Q4 2020 eBay Inc Earnings Call

[music] Tom.

Ladies and gentlemen, thank you for standing by and welcome to the ebay Q4 2020 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.

Ask a question during the session will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and.

I would now like to hand, the conference over to your Speaker today, Joe Boulanger VP of Investor.

Communications and Investor Relations. Thank you. Please go ahead.

Good afternoon. Thank you for joining us and welcome to ebay earnings release conference call for the fourth quarter of 2020, joining me today and the call or Jamie Iannone, Our Chief Executive Officer, and Andy <unk>, Our interim Chief Financial Officer.

We're providing a slide presentation to accompany Andy's commentary during the call, which is available through the Investor Relations section of the ebay website at investors Scott Ebay, Inc. Dot com.

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 our performance you can find a reconciliation of these measures to the nearest comparable GAAP measures and the slide presentation accompanying this conference call.

Additionally, all revenue and <unk> growth rates mentioned, and Jamie and Andrew remarks represent FX neutral year over year comparisons unless they indicate otherwise.

And 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 and uncertainties and our actual results may differ materially from our forecast for a variety of reasons.

You can find more information about risks uncertainties and other factors that could affect our operating results and 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 and this presentation is as of February three 2021, and we do not intend and undertake no duty to update this information.

With that let me turn it over to James.

Thanks, Joe Good afternoon, everyone and thank you for joining us I'll begin today's call with some key highlights from last quarter of last year and walk you through and update on the progress of ebay Tech led via imagination.

I will then turn the call over to Andy to discuss the details of our recent performance and near term outlook.

Overall 2020 was a great year for sellers and buyers on ebay. We are pleased that we closed out the year with strong results for.

Q4, gross merchandise volume and marketplaces grew 18% well ahead of our expectations and.

And the holiday season contributed to the strong performance as we saw record volume with high velocity and hard to find and fill it out items.

Refurbished gift also emerged as a top trend and we saw many products from top brands and our certified refurbished experienced sell out completely.

Our buyers were very active during the holiday season, and the U S. One and 10 online shoppers bought something on ebay and Germany that number was one and seven and in the U K. It was wanting for.

In addition to this holiday surge, we experienced unprecedented and traffic levels for most of 2020 and yet our platform had the highest availability and the last six years.

To put this in context more than 100 days in 2020 exceeded peak 2019 traffic levels.

Ebay and been able to seamlessly handle these peaks, while keeping our marketplace open for all during a global pandemic.

For the full quarter revenue grew 10 points faster than volume up 28%, driven primarily by payments and advertising and we delivered <unk> 86, and non-GAAP earnings per share, which was above our expectations and included re investments for the long term.

Our customer metrics grew on both sides of our marketplace and the quarter.

Active buyers grew 7% to 185 million globally, and our active seller base increased by 5% as more small business and consumer sellers listed and sold on the platform.

These results capped off a tremendous year for ebay in 2020, we added an incremental $14 billion of GMB, that's more growth and the past seven years combined.

Organic revenue grew 21% and non-GAAP earnings per share grew 49% and we returned nearly $5 6 billion to shareholders through dividends and buybacks.

And July I laid out our long term vision for the company and we have re architected, our roadmap to achieve our tech led to the imagination over the next few years.

We also made progress on our multiyear initiatives payments and advertising, which drove tremendous financial results, while providing customers with a significantly improved experience.

We continued to make significant advancements with our managed payments transition ending the year with over 1 million sellers migrated.

During the quarter ebay managed payments for over 38% of on platform volume.

And the U S. We exited the year with over 50% of the migration from fleet.

In addition to the five markets, where we already launched changes and have been announced or underway, and France, Italy, Spain and greater China.

We have also started to transition consumer sellers and the U S U K, Canada and Germany.

Seller satisfaction has improved compared to Q3 and NPS scores from sellers and managed payments remained more than 10 points higher than the NPS of sellers, who have yet to migrate.

Over the course of 2021, we plan to rollout payments to remaining markets launched cross border trade and into these product capabilities for all use cases.

This roadmap opens up managed payments to all sellers globally and places us firmly on a path towards 100% migration.

As the vast majority of the transition will be complete by the end of this year, we are well positioned to deliver at least an incremental $2 billion and revenue and $500 million and operating income annually in 2022.

And Q4 advertising growth outpaced volume once again as sellers lean further into promoted listings to grow their business for the quarter promoted listings delivered over $215 million of revenue up 57%, despite having lapped a major product launch that drove strong acceleration and a year ago.

For the full year promoted listings grew 86%.

This product continues to grow in part because sellers, who have adopted promoted listings are seeing on average a double digit sales increase.

Our total advertising revenue reached a new milestone and 2020, passing $1 billion for the year, we see tremendous growth potential remaining as this represents approximately 1% of GMB well below industry benchmarks, we expect advertising revenue to outpace volume for the foreseeable future.

Now I would like to share an update on the transfer of classified that event and.

We remain excited to bring together two highly complementary businesses that can create tremendous value over time. We believe the deal is on track to close as we received the vast majority of regulatory approvals, we expect closer by the end of the first quarter subject to the remaining regulatory approvals, which we are working to obtain.

We also recently announced that we are exploring options for our Korean business.

Our two local platforms key market and IAC have built leaving E commerce positions by tailored to customer needs with innovative experiences.

