Q3 2021 eBay Inc Earnings Call
Yeah.
Good day, and thank you for standing by and welcome to the ebay Q3, 2021 earnings call.
At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.
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I would now like to hand, the conference over to your Speaker today, Joe Johnson.
Communications and Investor Relations. Please go ahead.
Good afternoon. Thank you for joining us and welcome to Ebay's earnings release conference call for the third quarter of 2021.
Joining me today on the call are Jamie.
Executive Officer, and Steve priest, our Chief Financial Officer.
We're providing a slide presentation to accompany Steve's commentary during the call, which is available through the Investor Relations section of the ebay website at investors start 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.
Can find a reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call.
Additionally, all revenue and GMP growth rates mentioned in Jamie's in Steve's remarks represent FX neutral year over year comparisons unless they indicate otherwise in 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 in our most recent periodic reports on Form 10-K, and Form 10-Q, and our earnings release.
From earlier today.
You should not rely on any forward looking statements all information in this presentation is as of October 27, 2021, and we do not intend and undertake no duty to update this information.
With that let me turn it over to Jamie.
Thanks, Joe Good afternoon, everyone and thank you for joining us.
Today I will begin the call with key highlights from the third quarter, then I will share some updates on the progress we are making towards our strategic vision.
At the end of my remarks, I will turn the call over to Steve who will discuss our financial performance and outlook in greater detail Q.
Q3 was another strong quarter driven by our team's relentless focus on sellers and buyers I am excited by the positive impact. This is having on the underlying health of the business. The changes we are making to the marketplace. Our improving results today and are also putting us in a better position to deliver sustainable growth. We remain confident in our long term vision to grow the core.
Become a seller platform of choice and cultivate lifelong trusted relationships with buyers let.
Let me highlight a few achievements from the quarter that brought us one step closer to this vision.
Our business delivered better than expected revenue and earnings growth on the high end of our guidance.
Our strategic playbook continues to improve customer satisfaction and build trust and is leading to faster GMB growth and our focus categories.
Finished payments migration, which is nearly complete it is helping sellers and buyers by reducing friction lowering cost and enabling new capabilities.
Our advertising business continues to grow faster than marketplace volume and our product innovation provides sellers new tools to help them scale their ebay businesses. We're also making great strides in our ESG efforts.
Recently, we received approval from the science based targets initiative for our multiyear carbon emission reduction goals and importantly, we announced that ebay will be 100% carbon neutral this year and will remain so going forward.
I am pleased to report that all key business metrics, either met or surpassed our expectations in Q3 revenue over performance growing 10% driven by acceleration in the payments migration and promoted listings growth.
We also delivered <unk> 90 of non-GAAP EPS at the high end of expectations, while increasing technology investments.
<unk> performed in line with expectations globally, declining, 12% versus last year, and increasing 9% compared to 2019.
Excluding transitory macro impact we continue to see modestly positive underlying growth in the business.
Global active sellers remained unchanged at $19 million and total active buyers were $154 million.
Over the past year, we have focused on attracting and retaining high value buyers by innovating and focused categories and targeting enthusiasts with upper funnel marketing we.
We have also discontinued legacy couponing that skewed towards low value buyers. These actions are resulting in a gradual evolution of our buyer base over time.
Third to the third quarter of 2019 high value buyers are up 6%.
Another ongoing transformation of our marketplace as managed payments, which progressed quickly during the quarter.
In Q3, we processed over 90% of on platform <unk> and remain on track to finish by the end of this year.
Im thrilled that we are close to migrating all of our global sellers to our nextgen product experience while.
While we are close to completing the transition we are only at the beginning of realizing our full payments potential.
Owning the entire seller and buyer journey lots of opportunities to remove friction improve trust and provide new capabilities to sellers and buyers were already starting down this path and here are a few examples.
Last quarter, we effectively eliminated unpaid items on fixed price transactions and have continued to reduce this issue for best offers.
In the U K, we are paying many sellers as quickly as next business day after buyer payment is confirmed.
Based on community feedback, we reduced another pinpoint for trusted sellers by increasing protection against fraudulent returns by requiring photos and providing returns shipping credits in it.
Addition, we continued to improve our stores experience to make ebay the seller platform of choice.
<unk> been increasing our traffic to stores and providing more CRM capabilities to make managing their businesses on ebay easier than ever.
We are leveraging these new features to drive repeat purchases.
For example in only six months since launch more than $2 5 million buyers has completed a repeat purchase from a store using our new seller funded coupons.
To further build sellers brands, we are testing video integration on high traffic pages to help them tell their unique and compelling stories.
Suzie it's buyers.
Our advertising revenue continues to outpace volume due to promoted listings, which drove over $207 million in revenue in Q3 up 9%. We also tested three new promoted listings products and are starting to offer these features to more sellers.
This feature allows sellers to boost visibility of auction listings for onetime fee, regardless of whether the item is sold.
Early adopters have seen substantial growth in impressions and clicks.
Last month, we invited eligible sellers to try promoted listings advance enabling them to create campaigns on a cost per click basis with more budget control in.
In parallel we launched a suite of tools to create campaigns monitor performance and optimize returns. We are also providing training and webinars to drive trial and adoption.
