Q1 2021 eBay Inc Earnings Call
Good day, and thank you for standing by and welcome to the ebay first quarter 2021 net 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 to ask a question. During the session you will need to press star one on your telephone.
Besides 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 Bob.
And VP of Investor Relations and Communications. Please go ahead.
Good afternoon. Thank you for joining us and welcome to ebay as earnings release conference call for the first quarter of 2021, joining me today, and the call or Jamie I and owning 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 day Ebay, Inc. Dot com before we begin I'd 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 the reconciliation of these measures.
To the nearest comparable GAAP measures and the slide presentation accompanying this conference call. Additionally, all revenue and GMP growth rates mentioned, and Jamie's and Andy's 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. This presentation is as of April 28, 2021, and we do not intend to and under.
No duty to update this information.
With that let me turn it over to Jamie.
Thanks, Joe and good afternoon, everyone and thank you for joining us.
And they will begin the call with key highlights from the first quarter, then I will share. Some reflections from my first 12 months of CEO and provide an update on the status of our tech led re imagination at.
At the end of my remarks, I will turn the call over to Andy who will discuss our financial performance and outlook in greater detail.
The first quarter of 2021 was an excellent and starts the year for sellers and buyers on ebay gross merchandize volume grew 24% ahead of expectations revenue grew 38% outpacing volume primarily due to payments and advertising. This is the fastest our revenues have grown since 2005.
And we lean further into technology and vertical marketing investments, but still delivered $1.09 and non-GAAP earnings per share above our expectations and.
Importantly, our customer metrics grew on both sides of our marketplace active sellers grew 8% to 20 million globally more small businesses are joining the platform and more consumers are engaging and selling.
C. G M D growth outpaced b to C for the fourth quarter in a row. This is positive for the long term as consumer sellers bring unique inventory at compelling prices and spend more than twice as much as buyers who don't sell.
Active buyers grew 7% to 187 million globally, we are retaining buyers acquired over the last year at similar rates as pre pandemic level, and we're seeing higher customer satisfaction and several categories as well as increased spend per buyer.
We have continued to make progress on our multiyear initiatives payments and advertising, which contribute to a seamless customer experience and increase our platform monetization and deliver compelling financial results.
Managed payments and in Q1 with over 4 million sellers migrated. This includes millions of consumer sellers and hundreds of thousands of businesses globally.
During the quarter ebay managed payments representing over 52% of on platform volume up from 38% last quarter.
And the U S. We exited the quarter over 80% complete.
By applying what we learned and previous market, Rollouts, and France, Italy, and Spain progressed, and then even faster pace and we're on track to launch greater China This quarter and all remaining markets by the middle of the year.
We continue to see higher seller satisfaction due to a simpler and and experienced that reduces cost and complexity for many years before managed payments sellers had to manage delays between purchase and payment across two platforms that tied up their inventory.
And sellers migrate to managed payments that pinpoint is resolved saving time and money and in Q1, we reduced unpaid items by approximately 80% on fixed price transaction.
We remain on track to complete the vast majority of the payments transition by the end of this year, which would deliver our stated financial goals and at least an incremental $2 billion and revenue and $500 million and annualized operating income in 2020 two.
And Q1 advertising growth outpaced volume driven by promoted listings, which delivered close to $224 million of revenue up 58% more than 1.3 million and sellers promoted close to 400 million listings during the quarter.
Growth was driven by increased seller adoption and AI improvements that increased conversion.
Inspired by the success of promoted listings over the past few years, we are investing aggressively and innovation.
We reached 1 billion of advertising revenue in 'twenty, and 'twenty, primarily through promoted listings, which leverages a risk free CPA model for fixed price inventory to.
And to capture our next billion, we're running multiple experiments, including and AD product for auctions and cost per click capabilities.
We're also exploring a new capability that expands seller exposure by increasing off ebay traffic to promoted listings.
Q1, clearly demonstrates that the ongoing execution of our long term vision is driving better results.
Mall business and consumer sellers are thriving and buyers are finding unique items at great prices, we have seen strong growth and volume revenue and earnings over the past year due to a combination of mobility, driven tailwind and the execution of our multiyear monetization initiatives.
And we are driving value through portfolio optimization, and returning capital to shareholders.
Despite these notable achievements, there's still a tremendous amount of potential to be realized.
Now I'd like to take a step back to a year ago. When I rejoined this remarkable company as CEO I knew ebay as a pioneer and e-commerce with a globally recognized brand robust organic traffic and long standing customer relationships and I've always been inspired by the purpose and special culture at creative.
Last July we set out a vision for a tech led re imagination of ebay.
First we believe that we can drive growth in our core by significantly increasing customer satisfaction.
Second we saw the need to better serve our small businesses and consumer sellers to become their platform of choice.
And third we identified the opportunity to evolve our relationship with buyers to drive better long term retention.
I am confident we can deliver on these three pillars positioning us to more effectively compete and win and a huge and growing addressable market.
Our results to date are very encouraging our underlying growth is accelerating sellers and buyers are growing and we are making progress and our pursuit to be the best global marketplace to buy and sell simply put our strategy is working and let me share. Some examples with you.
And the U S. We are growing our core and Q1 sneakers valued above $100 grew at a triple digit rate once again.