With a paid loyalty program of over $2 5 million members and a growing first party inventory program.

These businesses, primarily focused on new and season products from BDC sellers with limited cross border trade.

As we mentioned in our press release, we will not be communicating any further information about the strategic review process until there is material information to disclose.

I will now provide and update on the progress we have made towards our long term vision for ebay <unk>.

The three strategic priorities to support this vision remain the same first to defend our core by building compelling nextgen experiences for our enthusiasm.

Second to become the partner of choice for sellers and third to cultivate lifelong trusted relationships with our buyers.

And the past few months, we launched several new product experiences aligned with this vision, while we still have a long way to go we are encouraged by the initial reaction from buyers and sellers and the acceleration and GMB and several categories.

During the fall and the U S. We launched authentication for luxury watches and quickly rolled out a similar experience to sneakers a few weeks later.

We have put a greater focus on protecting buyers and sellers by preventing counterfeits and eliminating fraudulent returns. These experiences are driving significantly higher than average customer satisfaction and.

And we see opportunities to expand this capability to other verticals and markets.

This new product experience is driving material growth in these categories for U S business for luxury watches over $2000. We saw a double digit increase and GMB growth and Q4 versus Q3, driven by higher sell through rates and higher average prices for.

And for sneakers over $100, we saw triple digit growth year over year and Q4, while some volume growth is due to the effects of the pandemic significant growth drivers included the authentication rollout pricing reductions and marketing changes.

Sneaker buyer behavior is a great example of the power of the ebay platform and.

And 2020, the average customer who purchased a pair of sneakers over $100.

And a total of $2500 on ebay and.

Proximately, 80% of that spend was in categories outside of sneakers, We will continue to drive more cross category shopping to grow <unk> over time.

To expand the buyer base, we're investing in new channels, including social marketing to reach more Gen Z and millennial customers. We launched the tick tock campaign called lays them up generating $4 7 billion views and we also have been partnering with celebrities famous athletes and influencers on exclusive promotion.

Another area of non new and seasonal inventory, we're focused on is outlet fashion.

And the U K, we launched and optimize brand outlet experience with 150 fashion brands offering products at deep discounts.

This contributed to strong double digit GMB growth and fashion ahead of UK market rates. We also saw active listings double and active buyers and the category grew 30% and Q4.

Moving onto the second key priority of our vision, becoming the platform of choice for sellers.

In addition to enhancements and payments and advertising, we continue to provide small businesses with more tools and capabilities to help them grow.

And Q4, we added more automation and scale to seller initiated offers this uniquely ebay feature allows sellers to escape the limits of our buybacks by enabling them to offer custom deals to individual buyers for the year seller initiated offers drove over $1 $2 billion of GMB.

Another win for sellers on ebay and Q4 was and SCO.

The work, we have done and the path to optimize our platform for search engine ranking and visibility is paying off.

Seo traffic and is growing faster than pay channels, and delivering more and new buyers to small business sellers on ebay.

Last we continue to increase seller visibility and a native app by driving traffic to their ebay stores, 95% of our store subscribers have migrated to the newest experience and they're seeing a 20% average increase and visits to their storefront.

The third key priority of our strategy is to cultivate lifelong trusted relationships with buyers to.

To achieve this we are leveraging technology to remove friction and throughout the buying journey.

A major focus for us has been the native App experience in 2020, almost half of our global GMB was transacted in the App and it continues to grow faster than the overall business as buyer and seller preferences evolved.

We have maintained high ratings and both iOS and Android and our App was downloaded more than 50 million times in 2020.

To drive engagement from buyers on mobile we have simplified item pages made it easier to like our Sharon item and provided more exposure by granting direct access to seller stores.

Additionally, we improved conversion by enhancing search relevance and streamlining sort and filter options, allowing app users to find what they're looking for faster.

While we are focused on delivering our vision, we remain committed to keeping our purpose at the forefront by leveraging the power of our platform to support our communities.

One way we did this last year was by helping to quickly and efficiently distribute PPE to frontline workers and the UK.

Ebay partnered with the Uk's National Health service, the Department for Health and social care and logistic partners on this effort.

I am proud to report that in December the NHS PPE portal powered by ebay reached a significant milestone.

Together, we delivered more than $1 billion PPE items to more than 45000, and social care providers in the U K.

Another way to ebay platform provides opportunity is by enabling a thriving customer community that loves to give back during.

During the year that has been challenging for so many the ebay for charity community continues to gain inspiration and two.

<unk> 2020 was a record breaking year with nearly $123 million range globally and charitable donations.

The generosity showed by our buyers and sellers is amazing the spirit of our global community centered around connection and economic opportunity for all is clearly alive and well.

But over the course of 2020 ebay invested more than $100 million to support the growing needs of small businesses around the world through programs like up and running.

These programs provided the access training and resources needed to start selling online and connect new sellers to ebay's global community of buyers and.

And Jeff last quarter, we announced further assistance through and up and running grant program and the coming weeks, we will reward a number of EBIT U S small business sellers, a grand package worth $10000 each.

As I've mentioned in the past at ebay and we focus our sustainability initiatives and the most impactful goals that will help strengthen our business and provide the most value to all our stakeholders and our commitment to climate action and transparency is being recognized externally. We were once again included and the Dow Jones sustainability World and north of.

