Q3 2020 eBay Inc Earnings Call
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I'd like to hand, the conference over to your speaker today, Joe, but lumpy VP of communications and Investor Relations. Please go ahead Sir.
Thank you good afternoon.
Thanks for joining us and welcome to the base earnings release conference call for the third quarter of 2001.
Joining me today on the call.
Our chief Executive Officer, and any kind of our interim Chief financial Officer.
Providing a slide presentation to accompany Andy's commentary during the call, which is available through the Investor Relations section.
And that sort of stuff.
Before we begin I would like to remind you that during the course of this conference call. We will discuss some non-GAAP measures related to well performance you can find the reconciliation of these measures to the nearest comparable GAAP measures and slide presentation accompanying this conference call.
Additionally, all revenue growth rates mentioned, Didnt Jamie's Andy's remarks represent FX neutral.
Aspen's into.
Indicate otherwise.
This conference call management will make forward.
Looking statements, including without limitation statements regarding our future performance and expected financial results. These forward looking statements involve known and unknown risks uncertainties and our actual results may differ materially.
Right.
You can find more information about risks uncertainties and other factors that could affect our operating results.
Our most recent periodic reports on form 10-K and form 10-Q.
And our earnings release from earlier today.
You should not rely on any forward looking statements all information in this presentation is as of October 28, 2020, and we did not intend and undertake no duty to update this information.
With that ill turn it.
It over to Jim.
Thanks, Joe and good afternoon, everyone and thank you for joining US today I'll walk you through some of the key highlights from the quarter and update.
Hi Tech Reimagination at the company.
Andy to discuss recent performance and near term outlook.
Before I do that I'd like to take a moment and reflect on a major milestone ebay past plasma.
25 years ago during Labor day weekend, our founder Pierre launched ebay as a technology experiment.
The operation once you create open fair interested in marketplace that empower people and created economic opportunity for all.
Since our inception EBIT pioneered online shopping.
On a brand that has shaped the modern commerce landscape we are.
Very proud of our accomplishments and today, we are 183 buyers to nearly 19 million cell lines around the world.
Broad and diverse set of categories.
Operating during his thoughts on our buyers.
Buyers and sellers need most lots of Morningstar. Please go and working hard to meet the needs of our customers.
Thanks to their own reality.
As we look ahead to the next 25 years, our vision is to become the best global market.
It sounds good.
Glad reimagination of the bank.
I'll come back to this is a little bit but first.
First let me talk about our most recent achievements.
In the third quarter, we delivered strong results.
Earlier this month, we have David how we report classifies but to be clear on apples to apples basis, we performed better than expectations on both the top and bottom lines.
Gross merchandise volume and marketplace, 21%.
To put that in perspective perspective, we added over 4 billion in volume in Q3 versus last year more than many businesses do annually.
Active buyers increased over 183 million Buckley organic revenue grew faster than volume up 26% driven by payments and advertising.
David migrations made significant progress in Q3 and is that the right buyers sellers simplified and to an extent.
Starting with five largest markets.
Just first on transitioning business sellers to the payments platform.
We exited the quarter with over 340000 sellers migrated.
During the quarter ebay managed payments for over 20% on platform volume.
Additionally, when foreign policy that we are expanding managed payments to France, Italy, and Spain in early 2021, and we will be getting them great consumer sellers in Q4.
We remain on track and expect to complete the vast majority of our transmission by the end of next year.
Our feedback has been encouraging as MTS from sellers in much payments has averaged more than 20 points higher than the NPS of sellers, who have yet to migrate.
Buyers love the flexibility choice and ease of use we are seeing and reactivated buyers.
Alternate forms of payment like credit and debit cards Google play.
And Apple pay across the majority of your purchase.
Im confident that we are on pace to deliver 2 billion dollar Avenue and $500 million.
Income on a GAAP basis by 2022.
Advertising growth continues to be driven by promoted listings, which continued to outpace volume a trend. We expect will continue for the foreseeable future and.
In the third quarter promoted listings delivered $186 million or seven upstairs.
Up 7%.
We are providing sellers with more driven by nations optimizer add conversion, while we tested built more technology features to drive future growth and position ebay after sellers platform of choice.
Now turning to classified we.
We believe that the transfer classified Atlanta is on track to be completed in Q1 2021 subject to regulatory approvals will be excited to bring together the two highly complementary businesses that can create tremendous value over time.
The marketing needs as evidenced by the appreciation in Adventist share price would increase the value of ebay from 9.2 billion over $11 billion based on recent trading levels.
As you May recall last quarter I outlined a long term vision for ebay.
Hi Tech gladly imagination, we realized the enormous untapped potential of our marketplace and drive sustainable long term growth.
We had three strategic priorities that support the expansion first.
First to the second quarter by better compelling next experiences for our enthusiasm.
Second to become the partner of choice for sellers and third to cultivate lifelong trusted relationships with our buyers. We are in the first phase of a multi year journey, but many improvements for buyers and sellers yet to come.
But over the past quarter, we were able to take several steps towards realizing that vision.
As I mentioned, our first priority is all about defending our core business. Our focus here is on the new exclusive products and simplifying consumer Sally.
Taking a holistic view of customer needs response, and launching features to address those needs.
Keeping the approach leveraging scalable technology across in this category.