Since launching authentication, we verified hundreds of thousands of sneakers and we're seeing buyer satisfaction above 80 as a result. In addition, we are expanding our engagement with Gen Z and millennials, so a wide range of social channels.
Based on the tremendous success, we've seen in the U S. We are rapidly expanding identical capabilities and other major markets. We have set up local authentication centers and are launching and the U K, Australia and Canada. This quarter. These.
And these centers will also unlock cross border trade opportunities and sneakers and and other categories.
And luxury watches we saw growth accelerate from 16% and Q4 to 38% and Q1 and the U S.
For authenticate items, we are seeing customer satisfaction levels close to 90% and it is changing customer behavior sellers are listing more items and seeing a higher price realization and buyers are visiting ebay more often and spending more.
One of the key advantages of our platform is cross category shopping our luxury watch buyers like our sneakers enthusiasts spend thousands of dollars on other categories across the platform.
In addition, based on the value we are delivering and luxury watches we recently raised fees and this category to create more investment capacity.
For our certified refurbished experience ebay sellers continue to see strong velocity and we've expanded and the U S. Over 150 brands. We've also rolled certified refurbished out to the U K, Canada, and Germany with more than 100 and top brand signed up already.
Here's loved the low prices, unlike new products as well as free shipping extended warranties and extended returns.
Now I want to highlight the next core category, where we see significant potential trading cards, a key part of our collectibles business ebay is a market leader in this category with the widest selection across all price levels, we've seen explosive growth to start the year.
And the U S. G. M D was over $1 billion, and Q1, which represents more than half of 2000 twenty's record setting volume.
Active buyers of trading cards doubled and existing buyers purchased more items at higher prices than last year too.
And to dramatically simplify selling we recently launched image based scanning for our top selling trading cards. In addition, we introduced a new low cost tracked shipping service and aggressively marketing to buyers and social and enthusiasts forums, we plan to launch more innovation for training cards throughout this year.
Another area of focus for US is customization, beginning next month and the U K and Germany, we will offer a new capability to all sellers to offer personalized goods and categories, such as home fashion and jewelry.
This will allow buyers to find it and our specific customization requests to the seller in the past. This process was manual which limited G. M V. But we believe this new experience can significantly improve customer satisfaction and bring more supply onto the platform and capture more growth we plan to expand this capability to all major markets.
And the coming months.
As I mentioned upfront our playbook to grow the core is working well.
We have a series of innovation rolling out to more markets throughout the year, while we've only touched a small percentage of global volume. So far all of our largest ebay categories collectibles home and garden fashion electronics and parts and accessories have addressable opportunities that can benefit from this playbook.
In addition to category specific changes, we're rolling out site wide improvements for all sellers.
And for consumer sellers and small businesses, we are focused on significantly reducing complexity, helping maximize value and driving sustainable growth.
We believe these changes will increase seller satisfaction and grow the number of active sellers on the platform here are some examples of what we are doing.
Image based listening can remove up to 75% of the time it takes to list and item. We have activated this feature and trading cards, and we plan to expand and multiple categories and geographies throughout the year Lee.
Last quarter, we talked about how we have migrated almost all of our stores subscribers to our new platform that increases traffic to their items by approximately 20%.
This quarter, we empowered sellers with new CRM features allowing them to directly issue coupons to acquire buyers. And addition, they can say coupon budgets include QR codes on packing slips and drive repeat business to their ebay stores.
Recently, we opened up therapy product research free for all seller hub users and several markets, including price insights and listing quality reports.
In addition, we launched sourcing insights that help sellers analyze trending categories top products and signals what inventory is most likely to sell.
To acquire more buyers, we're also adding new AD formats to our display and social marketing, including video and we improved the inventory feeds that power them.
Once we acquire these buyers we are making changes to increase engagement and trust and their first 90 days and beyond as an example, we are leveraging a mobile first approach and revamping key communications buyers received we.
We are seeing increased engagement from Gen Z and millennial customers through social shopping such as ebay sneakers showdown.
For our experienced buyers and we continue to optimize the and and shopping experience and Q1, we increased conversion by improving our search engines understanding of longer complex queries, and we added functionality to help buyers identify free local pick up items and their community.
We are excited that all three of our strategic pillars are producing volume seller and buyer growth, but we have a long runway ahead of US we will continue to drive our investment decisions, both organic and inorganic and pursuit of achieving this vision.
While I'm pleased with our business results.
And I'm more proud of the way our employees and our platform are fulfilling our purpose of providing economic opportunity for all.
As part of our commitment to empowering small businesses everywhere, we announced an investment of $25 million into the clear vision impact fund to help support small and medium sized minority owned businesses that support historically underserved communities. We continue to support the U K 's National Health care service efforts and I'm happy to report that we are.
And now up to 2 billion PPE items distributed utilizing E based technology.
Additionally, we remain active and philanthropy during Q1, we raised over $35 million through ebay for charity. The company also contributed to Asian Americans Advanced Justice and supported and employee, giving during black history month, and the lunar new year, and we quadrupled employee matching gifts limits to the ebay Foundation.
Finally, another area that inspires me its EBIT impact on the planet many companies make admirable investments into adjacent programs, but at ebay sustainability is the core of our business. Since ebay was founded over 25 years ago re commerce or the resale of pre owned goods has been and integral part of our.