America indices and recognized and the carbon disclosure project a list for the first time.

And the past year alone and we have avoided and an additional 720000 metric tons of carbon emissions through people selling their pre owned electronics and apparel on ebay.

In summary, we are making progress on our vision to realize the enormous untapped potential of ebay and we have a clear roadmap for 2021 and beyond.

And our payments transition is on track and will largely be completed this year.

Our advertising business will continue to outpace volume through promoted listings and other products.

As we defend the core we plan to expand our new vertical experiences to more markets and innovate and more categories to date, we've only touched a single digit percentage of our global <unk>, but in the coming years that will expand to a majority of volume.

To build the platform of choice for sellers, and we will continue to expand the stores experience and gift sellers more tools to increase velocity. We will also leverage technology to dramatically simplify the and and selling process for consumer and business sellers.

To create more lifelong buyer relationships, we will connect with them through new channels deepen their engagement with the ebay app and deliver trusted experiences when they shop with us.

Last but not least we will continue to invest and product and technology and evolve how we spend marketing in order to become the best marketplace and the world for buyers and sellers.

I know, we can accomplish all of this due to the fantastic team I have the privilege of leading our employees live our purpose and 2020 and I'll look forward to what we can do together for our customers and 2021 and beyond.

With that I'll turn the call over to Andy to provide more details on our financial performance Andy.

Thanks, Jamie I will begin my prepared remarks, with our Q4 financial highlights starting on slide four day earnings presentation.

And Q4, we generated $2 $9 billion of revenue.

86 of non-GAAP, EPS and $715 million of free cash flow, while returning $529 million to shareholders through share repurchases and cash dividends.

Moving to active buyers on slide five we.

We exited the year with $185 million buyers, representing 7% year on year growth.

Two point acceleration versus the third quarter.

Since the end of Q1, we've added 11 million buyers to the ecosystem and are seeing retention rate in line with historical cohorts and we continue to see growth and gms per active buyer across the buyer base.

Moving to slide six and Q4, and we enabled $26 $6 billion of marketplace GMB up 18% year on year, while volume decelerated three points versus the third quarter, we did see modest acceleration compared to September growth rates, driven by a decrease in consumer and mobility and benefits from Andrew.

<unk> improvements and the product experience across horizontal work streams and the progress, we're making and key verticals.

And the U S. We generated $9 6 billion and <unk> and Q4 up 25% year on year decelerating eight points from Q3.

International <unk> was up 15% year on year, a one point acceleration versus the third quarter inclusive of growth and our off platform Korean business at 5% accelerating one point from Q3.

For the full year, the marketplace platform generated 100 billion and GMB up 17% year on year and acceleration of 19 points versus the prior year.

Turning to revenue on slide seven our.

Our Q4 net revenue was $2 9 billion.

Up 28% organically accelerating two points.

We delivered $2 6 billion of transaction revenue up 31% accelerating three points from Q3, driven by our payments migration and strength and advertising.

And managed payments and strong execution continued as we rapidly expanded seller and migration to the new payments platform.

And over 38% of global on platform and volume in the quarter.

In addition to the higher customer satisfaction metrics that Jamie mentioned managed payments contributed 10 points of incremental revenue growth versus 2019.

Transaction take rate was nine 8% for the quarter accelerating 40 basis points, driven by managed payments and promoted listings.

Partially offset by FX.

This is the second straight quarter with a 40 basis point increase and we expect take rate to continue to grow as managed payments and promoted listings continue to scale.

We delivered $270 million of marketing services and other revenue up 3% accelerating four points from Q3, mostly from a lower headwind from lapping the sale of brands for friends and partially offset by first party growth and Korea, which decelerated approximately 40 points to 60% year on year growth.

For the full year, the marketplace platform generated $10 3 billion and revenue up 20%.

Year over year growth was driven by higher volumes as well as strong execution and our initiatives.

And advertising, we cleared 1 billion ahead of expectations and powered by the 86% growth and promoted listings.

And managed payments delivered eight points of incremental revenue growth and the second half of the year turning to slide eight and major cost drivers.

And Q4, we delivered non-GAAP operating margin of 28, 1%.

This is up approximately 20 basis points year on year, driven by volume leverage and growth and advertising, partially offset by Reinvestments and FX.

Cost of revenue was up over one point year on year, driven by managed payments and our first party inventory program and Korea, partially offset by volume leverage.

Sales and marketing expense was down approximately 50 basis points versus the prior year as volume leverage and spend efficiency were partially offset by investments and our vertical strategy and brand advertising.

Product development costs were flat as volume leverage was offset by investments and the product experience, including managed payments.

G&A was down approximately 70 basis points, primarily from volume leverage and cost control.

Partially offset by charitable donations to support the ebay Foundation.

Transaction losses were down 10 basis points and.

Ed that rates have performed better than expected.

For the year operating margin was 31, 3% up three points.

Two points from volume upside net of reinvestment and.

And one point from continued cost efficiency related to our operational review.

Turning to EPS on slide nine.

And Q4, and we delivered 86% of non-GAAP EPS up 31% versus the prior year non.

Non-GAAP EPS growth was driven primarily by higher volume and.

And reduction in share count driven by our repurchases and growth and advertising and payments.

Partially offset by a higher tax rate and investments and our vertical strategy and brand advertising.