A great example of that is the securities of changes, we made to our luxury watch category.
Recently, we launched authenticity guaranteed on all up is about $2000.
This permit increases confidence both buyers and sellers.
Chris could count on meticulous verification by third party experts and seller service.
Let me turn this.
In addition, we announced an extra service for high dollar transaction plus.
Plus new content robots enthusiastic and we also read speech for sellers.
While the service is still in its early stages, we've already seen a modest increase in supply and higher average selling prices.
Also turned our focus to the sneakers category, which attracts cockney doozies, particularly the agency millennials in the U.S. Sneaker GMB has significantly improved from even without these buyers and sellers brings tremendous value to our ecosystem.
Sneaker by purchases intend you need categories, each year more than double the amount other ebay buyers.
Leveraging similar technology launched in watches with.
We ended the authenticity guaranteed to speakers, we are requiring all collectible sneakers, both new and pre owned about.
$100 to be verified by a team of independent third party industry experts.
The program kicked off if you authentication most popular brands and styles.
All sneaker sales over $100 next year.
A year ago, we were losing share in this important category, but.
We are seeing over 50%.
Year to date and that was before launching the authenticity.
And just last week, we announced launch of a new elevated experience for certified refurbished products.
Tens of billions of dollars in untapped potential in the global refurbish market through.
Through our new certified refurbished program.
Save up to 50%, but can you break that inventory with all the insurance is of buying you, including a two year warranty ebay money back guarantee and hassle free 30 day returns.
We are launching this program in partnership with globally recognized brands, including Twog dirt.
Hoover makita and fill up that certified refurbished.
Exclusively on ebay.
Not only does this program help with buyers budgets, leading into the holiday season. It also helps to eliminate unnecessary waste by keeping products in circulation for many years to come.
We see a long runway to accelerate GMB growth given the $500 billion global total addressable market, we are competing for but it will take time.
Leveraging scalable technology, we can uniquely address the needs of customers across a diverse mix of categories and electronics fashion.
Both home and garden parts and accessories and more.
Moving onto the second keep our vision, having the platform of choice for sellers.
Over the past three months in addition to enhancements to manage payments and advertising continued to scale of ebay benefit small businesses.
We work closely with you PDF offer new shipping services for sellers on our platform.
In addition, direct integration with ebay labels sellers, no access to discounted rates saving them time and money.
Also have access to order details customer information label printing and shipment tracking all fixed.
And buyers benefit from lower shipping costs and integrated tracking at.
Additionally, we are supporting stellar profitability during the upcoming holiday season.
Working with the carriers on our platform to eliminate kicks, even stripping surcharges on ebay.
Recently, we rolled out.
US one second we're getting some feedback on that working through exactly what you can give us some moment.
And excuse me speakers can you try speech.
To try speaking over the backup line at the moment.
Does this sound better when baby backup line.
It's more clear.
Just one more to sir.
Hi, guys.
Okay.
Yes.
Thanks.
Okay.
Ladies and gentlemen, we apologize for the interruption youre, having technical difficulties. Please stay on the line.
Yes.
At the risk of repeating myself I'm going to go back a little bit just to make sure because I understand the line got salvi, which we apologize about the technical difficulties.
So we also turned our focus to the sneakers category, which attracts passionate as busy as particularly Gen Z and millennials in the U.S. Sneaker GMB has significantly improved from a year ago. These buyers and sellers bring tremendous value to our ecosystem and average sneaker buyer purchases intensity category each year more than double the amount of other ebay buyer.
Yes.
Leveraging similar technology launched in watches we expanded the authenticity guaranteed to sneakers, we require all collectible sneakers, both new and pre owned above $100 to be verified by a team of independent third party industry experts the program kicked off with the authentication of our most popular brands and styles and we'll scale to Austin.
Anchor sales over $100 next year.
A year ago, we were losing share in this important category, but now were seeing over 50% GMB growth year to date and that was before launching the authenticity guarantee.
And just last week, we announced the launch of new elevated experience for certified refurbished products, we see tens of billions of dollars in untapped potential in the global refurbished market through our new certified refurbished program buyers can save up to 50%. Unlike new branded inventory with all the assurances of buying near.
Including a two year warranty ebay money back guarantee and hassle free 30 day returns. We are launching this program in partnership with globally recognized brands, including Delong, a dirt Devil Hoover Makita and Philips that we'll sell certified refurbished inventory exclusively on ebay not only does this program helped with buyers but.
This leading into the holiday season. It also helps to eliminate unnecessary waste by keeping products in circulation for many years to come.
We see a long runway to accelerate GMB growth given the 500 billion dollar global Tam, we're competing for but it will take time.
Leveraging scalable technology, we can uniquely address the needs of customers across a diverse mix of categories in electronics fashion collectibles home and garden parts and accessories and more.
Moving on to the second key priority of our vision, becoming the platform of choice for sellers over the past three months. In addition to enhancements and manage payments in advertising, we continue to leverage the scale of ebay to benefit small businesses.
We worked closely with GPS to offer new shipping services for sellers on our platform. In addition to a direct integration with ebay enabled sellers now have access to discounted rates saving them time and money.
Sellers also have access to order details customer information label printing and shipment tracking all in one place and buyers benefit from lower shipping costs and integrated tracking.