And that form and purpose our community connects and trades pre owned items that hold meaning and usefulness and keeps these items out of landfills.
A recent survey confirmed that re commerce resonates with our customers and the U S. 87% of respond and say they have sold preowned goods and the last 12 months.
And they are just selling 81% of Gen Z customers surveyed said that buying pre owned items has become more common and the last year.
In summary, we are making great progress on the Tech led re imagination of ebay, we deliberate historically strong Q1 results putting us in a stronger position today than we thought we'd be coming into the year.
Looking forward, we are excited because our long term strategy is working by increasing customer satisfaction, we are accelerating our core business, while attracting and retaining sellers and buyers. There is more work to do but I couldn't be prouder of the ebay team, they're focused and driven and they work hard every day to innovate keeping our.
<unk> is at the forefront 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 first quarter financial highlights starting on slide four of the earnings presentation.
The first quarter was another great quarter for ebay regenerated over $27 billion of G. M D. Our highest G M D quarter ever and we delivered $3 billion of revenue $1.09 of non-GAAP, EPS and $855 million of free cash flow, while returning 414 million.
To shareholders through share repurchases and cash dividends.
Moving to active buyers on slide five.
We exited the quarter with 187 million buyers, representing 7% year on year growth consistent with the fourth quarter.
Added 13 million buyers to the ecosystem since the beginning of 2020 and are experiencing retention rates that remain in line with historical trends.
And as we said throughout 2020, we continue to see growth and G. M b per active buyer across all cohorts.
Moving to slide six and Q1, we enabled 27 $5 billion of marketplace G. M V up 24% accelerating six points versus the fourth quarter.
On a spot basis, this represents growth of 29% and acceleration of eight points versus the fourth quarter.
As over 60% of our G. N V is generated outside of the U S. We saw a five point translation benefit due to the weaker dollar.
On platform volume, which represents nearly 85% of total GMB grew at 28% a seven point acceleration versus Q4, driven by site wide product experience improvements.
<unk>, we're making and key categories increased mobility restrictions and additional stimulus and the U S.
Our platform business and Korea was relatively stable versus the fourth quarter at 4% year on year growth.
And the U S. We generated $10 $4 billion of G. N V and Q1 up 36% year on year accelerating 11 points from the fourth quarter, driven by mobility dynamics stimulus payments and strengthen our core categories, including collectibles.
International <unk> was up 17% year on year, a two point acceleration versus the fourth quarter, driven by strength and our core categories and mobility dynamics.
Turning to revenue on slide seven.
Our Q1 net revenue was $3 billion up 38% and accelerating 10 points on and FX neutral basis.
As Jamie said this was our strongest quarter since 2000 and Todd.
On a spot basis this represents growth of 42%.
We delivered $2 $7 billion of transaction revenue up 40% accelerating nine points from the fourth quarter, mostly driven by our payments migration and volume strength.
And managed payments, we continue to execute and have made great progress on seller migration to the new payments platform.
Jamie mentioned, we processed over half of our global on platform volume and the quarter, which contributed approximately 15 points of incremental revenue growth versus 2020.
Transaction take rate was 10% for the quarter accelerating 20 basis points, driven by managed payments, partially offset by category and seller mix and addition to currency hedging impacts.
When we started the managed payments journey, we expect it to progressively increased monetization of our site, while delivering better seller economics and improved experience for both buyers and sellers.
And overall revenue growth for the business, we continued to deliver across all of these dimensions.
We delivered $291 million of marketing services and other revenue up 22% accelerating 19 points from the fourth quarter, driven by first party growth and Korea, which grew approximately 120% and addition to strength and advertising and shipping.
Turning to slide eight and major cost drivers and Q1, we delivered non-GAAP operating margin of 33%.
This is up approximately 140 basis points year on year, driven by volume and advertising, partially offset by product and marketing reinvestments and the impact of managed payments growth and FX.
For each of the non-GAAP expense buckets volume and a higher take rate provided leverage as a percent of revenue.
I will provide additional context for other significant drivers.
Cost of revenue was up nearly four points year over year as leverage was more than offset by scaling managed payments and our first party inventory program and Korea.
As a reminder, the managed payments cost structure includes payment processing cost that scale in line with payments revenue.
This dynamic has been fully contemplated and our 2020 two margin targets.
Sales and marketing expense was down nearly two points versus the prior year as leverage was partially offset by investments and our vertical strategy strategic reinvestments and online marketing and FX.
Product development costs were down 10 basis points as leverage was mostly offset by investments and end to end product experience and addition to managed payments and advertising.
G&A was down nearly two points, primarily from leverage and disciplined cost control.
Transaction losses were down approximately one and a half points from the benefit of fee, netting and our managed payments initiative and lapping COVID-19 driven deferred fees and solid protection increases.
Turning to EPS on slide nine.
And Q1, we delivered $1 nine of non-GAAP, EPS up 59% versus the prior year.
Non-GAAP EPS growth was driven primarily by higher volume growth and payments and advertising and the reduction and share count driven by our repurchases, partially offset by investments and product and marketing.
GAAP EPS for the quarter was 82 cents up 44% versus last year.
The increase and GAAP EPS is mostly driven by the same factors as non-GAAP performance, partially offset by the fair value of the Audi and warrant.