For the year, we delivered 49% growth and non-GAAP EPS, primarily driven by volume reduction and share count from our repurchase program.

And advertising and payments and addition to continued cost efficiency.

Partially offset by FX and higher tax rate and lower interest income.

GAAP EPS for the quarter was $1 12.

Up 94% versus last year.

The increase and GAAP EPS is mostly driven by the same factors as non-GAAP performance plus the change and the value of investments, including the fair value of the Audi and warrant.

Partially offset by a higher tax rate.

For the year, we delivered a 100% growth and GAAP EPS, primarily driven by the fair value of the Audi and warrant.

Non-GAAP performance, our share repurchase program, partially offset by higher tax rate.

As always you can find a detailed reconciliation of GAAP to non-GAAP financial measures and our press release and earnings presentation.

Moving to slide 10.

And Q4, and we generated $715 million of free cash flow up 27% driven by higher earnings.

We had a very strong year of cash generation, finishing 2020 with $2 $7 billion of free cash flow.

29% increase year on year, driven by topline growth and improved working capital and lower capex, partially offset by higher cash taxes moving.

Moving to slide 11 for the quarter, we ended with cash and investments of $4 1 billion.

And debt of $7 8 billion.

And Q4, we repurchased nearly $8 5 million shares at an average price of $49 46 per share amounting to $419 million.

For the year, we repurchased nearly 124 million shares at an average price of $41 31.

Amounting to $5 1 billion and total.

We ended the year with $2 billion of share repurchase authorization remaining.

Moving to slide 12, I'd like to provide and update on our investments.

Starting with the pending classifieds transaction as Jamie said, we remain excited to bring together two highly complementary businesses that can create tremendous value overtime when.

And when we announced the transfer on July 20th devaluation was $9 2 billion based on a mix of cash and out of into shares.

And the share price is appreciated by over 10%, which increase the value of the classifieds business to nearly $10 7 billion based on recent trading levels. We expect that the cash portion of the transfer will provide approximately $2 billion net of tax and.

And we currently expect any future sale of our stake would be a taxable event at the prevailing statutory rate.

Turning to audience.

The warrant we acquired in Q2 and 2018 is valued at $1 1 billion at the end of Q4 and increase of $770 million year on year.

This is an additional value drivers stemming from our payments initiative incremental to the plan of at least $2 billion of transaction revenue and $500 million of operating profit that is expected in 2022.

You can find more information on the audience and our 10-K.

For both of these investments we remain excited about the optionality, they provide including the significant value each can generate for shareholders.

Moving to guidance on slide 13.

Given the limited visibility to potential outcomes and the longer term, we are providing guidance for the first quarter and we will reassess providing longer term guidance at a later date.

For Q1, we are projecting revenue between $2 94, and $2 $99 billion growing between 35% to 37% on an organic FX neutral basis.

This assumes marketplace's volume growth and the low twenty's, driven by strength and ecommerce and continued improvements and our user experience.

In addition, we expect further take rate expansion driven by ongoing strong execution and managed payments and advertising.

We expect non-GAAP EPS of $1 <unk> to.

<unk> to $1 <unk> per share representing 49% to 57% growth.

We expect non-GAAP EPS growth will be driven primarily by volume lower share count.

Managed payments and advertising, partially offset by continued investments and product and marketing.

We are expecting GAAP EPS from continuing operations and the range of 81 to 86 per share and Q1.

In February our board approved a 13% increase to our quarterly dividend raising it to <unk> 18 per share the dividend will be payable to shareholders of record as of March one with a payment date of March 19th.

Our board has also approved an additional share repurchase authorization of $4 billion with.

With no exploration raising the total authorization to approximately $6 billion.

While we are guiding for the full year, we do want to provide some additional context for our path forward.

And on volume, while we are in early days, we feel great about the progress we're making on the strategy. We've laid out and believe these efforts will continue to deliver growth as we scale.

And the near term it is important to note that we will begin to lap significantly tougher comps towards the end of Q1.

And looking at Q2, specifically, we will be facing into our peak level of growth and 2020 that was driven by the first wave and mobility restrictions.

Stimulus payments around the world and supply chain disruptions that our globally distributed sellers, we're well positioned to overcome.

We expect revenue will continue to outpace GMB and seller migration into managed payments nears completion and.

And we expect adds to continue to grow faster than volume on our way to the next $1 billion.

On margin, we expect to continue to drive operational efficiency, while investing into higher rates of long term revenue growth.

We maintain our commitment of delivering two points of margin expansion versus 2019, achieving at least 30% by 2022.

We expect to deliver strong free cash flow and we will continue to return capital to shareholders through share buybacks and dividends, while being opportunistic with strategic M&A to accelerate our core strategy.

Throughout 2020, we strengthened our balance sheet by leveraging favorable market conditions to improve rates on our outstanding debt within our existing targets and tenants.

We will continue to optimize our capital structure, and recently announced our intention to call our retail bond that we plan to replace with debt at favorable rates and 2021.

In summary, 2020 was an extraordinary year.

We added $14 billion of GMB, and 11 million active buyers to our ecosystem.

And we executed and payments and advertising, which delivered a combined seven points of incremental revenue growth compared to <unk> <unk> for the year 13 points and the fourth quarter.