Additionally, we are supporting solid profitability during the upcoming holiday season by working with the carriers on our platform to eliminate peak season shipping surcharges on ebay.
Recently, we rolled out an upgrade communication systems that allow buyers and sellers to connect securely on our platform also we have provided small businesses and new marketing tool to drive traffic back to their ebay stores through our affiliate platform.
And just in time for the holidays last month, we expanded the time away functionality, making it easier for sellers to update their listings and protect our on time delivery record, while providing buyers more accurate shipping estimate.
Looking forward, we are embarking on a multi quarter journey to improve selling those that leverage more AI capabilities to dramatically simplify selling and drive more growth for small businesses.
The third key priority of our strategy is to cultivate lifelong trusted relationship with buyers to achieve this we are leveraging technology to remove friction throughout the buying journey.
In Q3, we improved search results, which would lead to material increases in conversion.
By including more behavioral data, we were able to optimize machine learning algorithms at the top of the funnel that led to improved buyer engagement and ultimately led to increased purchasing these.
These technology advances generate significant impact at every incremental point of conversion creates almost 1 billion more GMB annually.
More importantly, these buyers are discovering the items they are searching for and faster and simpler ways.
Another way, we are building trusted relationships with buyers is by improving our shipping tracking in the UK and Australia, we developed a unique new capability to implement virtual tracking for Royal Mail in Australia post leading to significant increases in tracking coverage.
Sellers do not have to explicitly provide information and buyers can track orders with confidence.
We will continue to invest in the buyer experience and marketing technology capabilities as we work to foster lifelong trusted relationships with buyers.
Finally, an area that I and the team are extremely passionate about is doing good for our communities around the world we focused initiatives on the sustainability issues material for the long term strength of our business and where we can be most impactful to our stakeholders we.
We have measurable and transparent calls to evaluate our progress and to hold ourselves accountable to these important milestones such as driving more circular commerce getting to 100% renewable energy by 2025, and raising significant amounts for charitable causes.
We began ebay for charity in 2003 to make it easier for customers to support their favorite charities. Since then we've raised over $1 billion for charities around the world and we're working hard on our goal of another 600 million raised by 2025.
In Q3 ebay for charity began working alongside international artists their campaign called artist stand together, we are helping to raise funds for organizations that work to increase further voter turnout for the upcoming US elections addition.
Additionally, ebay foundation reached its $1 million Kiva lending goal to support global untapped entrepreneurs through an employee micro lending initiative.
Ebay everything we do ties back to our purpose of creating economic opportunity for hall, and I'm very proud of our team for keeping us at the forefront, especially during these remarkable times.
So in summary, we had a clear vision to realize the enormous untapped potential of ebay, while we have made meaningful progress in Q3, we still have a long way to go we are investing in technology and focused on delivering the best market place in the world for buyers and sellers and I want to thank all of our employees have been working diligently to support our customers buy back.
Turning our tech led Reimagination delights.
With that I will turn the call over to Andy to provide more details on our financial performance Andy.
Thanks, Jamie and thank you all for joining today.
Before I walk you through the results for the quarter I'm going to take a few minutes to provide some additional context on the financial reporting impact of moving our classified business to discontinued operations.
With that designation our reported results reflect only the performance of our marketplace business.
The Q3 results for classified ads are reflected in GAAP EPS from discontinued operations.
You can find a presentation of historical financial statements recast to the current presentation in the form 8-K, we published on October Onest.
When we last provided guidance in July classifies was included in both our Q3 and full year 2020 guidance assumptions.
On slide four you will see a refreshed look at what our July guidance would have been if we had excluded classified.
This will help create an apples to apples comparison versus our Q3 results reported today.
Let me quickly walk let me quickly walk you through the numbers adjusting for the classified the impact to our July guidance. The implied Q3 guide for marketplaces was between 2.38 and $2.45 billion of revenue growing 16% to 19% on an organic FX neutral basis and.
Non-GAAP EPS between 68, and 74 cents per share representing 31% to 42% growth.
On slide five we've made a similar adjustment for our full year guidance.
Adjusting for classified the implied full year 2020 guide for marketplaces revenue was between 9.59 and $9.78 billion growing.
Growing 14% to 16% on an organic FX neutral basis.
Operating margin in the range of 30% to 31%.
Non-GAAP EPS between $3.04 at $3.16 per share and GAAP EPS between $2.51 and $2.66 per share.
And finally free cash flow adjust to the range of $2.2 billion to $2.35 billion.
With that I will move on to our current quarter results.
Turning to our Q3 highlights on slide six in Q3, we delivered revenue of $2.6 billion up 26% on an organic FX neutral basis.
Non-GAAP EPS was 85 cents up 64%.
Both were significantly above our expectations.
Non-GAAP margin came in strong at 30.7% inclusive of our ongoing investment in Mems payments.
We generated $584 million of free cash flow.
We executed $700 million of share repurchases and delivered $111 million in cash dividends in the quarter.
Our Q3, Overperformance was driven by a number of factors, including our migration to manage payments strong execution in advertising and the vol and volume growth ahead of our expectations.
Based on our Q3 results and an improved topline outlook for the fourth quarter, we are raising our full year guidance, which I will cover in more detail in the guidance section.
Moving to active buyers on slide seven.
We ended the third quarter with 183 million active buyers, representing 5% year on year growth consistent with the second quarter.