Moving to slide 10, and Q1, we had a very strong quarter of cash generation, finishing Q1 with $855 million of free cash flow of 65% increase year on year, driven by topline growth increased working capital and lower capital expenditures.
Turning to slide 11.
For the quarter, we ended with cash and investments of $3 $9 billion and debt of $7 billion.
And Q1, we repurchased approximately five 2 million shares at an average price of $55.70 per share amounting to $292 million.
We exited the quarter with $5 $7 billion of share repurchase authorization remaining.
Moving to slide 12 and investments.
When we announced the classifieds transaction without a into on July 20th of last year. The valuation was $9 $2 billion based on a mix of cash and the value of out of into shares at that time.
And as of April 27th the advent of share price had appreciated by nearly 37%, which increased the value of the deal to over $12 $7 billion.
We continue to expect the deal to close and the second quarter with the cash portion of the transaction, providing approximately $2 billion net of tax.
Turning to audience.
The warrants, we acquired and the second quarter of 2018 are valued at $1 billion at the end of the first quarter and increase of over $700 million year on year.
You can find more information on the Audi and warrant and our 10-Q.
We remain excited about both of these investments the optionality, they provide and the significant value each can generate for our shareholders.
Turning to guidance on slide 13.
For Q2, we are projecting revenue between $2 98, and three point O $3 billion growing between 8% to 10% on an organic FX neutral basis, representing 12% to 14% growth on a spot basis.
This assumes marketplace volume declines high single to low double digits on and FX neutral basis, representing a decline of mid to high single digits on a spot basis.
This volume guidance is driven by three main components.
First the negative impact from lapping our second largest quarter ever which was fueled by the first wave of mobility restrictions stimulus payments and supply chain disruptions.
Second the ongoing benefit from macro factors, including mobility and stimulus payments across our on platform businesses, which we estimate are contributing high single digit growth this quarter.
Third and most importantly continued delivery on initiatives driving us towards our vision and many of which Jamie highlighted earlier.
On a year over two year basis. This guidance represents growth and the high teens on a spot basis, which is more than $4 billion and incremental G. M V versus the same quarter in 2019, as our sellers and buyers have discovered or rediscovered the power and reach of our global platform.
We expect non-GAAP EPS of <unk> 91 to 96 per share representing a six 211% decrease primarily driven by volume deleverage and continued investments and product and marketing and support of our strategy.
Really offset by managed payments and a lower share count.
We expect non-GAAP effective tax rate of 16% to 18%.
We are expecting GAAP EPS from continuing operations and the range of 67 to 72 per share and Q2.
Finally on Q2, our EPS guidance assumes approximately $400 million of share buyback.
While we arent providing guidance for the full year, we do want to provide some additional context on our path forward.
On volume our conviction and the vision is increasing and we are confident these efforts will continue to drive additional growth as we scale.
While difficult to forecast mobility and will likely continue to improve throughout the second half pressuring gross.
And when combined with easier lapping that could result in second half FX neutral volume growth rates similar to those of our second quarter guidance.
For buyers and similar to G. M V. We expect growth will be pressured as we lap periods of high buyer acquisition.
We expect revenue growth will continue to materially outpace G. M V growth as our monetization initiatives drive a higher effective take rate.
Specifically and payments were more than halfway done with the migration of on platform G. M B and expect to deliver at least $1 $7 billion of revenue in 2020, one well on our way to realizing at least $2 billion of revenue and 2022.
On margin, we are on target and remain committed to delivering two points of margin expansion versus 2019, achieving at least 30% by 2020 two.
We set along the way that margin accretion won't be linear and and 'twenty 'twenty. One we expect margin will be approximately 29% for the full year.
With regards to cash and capital allocation, we will.
Continued to deliver strong free cash flow, we remain committed to our targets and tenants and we will continue to optimize our capital structure within them.
Specifically on buybacks for the full year, we anticipate repurchasing approximately $2 billion of stock excluding deal proceeds we will update plans for use of proceeds from the classifieds transaction at the time of closure.
For our Korea business, we have a strategic review process underway, which includes the possibility of a sale with interest from multiple parties.
We are exploring that interests and will provide an update when we have material information to share.
And finally on FX at current rates, we would expect to benefit of currency to be smaller and the second half as we lap a relatively weaker U S. Dollar.
In conclusion, Q1 was a record quarter for ebay and we enter Q2 excited about the path forward to deliver on all aspects of our long term plan.
We will continue to execute on our multiyear modernization initiatives, which are driving material benefits to our customers and shareholders as we move towards at least $2 billion of revenue and a half a billion dollars of operating income and managed payments and the next $1 billion of advertising revenue.
We are delivering on our core strategy, increasing customer satisfaction, and attracting and retaining customers as we capitalize on our half trillion dollar addressable market that is growing double digits.
We're delivering consistent strong free cash flow and continue to deploy that cash and a disciplined manner by investing and our platform for the long term and returning capital to shareholders.
On margins, we remain on target for at least two points of improvement in 2020 two compared to 2019, while we continue to drive efficiencies and strategically reinvest to accelerate growth.
And finally, we're executing on our portfolio reviews, and we'll deploy capital and a disciplined manner balancing reinvestment and the core capacity for mergers and acquisitions.