We processed over 38% of on platform <unk> through managed payments and the fourth quarter, while improving experiences for buyers and sellers.

We cleared $1 billion and advertising and the year highlighted by 86% growth within promoted listings.

We grew non-GAAP EPS by 49% and delivered strong free cash flow of $2 7 billion.

We executed a comprehensive portfolio review, including the divestiture of Stubhub for $4 billion dependent.

And the pending transfer of ECG assets at a favorable valuation and announced the decision to explore options for Korea and January.

We returned nearly $5 6 billion to shareholders through share repurchases and cash dividends and repurchasing $5 $1 billion of our own shares taking advantage of and market price that we do not believe reflects the value of our company.

And in these Imaginably tough times, we were there to help our employees sellers buyers and communities, while delivering strong results for our shareholders.

We exit 2020, having improved the underlying health of the business by delivering on the strategy we implemented this year.

And we entered 2021 focused and excited to deliver on the next phase of the strategy as we build more compelling nextgen experiences become the partner of choice for sellers and cultivate lifelong trusted relationships with our buyers and.

And now we'd be happy to answer your questions operator.

As a reminder to ask a question you need to press star one on your telephone to withdraw your question press the pound and housekeeping. Please standby, while we compile the Q&A roster.

Our first question comes from Eric Sheridan UBS. Your line is open.

Thanks, so much for taking the questions maybe two if I can appreciate all the color on some of the vertical moves, you're making and especially with respect to watches and speakers can you talk a little bit just strategically about how much you already have employees to capitalize on looking.

Going vertical by vertical within the marketplace or how much are sort of investments you have to make to unlock the opportunity over the longer term and then.

And I understand on what you face and the middle part of the year with respect to comp against the growth from a year ago can you just talk philosophically about how much you think your exit velocity is going to matter against running against that comp versus how much you might want to make investments to sustain momentum and user buyer growth or buyer behavior.

Sort of outline the comp through some of the investments you might be able to make against the business or just letting the market play out from a comp perspective. Thanks, so much.

Yes, Thanks, Eric Let me take the first one on protocols and you can take the second so we invested and those vehicles really based on the strategy that we laid out in July and focusing on non new and seasoned and opportunities where we had strength to win and if you look at those categories being watches, yes, sneakers, which we brought out shortly after watches and then certified refurbished.

Saw really great growth rate as I mentioned, the triple digit growth rate that we saw and sneakers you got to remember this was a business that had been and decline and so to see it.

As strong as this shows us the power of really focusing on those protocols and the end and experience for our for our customers and so while those categories represent a single digit percentage of our GMB. The plan is to continue to rollout our new category experiences from an end to end perspective over the course of the coming years eventually meeting the majority of our.

<unk> I will add that we included another.

Area for us and the UK, where we piloted a fashion brand outlet with 150 fashion brand sellers performed really well double digit growth.

Ahead of the market and ahead of what we expected and so with that kind of gives us the confidence that the strategy is working and the confidence to continue to rollout more categories over the coming quarters and years.

Eric and then on.

On the second part of your question on.

On comps and investment.

Clearly, there's a lot of noise and now with what's going on with the pandemic, but that hasnt stopped ore really changed the approach we've taken towards building towards longer term growth, that's given us a little bit of a tailwind to lean in a bit on investment, but the beauty of this model is.

As I said in my prepared remarks, we're committed to the 30% margin and we believe.

And that we've got a very strong plan to get there.

And we feel like we have done.

Great progress on the initiatives this year exiting the year stronger.

Certainly stronger than we entered and stronger than we had anticipated when we when we entered the year as we look at the controllable aspects of growth. If you Peel apart what we can see from from Covid related items.

Great. Thanks, Scott.

Our next question comes from Edward <unk> with Keybanc. Your line is open.

Hey, guys two quick ones from me I guess first.

You made some really strong strides and gangster and new customers getting them back and the platform.

What are you doing Scott.

And ensure that they arent, just one and done and get that David.

And I've called related our bank and bidding against us and for the.

And this holiday and then.

A follow up.

And I can see the strength and sneakers and watch it and I know you guys have a third party authentication services I believe.

Scalability.

And that you're continuing growth businesses. Thank you.

Yeah, so starting on the buyer ones, we acquired 11 million buyers over the course of the year.

And what we're seeing is that the behavior when we look at things like frequency and retention.

Not different and is as strong as we've seen and Pasco Hearts, which means they didn't just come to us for ebay to buy a specific PPE and then and we won't see them again, we're doing a good job of turning and percentage then into enthusiasts and what we're really focused on is how do we turn them into cross category shoppers, So as I mentioned and the remarks.

Our sneaker buyer and comes into ebay is going to be worth 2500, while David buying $2500 worth of GMB, but only 20% of that is and sneakers and 80% of Ed will be and other categories across the site and Thats a huge advantage for us because the cross category nature that we have of the platform and it's also a specific focus and something that we lean into <unk>.

What is driving it and a lot of that growth is coming from CDC and is bringing gen Z and millennials to the platform, which is also critical and and part of our strategy in terms of the authentication and we've ramped up the amount of authenticating and we're dealing to know every sneaker over $100 gone through to the to the.

The casing platforms, and we're seeing great response, and great operations. There. So consumers are getting their sneakers really quickly and the authentication process is working and look while it's a very very small percentage of things that we find where there are issues that guarantee for customers is a huge differentiator and is it a big part of what's leading to the.

