Shares of Etsy plunged today after the company reported roughly in-line revenue and a wider-than-expected loss. Etsy, a popular marketplace for handmade goods, reported top line of $58.5 million, ahead of expectations of $58 million. However, the company lost $36.6 million in the quarter, or $0.84 per share.
In the year-ago quarter, Etsy had a far-smaller $463,000 loss. Etsy is off over 13 percent in after-hours trading as of the time of writing.
The company’s revenue growth, compared to the year-ago quarter of 44.4 percent, greatly outpaces the expansion of sales on its platform, which posted a slimmer 28.2 percent rise. Investors may view that discrepancy as indicative of potentially deprecated revenue growth.
Adding to the negative pressure is the company’s notes on its second — current — quarter. Quoted at length to preserve tone [emphasis mine]:
We’d like to highlight a few factors that we believe will impact Etsy’s second quarter 2015 results. First, if foreign exchange rates continue at current levels, it will likely continue to impact buyer behavior outside of the U.S. Second, we expect to increase the pace of hiring in the second quarter compared with both the first quarter of 2015 and second quarter of 2014. Third, we plan to spend more on marketing in absolute dollars in the second quarter compared with both the first quarter of 2015 and the second quarter of 2014. Finally, we would like to remind investors that second quarter 2015 results will include some one-time expenses such as Etsy’s $300,000 cash contribution to Etsy.org described in the Etsy prospectus filed on April 16, 2015 and approximately $300,000 in IPO expenses not deductible from Etsy’s IPO proceeds.
That implies slower revenue growth, increased headcount and rising costs. Combined, you can spell that in the following way: margin pressure. Etsy’s operating expenses rose 72.6 percent compared to the year-ago quarter.
The chart is illustrative:
Etsy went public at $16 per share, soared to more than $35, and is now trading under the $18 mark.