What Happened With Etsy?

By Paul Ausick Updated Apr 28, 9:47AM EDT · Published May 19, 4:47PM EDT

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Etsy Inc. (NASDAQ: ETSY) reported first-quarter 2015 results after markets closed on Tuesday. The online marketplace where craftspeople sell and buy handmade goods posted diluted net loss per share of $0.84 and $58.54 million in revenues. In the same period a year ago, the company reported a net loss of $0.01 on revenue of $40.54 million. Analysts had no estimates for the quarter because the first quarter ended prior to Etsy’s IPO in mid-April.

In our preview of the company’s earnings, we suggested that absent any real history the main thing to look for here was how investors and analysts react to the results. So far in the after-hours session, the response from investors has been to sell.

Etsy tried to get investors and analysts to look at user growth and gross sales. Those numbers were good, but not outstanding. Active sellers rose 25.8% to 1.43 million and active buyers rose to 20.84 million, up 36.5% compared with the first quarter of last year. Mobile visits are up, but only by 7.5%, and mobile sales are up by just 6.2%. Neither number will make an investor’s heart go pitty-pat.

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The company’s CEO put the best spin on the results that he could manage:

We made progress down our path to make Etsy an everyday experience, build local marketplaces, globally, offer high-impact seller services, and expand the Etsy economy. We will continue to concentrate on creating long-term value for Etsy and our community, which we believe will result in sustainable long-term returns for our investors.

That expansion is costing the company serious cash. Operating expenses rose nearly 73% year over year, driven primarily by marketing and G&A spending. The first quarter net loss totaled $36.6 million compared with a loss of just $500,000 in the year ago quarter. Net cash from operations rose from $6.2 million a year ago to $8.9 million this year. Adjusted EBITDA rose from $6.1 million a year ago to $6.67 million this year.

For the second quarter, Etsy said it expects to hire more employees, spend more on marketing and ring up some one-time expenses. The company also said that if currency exchange rates continue at current levels, that will have a (presumably) negative impact on sales outside the United States.

Shares were plastered after hours, trading down nearly 14% at $18.10, well below the post-IPO low of $19.15. The stock’s high is $35.74.

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.