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Etsy: a Hand-crafted Commerce Site

etsyEtsy (NASDAQ: ETSY) operates an ecommerce marketplace, focused on handmade and vintage products and supplies, including clothing, jewelry, electronics, household goods, bath and beauty products, wine, do-it-yourself kits, and toys. Debunking the myth that successful ecommerce sites can be operated only from Silicon Valley or Seattle, Etsy’s operations are based in Brooklyn, one of the five boroughs of New York City. Consensus estimates call for revenue of $273 million in 2015, an increase of 39 percent over 2014, and a Loss per share of $0.69 in 2015, as compared to an operating loss of $15 million in 2014.

Etsy came public on the NASDAQ in an IPO priced at $16 per share on April 16, 2015 in a transaction led by investment banks Goldman Sachs, Morgan Stanley, Allen & Company, Loop Capital Markets, and The Williams Capital Group. Originally structured as a 16.7 million share IPO, the deal was expanded through the underwriter’s allotment to ultimately encompass 19.2 million shares, with 13.3 million shares sold by the company, and 5.8 million shares sold by existing shareholders, up from 3.33 million at the time the deal was priced. All told, the company raised nearly $200 million. Post-IPO the company has about $293 million in cash and no debt. At a recent share price of $13, Etsy’s market cap is roughly $1.5 billion.

Etsy is the most recent in a string of ecommerce IPOs over the last couple years, which include Zulily (NASDAQ: ZU), an ecommerce site focused on Moms, which came public in November of 2013, as well as Boston-based Wayfair (NYSE: W), an October 2014 IPO focused on home furnishings. Recognizing the growing percentage of consumer products purchased over the internet, and that not even Amazon.com can completely dominate web commerce, Etsy occupies a unique niche in online commerce, offering handcrafted, rather than mass produced products, including so-called vintage products, which must be 20 years of age or older.

Etsy’s revenue comes from listing fees from sellers on its sites, typically $0.20 per listing fee, as well as a 3.5 percent fee on the value of an item sold on the site. These fees account for about 55 percent of revenue. In addition, Etsy collects seller services fees, consisting of promoted listings, direct checkout fees, shipping labels, and wholesale fees. Together these comprise nearly all of the remainder. Like eBay, Etsy does not hold inventory or sell goods, an important selling point for sellers concerned that Etsy might compete with them. As of the end of 2014, Etsy claimed over 19.8 million active buyers, and 1.4 million sellers.

To learn where Etsy trades relative to its Internet IPO peers of the last seven years, please contact Battle Road Research for additional information.

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MaxPoint Interactive: Predicting Customer Behavior

xJ_aOzgX_400x400MaxPoint Interactive (NYSE: MXPT) provides an advertising technology platform that helps national brands drive local in-store sales by predicting likely buyers of a product at a particular retail location, and then executes digital marketing campaigns to reach the buyer. Consensus estimates call for revenue of $90 million in 2015 and a loss of $1.27 per share, as compared to revenue of $62 million and a loss of $5.4 million in 2014. The company revenue presented here excludes Traffic Acquisition Costs, aka TAC.

Founded in 2006 and based in Morrisville, North Carolina, MaxPoint staged its IPO on the NYSE on March 6, 2015 in a 6.5 million share IPO priced at $11.50 per share, in a $75 million transaction in which all net proceeds went to the company. The IPO was led by Goldman Sachs & Company, Deutsche Bank Securities, Pacific Crest, Needham, and William Blair. At a recent share price of $8.30, MaxPoint’s market cap is roughly $216 million.

Based on the premise that an estimated 88 percent of total US retail purchases still occur in stores, rather than online, according to research from EuroMonitor, MaxPoint helps retailers and national brands drive purchases in local stores. It does so by utilizing business intelligence captured in statistical models to analyze what it claims to be over 20 billion daily data points. The company’s models track 44,000 specific neighborhoods, capturing shopper demographics, purchasing power, and other attributes, in order to orchestrate a digital marketing campaign for in-store purchases of consumer products like cars, healthcare products, and certain types of high end consumer products that are still purchased primarily in stores rather than through Amazon.com and other online shopping sites.

As of the beginning of 2015, MaxPoint has 479 enterprise customers that conducted at least $10,000 of business with it in the last 12 months. MaxPoint, according to its website, “has worked” with the 20 largest national advertisers in the US, as well as the top 10 US ad agencies, though it is not clear how many of these it is working with currently. The company’s top ten customers accounted for 30 percent of sales in 2014, and no customer accounted for more than 10 percent of sales.

MaxPoint is the most recent public entrant into the crowded field of advertising technology, which sports no less than seven IPOs in the last several years. The sector has been among the most disappointing technology sub-sectors, with most companies not posting profits, and most trading at severely distressed EV/Sales ratios, based on the expectation for further losses. These include Millennial Media (NYSE: MM), Tremor Video (NYSE: TRMR), YuME (NYSE: YUME), and Rocket Fuel (NASDAQ: FUEL). The stand-out exception appears to be France-based Criteo (NASDAQ: CRTO).

Post-IPO, MaxPoint has a decent balance sheet, with about $39 million in net cash (inclusive of $44 million in debt). To see how MaxPoint Interactive screens against a comparable group of over 40 Internet IPOs of the last seven years, please contact Battle Road Research.