Etsy's Q1 Earnings Miss Estimates, Challenging Q2 View Raises Concerns

Core Viewpoint - Etsy's shares have declined 19.7% year to date, underperforming both the Zacks Retail and Wholesale sector and the Zacks Internet-Commerce industry, which saw declines of 3.6% and 7.1% respectively [1] Financial Performance - First-quarter 2025 earnings were reported at 46 cents per share, missing the Zacks Consensus Estimate by 8% and decreasing 4.2% year over year [1] - Revenues for the first quarter of 2025 increased by 0.8% year over year to $651.2 million, exceeding the Zacks Consensus Estimate by 1.33% [2] - Marketplace revenues were $458.5 million, accounting for 70.4% of total revenues, down 1.8% from the previous year [3] - Services revenues reached $192.7 million, representing 29.6% of total revenues, and increased by 7.7% year over year [4] User Metrics - The total number of active buyers decreased by 3.4% year over year to 88.5 million, while the active buyer base decreased by 1.7% to 94.8 million, surpassing the consensus mark of 94.4 million [5] - The active seller base was 8.1 million, down 11.3% year over year, missing the consensus mark of 8.9 million [5] Gross Merchandise Sales (GMS) - Consolidated GMS was $2.8 billion, down 6.5% on a reported basis and 5.7% on a currency-neutral basis from the prior year [6] - The Etsy marketplace's GMS was $2.3 billion, reflecting an 8.9% year-over-year decline on a reported basis [6] Operating Results - Total operating expenses for the first quarter were $481.4 million, up 23.2% year over year, with operating loss reported at $22.3 million compared to an operating income of $68.1 million in the prior year [7][9] - Adjusted EBITDA increased by 1.9% year over year to $171.1 million, with an adjusted EBITDA margin of 26.3% [9] Balance Sheet - As of March 31, 2025, cash and cash equivalents totaled $649.2 million, down from $811.2 million at the end of the previous quarter [10] - Long-term debt remained unchanged at $2.3 billion [10] Guidance - For the second quarter of 2025, Etsy anticipates a take rate of 23.3% and expects consolidated GMS to decline at a rate similar to or slightly better than the first quarter's year-over-year decline [11]