During Q3, we explored ways to syndicate ads off ebay through external promoted listings.
Due to ebay partner network, we are testing tools and incentives for our affiliates to drive enthusiast buyers to existing promoted listing sellers.
We're also experimenting with other forms of seller funded marketing across various channels, our new advertising products are in the early days and we're excited about their long term potential.
Moving to our focus categories I am pleased with the pace of innovation and the positive reaction from our sellers and buyers buying from these categories continues to outperform the rest of the marketplace and we're increasing customer satisfaction by improving trust.
As you may recall, when we exited last quarter, we had applied our playbook to approximately 10% of global G. M. D. We remain on track to expand that is roughly 20% by the end of the year. Let me walk you through several examples.
Our sneakers business in the U S continues to grow at healthy double digit rates. During Q3, we launched authentication in Germany added 30 more brands to our catalog and improved SCO performance for top sneaker brands. We also lean further into upper funnel marketing and sponsored key industry events to strengthen our reputation with enthusiasm.
Starting tomorrow, we'll be Trialing, a new three D image capability on select sneaker listing.
Leveraging AI and machine learning experience will allow buyers to interact with a detailed 360 degree view of the actual item. They are buying we are excited about the potential of this new technology, particularly the ability to reinforce buyer confidence at the point of purchase.
Moving to luxury watches. This category is also growing at strong double digit rates in the U S. Buyers are finding more inventory on ebay than other marketplaces as many brands have decreased production and pre owned supply is limited and on other platforms.
Since launching authentication and luxury handbags growth has accelerated in this category and was positive in Q3 outperforming the total U S site by double digits. We're.
We're seeing the same high customer satisfaction as other authenticated categories.
As I've mentioned in the past part of our strategy is to drive enthusiasts to new trusted experiences and then leverage those buyers across our vast supply in other categories.
The average buyer, who purchase sneakers and luxury watches spends approximately $2000 and $8000 respectively in other categories.
We are seeing the exact same behavior in our latest focus category.
Buyers of authenticating handbags are spending over $5000 outside of handbags. This cross category benefit for sellers and buyers is a unique advantage for ebay.
One of the reasons our growth has improved and luxury categories is the improvement in buyer and seller Trust. We recently celebrated the one year anniversary of authenticity guarantee having now processed over one 4 million items across multiple categories.
Customer satisfaction has consistently exceeded 90% and we are operating in five countries with a mix of in house and third party resources.
Another focus category that is driving growth in the U S is trading cards, which is growing significantly faster than the total marketplace. In late July we launched new features including price guides and collections, which allow trading card enthusiasts to view manage and track the value of their portfolios.
To date close to 4 million cards have been added to customer collections. In addition, close to a quarter of a million buyers have used ebay's newly launched price guide to visualize the changing value of their favorite trading cards. These features cater to the needs of high value enthusiasts, and our increasing engagement and trust and ebay.
The next focus category, we were applying the innovation playbook too is motors parts and accessories.
Or is that creating a one stop shop for vehicles and parts enthusiasts.
We are excited by the potential of bringing them together one of the world's largest vehicle collections with hundreds of millions of parts and one customized experience we're exploring for <unk>.
Are there changes to parts and accessories that leverage our strong market position.
ESG remains critical to our business health and to our customers and I'm pleased to announce that we've reached some significant milestones in our journey toward establishing ebay as the leading sustainability company in ecommerce.
Just two.
Ducks Ingalls were approved by the science.
Based targets initiative.
We will reduce scope, one and two carbon emissions by 90% by 2030. This is the most ambitious designation available and aligned with the Paris agreement.
Additionally.
We will reduce value chain emissions from downstream transportation by 20% in the same timeframe can reduce emissions from goods shipped using our platform, we will partner with our logistics providers to encourage low carbon alternatives.
I'm also proud that ebay will be carbon neutral for our offices and data centers in 2021, we expect to maintain this going forward as we continue efforts to reduce our overall carbon footprint at.
And ebay is one of our core values is to be for everyone. As part of this focus supporting our seller community is critically important earlier this month.
We issued a new report on equitable entrepreneurship, which revealed how selling on ebay helped women during the pandemic. We found that 82% of women, who are new to ebay or increase their selling did so because of job loss reduction of income illness loss of childcare.
Some other hardship.
This vast majority of women surveyed says the ability to sell on ebay was a benefit during the pandemic, citing the need to earn additional income for themselves or drive revenue for their businesses I'm proud that our platform can provide flexibility and opportunity to so many during tough times. So that they can earn extra income through selling on our marketplace.
I'm also inspired by the continuous generosity of sellers and buyers on ebay.
In Q3, approximately $35 million was raised through ebay for charity up 11%. Additionally, thousands of global employees helps select small businesses to receive grants totaling $3 million from the ebay Foundation. These grants are focused on serving under represented entrepreneurs and are used to provide training coaching and mentorship.
If needed to help their businesses thrive.
In closing as I mentioned at the start of the call Q3 was yet another strong quarter, we continue to make progress on our multi year journey and it is clear that our strategy is working enthusiastic are responding to innovation and our focus categories and are increasingly putting their trust, putting up new capabilities for sellers and buyers our advertising business.