The triple digit growth, so we're leaning and a lot in terms of marketing and acquiring those customers and that category and we're excited for what we're seeing.

Thank you.

Our next question comes from Ross Sandler with Barclays. Your line is open.

Hey, guys, just two questions first and international looks like and some months.

This acceleration there.

And <unk>.

UK and Germany, and also accelerating windows and the guidance that Paul Hofman with denim and <unk>. So I guess can you just walk through how much of that is company specific initiatives versus just the overall economy.

Mark will cease.

<unk> mobility, and Lockdowns in homecare and <unk>.

And of course, you mentioned and OPO and.

And growing faster than paid in full.

And that was the plan.

Hum.

And so five years ago. So just I guess what are you doing.

Let's move to unlock that IPO.

Ill take that channel.

On a go forward basis. Thank you.

Got it Hey, Ross I'll take the first one.

Our Q4 dynamics and and the international versus.

U S split.

It looks like there is.

Bit of a difference between U S and international growth rates with the U S down eight and international.

Accelerating on a quarter over quarter basis, that's really less and impact of.

What we saw in the fourth quarter and more and impact of kind of the unwind of the second quarter Spike and how third quarter rates.

Played through so keep in mind and the U S and the third quarter the.

And the growth rate and the deceleration from Q2 was a little less so when we look at <unk>.

And third quarter or fourth quarter.

And how it plays through into the first it's really for us more than what we saw what we've seen since September with some acceleration.

And all basically all countries around the world.

And that's played through to the first quarter and it's implied in the acceleration and you see in our Q1 guidance.

So clearly mobility plays a large role and sustaining a level of growth.

And.

Driving a bit of acceleration.

But again.

The initiatives, we're working on and.

And the progress we've made with regards to product marketing and managed payments and search.

Contribute as well to the acceleration on a quarter over quarter basis, but clearly the majority of that is going to be mobility, driven but underlying performance better.

Yes, I'd say on the <unk>.

Look there's a number of things that we've been doing in terms of how we structure, our listings and work with our content and design, though that actually specifically drive it there.

And as some Google algorithmic change, which we benefited from.

And we've been doing some upper funnel, specifically and targeted vertical which we think helps some of our lower funnel activity I think the important thing to remember is.

And general 80% of our traffic on our site is organic and people coming to us directly and Thats really one of the strengths and assets of ebay, but certainly the SCO is helping us with our initiatives to drive cross category purchase and drive consideration.

Our next question comes from.

Colin Sebastian with Baird. Your line is open.

Alright, great. Thanks, guys congrats on the quarter.

To follow up again on cross marketing just to understand how new this new this initiative is something you've been working on throughout 2020, and if you have any metrics on maybe the number.

And as of landscape.

Perhaps you guys could comment on and how Youre perceiving the landscape with some call them up and coming marketplaces.

And across some of your key categories alright. Thanks.

Yes, so look on the.

On the cross marketing I think it's been important for ebay since I was here. The first time and continues to be a really important thing when you look at driving to see LTV of our buyers.

If I go back to the Sneaker example, I talked about the 80% outside the category and that represents and purchasing and 10 categories outside of the out of that core category.

I would even broaden that question to say, we're really starting a lot that first and a 90 day experience for our customer and looking at all of the things that drive the retention of that and so getting them to download the mobile app getting them to shop across category and getting them to watch or save items and.

And really driving more of our marketing technology to aligned to driving the retention to buyers and that's why we're excited to see that.

A big reason and we also focus on <unk> selling is because and we acquired that buyer to come in as a buyer and then we get them to just do any kind of casual selling may become two to two five times more valuable to us as a buyer so really that whole kind of introductory lifecycle and being really algorithmic and using our best data science and AI.

Really working on our marketing technology to be able to leverage that more is it is a key focus for us and mark.

On the competitive landscape, we feel we feel great about our positioning.

And we significantly improved the NPS of our experiences, especially and those focused vertical that we talked about.

And we're seeing really good feedback from buyers and sellers and that that's.

Always the leading indicator is is that <unk>, and NPS performance and and what's happening there and so.

That combined with the payment and <unk> SaaS software seeing where sellers that are moving to our payments to Don how are managed payments platform have a 10 point higher NPS.

Making us feel really good about where our competitive positioning is and I.

And lastly, I'd say is just thinking about the scale right. So we talked about $14 billion GMB.

And that we grew year on year last year, that's more than the last seven years combined that's more than most vertical competitors would do and a year, we grew more than that amount and so being able to leverage those 185 million buyers and have and purchasing cross category is a huge and unique asset for ebay.

Great. Thanks James.

Our next question comes from Steve.

Your line is open.

Okay. Thank you so I think Jamie.

Previous management teams.

Talked about looking at managing and the amount of real estate.

Dedicated to promoted listings for system or legacy forms of advertising. So are you yet and a place where you've had to make those types of trade off decisions in terms of one versus the other.

And secondly, you recently announced the rollout of managed payments to both merchants and buyers in China, and so I think.

Part of the benefit of working with AD units.

Accept different forms of online payment, which you probably couldn't do before.

And this theoretically should help you take down some of the friction I guess cross border trade. So does this help you think about potentially expanding your customer acquisition funnel as well. Thanks.