New and reactivated buyers continue to drive year on year growth.
We continue to see strength in GMB per active buyer across all cohorts in Q3.
While we initially saw stronger activity levels from buyers acquired in Q1 and Q2 those buyers are now trending towards behavior more consistent with historical cohorts.
Moving to slide eight in.
In Q3, we enabled $25 billion of marketplace, GMV up 21% year on year decelerating eight points versus the prior quarter as global mobility continued to improve particularly in our international on platform markets.
In the US we generated $9.8 billion of GMP.
Up 33% year on year decelerating two points from the second quarter.
Growth was at its peak in July and then moderated through August and September driven in part by the wind down of government stimulus payments even.
Even as residential mobility remained relatively constant.
International GMV was up 14% year on year, a 12 point deceleration versus the second quarter, driven by moderation in Germany and the UK.
We saw strong ongoing correlation between mobility restrictions and GMB growth across our international markets, where the most pronounced growth deceleration occurred in markets with the biggest increases in mobility.
And our off platform Korean business growth was 4% decelerating one point from the second quarter.
Looking closer at volume, we continue to assess the impact of coated to better understand the overall performance of our business.
We have seen modestly improved underlying performance versus our pre cobot 2020 plan.
Driven by increased velocity and product experience improvements and ongoing tailwind from the recent increases in our active buyer base.
In addition, we've seen temporary cobot related growth acceleration in GMV that we expect will continue to moderate as mobiliti increases over time.
And with this component being the biggest wildcard in terms of magnitude and timing it remains difficult to predict results beyond the near term.
Turning to revenue on slide nine.
Our net revenue was $2.6 billion up 26% organically decelerating two points.
We delivered $2.4 billion of transaction revenue up 28% down five points from the second quarter with strength and payments and advertising, partially offsetting the deceleration in GMP.
Looking closer at manage payments the increased seller adoption and high customer satisfaction that Jamie you mentioned that the five points of incremental revenue growth versus 2019 on a continuing operations basis, approximately one point better than anticipated.
Transaction take rate was 9.4% for the quarter accelerating nearly 40 basis points from Q2, primarily from the ramp of managed payments and the continued strength in promoted listings.
We expect take rate to continue to increase further as managed payments and promoted listings continue to scale.
We delivered $251 million of marketing services and other revenue down 1%.
Accelerating 15 points from the second quarter, mostly from a lower headwind from lapping the sale of brands for friends in the middle of Q3 2019.
And our first party growth in Korea.
Turning to slide 10, and major cost drivers as a percentage of revenue.
In Q3, we delivered non-GAAP operating margin of 30.7%.
This is approximately four points higher year on year, driven by volume leverage partially offset by continuing investments and manage payments and strategic reinvestments.
Cost of revenue was down nearly 20 basis points year on year as volume leverage is partially offset by managed payments and our expanding first party inventory program in Korea.
Sales and marketing expense was down over two points versus the prior year as volume leverage was partially offset by strategic Reinvestments and online marketing brand and our vertical strategy.
Product development costs were down approximately 10 basis points, driven by volume leverage partially offset by incremental investments in the product experience, including managed payments.
Gionee was down nearly 40 basis points, primarily from leverage and cost control.
Transaction losses were down one point as bad debt rates have performed better than expected.
Turning to EPS on slide 11.
In Q3, we delivered 85 cents of non-GAAP EPS up 64% versus the prior year.
Non-GAAP EPS growth was driven primarily by higher revenue growth and our share repurchase program, partially offset by our investment in managed payments and FX.
GAAP EPS for the quarter was 88 cents up 250% versus last year.
The increase in GAAP EPS is mostly driven by the change in fair value of the adient warrant and the same factors as non-GAAP performance. In addition to lapping the divestiture of brands for friends.
The value of the adient warrant stands at $777 million at the end of Q3, an increase of $573 million year over year.
This is an additional value driver stemming from our payments initiatives incremental to the $2 billion of transaction revenue and $500 million of operating profit that is expected in 2022.
You can find more information on the audio and warrant and our 10-Q and as always you can find a detailed reconciliation of GAAP to non-GAAP financial measures in our press release and earnings presentation.
Moving to slide 12, we generated $584 million or free cash flow in Q3 down 18% driven by the timing of cash taxes, partially offset by higher earnings.
Year to date through the third quarter, our free cash flow is $1.9 billion up nearly 30% year on year.
Moving to slide 13, we ended the quarter with $4.1 billion in cash and investments.
And debt of $7.8 billion.
In Q3, we paid down over $900 million in debt, bringing our total debt back to the 2019 year end balance of $7.8 billion.
This completes actions taken in 2020 to strengthen our balance sheet by leveraging the favorable market conditions to improve rates on our outstanding debt.
Additionally, we paid over $700 million in income taxes from the divestiture of Stubhub, which is presented in operating cash flow from discontinued operations.
Leaving approximately $250 million to pay in Q4.
We returned $111 million to shareholders and dividends in the quarter.
We executed $700 million in share buybacks in Q3, bringing our total share buyback to $4.7 billion. So far this year.
We entered Q4 with $2.5 billion share repurchase authorization remaining.
Our capital allocation strategy and key tenants and targets have not changed we remain committed to maintaining our triple B plus credit rating mid term leverage of approximately one and a half times net debt and gross debt below three times EBITDA and.