Innovating by providing a portfolio of tools are sellers can leverage to build and grow their businesses on ebay.
We are accomplishing all of this while setting and achieving economic opportunity is available.
All I want to thank our passionate employees, who have tirelessly worked to bring our vision and purpose to life their dedication to serving sellers and box.
Ours is inspiring.
This execution is driving innovation, and making ebay a better marketplace and I couldn't be prouder to lead this team with that I'll turn the call over to Steve to provide more details on our financial performance Steve over to you.
Thank you Jamie and thank you all for joining us today.
I'll begin with our Q3 financial highlights on slide four of our presentation.
We delivered another strong quarter.
Our results met or exceeded expectations across all key metrics, while our year over year comparisons reflect the extraordinary growth we experienced last year as a result of the pandemic.
These results were underpinned by continuous execution division some payments for much of the listings focused categories.
Year over year on an FX neutral basis.
Primarily due to contributions from managed payments.
Non-GAAP EPS was <unk> 19 per share and our operating margin was 31, 7%.
We generated $502 million of free cash flow and returned approximately $2 $4 billion to shareholders through share repurchases and cash dividends during Q3.
Given the underlying growth in that business and strong free cash flow generation I'm pleased to announce we've raised our share buybacks.
Target for 2021 from five to.
To $7 billion.
Our pending portfolio transactions remain on track to close within the previously communicated timelines.
We anticipate the sale of other ventures chest, so familiar with closed during Q4, while the career deal should close early next year or potentially by the end of 'twenty to 'twenty one.
Turning to active buyers on slide five.
We exited Q3 with 154 million active buyers on a trailing 12 month basis, representing a 5% decrease year over year. This.
This decline was primarily driven by low value bias, a group makes up more than half of our buyer base, but only 5% of Jim.
As Jamie mentioned this ongoing trend as a result of our strategy.
<unk>, attracting and retaining high value bias.
Confidence in this approach, but we recognize the reduction right. It's already buyers could pressure, our rolling 12 month active buyer cats in the coming quarters.
Compared with Q3 of 2019.
<unk> are down 7%, while high value buyers are up 6%.
Moving to <unk> on slide six in.
In Q3, we delivered $19 $5 billion of Jeffrey down 10% year over year on a spot basis down 12% on an FX neutral basis in line with our expectations.
The macro benefits to our business from my ability was significantly diminished in Q3 as restrictions probably that across the globe. We continue to see modestly positive.
The line growths in our business.
With Q3 of 2019.
<unk> grew 9% on an FX neutral basis performance by market vary based on a number of factors, including relative my ability.
Specific macroeconomic trends.
Internationally GM V was roughly flat versus Q3 of 2019 on an FX neutral basis.
A number of factors influenced the growth differential between the U S.
The national markets during the quarter.
Our ability is back to pre COVID-19 levels in many of our largest international markets.
Finishing the volume tier wins, we benefited from prior quarters.
Changing consumer behavior, including an uptick in leisure activities and travel also might've impacted ecommerce growth internationally.
Additionally.
This category mix varies in our international markets, which have a lower exposure to certain fast growing verticals like for vegetables, a higher concentration of items from cross border trade, but are more difficult to source.
Driving.
The supply chain disruptions.
Finally, our focus category Rollouts among license in our international markets.
However, as our innovation playbook expands to more categories and countries where confidence international growth trajectory.
Chris.
In the U S geography grew 22% versus Q3 of 2019.
<unk> domestic marketplace was driven by strong execution against our strategic pillars.
Growth within E Commerce.
Residential mobility improved in the U S that continues to try to European markets, while leisure activities and travel increased in line with normal inclusion the lingering impact of government stimulus discussed as you benefit from supply chain disruptions.
But there are likely a net positive.
Contributor to U S growth.
Yes.
Turning to revenue on slide seven.
Net revenue for Q3 was $2 $5 billion up 10% year over year on an FX neutral basis, and 11% on a spot basis.
We delivered $2 4 billion of transaction revenue also up 11% on an FX neutral basis.
Growth was primarily driven by managed payments, which contributed roughly 20 points of incremental revenue growth during the third quarter.
Payments for all driving it.
Basis points sequential increase in our take rate, which surpassed 12% in quarter three.
Moving forward, we expect a sequential take rate increases to.
Otherwise as the managed payments Rollouts is nearly complete.
Within the advertising business promoted listings grew 9% year over year outpacing volume by 21 points.
Early adopters of the new promotion.
Such as lifting products.
Significant increases in performance, giving us confidence in the long term potential for advertising revenue.
Marketing services and other revenue declined 7% year over year to $151 million driven by the impact of sold out some declines on shipping programs had headwinds within third party advertising.
We continue to purposely reduce third party advertising in favor of promoted listings.
Deliver superior performance and Offloading GAAP operating margin of approximately 31, 7%.
This represents the two.
Primarily driven by lower.
Portfolio.
Our cost of revenue was scaled in line with payments growth.
It's a viable processing costs.
This dynamic has pressured gross margins during that transition to managed payments. However, once the transition is complete we expect gross margins to be more stable.
<unk> expenses most notes.
Goodbye.
Sales and marketing fell by nearly four points as a percentage of revenue year over year in Q3.