Yes, so first on the on the advertising business feel great about hitting the $1 billion milestone.

As we look at a lot of that growth is being driven by the growth of promoted listings and as we analyze it we are seeing better seller penetration of people coming on the platform better technology and tools in terms of our ability to do relevance and we're not seeing integrated the buyer experience, which is what gives us comfort that when we look at it and total <unk>.

And 1% of our total GMB that we have the opportunity to continue to have advertising drove faster than our <unk> on the platform.

And really really based on that strength of promoted listings.

And your question on managed payments absolutely its a huge part of the win is really streamlining the payment process and providing more payment options cross border trade for US has always been a great business, a really unique business to ebay and specifically and the greater China corridor.

And helps us bring on new buyers to the platform and a different type of inventory. So between what we're doing in terms of speed pack and some of the forward deployed inventory plus now as we expand payments to two.

Greater China, we think that will help a number of quarters in terms of our cross border trade business.

Thank you.

Our next question comes from Thomas Forte with D. A Davidson your line is open.

Great. Thanks for taking my question. So you sort of touched on this and the prepared remarks, but I was hoping you could give a little more of an answer on it Steve made a number of changes to your operating assets moving.

18 months I wanted to get additional details on your thoughts on your long term capital allocation strategy, including M&A.

Back and dividend and.

The M&A part.

Are you looking more for tuck in or would you be looking for something.

More of a growth type asset.

Thank you.

Yes, theres really nothing different about our thinking towards capital allocation.

Model gives us the flexibility to both invest back in and our business organically.

And opportunistically to look at M&A as well as return capital to shareholders.

Business generates a high amount of free cash flow, we have a strong balance sheet and I think we have a track record of both <unk> and exercising discipline and our portfolio as well as maximizing value for shareholders. So we will continue to look opportunistically at M&A and.

And do so for tech and talent are areas that we believe are going to accelerate the strategy that we laid out in July and if you want to add anything to that.

I think the only thing I'd add is while we do.

A pretty accurate playing field with what with what's coming with ACG.

And the like I think if you look at historically, what we've done with Stubhub and some other things in the past.

You can expect it will be consistent and what we've done our tenants and targets are unchanged and.

And our number one focus is do what we can to invest back in the business to grow organically.

Look at M&A, where it helps us to do that.

We remain committed to shareholder return.

And I would just expect us.

To continue to do that.

Great. Thanks for taking my questions.

Our next question comes from Tom Champion with Piper Sandler Your line is open.

Okay.

Great good afternoon.

We've done survey work here that.

It reflects a rising interest and pre owned goods among gen Z and millennial cohort and just curious if you are seeing this trend reflected in your new buyer growth as well, whether you'd you'd kind of agree with that and then maybe just as a second question around advertising.

There are clearly some larger internet platform, saying iOS changes will make small business advertising more difficult and integrated.

Roy this year and just curious if you think this represents an opportunity for ebay.

To step in and offer a solution among smbs.

Thank you.

Yeah. So first on the on the Gen Z and millennials absolutely.

Huge area and why were focused on pre owned not only because of the attractiveness. There, but also just the impact on the planet and if you look at the numbers that we talked about from savings and 720000 metric tons of carbon emissions.

We recently did a survey probably sounds like much of a survey that you've done and what we saw is that 72% of our sellers that come and start selling on the platform are doing so because they need to earn a little bit of extra money and.

And some percentage of those are actually because they lost their job and so theyre looking for opportunities.

And I'm, just making money on the platform. The other thing Thats important to remember is that.

We believe that.

People have about $4000 of items and the house that they can sell less and 20% of that is online.

And so there is a huge kind of social element, which we're leaning into as part of that but definitely a focus on the gen Z and millennials and Youre seeing that sneakers, you are seeing that and what we did with our brand fashion outlet and the U K and Youll see us continue to focus on and tracking that customer to the platform.

Your next question comes from Colin.

And with <unk> Securities. Your line is open and before you before you do I forgot that I didn't ask answer your advertising question. So let me just cover that one real quickly.

Look we believe that ads is beneficial for us because we essentially have a closed platform.

We're able to drive the majority of that growth of promoted listings, where we actually can see.

The actual relevance the implications the clinic there is all of the data and that makes that impactful. So yes that that gives us I think a lot of bullishness in terms of the future opportunity for us and the advertising, especially since we're only penetrated at one percentage of GMB and we think theres opportunities to continue to expand the number of sellers that use the platform.

Form.

And as well and build new capabilities to make that platform, even more attractive with with some new tools et cetera, which you'll see over the coming quarters and <unk>.

Coming years.

Can you hear me.

Yes go ahead, sorry about that excellent day no. Thanks, a lot. Thank you for taking my question I just have a two part question one.

And I look at slide.

And the <unk> breakdown it looks like <unk> was up 25% year on year, which is pretty impressive and I look.

Got it on a sequential basis, it was actually slightly down and a seasonally strong quarter. I was wondering if you can expand on that and then related to that.

As I look at your.

Our guidance for Q1 kind of what's baked into your guidance and in terms of the mix between U S growth versus international and thank you.

Alright.

And it's just about U S versus international for Q1 guidance.

Yes.

I'll take that one first just on the.

A little similar to the question earlier.