And a target cash balance of approximately $3.5 billion. We also remain committed to our dividend.
Moving to slide 14, I'd like to provide an update on the pending classifies transaction.
We remain excited about this deal as it allows us to realize near term value, while enabling us to participate in the future upside potential of the world's largest online classified company.
We are on track to close the deal in Q1 subject to regulatory approvals.
When we announced the deal on July Twentyth devaluation was $9.2 billion based on a mix of cash and added that to shares.
The share price is appreciated by over 30%.
Which increases the value of the classified business to over $11 billion based on recent trading levels.
Finally, we expect that the cash portion of the deal will provide approximately $2 billion net of tax and we currently expect any potential future sale of shares would be would be a taxable event at the prevailing statutory rate.
Turning to slide 15 in guidance.
We continue to operate in an environment with low visibility, which proves to be very difficult when trying to provide guidance each.
Each month, sometimes each week reveals new external drivers that can have a material impact on consumer behavior.
The dynamics, we faced in Q3 were different from what we faced in Q2.
And it's clear that Q4 will be different than what we experienced in Q3.
The shape and speed of pandemic recovery, the strength of the holiday season, and the size and timing of potential government stimulus programs are among the many variables that could have a significant impact on our outlook.
For Q4, we are projecting revenue between 2.64 and $2.71 billion growing 19% to 22% on an organic FX neutral basis.
This assumes marketplace volume growth at low double digit rates with gradual moderation through the quarter.
We expect managed payments to continue to deliver revenue acceleration contributing approximately eight points to Q4 revenue at the midpoint of our guidance driven by continued seller migration.
We expect non-GAAP EPS of 78 to 84 cents per share representing 18% to 27% growth.
Non-GAAP EPS growth was driven primarily by volume and lower share count part.
Partially offset by continuing investments in technology and marketing.
We are expecting GAAP EPS from continuing operations in the range of 58 to 64 cents per share in Q4.
After adjusting for classified moved to discontinued operation. This Q4 guide represents a material improvement on volume revenue and non-GAAP EPS versus our expectations back in July.
For the full year, our revenue guidance is $10.04 billion to $10.11 billion, representing an organic FX neutral growth rate of 19% to 20% drill.
Driven by an improved GMB outlook and continued scaling of manage payments and advertising.
We expect operating margins to be in the range of 31% to 31.5%.
With a non-GAAP effective tax rate of 15% to 16%.
With the above dynamics, we expect non-GAAP EPS in the range of $3.34 to $3.40 per share driven by three by Q3 over performance.
And an improved topline outlook for the fourth quarter.
We now expect free cash flow of $2.5 billion to $2.6 billion Capes.
Capex in the range of 4% to 5% of revenue.
And we're increasing our outlook on share repurchases to approximately $5 billion for the full year.
Finally, we expect GAAP EPS from continuing operations in the range of three to $3.06 per share.
In closing we are excited about the progress we've made this quarter.
Externally the macro environment is helping to drive strong business performance.
Internally with the leadership team now solely focused on the marketplaces business, we're making progress with our new strategy.
We're pleased by the increase in speed of execution demonstrated by our launching authenticity guarantee across multiple categories grow.
Rolling out our certified refurbished program, expanding shipping services, and tracking and helping buyers find items and faster and simpler weights.
We're doing all of this while delivering on our revenue growth initiatives of manage payments and advertising, which are both becoming critical material pieces of our financial architecture.
Our margin commitments remain in place and we're on track to deliver at least two points of operating margin growth by 2022 as compared with 2019.
As we've said in the past, we will continue to balance topline growth and margin expansion as we find new opportunities, we will capitalize on them to drive growth.
We remain focused on improving the underlying health of the marketplaces business and as we've mentioned this is going to be a multi year journey although.
Although it's early the results tell us we're on the right track furthering our conviction to compete and win in the half a trillion dollar total addressable market we are focused on.
And now Jamie and I would be happy to answer your questions operator.
At this time, if you would like to ask a question over the phone lines. Please press Star then one on your telephone keypad, well pause for a moment, while beacon lbs acuity roster.
Your first question comes from the line of Scott Devitt of Stifel. Your line is open.
Hi, and thank you.
In Q3 items sold decelerated a bit more than GMP and was wondering what caused that were there. Some changes in ASP driven by category mix or was there. Some other factor at play there and then secondly, this was partly answered but.
And for Q, I think you fully comp the sales tax collections.
Implementation and it was a 600 basis point headwind in for Q 19.
It did just a 22% in Q3 and I think that also had a 3% headwind in it.
It does seem like we're going to have limited mobility again this quarter certainly in the us and there were some announcements today in certain countries in Europe in Fourq, you guided to low double digit GMB growth Im just wondering is there anything that you are seeing in the business that is leading to that or is that just more as you discussed a bit on the call.
Staying consistent with this conservative approach.
Guidance, given the uncertain business conditions as seems to have been the case on the one Q2 Q guide as well. Thank you.
That.
Ill start with.
The question on guide.
And Scott Jason to your point, Theres, Theres, new information coming out on a daily basis, which.
Makes this tough I.
I think.
The way that we've looked at it.
Clearly, there's a there's multiple factors moving that can influence our volume outlook for the quarter.