In addition to leverage from payments revenue sales and marketing was lower due to a reduction in coupons and rewards programs.
That were previously targeted towards low value bias.
Product development increased 21% year over year.
As we continue to accelerate product innovation.
Our longer term strategic initiatives within payments advertising focused customers.
Transaction losses rose as a percentage of revenue by nearly two points versus last year.
Higher consumer protection losses from the payments transition.
The lapping of one time benefits in the prior year, which were partially offset by the benefits of financing.
Turning to EPS on slide nine.
We delivered 90 of non-GAAP EPS in Q3 up.
9% year over year as ramping contributions from payments.
Net benefit of share repurchases more than offset the locking of COVID-19 driven volumes a year ago.
GAAP EPS for the quarter was 43 <unk>.
The Delta was primarily driven by a fair value adjustment.
On the other venture chess, partly offset by guidance from other investments.
Switching to free cash flow on slide 10.
We delivered another strong quarter of cash generation in Q3 with $507 million of free cash flow, a 4% decline year over year.
The decline was driven by the timing.
I think of working capital and Capex spend partly offset by operational efficiencies.
The timing of 2020 cash taxes.
As a reminder, the managed payments transition as yield meaningful working capital benefits.
Through three quarters of 'twenty to 'twenty, one this benefit amounted to approximately $300 million.
Moving to capital allocation on slide 11.
We ended the quarter with cash and non equity investments of $5 1 billion and gross third quarter returned approximately $2 4 billion to our shareholders through stock repurchases and dividends.
We repurchased approximately 31 with an average share price of $72.52.
We also paid a quarterly dividend of $116 million in September.
Given our fortress balance sheet.
Strong underlying free cash flow.
Upsizing, our share buyback plan for 2021.
<unk> 5 billion to $7 billion.
Which implies approximately $3 billion of repurchases during the fourth quarter.
Overall, our capital allocation objectives remain unchanged.
Preserve financial flexibility.
Execute on strategy and drive long term value creation.
We aim to drive organic growth in our business.
Opportunities to supplement that growth with disciplined acquisitions and investments.
We will optimize our financial flexibility.
<unk> to debt and cost of capital.
And we will continue to deliver meaningful returns to shareholders.
Share repurchases and dividends.
Moving to investments on slide 12.
As a reminder, we received 540 million shares and other events from our classified style, which closed June June of this year, representing an equity ownership stake of approximately 44%.
As a regulatory condition of the classified style, we committed to reduce our ownership stake in the venture.
33% or less.
The 18 months following the close of the sale.
In July we agreed to sell approximately 135 million checks to Panera for roughly $2 4 billion.
We believe the <unk> sale remains on track to close during Q4, the 405 million shares that we would retire with close to $7 billion at the end of September.
Turning to add in the loans, we acquired in connection with our strategic partnership during the second quarter of 2018 were valued at $1 4 billion at.
At the end of Q3, an increase of over $300 million quarter over quarter.
Youll find more information on the audio months and at the 10-Q.
Ah staking to carrier bags is appreciated and Friday following the company's IPO in August.
At the end of Q3, our investment is worth approximately $800 million.
Finally in June we announced plans to sell over 80% of our Korea business to a margin of approximately $3 billion.
Upon deal close we will retain an interest of just under 20% of ebay Korea was kind of an implied violate the deal remains on track.
By early 2022.
With a possibility of closing before the yearend.
We remain excited about Apple.
Friday of global investments the potential optionality they provide.
I can provide you that collectively represent for <unk> shareholders.
Turning to guidance on slide 13.
For the fourth quarter, we are projecting revenue between $2 $57 billion to $62 billion.
Representing growth of 3% to 5%.
On an FX neutral basis, and approximately 4% to 6% on a spot basis.
Our tight races, with notably in recent quarters.
Contributions from payments and advertising.
Although we expect advertising to continue growing faster than volume.
The impact from payments on our tight rate to moderate as we are nearing completion of our managed payments transition.
We are raising our 2021 full year outlook for Pi revenue guidance implies <unk> satellite teams on an FX neutral basis versus last year.
Mid to high single digits compared to Q4 of 2019.
Focus categories.
Our outlook also assumes minimal benefits from macro factors like mobility stimulus and supply chain impacts.
However, we know the macro environment remains dynamic and difficult to predict with varied impacts from country to country.
We expect non-GAAP EPS of <unk> 97.
So dollar one center shack in Q4 represents the 14th.
And to 19% year over year growth.
We plan to continue investing in product and technology to deliver better customer experiences and improve customer satisfaction.
We anticipate our non-GAAP tax rate to between eight.
Okay, 19%.
Two recent outperformance of our U S business.
We expect our GAAP EPS.
Range of 72 to 76.
Sure in Q4.
In closing we delivered strong results in Q3, but maximum exceeded expectations across all key metrics.
We continue to execute our strategic vision.
So our core marketplace, while maintaining a balanced and disciplined.
Enable us to generate this year on that transition.
On track for completion by year end.
However, we believe our payments journey is just beginning this.
This milestone and lots of new opportunities.
To reduce friction in the marketplace will provide additional financial centers.
Volume incentives increasingly leverage our expanded product portfolio.
To amplify the exposure.