Based on the trends, we saw and the fourth quarter kind of the movement and.

U S versus international was relatively similar and so as we look into Q1 and what we've seen thus far in the quarter and therefore implied in the guide is.

Similar movements by country, So no real difference U S and international in terms of quarter over quarter dynamics and and our first question.

Was it U S GMB only the deceleration.

Yes.

Basically.

Slide six yes, sorry.

Sorry, you said that one I think again if you.

And as Les and issue or a lesser.

Component of Q4 activity as much as it is.

Hangover in Q3.

<unk>.

And the Spike in Q2.

So the U S.

Clearly, a very large volume spike and the second quarter volume and the U S hung and longer and the third quarter, partially as a result of stimulus partially as a result of some of the.

Supply chain disruption and then has that slowed down through the end of the third quarter.

Some of that is what you're seeing play through in the quarter over quarter dynamics, but as I said from September on the activity by country has been relatively similar.

Got it alright, that's helpful.

Thanks, Tony Thanks, Jeff.

Our next question comes from Bob and Paul.

And home Securities. Your line is open.

Hey, guys.

Just a couple of quick questions really on the 7% increase and buyers.

What would you put into the largest factors to the new buyers during this period versus what we've seen over the last.

Nine to 12 months and <unk>.

The second question is just are you seeing any change and buy it now versus the auction type buying with the consumer.

Yeah sure Bob So look the increase and buyer is in part doing a lot of the strategic work that we're doing and the focused vertical as these policy and more marketing and the quarter really talking about some of the new capabilities that we have out there and.

And we leaned in from a reinvestment standpoint to not only acquire those buyers, but to really to work on driving the retention of those buyers into our key platform. So.

Obviously and a number of countries and it's also a pandemic related.

And mobility.

Also been leaning in to kind of take advantage of that and drives our cohort curves and we've been and prospect we've been seeing from from that perspective in terms of.

And the makeup of different format now remains the vast majority of what's on the platform.

We do see strength and auctions and areas like collectibles, which is a category that's growing strong for us, but now it has by and now remains strong, but we have innovated over the years and things like best offer and and seller initiated offers and seller initiated offers and as an example is almost the inverse the best off our best offers the buyer, making and offer seller.

And can actually make specific individual offers to sellers hill interacted with one of their products and and we're doing $1 billion <unk> already and that and it's one other unique elements of the ebay platform as auctions best offer sorry initiated offers are all ways for buyers and sellers to to get to a negotiated price on the platform, but but overall by now.

Still remains the vast majority of the business.

Great. Thank you very much.

Okay, operator, we have time for one more.

Our final question will come from Brian Nowak with Morgan Stanley. Your line is open.

Thanks for taking my question.

And just the.

The first one Jimmy I appreciate all the color around sort of the way Youre studying the first 90 days of experience of the consumers and sort of the day, 80% of the traffic that comes organically I'd be curious to hear about in the U S talk to us about what you've seen as being the one or two key categories that have been the biggest enable.

<unk> of the new people have come to the platform and how have you seen that change from last spring to know which categories are sort of driving the the new people to the category and then secondly, just as we think about the advertising business to start.

It was about qualitatively what types of investments you still see yourself needing to make internally to sort of ensure that the advertising business is set up to continue to scale and deliver value for the merchants.

Yeah. So look the buying five David that we saw over the course of the year. It started and PPE equipment, and then went to kind of stuff that people needed to work from home or stay at home fitness equipment and laptops and that.

Type of thing, but after that it was really broad based and continues to be broad based in terms of where we're acquiring buyer. So from everything from people spending time, and our hobbies and parts and accessories or fixing up their cars.

Two.

To certified refurbished and what we're doing there, we're definitely seeing strength and buyer acquisition and the focus verticals that we've been talking about so like apparel that we worked on and the and the quarter with the brand fashion outlet and then.

And the areas that we that we announced and the U S and we will be expanding globally. So.

More important for us is not only where we acquired and getting really smart and using a lot of AI about what's the best back and category. How are we using all of our tools and capabilities across marketing and the apps and the websites to get them to interact and different parts of the business and.

And that's where I think about it just getting a little bit better every single day and how we're able to do that it's going to it's going to be what continues to help drive those numbers.

From an AD perspective, we're.

We're focused on the tools and capabilities to make it easier for sellers to use the product to give them templating and reporting of how it's doing and be able to have that closed loop ROI on the spend that they have on the platform to make it more applicable to see to see sellers and.

And make it really easy to air because obviously, if you think about our sophisticated <unk> seller is easier to interact with and much easier understands and advertising product. So thats a big component of what we're doing.

And then also just building new algorithms and relevance and machine learning into our we displayed and the best thing to the buyers that we continue to expand the program, while while not degrading the buyer and experienced and ideally enhancing the buyer experience through what we're doing on our advertising products. So.

What Youll see is just continued quarter after quarter innovation innovation and that product to to help us keep the growth and reached the potential of the product and have it continue to outpace the outpaced <unk> four for the near and medium term.

Great. Thanks, Jamie Yeah.

Ladies and gentlemen, we have reached the allotted time for questions and answers.

And I'll turn the call back over to the company for closing remarks.

I think we're all set we can close the call.

Thanks for everyone and thanks, everyone.

This concludes today's conference call you may now disconnect.

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