Stock Story -
Online marketplace Etsy (NASDAQ:ETSY) beat analysts' expectations in Q4 FY2023, with revenue up 4.3% year on year to $842.3 million. It made a GAAP profit of $0.62 per share, down from its profit of $1.21 per share in the same quarter last year.
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Etsy (ETSY) Q4 FY2023 Highlights:
- Revenue: $842.3 million vs analyst estimates of $827.2 million (1.8% beat)
- EPS: $0.62 vs analyst expectations of $0.78 (20.4% miss)
- Free Cash Flow of $282.5 million, up 36.1% from the previous quarter
- Gross Margin (GAAP): 69.6%, down from 72% in the same quarter last year
- Active Buyers: 96.48 million, up 1.41 million year on year
- Market Capitalization: $9.09 billion
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Online MarketplaceMarketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales GrowthEtsy's revenue growth over the last three years has been strong, averaging 22.4% annually. This quarter, Etsy beat analysts' estimates but reported lacklustre 4.3% year-on-year revenue growth.
Usage Growth As an online marketplace, Etsy generates revenue growth by increasing both the number of buyers on its platform and the average order size in dollars.
Over the last two years, Etsy's active buyers, a key performance metric for the company, grew 3.4% annually to 96.48 million. This is one of the lowest rates of growth in the consumer internet sector.
In Q4, Etsy added 1.41 million active buyers, translating into 1.5% year-on-year growth.
Revenue Per BuyerAverage revenue per buyer (ARPB) is a critical metric to track for consumer internet businesses like Etsy because it measures how much the company earns in transaction fees from each buyer. Furthermore, ARPB gives us unique insights as it's a function of a user's average order size and Etsy's take rate, or "cut", on each order.
Etsy's ARPB growth has been decent over the last two years, averaging 5.1%. The company's ability to increase prices while growing its active buyers demonstrates the value of its platform. This quarter, ARPB grew 2.8% year on year to $8.73 per buyer.
Key Takeaways from Etsy's Q4 Results It was good to see Etsy narrowly top analysts' revenue expectations this quarter. Free cash flow was also solid. On the other hand, revenue & user growth has regrettably slowed. Overall, this was a mixed quarter for Etsy. The company is down 4.3% on the results and currently trades at $73.85 per share.