And your dividend and buying back our undervalued stock.
And now we'd be happy to answer your questions operator.
As a reminder to ask a question and I need to press Star one on your telephone and that's all your question press the pound and Husky.
Our first question comes from Ross Sandler with Barclays. Your line is open.
Hey, guys.
Okay I have three questions if that's okay sorry.
And the guidance, you've given like kind of loss and the year on year, but if we go from <unk> to <unk> sequentially I think it assumes about a 7% decline Q on Q for G. M P.
And you normally were kind of flat Q on Q. So I guess can you parse that into how much is like stimulus burning off versus all these economies reopening.
And the context of what Jamie said it Bob.
Buyers, retaining and a high level and spend per buyer going up and I'm just trying to reconcile that.
Second one is on the margin so the 29% margin guidance is.
Is that just from all of this payment revenue coming in at a lower margin or is there.
Other discrete areas that you're you're layering and on the investment.
And then lastly.
On the.
Trading cards are there other categories like this that just kind of have emerged over the last year that you guys, maybe had been more nascent and and juice and now are being like activation because consumer behaviors change anything else. Besides train cars, you would point to the net.
And it would be and examples like coming out of this whole thing why ebay would be and being much better shape from a category perspective.
It's a lot.
Yeah, I'll start with the trading card ones and then I'll, let Andy talk about the other two so yeah. You know, we've always had a great history, and the collectibles business and a great history and trading cards, and obviously Q1 was really strong doing it over $1 billion in the quarter, which was more than half of last year's record setting and I'd say you know in general what we see is that.
You know when we take category by category and we changed the N P asked and we change the customer experience that changes the buyers and sellers and.
And the G. N V follows and in that case, it's similar to what we saw in and sneakers and and watches where you know that change led to a dramatically different performance and we see customization, which we just launched this quarter as another one of those opportunities we do millions of items on the site today, but we do it in a way and that's really full.
A lot of friction between the buyer and the seller and it makes it really seamless and things it gives us the opportunity to open up more G M D and but as I said upfront you know we haven't even touched the some of the major categories that we have like home and garden fashion and electronics and parts and accessories. These are big core categories that all have addressable opportunities.
And we think and can benefit from this playbook.
Yeah, Ross and on the on the other two questions.
And on Q2, and Q Q1 versus Q2 dynamics I mean, clearly the first quarter was a huge quarter for us as I said, you know our largest quarter ever.
As we indicated in January.
And we had seen increasing restrictions late late last year and through most of our markets and those kind of persisted into the first quarter.
And and the growth and the and the first quarter.
Driven by two main factors you know as we've said the continued underlying performance and then the correlation between mobility.
And G M D and then as the quarter progressed.
A lot of further developments and things we learned along the way.
You know if you go back to January and pace of vaccines were very different from from where they are today mobility has improved throughout the quarter and most markets and then you've got as you mentioned that the impact of stimulus payments and the U S, which you know its hard to say exactly the impact but or when.
And it started or when it will stop but we believe the peak of that impact was probably in the March timeframe.
So when you look then at a on a quarter over quarter basis, the biggest difference between.
Q1, and and the outlook for Q2 would be the fact that the stimulus or nuts, and Ms, sorry, but the mobility and and a better place today than it was.
At the beginning of the first quarter.
Our underlying performance continues to be great and then as we've said you know progress on payments.
And as you know is continuing to be very positive as well that leads a little bit into your to your second question on margin rate for the year I think.
You know a couple of things to consider we're still on target for the 30% that we said for next year.
And and we have said all along it's not going to be linear and we're gonna have quarters, where we're up or down.
And we're going to continue to balance growth and margin along the way.
A couple of things when you look at.
Q1 relative to the rest of the year and then the second half and again you hit on a couple.
I think it's important to remember.
Our historical trend is that Q1 is a bit higher than the rest of the year and and.
Typically higher than Q2 last year that was a bit muted with the amount of growth that we saw but I think this year were you know with the with the relative size of the two quarters more on that trend.
And then you know without getting into a specific walk on the second half I think three things one would be you know a moderating growth, which will have some impact on volume you know and and deleverage.
We continue to invest for long term health, so we're not gonna be managing to a quarterly.
Margin target, we're working towards you know longer term business health and then you did call it and it's a great problem, which is you know payments is scaling rapidly.
And it's delivering a tremendous amount of incremental op income and it does come with a with a minor bit of pressure on operating margin but.
We feel great about that progress and what it does for the P&L.
Yeah.
Our next question comes from Colin Sebastian with Baird. Your line is open.
Alright, great. Thanks for the questions.
First off a bigger picture question for you, Jamie you talked a bit about some of the additional product planning with advertising and so more broadly I wonder how you think about the ramp of overall seller monetization how much additional upside you see there or if you see perhaps an opportunity longer term to to.
Shifting our model towards more AD orientation, like we see with marketplaces and other and other markets.
And then secondly.
On the margin side and.
And the spending side, obviously dynamics this year are a little bit different given the comps.
But we've seen periods of Reinvestments.
And with ebay over the last decade, and so Jamie you outlined a bit of a division last year and it sounds like you're happy with the progress this year. So far this year with the verticals.
But how are you.
How do you weigh the need to invest long term and and measure your performance on a short term basis and how quickly are you going to be able to pivot if necessary.
