1/ $ETSY 2Q’21 Update
Mixed quarter. Slightly disappointing guidance, and some word of caution for even beyond 3Q’21.
We have entered the treacherous stage for Covid beneficiary stocks, and the broader picture may remain a bit hazy for quite some time.
Here are my notes.
2/ For the past 5 quarters, Etsy comfortably beat high end of GMS guidance. Not this time even though it spent 31.7% of revenue in Sales & Marketing (+491 bps YoY) in 2Q’21.
3/ # of sellers sequentially increased by 531K QoQ which is really impressive. For context, it took Etsy 4 quarters pre-pandemic to add 587K sellers.
Many one-off mask buyers left which stalled # of buyers.
4/ Etsy still added 8 mn new buyers in the quarter vs ~4 mn they were adding pre-pandemic. GMS per new buyer is also accelerating at a much faster rate.
5/ Slightly disappointing to see # of habitual buyers, who are just 9% of active buyers but drive 40% of GMS, not increase sequentially in this quarter.
Buyer retention is consistently ~500 bps higher pre-pandemic levels which calm my nerves.
GMS per active buyer +22%
6/ One metric I would suggest @jgsilverman to provide is how many habitual buyers are buying from multiple categories.
As a shareholder, I would like to see buyers coming back to Etsy for different category of products.
7/ Etsy launched XWalk, Large-scale, real-time graph retrieval engine that provides more relevant search results and narrows the semantic gap, boosting conversion and repeat purchase rate for buyers.
Xwalk reduced the number of dead ends (queries with 0 search result) by >1 mn.
8/ The product experience has improved significantly.
“While we aren't in a race to be fastest, it's critical that we have transparent expectations that our
sellers can meet reliably.”
9/ Last week, Etsy launched Star Seller program. I really like this initiative as it sets clear expectation what it means to be a good seller on Etsy.
“We believe this creates a race to the top for sellers”
10/ “We focused on organic product improvements and to date, have invested very few marketing dollars to drive app downloads.”
Etsy started to prompt buyers to download the app, which is highest converting experience, in Q2 which is showing results.
11/ Today, Etsy calls itself House of Brands with Reverb, Depop, Elo7 in addition to the core Etsy brand.
“…we think Depop is potentially to Etsy like Venmo was to PayPal, a new way to shop for the new generation”
12/ “We now have a foothold in Latin America, a region with high barriers to entry where we previously did not have a meaningful customer base.”
Josh seems to think Brazil is a tough market to crack from his eBay experience and hence preferred a native brand Elo7 to enter LATAM.
13/ “will take multiple quarters and years to operationalize all of the many ways that we believe we can help Depop and Elo7 grow.”
“We launched a new premium ad platform for Bump" (on Reverb)
14/ Some ways Etsy can help optimize the acquisitions over time.
15/ International continues to outpace US GMS growth and now 41% of overall GMS.
16/ One of the drivers for increased S&M is Etsy’s focus on top-of-the-funnel marketing.
Long-term, I think it’s the right strategy even if it decreases margins in the short-term.
17/ In 1Q’21, Etsy did not buyback any share, and when stock went down 40% from the peak, I wondered whether Etsy will buyback in 2Q’21. They did. Etsy repurchased $180 Mn shares (SBC ~$48 mn).
18/ Outlook: mid-teens GMS growth guidance (excluding masks) for core Etsy. Overall consolidated (i.e. House of Brands) GMS guidance $2.9-3 Bn.
Consolidated take rates guidance 17.4% (but 17.7% for core Etsy+Reverb). Depop and Elo7 will have 300 bps impact on adj EBITDA margin.
19/ Etsy bears will have a field day with these two paragraphs.
Management outlined a wall of worry for 4Q’21 and 1Q’22. If you are not a long-term investor, this can get uncomfortable.
End/ Here’s my deep dive on $ETSY from October 2020: mbi-deepdives.com/etsy-a-handmad…
All my twitter threads here: mbi-deepdives.com/twitter-thread…
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