It's really hard to predict how any of them will play out.
And certainly to try to itemize, which which pieces we've included for four which amounts.
We can't do at this point.
What we have tried to do with our guide.
His his compile what we've learned through the third quarter and what we've seen in.
It implies that continued growth moderation in the fourth quarter followed.
Following what we saw in the third.
And end to end and what we're seeing the beginning of the fourth.
With regards to consumer behavior and mobility.
What we provided I wouldn't call. It conservative I think it's our best outlook based on the combination of these factors.
And certainly.
Any one of those could change and could impact.
Impact our results.
On the I think you called it right on the on the sold items there's.
PMT and category mix and similar to.
What you see on buyers on what you see on GMV, either just the magnitude of.
Of things changing on a quarter over quarter basis, given the the breadth of categories that we have in the different.
Price tranche as I think you called it right.
Thank you.
Your next question comes from line of Richard Kramer of Lorex Research. Your line is open.
Thank you very much Jamie I've got two questions. The first is I'd like to get some more detail on your calculator reimagination, especially given that you've seen declining R&D and relatively low capex. So specifically can you talk a little bit about how ebay might be developing infrastructure for social commerce be it with more mom.
Our messaging video or some material revamp of what's been a very consistent user experience and the look and feel and then maybe second question. Since you mentioned ebay is being a global marketplace. When we last got the geographical detail you had roughly 80% of your business in four countries and.
A very wide range of markets covering the other fast so what's your approach going to be to reaching scale and other countries and how important is that global footprint to you and what sort of investment requirements QC and in 21 and beyond to to make ebay go beyond 80% coming just from those four markets. Thanks.
Yes on the first one on the Tech led Reimagination, It's why you see us making the investments that we're making is that we believe that there are some big horizontal things that really move the business like payments and advertising. We're obviously, putting a lot of technology focus on and then you saw this quarter. Some specific vertical experience is a focus for us and.
Both watches and sneakers and also in certified refurbished and so we actually think this is the start of really leveraging our technology and where horizontal plus a vertical focus brings together just a much different experience on ebay you think about the level of trust that we just put in place in those three categories, It's really game.
Changing versus where we were before.
You asked specifically about marketing Theres, a lot of things that we're doing specifically in paid social and using new channels that we hadn't used before that's a key part of it for US. If you think about the sneaker category. As an example, we're bringing on a lot of gems that millennial silver going out reaching them, where they are because.
When we acquire them and sneaker category as we said they end up buying in intensity categories across the site.
The second thing I'd say on our footprint is look we've got some very strong growth in some of our smaller markets. There's a lot of advantage to the scale of our cross border trade business, where we are bringing products from very different countries to our smaller countries or exporting out of our smaller countries and and obviously play a role in that so.
We continue to believe that that those are important and good growth opportunities not only from domestic business, but also for the cross border trade at they bring.
Okay. Thanks.
Your next question comes from line of cone Sebastian of Baird. Your line is open.
Great. Thanks, good quarter, I guess, given some of the concerns around carrier capacity during the holiday period I'm wondering if it's a long tail of sellers.
They are more impacted by that or are your contracts with shippers largely protecting them from those bottlenecks and then looking at active buyer growth with the potential to accelerate that growth over the near term.
Lastly, given the secular shift we're seeing or are you more focused in terms of the marketing efforts on driving engagement with the existing buyers in that and the recent cohort ads. Thank you.
Yes on carrier capacity part of why we did the STL. This year was to open up more flexibility and more options for our sellers. So not only are they going to save a bunch on the rate on that they're going to have on there, but the integration is going to make it really easy for sellers and provide all that tracking for buyers. So now you have multiple options, even as a small consumer Sal.
Higher between Usbs, EPS and Fedex one of the things. We have worked on is deals that actually protect them from teach shipping charges or surcharges over the holiday. So we think the combination of of that flexibility of choices plus the negotiating on behalf of our community will work out well for them on that on the shipping side.
On the active buyer growth as as we talked about our real third priority is turning buyers in the lifelong enthusiast, so really focusing on how do we when we bring in a new buyer expand them into multiple categories. Because we know that drives their LTV. So I use the sneakers example earlier coming in via sneakers, many of buying intend categories.
It's also a big vision for our push to consumer selling this quarter I actually see the cgmp growth grew faster than our BDC group growth and that pushes really because once we get to a buyer to sell they become more than twice as valuable as a buyer. So thats really our focus is on accelerating those things in and driving that long term.
Potential of the people that we're bringing to the site.
Okay. Thanks.
Your next question comes from line of Tom Champion of Piper Sandler Your line is open.
Hi, good afternoon.
On.
TMB trends it looks like the growth.
Hi between Us and international is really starting to to diverged with internally.
International Decelerating more I'm just curious.
What do you think might account for that or whether it's how.
Explain by mobility.
And then.
On managed pay it sounds like you added about 300000 sellers into the program.
This quarter and add 5% of revenue that that seems like it's about 130 million in revenue is approximately the right magnitude. Thank you.
Yes, I'll take the.
On the on the third quarter volume Us International.
Look there are differences, we see globally, we indicated on our on the on the call in July that we were seeing continued strength.
Through the month of July in the U.S.
Post July we did see some increased moderation in August and September.
And we think.