Yeah. So first on the on the monetization side and so look obviously, both payments and advertising are leading to the significant growth and revenue ahead of and payments. Since you asked me about advertising and I'll talk about we feel great about the business and part because our sellers are seeing a great return on their AD spend and we think there are.
A lot of opportunity left from that perspective to help them be able to move their products with velocity. So what we're announcing this quarter is that we're basically rolling out three new experiments or pilots and our advertising business and the.
First being placement for our auctions and so the growth that we've seen to date has really just been on the fixed price business and so that'll be a new capability. We're also testing a CPC based capability for our sellers, which is a new potential growth factor and we're looking at off ebay opportunities for our sellers too.
Even further and increase their exposure. So you know we continue to look at the monetization and are we adding value to sellers. A great example for that is and watches this quarter and we saw an opportunity to increase our fees there because of the value that we're creating for our sellers in that category you know overall when I look at advertising it.
They'll only 1% of G N V and and you know if you look at benchmarks and there's significant opportunity above that and.
And you know we you know as long as we continue to add value to sellers and we think that'll be a continued opportunity on the second side on the investments you know we laid out in July.
<unk> strategic plan and started with you know the category idea on verticals specifically.
Reinventing the experience change and the N P S and driving G. M B and if you look at the results over the past few quarters. You know this is the fourth quarter and a row, where we have triple digit growth and sneakers. You know this is a business that had been declining double digits and our watches went from 16% last quarter and a 38% more importantly, though we're seeing customer satisfaction metric.
And the Eighty's Ninety's and so we think this concept of a really applying it to other parts of the business. So what youre going to see over the next coming quarters and years and Thats continuing to expand that focus.
And invest and and roll out additional categories. You know like I said up front the majority of our big categories like parts and accessories electronics fashion all have similar opportunities to follow that playbook. So you know we're going to continue to do it and a balanced way and as I talked about in July and man.
And you know what what we spend with the what we see as the growth opportunity.
And and we've already done that and a lot of areas, especially and in marketing over the past couple of quarters.
Alright, thank you.
Our next question comes from Craig Huber with Keybanc. Your line is open.
Hey, thanks, so much for taking the questions I guess, just first and the path to the previous question. You know it was interesting that you took up take rate and watches I guess.
Jamie if you step back and look at take rate overall, and basically great are there more opportunities to take up take rate are there.
And as you can continue to add that that exclude advertising that would allow you to to have that higher take rate and then I guess you know as you guys make some of these muscle and moves in specific verticals any sense as to how large these verticals are as a percent told G. M. D. And then a follow up on fashion and I know you've been doing some off price fashion tests and the U K any timing on rolling and that up to you.
Thank you.
Yeah. So.
And take rate.
Obviously with payments, we actually think we are for the vast majority.
Majority of sellers and they're gonna experienced lower fees, even though you don't mean at least half a billion dollars of operating income to our business and we continue to look for ways that we can drive kind of a new experienced the off ebay advertising as it is a great example of that and you know to your comment on watches it's really a kind of a category by category basis of us looking at what valley.
Are we creating and and what opportunities are there for them for our sellers and how large this can be.
Why were focused on the non new and season is because we believe it's a it's a $500 billion total addressable market and and if you look at our categories on the site, we have high single digit low double digit penetration and so we think there's lots of opportunity and you know coming back to the core of what we said about re commerce I think.
More and more especially in younger generations are interested in the re commerce of Preloved items and so it's why we're leaning in so much towards that.
And also we're seeing the strategy is working with sea to sea. So you know our sea to sea again outgrew, our b to C grew 34% versus 21%.
But that only not only that brings that you Nick inventory, but it turns knows us.
And buyers into twice as valuable buyers when they try when they try casuals Sally and then lastly, you know the.
The tests, we've been doing on the brand outlet side and the U K has been performing well and we're growing double digits ahead of market rates.
And as I mentioned before what's great is that while we went out and sourced all of the initial programs to kind of build that up and now the brands are actually calling us and asking us to be part of that program. So you know you've seen this playbook from us over the past few quarters, where we're trying things and different markets finding success, and then rolling them out and more broadly.
So you know we've had a lot of success with sneakers and the U S and we're now rolling that out to U K, Canada, and Australia, and this quarter and you'll see us continue to follow that playbook.
Great. Thank you.
Our next question comes from Tom Champion.
Your line is open.
Yeah.
Hi, good afternoon, and I just wanted to.
And I ask a follow up to prior.
And I think last quarter.
And you framed.
And can be covered by new category experiences and it was.
Single digits, or you know kind of less than 10% of T.
T and B and the fourth quarter and just.
Curious if you could update that metric where were these new category experiences reached this quarter and maybe what could.
Could be achieved by by yearend.
Hum.
And any comments on that would be helpful. And then Jamie I'm. Just curious if you could talk about what are the remaining seller pinpoints that you're really focused on.
And a lot of work with.
And the payments and maybe you know reach on the advertising side, but what are you hearing from sellers.
As to the features that they'd like to see thank you.
Yeah. So look at what I would say is that on the categories that we've tackled thus far we're still and kind of single digit percentage territory and what we've said is that we believe that over half over the coming years over half of the G. M. B is addressable and this type of opportunity and especially and some of these major categories and frankly, there's probably opportunities across all cat.
