our Direct Checkout seller service. This enhancement, which we launched in October 2015, has been a primary driver for Direct Checkout revenue growth this year and Seller Services revenue growth overall. We expect Direct Checkout revenue to grow solidly in the fourth quarter, but with the anniversary of the integration, growth is expected to decelerate. Based on this and other contributing factors, we expect to deliver the following fourth quarter results:
    • GMS growth of at least 15%
    • Revenue growth of at least 20%
    • Gross margin of at least 65%
    • Adjusted EBITDA margin of at least 13%

Etsy is not able, at this time, to provide GAAP targets for net income margin for the fourth quarter and full year 2016 and 2016-2018 because of the difficulty of estimating certain items that are excluded from non-GAAP Adjusted EBITDA margin, including provision for income taxes, acquisition-related stock-based compensation expense and foreign exchange gain or loss, the effect of which may be significant.

Chief Financial Officer Transition

Etsy also announced today that CFO, Kristina Salen, has decided to leave the company at the end of March 2017. Kristina intends to pursue other professional opportunities following a 5-month transition period during which Etsy will focus on recruiting her successor. Etsy intends to launch a formal search immediately.

"As our first-ever CFO, Kristina has been an incredible partner to me and the rest of the Etsy team over the past four years," said Chad. "Not only has she built and scaled the finance function here at Etsy, but she also led us through our IPO as well as several other important milestones during our first year as a public company. We support her desire to pursue new opportunities and adventures as she continues to grow professionally. We will miss her after she completes the transition in March 2017. Over the next five months we look forward to her continued leadership during our search for her successor."

For additional information about the planned transition, please see Kristina's post on Etsy's news blog.

Webcast and Conference Call Replay Information

Etsy will host a webcast to discuss these results at 5:30 p.m. ET today. To access the live webcast, please visit the Etsy Investor Relations website, investors.etsy.com and go to the Investor Events section.

A replay will be available following the live webcast and may be accessed on the same website. A telephonic replay will also be available through midnight ET on November 15, 2016 at (855) 859-2056 or (404) 537-3406; conference ID 95201314.

About Etsy

Etsy operates markets where millions of people around the world connect, both online and offline, to make, sell and buy unique goods. Etsy also offers a wide range of seller services and tools that help creative entrepreneurs start, scale and manage their businesses. The Etsy community includes creative entrepreneurs who sell on our platform, thoughtful consumers looking to buy unique goods in our marketplace, retailers and manufacturers who partner with Etsy sellers to help them scale their businesses and Etsy employees who maintain our platform and nurture our ecosystem. Our mission is to reimagine commerce in ways that build a more fulfilling and lasting world, and we're committed to using the power of business to strengthen communities and empower people.

Etsy was founded in 2005 and is headquartered in Brooklyn, New York.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information related to our possible or assumed future results of operations and expenses, our financial guidance, our mission, business strategies and plans, business environment and future growth. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "anticipates," "believes," "expects," "may," "plans," "will," "intends," or similar expressions and the negatives of those terms.

Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include (i) our history of operating losses; (ii) the fluctuation of our quarterly operating results; (iii) adherence to our values and our focus on long-term sustainability, which may negatively influence our short- or medium-term financial performance; (iv) the importance to our success of the trustworthiness of our marketplace and the connections within our community; (v) our ability to expand successfully into markets outside of the United States; (vi) increases in our marketing efforts to help grow our business, which may not be effective at attracting and retaining Etsy sellers and Etsy buyers; (vii) our payments system, which depends on third-party providers and is subject to evolving laws and regulations; (viii) our ability to add new members to our community, grow our ecosystem and open new sales channels for Etsy sellers; (ix) our ability to develop new offerings to respond to the changing needs of Etsy sellers and Etsy buyers; (x) the effectiveness of our mobile solutions for Etsy sellers and Etsy buyers; and (xi) our ability to compete effectively. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

 

Etsy, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)



As of
December 31, 
 2015


As of
September 30, 
 2016





ASSETS




Current assets:




