Dive Brief:

• Etsy on Thursday reported that second quarter gross merchandise sales rose 21.4% to $1.1 billion from $901.7 million in the year-ago quarter, as revenue (including the marketplace and services) rose 36.8% to $181.1 million from $132.4 million a year ago. That missed the FactSet​ analyst expectation for $183.1 million, according to MarketWatch.

• The marketplace's active buyer count rose 19.3% to 42.7 million, and its number of active sellers rose 17.7% to 2.3 million, according to a company press release.

• Adjusted EBITDA rose 43.4% year over year to $39.7 million, with adjusted EBITDA margins expanding by 100 basis points to 22%, as net income surged 439.3% to $18.2 million from $3.4 million in the year-ago period.

Dive Insight:

Etsy has managed to turn its fortunes around under CEO Josh Silverman, who arrived two years ago as the maker marketplace faltered. Despite its profit surge in the quarter, investors punished the company over its sales miss, sending shares down as much as 8%.

But Etsy expects continued improvements, as reflected in its revenue guidance boost. The company now expects its 2019 revenue to rise 32% to 34% to between $797 million and $809 million (up from its earlier expectations for a 30% to 32% increase to $785 million to $797 million), although it also expects adjusted EBITDA margin to expand 22% to 24% to between $177 million and $193 million (down from its earlier expectation for a 23% to 25% expansion to $182 million to $198 million).

On a conference call with analysts Thursday, Silverman kept the focus on the company's recent growth and future initiatives, noting that an earlier marketing boost and search enhancements led to sales growth. "The second half of this year also includes a trio of bold new initiatives that we expect will catalyze additional future growth," he said, according to a Seeking Alpha transcript, calling out the marketplace's new free shipping program, the impending launch of a unified ad platform called Etsy Ads and the acquisition of musical instruments marketplace Reverb.

Etsy Ads is poised to help sellers drive sales and boost Etsy's revenue — a tactic that has worked wonders for Amazon, where advertising has stoked revenues in recent quarter. "So this is an opportunity for us to keep our mandatory fees low while offering great value-added services that [sellers] may or may not choose to opt in to but as they choose to opt in to them, the effect is that Etsy's take rate goes up," Silverman said.