<unk> overtime to be all they ever change it.
Wanted to see if the thesis that we laid out worked and it's been working pretty consistently and that's the feedback we're getting from buyers and sellers and we're obviously seeing it in the business and.
And Theres a lot of opportunity for us on the seller side and so on the store side.
Migrating all of our stores to the next Gen platform, that's mostly complete which is a much better platform for them. This quarter, we're rolling out CRM capabilities, which has been a longstanding ask of theirs.
So that they can remarket to buyers and through packing slips through email et cetera. So that's been pretty significant and then even things like the customization that we're launching is a longstanding seller request and two to drive their business.
We didn't talk much about this but one of the pain points that has existed in the ebay community for our sellers has been unpaid items and for since the company really started payments was divorced from our separated from purchase and so sell or sometimes would have at transaction close without getting Payne the ability now that we've launched managed payments and we're migrating.
A bunch of new technologies, we actually reduced that by 80% for our sellers. So that's a pain point that we're really happy to and to be able to eliminate for them and then on the <unk> side, it's really about making it easier and why you see us launching things like image based listing is because we want to take all the friction out of the experience and make it a really short couple of minutes.
<unk> to get your items up onto onto the platform. So.
We're doing a lot more education things around around the seller business really focused on continuing to drive that <unk> business. So I think each each quarter.
And it will be rolling out features that really address this key thesis of taking all the friction out of the experience and and making this the best marketplace and the world.
Thank you.
Yeah.
Our next question comes from Mark Mahaney.
Evercore ISI your line is open.
Hi, This is sweat that Bob and Mark I was wondering if you could please comment on buyer growth you laid out some of the initiatives that you are taking to continue to drive growth, where do you think what do you think could be and sustainable growth for buyers and then the second thing you also pointed to some of your top category.
And that includes collectible and home and garden and electronics fashion parts and accessories and that may have missed something but how.
How how big are they currently today as part of you know as a percentage of G. M D and how do you think the cross categories yet Lee.
Plays out and <unk>.
And in fact reopening thank you.
Yeah. So first time buyers you know look and Q1, we added 7% to our active buyer count to 187 million globally.
Over the past year, we've added 13 million buyers to the marketplace and what we're seeing is that those buyers are behaving with strong performance like like pre pandemic. So theyre not just coming to ebay for during the pandemic time period, and leaving we're converting a good amount to our strategy of longstanding enthusiasts.
We're really focused on the first 90 days for buyers and making sure that they have a great experience on the site and what Youre seeing is that the NPS is up, especially and focused categories like watches and sneakers and certified refurbished where you now have a two year warranty and hassle free returns.
So so we're really we're really pleased with that the cross category nature and the size of these categories is one of the best assets of ebay and we talked last quarter about our sneaker buyer, where we acquire and new Gen Z buyer, they end up buying $500 and sneakers, but another $2000 outside sneakers were seeing the same type of thing and watches where we're acquiring.
A buyer of new high and watches and.
Theyre spending thousands of dollars outside of other categories and so.
So we continue to lean in and because it's a huge accelerator for us to get buyers purchasing cross category and a lot of the marketing technology that we've built and we worked on the AI with recommendations et cetera is really centered on this idea of of capturing buyers.
And having them transact and multiple categories.
Okay. Thank you.
Our next question comes from Justin Post with Bank of America. Your line is open.
Yeah.
It's going to be a lot of moving parts. This year with e-commerce facing the comps and it's not just us. So what do you think is the best way to measure your progress. This year as we think about it is it market share versus e-commerce spend and.
And what specific milestones if GMB matches your outlook should we be looking for that really show Youre, making progress this year. Thank you.
Yeah. So I mean, one that we're clearly looking at as well.
Last year being such an anomaly with the pandemic is year over two year and the growth that we're seeing there, which we're excited by.
Clearly, we'll be lapping some of the buyer.
Extensive buyer growth that we had and lask you too, but we're looking at the performance of those active buyers on a go forward basis, and we're pretty pleased with them with with that performance and then the last thing I'd say is that look a lot of the stuff that we're doing on the core strategy is really about the long term growth. So we're going to see things and the short term.
Variances.
Versus prior year, but I think for me. The core thing is the playbook that we've put in place is working this thesis of really changing the growth trajectory and the category by investing and the playbook is what the team is focused on and we're going to stay on that for for the.
Near to medium future. If I look at you know coming into this and 2019, we were I think declining 2% from a G and be perspective, and if you look at our revenue growth projected next quarter. We're looking at double digit revenue growth. So we feel good about about where we're positioned coming out of the pandemic.
Great. Thank you.
Okay.
Our next question comes from.
From credit Suisse. Your line is open.
Okay. Thank you so much so Jamie now that the U S payment penetration is seems to be approaching the finish line here.
Is there anything you can say about how the simplified checkout versus what the buyer has had to go through before and I don't know how that might be resulting and hopefully a decrease to the overall friction and.
Hence and increase in conversion rate or purchase velocity.
And I guess.
As a follow up to some of the earlier questions on advertising.
As an increasing proportion of the transactions end up being.
C to C or what might be more unique collectible or enthusiast items.
Should we still be thinking that that type of gross merchandise value is still appropriate for P. L. A.
