How to prepare for Etsy Inc Earnings Call on May 8, 2019

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Etsy Inc.(EA) reported its 4th quarter on Monday, Feb 25, 2019, after the market closing bell. Here is a paraphrase of the key highlights from the call and my take below.

Key Highlights from Earnings Calls Event in Q1 2019 for Etsy Inc.


Call Presenter Key Points
CEO
Josh Silverman
  • Etsy's growth was higher than the overall e-commerce market in 2018. Gaining share in the addressable market.
  • Continued focus on improving the Etsy platform paying off.
  • Invested in the product experience for both buyers and sellers.
  • Improved customer support and infrastructure.
  • Tested new marketing channels.
  • Added context-specific search ranking, signals, and personalization.
  • Cyber Monday resulted in $19k per minute in gross merchandising sales.
  • Step back in Q1 to optimize spend in higher potential channels and strategies.
CFO
Rachel Glaser
  • Improvements in gross merchandising sales per active buyer. 
  • Focus on increasing habitual buyers (buyers 6+ times ).
  • EPS $0.32 compared to $0.36 compared to prior quarter.
  • Strong cash flow generated, nearly tripled in 2018.
  • Repurchased $135million of common stock.
  • $200m revolving credit facility.
  • Uncertainty due to the macro environment:
  • 2019 Guidance:
    • GMS : 17% - 20%
    • Revenue: 29% - 32% 
  • Soft Q1 2019 start. FX continues to be a headwind.
  • Modeling consideration: 
    • New product development investments
    • Marketing in TV and digital video back-half loaded in 2019.
    • Cloud migration expense until 2020.
    • Single transaction per month for sellers lowers credit card fees.

Questions by Audience:

  • What marketing investments in play in 2019 and what modeling considerations going forward? (Goldman Sachs Group).
  • Can Etsy provide more insights into habitual buyers? (Deutsche Bank)
  • What type of buyer profile new marketing is generating? (Citi)
  • What are the efforts on organic search front? (Citi)
  • What are other factors for a softer quarter to date in 2019? (KeyBank Capital Markets)
  • What are the targets for free shipping share in 2019? What are the updates on international post-integration? (RBC Capital Markets)
  • How far beyond 2019 does the price increase in the year 2018 impact? (D.A. Davidson)
  • What are the impacts of promoted listings and free shipping efforts on business? (Roth Capital Partners)
  • What are the one or two main drivers that drove the growth of gross merchandising sales? (Wedbush Securities)
  • What is the current headcount and how is progress on cloud conversion? (Loop Capital Markets )
  • How does the desktop conversion rate compare with the mobile web conversion rate now? (BTIG Capital Markets)
  • What opportunities does the strong cash flow offer? (IFS securities) 
Links to the Etsy Inc Q1 2019 Earnings call

Audio Transcript

Next Quarter Earning Call - May 8, 2019, after the closing bell.

What is my take on Q2 2019 event about earnings call from Etsy Inc.?

From the Etsy call that happened in the first quarter of 2019, I heard strength in Etsy is growth and cash flow. I heard cloud migration and I also heard test and learn approach on marketing. So I went ahead and spent time listening to investors day event that occurred on March 7, 2019. The text that follows will provide you 50,000 feet view of the business strategy shared on the recent investors day. 
Focus:

  • The collection of unique items is a core strength for Etsy.
  • So investments are focused on:
    • Best class search and discovery experience
    • A personalized touch to the listings
    • Building trust with buyers and sellers 
Approach: Machine learning and analytics on the heart of the work at Etsy

Guiding Principles:

  • To keep commerce human.
  • We commit to our craft.
  • We minimize waste.
  • We embrace differences.
  • We dig deeper.
  • We lead with optimism.
Levers of Growth:

  • Active Buyers
  • Frequency of buying
  • Average order value
After hearing to the investor presentation and last year's growth, I think the key things that I liked are:

  1. 2m+ buyers with 6 or more transactions (habitual buyers). 
  2. 80% of traffic is organic and flows free to Etsy.
  3. Occasion oriented buying at Etsy.
  4. Analytics and machine learning oriented experimentation.
  5. High-value system focus.
  6. Strong cash flow growth in 2018.
  7. Green and responsible citizenship focus alongside business focus.

The fact, that Etsy coined the term of habitual buyers and measured habitual buyers to be $2m at the time of the conference. The whole focus of the company is to deepen the relationship with these customers. I believe that Etsy is setting itself for longer-term business success. I think Etsy is a great investment opportunity for long term buying.

Given that Q1 was declared softer in the previous call, I want to hear to this quarter's call before I invest though. 

 Disclosure:
At the time of writing this blog, I do not own Etsy Inc.(Etsy) stocks.

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