So its impressive momentum with our focus categories, which are meaningfully outpacing overall volume growth.
We are confident we can continue to expand with innovation playbook to more categories and countries in the quarters ahead.
Our balanced approach to capital allocation has enabled us.
To reinvest in our business generate consistently strong free cash flow.
I will deliver attractive returns to shareholders through share repurchases and dividends.
As Todd as I am.
Numerous business accomplishments, while makes them even more impactful to me.
We are achieving these milestones while building sustainable inclusive and circular economy platform.
Credible work over the last quarter.
And the support for that amazing.
Sellers and buyers and the ebay community.
One final note.
We are in the midst of a multi year journey to deliver a tech led to re imagination of APAC.
As the impact from macro factors stabilizes.
Now reviewing our internal thoughts for 2022 and beyond.
We anticipate showing up.
Our longer term goals and aspirations on investor event early.
And the next year.
With that Jamie and I will now take your questions operator over to you.
Yes.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Again that is star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
We have our first question coming from the line.
Hi, Edward.
With Keybanc capital markets. Your line is open.
Hey, good afternoon, guys and thanks for taking the question.
Really wanted to click down a little bit on some of the categories that you are re imagining and some of the success Youre, noting there just help us understand maybe the new customers you're growing into the platform.
Thank you.
Yes, so I'll take that so first on the on the categories. It really is about both leading into the high value buyers that are on the platform as well as attracting new buyers in so if you look at what we're doing and why.
Quarter, we announced we're authenticating handbags over $500.
It is it is catering to both.
One of the great benefits of ebay is the cross category nature of shopping so if we acquire a buyer into a handbag, who buys the handbag over $500. They actually end up spending $5000 in other categories outside of handbags on the site. So when we think about acquisition is not just acquiring it for that.
Category its acquiring it more broadly for ebay that one of our significant benefits excited because we've expanded.
Categories. This quarter, we brought our sneakers authentication program to Germany, we brought watches to the UK business.
And we launched handbags in the U S. In terms of that product from a certified refurbished we added.
New brand Samsung Kitchenaid date.
Hey, Finn and.
Expanded number of products, there and that's exciting coming into holiday.
Your question on marketing, we've really shifted our marketing I think traditionally has been a mostly lower funnel with some broad base camp.
Campaigns on upper funnel really driving into how do we inquire acquire high value buyers and high value enthusiasts in specific verticals. So what that means is a whole lot more of upper funnel marketing partnerships leaning in with social media influencers in certain categories, and basically going much more broad with our marketing.
Plans to to find those buyers, where they are and I guess the last thing I'd say is we're really focused on that first 90 day experience on ebay. Many times in my career I've done this where you really get focused on how do you introduce them to the brand bring them up the lifecycle make sure that they turn into the high value buyers that we want to do and thats going to be continued for.
<unk> for us over the over the coming quarters.
Great. Thanks, so much.
We have our next question coming from the line of Colin Sebastian with Baird. Your line is open.
Thanks, Good afternoon, Jamie.
Jimmy maybe first on on the specific changes and that's working well how much effort is there.
Platform wide enhancements.
And if there are any sort of specific initiatives there will be the timing for those and then Steve maybe with respect to the Q4 outlook just looking at the sequential ramp versus typical seasonality. It's certainly a little light of historical patterns, even ebay it could be a net beneficiary from supply chain issues I know like factoring that in.
The outlook, but but maybe some additional color there would be helpful. Thanks.
Yes. So thanks for the question Colin So we do talk a lot about the vertical expansion and focus category work that we're doing and we're excited for what's happening there if you're actually step back and look at it the vast majority of our resources are actually going to site wide initiatives.
Across the board and I would point to a couple one is obviously our AD business.
Lot of investment there across the board.
Especially with the three new products that were at the beginning of launching obviously payments huge initiative, but other areas that we haven't talked a lot about like ebay stores. So working on a next gen experiencing ebay stores, incorporating vim tool capabilities. So that sellers can be more involved in how we bring buyers back to the platform and drive that repeat.
Business. So does that I just mentioned earlier about.
We launched it six months ago, but now sellers are funding the coupons to drive buyers back to the site from ASP buyers are interested buyers.
And that's a huge benefit for for sellers and the huge benefit for ebay, because we're involving them and driving them.
$2 5 million buyers have to use that in that in that time period and so.
We're also testing a new selling experience you if youre on the site Youll see that Theres a beta out there.
New way to sell so most of the the vast majority of investments are going to horizontal but what I like is it as a compliment because some of those horizontal lean into some of the vertical work that we're doing in the vertical work and focused categories. Some of the things that we're building for a given category, we're able to use in a number of categories across the <unk>.
So the two also play together well Steve I'll, let you take the second part of the question. Yes. Thank you Jamie Hi, Colin continued to lay out.
With the innovation that we're driving across the platform not only in the.
The effective cost of goods, but also the momentum the lines saw payments and ads as we've gone forward.
On a year over two basis I mean, if you think about it in standby new aggregator, we're obviously lapping the pandemic.
Year over two basis.
Mid to high single digit growth.
<unk> Q4, 2019, I think is a jeep Hudson.
Since <unk> Collins.
First of all.
Holiday perspective around Q4 is embedded in the guide.