Cash and cash equivalents

$

271,244



$

188,030


Short-term investments

21,620



82,338


Accounts receivable, net

20,275



20,886


Prepaid and other current assets

9,521



10,840


Deferred tax charge—current

17,132



17,132


Funds receivable and seller accounts

19,262



34,180


Total current assets

359,054



353,406


Restricted cash

5,341



5,341


Property and equipment, net

105,021



123,708


Goodwill

27,752



37,765


Intangible assets, net

2,871



8,772


Deferred tax charge—net of current portion

51,396



39,169


Other assets

1,626



1,040


Total assets

$

553,061



$

569,201


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

14,382



$

7,323


Accrued expenses

31,253



20,037


Capital lease obligations—current

5,610



6,563


Funds payable and amounts due to sellers

19,262



34,180


Deferred revenue

4,712



5,595


Other current liabilities

4,903



3,880


Total current liabilities

80,122



77,578


Capital lease obligations—net of current portion

7,571



5,325


Deferred tax liabilities

61,420



62,882


Facility financing obligation

51,804



55,214


Other liabilities

21,646



23,746


Total liabilities

222,563



224,745


Total stockholders' equity

330,498



344,456


Total liabilities and stockholders' equity

$

553,061



$

569,201


 

Etsy, Inc.
Condensed Consolidated Statements of Operations
(in thousands except share and per share data, unaudited)



Three Months Ended
 September 30,


Nine Months Ended
 September 30,


2015


2016


2015


2016









Revenue

$

65,696



$

87,562



$

185,604



$

254,758


Cost of revenue

24,165



29,314



66,783



86,323


Gross profit

41,531



58,248



118,821



168,435


Operating expenses:








Marketing

16,542



18,736



44,295



51,788


Product development

11,406



14,897



31,487



38,967


General and administrative

15,250



21,942



53,339



63,555


Total operating expenses

43,198



55,575



129,121



154,310


(Loss) income from operations

(1,667)



2,673



(10,300)



14,125


Total other expense

(1,129)



(709)



(19,802)



(405)


(Loss) income before income taxes

(2,796)



1,964



(30,102)



13,720


Provision for income taxes

(4,095)



(4,363)



(19,729)



(22,238)


Net loss

$

(6,891)



$

(2,399)



$

(49,831)



$

(8,518)


Net loss per share—basic and diluted

$

(0.06)



$

(0.02)



$

(0.59)



$

(0.08)


Weighted average common shares outstanding—basic and diluted

111,329,917



113,757,212



84,195,227



112,980,639


 

Etsy, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)



Nine Months Ended
 September 30,


2015


2016





Cash flows from operating activities




Net loss

$

(49,831)



$

(8,518)


Adjustments to reconcile net loss to net cash provided by operating activities:




Stock-based compensation expense

6,559



9,008


Stock-based compensation expense—acquisitions

3,158



2,582


Contribution of stock to Good Work Institute (formerly Etsy.org)

3,200




Depreciation and amortization expense

14,041



15,620


Bad debt expense

1,473



1,215


Foreign exchange loss (gain)

15,727



(3,071)


Amortization of debt issuance costs

122



137


Non-cash interest expense



3,274


Interest on marketable securities



840


Net unrealized loss on warrant and other liabilities

3,136




Loss on disposal of assets

476



1,134


Amortization of deferred tax charge

15,093



12,227


Excess tax benefit from exercise of stock options

(2,472)



(1,609)


Changes in operating assets and liabilities

8,325



(4,598)


Net cash provided by operating activities

19,007



28,241


Cash flows from investing activities




Acquisition of business, net of cash acquired



(7,880)


Purchases of property and equipment

(9,524)



(34,153)


Development of internal-use software

(7,329)



(8,441)


Purchases of marketable securities

(18,552)



(108,652)


Sales of marketable securities

17,270



47,136


Net cash used in investing activities

(18,135)



(111,990)


Cash flows from financing activities




Repurchase of stock



(633)


Proceeds from public offering

199,467




Proceeds from exercise of stock options

2,285



7,808


Excess tax benefit from the exercise of stock options

2,472



1,609


Payments on capitalized lease obligations

(2,262)