Eastern part driven by the expiration of the US stimulus. So so that in part I think is a little bit the strength you're seeing in the us.
In addition to if you look at.
Mobility, and and the progress of co bid.
Internationally we.
There was a little more mobility sooner.
In in.
In particularly in Germany, and the UK than we had in the U.S. So I don't I don't think Theres a draw.
Drastic business shift between any of those regions other than some of the dynamics associated with.
The reopening.
I think another in port Neal just generally on volume.
We have.
There's a few things we do see that concern.
Consumer behavior patterns are are definitely impacted by mobility.
That is different depending on location and country.
Sometimes state.
And I think the other the other key thing is that the customer and consumer behavior patterns aren't the same.
So as as.
Mobility and Lockdown happened in April and May.
With more time and less scarcity.
Some of that behavior is not as drastic.
As you to as we saw early on in the pandemic.
And then on the second part of the question was managed payments.
Yeah year logic is is about right on that.
Great. Thanks, a lot.
Your next question comes from line of Stephen Ju of Credit Suisse. Your line is open.
All right. Thank you so Jamie for some of these categories that you are leaning into like watches and sneakers. It seems like there is a.
Greater requirement to work with external parties Threed authenticator refurbish things so.
To some degree you are putting the ebay brand at risk here with your buyers. So what are you what incremental things are you doing to.
The seller or so that youve minimize bad behavior.
And second on the sea to see activity ramp.
Seems like consumers and I'll always going to be asked savvy somebody for more professional sellers about providing the correct descriptions for what they're selling.
And you also have to get merchandize and all kinds of different conditions, which seems like a pretty complicated structured data problem for your engineers to solve so.
You talk about what you're doing to make sure that stuff people are putting up for sale are correctly surfaced in search results. Thanks.
Yes, so on the first one thanks into the question, we we work really really industry, leading experts to do the authentication specific for that category.
In a very intense multi point inspection to make sure the product is truly authentic and so it really kind of.
Not only you have the trusted kind of seller piece in there by every single product every single sneaker over $100 by the start of next year will actually go through a third party authenticator and so really takes the risk away.
Potential issue by the time it gets the buyer.
Even sometimes there can be a mistake. It was missing piece of documentation. So the beauty is we are catching all of those things. The same thing in the returns on making sure that on the seller is getting back the product that they actually ship the buyer because the authentication works in both directions. So look its a really high level and trust when you look at the community feedback that.
Yes, and both from sellers and buyers incredibly enthusiastic they know it'll bring a lot of new buyers to the platform and for sellers that that's what they want.
Like we said on the call the business was growing 50% and sneakers, even before we launched this authentication I guarantee so were excited by on the CST ramp. It's a huge focus for us is using artificial intelligence and technologies to make it easier for the casual Esther to come on that list. So a lot of our listers will use.
Things like sell similar weather sell a similar product on their cell based on the.
Specific catalog description and what you'll see from us over the coming quarters is continuing to make that process easier to bring more to see to see sellers on its our number one priority is defending the core and a huge part of that is consumer selling.
I should say that they also bring unique inventory to the platform you know theres a lot of things that are not being sold by a business seller.
My.
One of my friends is looking for a guitar, we hero and absolutely no in selling that BDC anymore, you're only going to get that from the CDC seller. So we'd like to think about the unique inventory that brings the platform is also really important to us.
Thank you.
Your next question comes from the line of Youssef Squali, an ultra Securities. Your line is open.
Great. Thank you very much couple of questions here. So just on the city guarantee figures not for sneakers and launches. So far can you maybe just speak to and I think you also canceled some selling season sneakers on $100 or more can you maybe just speak to and maybe it's just too early but just any uplift.
You've seen in.
Sales for these two particular areas and whether there are any other big categories, which kind of lend themselves to.
Two the same thing and our management team and how was that I think you guys talk to that a tracking to your own expectations that.
Just considering the fact that it seems that you guys have fair amount of control over that is there a chance of seeing you migrate maybe the majority of all sellers globally earlier than expected and if not what are the.
The gating factors there. Thank you.
So the changes and then selling.
Selling fees on sneakers, we had done a while ago.
And what I would say is that it's very early in that we just launched that a few weeks ago, but the encouraging signs or what the feedback that we're getting from the community really leading it and.
Being excited by what this can do to unlock the category watches has been live a little bit longer and while early what we're seeing is an increase in supply on the platform and an increase in average selling price and if you think about it thats really what we want to see is that higher level of trust is making buyers really more comfortable which obviously works out 4%.
As well you know what I'm really proud of the team is that when we talk about a tech led reimagination, while it took US a couple of months to launch that technology for watches we actually rolled out a few weeks later for sneakers and so we're building capabilities that allow us to compete better in specific verticals, but a lot less capabilities can be leveraged across most.
Well categories and that that excitement.
The managed payments migration, it's important to know that there are still features that we continue to build out to be able to migrate more of the seller. So we're right on track, but as an example, if I'm a seller that shifts cross border to a country that we havent launched manage payments and we're not going to convert that seller over to the new managed payments platform.
Until we unlock that country, because we don't want them split between the old platform and the new platform. So there's still capabilities that were continuing to build out to ramp and and we basically are on track for our plan to be complete by the end of 2021.
Thanks, Jamie.
Your next question comes from line of Edward Yruma of Keybanc capital markets. Your line is open.