Because it seems like advertising should work best for probably those categories, where there are multiple sellers trying to sell austerity homogeneous.
Oh item okay. Thanks.
Yes, so first on the payment side I would say, yes, not only buyers now have more choices of how to pay and including Google pay Apple pay and credit card debit Paypal et cetera.
But you know you no longer have to set up two different accounts are you no longer have to manage the claims process and returns process and two different areas and it's one ebay money back guarantee so to us it dramatically simplifies the whole experience for a buyer and makes it easier and they keep that payment on file and it's.
It's just a dramatically easier experience and that's helping the seller too because I know I mentioned the unpaid item example earlier on the call, but also the ability for them to manage all of their business in one place.
Makes it much more streamline to to just run a business on ebay.
On the promoted listings, we see opportunities really across every category and every price point a G N V and the.
And the beauty of the CPA model that we've had the cost per acquisition model has been just the simplicity of it and I'm, just adding the percentage and.
And it makes it really easy.
And the C. B C. PC model that we're launching also gives the opportunity to to really kind of pushed volume.
And in a different way with a different set of capabilities, but even on single and unique items.
People want to promote those items and get more exposure for them. They have for the longest period of time, it's why we're launching the ads feature for auction and testing that is to us too.
And really go after it and it's still it's still not.
We still have a lot of opportunity across our listings to increase the penetration and like I said before we're only at 1% of GMP.
Thank you.
Our next question comes from Deepak Matthew Barney.
And with Wolfe Research your line is open.
Great Hey, guys. Thanks for taking the question. So first can you provide some color on what categories are specifically seeing robust mobility, improving and second quarter and then on the commentary around the second half G and wheat trends comps were also progressively getting easier once you navigate past second quarter, what you are saying that potentially.
G and Lee trends could be similar to the second quarter I know there is sudden and one time items and Duke you and there is potentially some geographies coming out later.
In terms of mobility, but can you parse out between those and do you expect further reversal in terms of kind of comparable basis on volumes beyond <unk>.
Yes, I'll take the first one the holiday and it takes a second and so on the category piece. You know we talked about last year was people started buying panic buying everything that was related to kind of health needs across the across the board on ebay and then we saw that expand into kind of stay at home categories.
Fitness and laptops, those types of things and and our electronics business and then really kind of across the board over the course of the year. So as you think about this year, it's really just a change against the against the backdrop of what we were buying last year I'll, let Andy take the second part of that.
And look you know we didn't provide guidance for the second half just just because of the dynamic environment and a wide range of outcomes.
You are right when you look at the comps for Q3 and Q4. They are you know modestly easier as we go through the year.
Second piece I'd say is we continue to expect to see the underlying business perform.
I think the wildcard and all of this is the macro factors.
Ability and stimulus and incredibly hard to predict there are certainly some benefit and the second quarter to those and the.
Yes.
It's possible that as regions open up and mobility improves that that offset some of the comps.
The easier comps that we see and the second half.
It's a scenario.
Hard to accurately predict where we're and mobility heads.
Operator, we've got time and got them more.
Our final question comes from Brian Nowak with Morgan Stanley. Your line is open.
Thanks for taking my question I wanted to ask about you you've done a great job of tackling a handful of these categories and sneakers and luxury watches authenticated and that trading cards.
And someone who are who sold a Barry Sanders rookie card and it isn't much better experience. So the question is as we sort of look ahead to you know the next 10, 2030 40, 50% of G M B and Youre going to re redo what is sort of the main technological constraint that you think is going to sort of dictate how.
And quickly or slowly you're going to be able to sort of redo the rest of the categories on the platform and as you're talking about the back half are you are you assuming you're going to have more categories rolled onto the new stronger interface yet.
Yeah. So the first thing I'd say is that on the on the category piece and <unk>.
Some cases the categories have overlap in terms of features or capabilities, we need to build and order to make that a winning NPS for us. So we built authentication and once it took us a couple of months to build it out, but then we're willing and able to roll it out to the next category and a and a couple of weeks and expand that geographically and so I think that's actually true.
And for a lot of areas, where there's components or features that we're building specifically to drive the NPS of a category that will be.
Applicable to a broad set of categories across the across the experience and in terms of pace, we're going to continue to do what we've done before which is you know roll them out and a specific geography make sure that we're seeing the intended in fact, and then and then roll it out across the board, we don't really want to talk about which categories next and what we're focused.
And for competitive reasons, but I would just say that we're really pleased with the playbook. We're really pleased that we're able to drive significant growth and a significant change in trajectory and most importantly, a significant change and the customer experience.
And so you're just going to see US continue feature after feature category. After category. The second thing I'd say is that the verticals is not the only investment that we're making a lot of our investment is going to site wide investments that impacted all categories. Clearly that is true for payments and advertising, but the same is true across our seller tools across our API.
And that's across the CRM and couponing capabilities that we just rolled out investments that we have and search and and SCO, which apply to the whole business. So the way I think about it and it's kind of a good amount of investment and vertical to really change the NPS those categories, but a significant amount of site wide investments as well which lifts.
And all categories. So that's that's the strategy and that's how we think about it and we're really pleased with the performance.
Okay.
Yeah.
There are no further time for question and this concludes today's conference call. Thank you for participating you may now disconnect.
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