From a headwind perspective in the prepared comments, we had we talked about supply chain pressure.
Cross border trade that we see.
One side in terms of its higher wind obviously he buys.
Well known for unique items.
We do expect some support to the holiday periods.
Since hikes, but overall I'm pleased with the labor will be continued modest modestly positive underlying growth on the platform.
As a result of the initiatives that we're driving forward.
Okay. Thank you.
Okay.
Thank you we have our next question coming from the line of Deepak <unk> Bannon with Wolfe Research. Your line is open.
Great. Thanks for taking the question just two quick ones first can you elaborate on the new promoted listings offerings I mean should we expect these offerings update on where you currently are in terms of penetration among the seller base for.
Promoted offerings and then the second question I realized back for next year.
Plenty of capacity, but I'm wondering if there is a formula you are thinking about.
To do it in a more programmatic way after the $7 billion. This year. Thank you.
Yes, so on the new promoted listings offerings, let me just kind of explain the three in detail. So the first one which is expressed as really to give us a promoted listings product against auctions. So since we launched this product five years opens up while a smaller format of the slide a format that has not been opened advertising before have more velocity goes after a different type of marketing budget for.
That perspective, since the opportunity to work with our secondary and <unk>.
<unk> advertising format and the third is off ebay advertising in that.
Using the vast marketing reach that ebay does today partnering with our sellers to drive advertising as part of that op ebay outreach to existing.
Existing buyers and new buyers back to the platform.
I would say for you is that it's early days on these three products. If you look back we started our AD business five years ago, and we've grown to a $1 billion.
Now over five years and so we're at the point now where we're testing we're learning we've.
Got invited sellers into the program and just like it took us time to build up the CPA based program I think it will take US time here to build up the the accuracy advertising program in terms of penetration, we still have a lot of opportunity left both in terms of the sellers in listings.
I believe the last stat, we shared was that only $400 million.
The listings have advertising.
With them. So there is a lot of opportunity for additional penetration.
I'll, let Steve take the second question about how we're thinking about the future.
So I'm not going to get ahead of myself for 'twenty to 'twenty, two we haven't put the guidance out there.
I will give us a little bit of color in terms of Huawei ASO.
We've previously said Reinvestments in the business as our first policy, whether that's build by our partner.
Having said that beyond that any excess cash that we do have.
<unk> continued to drive returns, we will continue with a disciplined return of capital to shareholders.
This is not a difference the posture of how this strong and consistent history of action on those.
Capital return.
And in 2021 is no exception, so think about this guidance since you're probably not the start to the year lift youre not suffice it and then most recently on this call talking about $7 billion.
So I think when I stand back and think about everybody has a hall pass.
The balance that we have and the benefits of the franchise because we all have the ability to do both in terms of reinvesting in the business and capital returns to our shareholders.
Shareholders.
Expect that philosophy as we go forward.
Got it okay. Thank you very much.
Hey, guys two questions.
One on just the U S versus international so it seems like.
A big reason why your <unk> is way above 319.
I think you said it was about 23 or something like that.
Compared to international is a little bit on the ISG comp, but also from these.
The focus category initiatives, so what's holding back the same type of uptick for international and then the second question on.
How big the ebay Motors these days.
And just can you talk about a little bit about the opportunity there in terms of making that one.
Focus category merging the parts with the <unk>.
Yes, So let me start with you guys Christian.
I'm really pleased with the momentum we're seeing in the overall.
Business, we're growing at 9% year over two year basis based on the strategic vision.
It's impacted by by mobility.
Coupled with an unprecedented snapback in travel and leisure activities in Europe.
In addition, as Steve mentioned.
For traders trade sellers were also pressured by supply chain disruptions that tends to be more in our in our international segment from a cross border perspective, and in our U S segment.
On the other hand in the U S. We've seen strong growth.
Driven by momentum in our core business to your question on the focused categories. It's not a structural change we actually think the work we're doing applies across the whole globe. It's really a timing thing so and most of these areas, we actually rolled them out in the U S get them perfected here and then expand that internationally. So for example, sneakers is just.
Launching this quarter in Germany.
We launched <unk>.
Watches in the U S. We just started that expansion in the UK. This quarter handbags, we just launched in the U S and then that Hasnt expanded yet.
So it's really a timing thing, but we think the playbook that we have is relevant in every single market that we have probably with the exception of.
Trading cards in collectibles, that's just so much stronger in the U S than it is internationally, but that's a huge huge benefit in a lot of the pieces that we're doing there.
A key focus for that but overall feel great about about the health of the business and our ability to expand those.
Focus categories internationally on.
On your second question on P&A, we haven't we haven't disclosed the size of the business, but I will say that if you just step back and look at the market. We're in a leading position in P&A, especially in UK and in Germany. It's.
The very strong category and a very strong franchise there.
And it's a key part of our path that we talked about last quarter of going from 10% of the site to 20% of the site.
A strong category for ebay because of the vastness of parts and accessories that we have we actually do a fairly good job with fitment I talked last quarter about the my garage feature and how we've expanded that internationally, which helps with fitment we.