(4,382)


Deferred payments on acquisition of business



(649)


Payments relating to public offering

(2,919)




Net cash provided by financing activities

199,043



3,753


Effect of exchange rate changes on cash

(3,291)



(3,218)


Net increase (decrease) in cash and cash equivalents

196,624



(83,214)


Cash and cash equivalents at beginning of period

69,659



271,244


Cash and cash equivalents at end of period

$

266,283



$

188,030


 

Use of Non-GAAP Financial Measures

In this press release, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net loss adjusted to exclude: interest and other non-operating expense, net; provision for income taxes; depreciation and amortization; stock-based compensation expense; net unrealized (gain) loss on warrant and other liabilities; foreign exchange loss (gain), acquisition-related expenses and contributions to Good Work Institute (formerly Etsy.org). Below is a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.

We have included Adjusted EBITDA in this press release because it is a key measure used by our management and board of directors to evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans, determine incentive compensation and assess the health of our business. As our Adjusted EBITDA increases, we are able to invest more in our platform.

We believe that Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business as it removes the impact of certain non-cash items and certain variable charges.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
  • Adjusted EBITDA does not consider the impact of stock-based compensation expense or changes in the fair value of warrants;
  • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
  • Adjusted EBITDA does not consider the impact of foreign exchange loss (gain);
  • Adjusted EBITDA does not reflect acquisition-related expenses;
  • Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense;
  • Adjusted EBITDA does not reflect the impact of our contributions to Good Work Institute (formerly Etsy.org); and
  • other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

 

Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA
(in thousands, unaudited)



Three Months Ended
 September 30,


Nine Months Ended
 September 30,


2015


2016


2015


2016









Net loss

$

(6,891)



$

(2,399)



$

(49,831)



$

(8,518)


Excluding:








Interest and other non-operating expense, net (1)

453



2,046



939



3,476


Provision for income taxes

4,095



4,363



19,729



22,238


Depreciation and amortization (1)

4,968



5,786



14,041



15,620


Stock-based compensation expense (2)

2,204



2,975



6,559



9,008


Stock-based compensation expense—acquisitions (2)

719



1,110



3,158



2,582


Net unrealized (gain) loss on warrant and other liabilities

(3)





3,136




Foreign exchange loss (gain)

679



(1,337)



15,727



(3,071)


Acquisition-related expenses



512





512


Contribution to Good Work Institute (formerly Etsy.org) (3)





3,500




Adjusted EBITDA

$

6,224



$

13,056



$

16,958



$

41,847


 

(1) Included in interest and depreciation expense amounts above, interest and depreciation expense related to our new headquarters under build-to-suit accounting requirements in the three and nine months ended September 30, 2015 and 2016 is as follows (in thousands):

 


Three Months Ended
 September 30,


Nine Months Ended
 September 30,


2015


2016


2015


2016









Interest expense

$



$

1,989



$



$

3,274


Depreciation



822





1,369


 

(2) Total stock-based compensation expense included in the consolidated statements of operations is as follows (in thousands):

 


Three Months Ended
 September 30,


Nine Months Ended
 September 30,


2015


2016


2015


2016









Cost of revenue

$

149



$

288



$

681



$

738


Marketing

120



229



349



628


Product development

756



1,234



1,981



3,117


General and administrative

1,898



2,334



6,706



7,107


Total stock-based compensation expense

$

2,923



$

4,085



$

9,717



$

11,590


 

(3) Etsy made a one-time contribution of 188,235 shares of common stock totaling $3.2 million and cash of $0.3 million to Good Work Institute (formerly Etsy.org) during the first and second quarters of 2015, respectively.

 

To view the original version on PR Newswire, visit:https://www.prnewswire.com/news-releases/etsy-inc-reports-33-revenue-growth-in-the-third-quarter-2016-and-raises-full-year-guidance-300355320.html

SOURCE Etsy, Inc.

Investor Relations Contact: Etsy, Jennifer Beugelmans, ir@etsy.com ; Media Relations Contact: Etsy, Kelly Clausen, press@etsy.com

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