Hey, good afternoon, and thanks for taking the question I guess just to drill down on some of the new category as little bit more I know you are using third party authentication. The can you kind of help us understand the cost profile around that.
Whether that the ability to scale as the business grows and then I guess just stepping back into the three big announcement that refurbish watches and sneakers I guess why did the three you think will be most significant or impactful in the medium term. Thank you.
Yes, so when we look at the.
Authentication costs.
We look at it in some ways, it's like a marketing costs. When we think about how do we bring new buyers into the platform. So if you look at what we would have collected in final value fees. For example on that product versus our cost of acquisition of bringing in a new buyer for is.
He's going to end up buying in 10 unique categories across the site, we're balancing that all out and we think as we think it's important we think there is a lot of potential and we think it is a big difference for ebay to have that level of trust.
In the category.
We haven't talked much about certified refurbished on the call yet, but I'm really excited by that I mean sneakers currently has a lot of potential as Doug watches, but theres tens of billions of dollars in certified refurbished it's a real sweet spot for ebay and this brings a whole new level of.
Just a feeling like you're buying unlike new product because you have the.
Not only all those guarantees that you have a two year warranty you have a 30 day hassle free return along with the ebay money back guarantee. So we just think it's a it's an important category. We're also seeing brands lean and.
Like we talked about on the call and Big brands and we're just getting started so we think theres a lot of runway ahead, and a huge market opportunity for us to go after that.
Thank you.
Your next question comes from the line or Robert Terrible of Guggenheim Securities. Your line is open.
Hi.
Good evening I.
I just got a couple of questions mainly on on M&A in terms, usually ghansham you the cash on the balance sheet, you talked a little bit about that but I'm. Just wondering as you as you sort of look at especially the sneaker category would you would you consider.
Acquisitions around that category to really accelerate your positioning and improving maybe if you could just elaborate little bit on that type of shared yet will be helpful. Thanks.
Yeah, we're not going to we're not going to speculate on kind of specific categories. In M&A. What I'd say is we're looking opportunistically at M&A like we always have at opportunities, where we think we could accelerate the vision that we laid out on on prior earnings calls and always doing things in an asset light way I'd like we tend to do here.
And the way that we think enhances shareholder value. So we're going to continue to be opportunistic about it.
Great and if I could just follow up on a different topic, but in terms of in the ability to sort of grow the buyers and sellers can you just talk a little more about the fourth quarter marketing plans in advertising in terms of the focus on continuing to bring in a new buyers and sellers in England.
The level of the rate in which you're thinking about that.
Yes, we are we using some new tools and technology over the holiday really going after some new channels like paid social like I talked about before in addition to the other kind of brand and performance work that that we normally do in the holidays, but really we're also you also going to see more targeted marketing from that you are seeing it.
Already where we're focusing on specific campaigns like we had a viral campaign on take time for sneakers that went incredibly viral.
And you'll see other specific really vertical marketing that were dealing to attract the right types of buyers in these categories that we're leaning in on so lots of things that we've experimented lift that we're learning from that that we're rolling out in the quarter.
Great. Thank you very much.
Your next question comes from the line of Brian Nowak of.
Fortune Stanley Your line is open.
Great. Thanks for taking my questions I have two please the first one I think in the second quarter. You added I think it's about 8 million net buyers sequentially.
I know a lot of focus is are turning them into a broader shoppers and then sellers can you talk to us about what you saw on the retention of those buyers that you added in the second quarter and are you seeing that expansion into new categories out of them already and then Jamie. This is now you had a few more months in the seat maybe just talk to US about how you are categorizing low.
Hanging air a low hanging fruit areas of improvement that can really change the business trajectory and 21 as opposed to sort of your longer term areas of focus.
Sure. So let me let me start with the latter and then we'll come back on the buyer. One. So you have if you look at the types of things that we rolled out this quarter.
Indicative of where our focus areas are so when you think about defend the core.
It's really around how do we go after the non new wind season, and help grow that business, we see a big kind of 500.
Billion dollars Tam there and like I talked about last quarter. This is these are not big Bang releases I think about our payments business as a a two year belterra for Faro released here I think what we're working on is.
A lot of releases throughout the year of different capabilities and hopefully continue to like I talked about before us launching something and then being able to roll it out to other categories. Other countries et cetera on a pretty frequent basis and that's how we're thinking about it is a multi year journey with a lot of wins along the way.
Andrew I'll take the buyer yet.
Yes, Brian look we saw in the second quarter, clearly a significant disruption.
And a lot of areas and scarcity in certain areas and sit in the supply chain and distribution.
That drove a lot of people shopping online.
And we and we did see some incremental activity from that from that cohort acquired at the end of the first and in the beginning of the second what we've seen in the third is it's it's reverting to a more normalized buyer acquisition trend and more normalized.
Repurchased frequency for those cohorts so.
Not performing above all cohorts and certainly not performing any worse than than buyers in the past what we have seen consistent across both quarters is just the volume of GMB and the amount of GMB per buyer of both for.
Existing buyers and new buyers at higher levels than we've seen in the past.
Got it okay. Thank you both.
Ladies and gentlemen, there are no there is no more time for questions.
This concludes today's conference. Thank you for attending you may now disconnect.
Yes.
Okay.
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