<unk> also recently announced a motorcycle parts finder in that business and it tends to help and be benefit also from a cross border trade to give you a sense of the scale. We've got hundreds of millions of listings in our parts business and what I'm excited by is one of the first evolutions that we did was take all of that inventory and make it available on our <unk>.
<unk> App, which is a dedicated separate app for vehicle enthusiasm and now you've got vehicles and parts and accessories.
A one stop shop from that perspective, so you'll continue to hear further updates from us about that category. It's our it's our next big category focus and one where we're coming into it from a position of strength.
Thank you.
We have our next question coming from the line of Doug Anmuth with Jpmorgan. Your line is open.
Thanks for taking the questions.
Q1 payments you've removed a lot of the friction already.
Now they have 90 plus percent of sellers.
Migrated on to managed payments.
What's next in terms of improving the experience going forward and then just curious if you have any preliminary thoughts on.
Some of the managed payments numbers in 'twenty two.
In terms of revenue and operating income thanks.
Yes, so first on the friction the whole idea of bringing commerce and payments together gives us great opportunities to remove friction in terms of benefits from there one of the ones that I'm really excited by is that since I worked at ebay at the last time, starting in 2001 unpaid items had been on this platform forever.
So.
Now, we've eliminated and fixed price virtually where doing so invest off.
And so sellers won't have to face that issue and it takes friction out of the platform on the buy side. It allows us to open up new opportunities for different forms of payment. So clearly we've already integrated Apple pay and Google pay.
But we launched a partnership with after pay.
In Australia business for buy now pay later.
After pay is a very strong brand in that market and that's bringing us new customers, it's already at 10% of our business there.
And we're continuing to look at new opportunities for forms of payment for our buyers secondarily as I'm a seller financing side, we launched a partnership in the U K with new land and opening up more opportunities.
For sellers know that they were processing such a large volume of.
Payments through the business.
So like I said in the call.
Way I look at it as the migration is complete but we're just getting started in terms of the opportunity of what we can do with with commerce and payments together in a single flow in a single experience.
Hi, Doug with regards to your question on payments Rollouts when it's too.
Too early to talk about 2022 driver at this point, but I was just wondering if it is.
Delighted we are with the progress we've made with over 90% of the platform volume.
It's 8 million sellers trying to the platform that we laid out some goals going back a couple of years with regards to $2 billion.
Of incremental revenue of $500 million of ROI, we are well on track margins in line. So we are already very happy with where we are.
Great. Thank you Bob.
Thank you Sir.
We have our next question coming from the line of Brian Fitzgerald with Wells Fargo. Your line is open.
Thanks, guys. A couple of quick questions any impact on auction bid density from them from the loss of low quality buyers or any impacts.
That may have on the marketplace beyond there to pursue.
<unk> and then you recently during the summer started showing buyers all shipping services offered by sellers.
It allows them to select carriers and shipping costs and estimate deliveries.
Still early days, but can you talk about what impact that's having if any on conversion rates.
Yeah. So frankly that format has actually been really strong because of the strength, we're seeing in collectibles, where it tends to be a more used format and I'm excited that we're starting to launch express because that will give our auctions sellers the ability to drive some more visibility for them and then to have a tool that they haven't been able to.
To use before.
In terms of the shipping services. This has been a constant March for US last year, we expanded in the U S to have USPS EPS and Fedex in there.
And did the same thing with Royal Mail in Australia post to greatly exceed the amount of tracking on the specific shipping test that's going on now it's kind of too early to tell.
What I would say in general is how to think about this Brian is.
Im trying to get the whole company focused on how do we make things as simple and it's easy to do on the platform. So what we're doing with our new seller flows with computer vision and trading cards is how do we take.
Take all of the work out of the listing process.
We're trying to do the same type of thing with our sellers and the stores product and making it really easy to get that set up on the platform and shipping is one of those areas, where theres an opportunity to take a lot of the friction out so the new partnerships that we've created the integrated tracking the smooth the returns process is all part of this evolution of just.
Make the whole platform so much easier to use and so we will keep you posted on how these tests rollout but.
But I'm happy with the progress so far.
Thanks, Jamie I appreciate it.
We have our next question coming from the line of Tom Champion with Piper Sandler Your line is open.
Good afternoon, Thanks, very much Jamie I'm wondering if you could talk a little bit about did you do.
Hopefully I'm pronouncing it right. It looks like you made an investment but it seems like kind of a BBB your commercial product.
How does this fit strategically and then.
I noticed.
<unk> was down <unk>.
Just curious.
What might have driven the result there.
And Steve maybe just a quick one for you.
Buybacks to $7 billion looks like.
3 billion in repurchases this quarter.
Increased from $5 billion.
Purchases last quarter.
I'm just curious with the increase in the buyback reflects greater confidence in the fundamentals.
And that would be helpful. Thank you.
Yes, so on the first one look I've been talking to since last July about a game changing level of trust on the platform and we've been doing that kind of category by category. So the authentication that we've been doing in the luxury categories really takes trust off the table. These two year warranties that we put in place for certified refurbished does the same thing.
And ebay actually has a good sized business and industrial business and capital equipment and bid. It allows us to put a whole different level of trust in there. There are long time seller and partner on ebay and the capabilities that they will bring to that category will help bring.
A new level of trust and just help buyers and sellers in that category move forward. So that's what I would say a better deal on the sea to sea. That's really just a lapping of the Covid dynamics that we saw from last year.
That time period.
And just some of the macro dynamics.
I would tell you is I'm really happy with the progress and continued to be a huge focus for us is on our Cds.
Really really simple.
And so that's going to continue to be something that works.
Quarter, because as I've mentioned in the past.
We when we talk about high value buyers that includes buyers themselves so by nature.
It helps drive them up there by our cohort curves as well as bringing that unique inventory. So we're going to continue to push forward. There and then Steve do you want to take the last one yes. Thanks, John It's Tom I think it's been interesting.
The company about four months now and I think the one thing I would say is just what's the latest shuttling the durability of the financial model.
Model.
Best in class margins.
Really significant value with an underlying platform that fortress balance sheet. If you take that in your pilot with the strategy that Jamie is right I think.
Today by franchise translates pretty misunderstood I wanted to one of the things that we need to do a better job is just really ensured that the investors need to understand a little better.
Again your points as well.
Momentum shine on the buyback and capital allocation as we progressed through 2021 from the two balance was $5 7 billion Israeli assess a reflection of that in terms of asphalt prices around balanced and disciplined capital allocation and getting that balance right between reinvestment in the businesses to drive growth.
Providing the the robust returns to our shareholders.
Thank you.
We have our next question coming from the line of Stephen Ju.
With credit Suisse. Your line is open.
Okay. Thank you so much so Jamie I think in your prepared remarks, you talked about what sounded like a three D modeling technology.
Youre using and the sneakers categories, so how easy or difficult to do and presumably and hopefully.
This is driving higher conversion rates, where this has rolled out as youre presenting more information for the buyers and I guess as a follow up.
Sure.
You get more.
More buyers to become sellers over time.
Are you seeing pretty consistent behavior with the newest batch of converted users versus.
The earlier cohorts.
Yeah. So on your first question, it's a very early test and pilot that we're doing but the idea is we want buyers to be able to see in <unk> real detail the actual item that there.
Are there going to be buying and so youre going to see us launching a couple of.
Yes.
Platform.
Okay.
$4000 over on the platform.
Last year. It was great I can see a lot of images, but the opportunity to really get in there and <unk>.
Some products that we have using that technology.
But what I am excited by is like the innovation and computer provision we are using our AI resources and computer vision resources here to do some interesting things there.
Over time, I think will really change the buying experience on ebay.
Your question on <unk>, it looks pretty similar to historical behaviors.
And consistent in terms of.
In terms of them coming onto the platform.
Continuing to list.
And then.
And then turning into buyers.
I'd say the other thing is that a lot of our business sellers actually started out as <unk> sellers. So it's another reason we lean in there I was visiting with a seller years ago. He had an extra set of tires sold them on ebay.
Then just starting to sell in a couple of more things in tires.
Now pivoted several times now runs a huge lug nuts business as a business seller with a warehouse and lots of employees. So that's the other kind of key focus for us on <unk>.
That's how a lot of our BDC sellers actually got their start in the platform.
Operator, I think we've got time for one more.
Thank you we have our next question coming from the line of Dan Salmon with BMO capital markets. Your line is open.
Great. Thanks, guys.
Good afternoon, guys. Thanks for sneaking me in.
For <unk> can you just expand a little bit on the affiliate program that you cited as one of the three new initiatives for promoted listings.
What are you, hoping what problems are you hoping to solve for your sellers with that.
If you could add some color on how significant you think that opportunity could be just second for Steve.
To what extent I guess put simply will you go.
Do you expect the metric to remain under pressure.
The strategy certainly seemed sound, but is your goal here to ultimately exit all of those low value buyers I'm, just hoping you could add some context to the scope of the strategy. Thank you.
Yes, so on the first one the op ebay advertising product, let me separate that from the affiliate advertising. We do so in affiliate can actually come onto the platform.
But the two the two definitely work hand.
Eric is really connecting enthusiasts to sellers, so being out on the platforms, where those enthusiasts.
Hakan that advertising by putting a really interesting items in front of those enthusiasts.
Driving that marketing because ebay has been doing this marketing and when we do it in cooperation with our sellers. It gives us a really broad reach.
For sellers it gives them another tool as well to take all the great inventory that they have on ebay.
Curious communities in different places.
He says in search et cetera to really drive that traffic to their business.
Let's go on ebay.
I'll, let Steve take the second one and maybe I'll, maybe I'll add on a bit.
No. It's not it's not about exits it's about focus and I think.
Certainly thinking about acquisition.
And growth on the platform.
It is about really changing our strategy and our focus and as such is just one of it is around about the value that various fires dragging so if I think about trying.
<unk> high value buyers are 20% of our buyers instead of a 75% of HCM very nice buys.
King.
Six different types of six different times a year.
Items of $1 and that bias cell, whereas the low value buys about 50% of our economic to see why we are focused on that strategy as we continue to evolve the platform focused on the enthusiasts focus on cross category solid, but it's very very important that we continue to have a pipeline.
As we evolve the business and grow it going forward.
And putting our focus and intense.
Jim not just around the number.
But much more focused on how we are turning buyers into high value enthusiasts and how we altering our marketing plans that were out there actually acquiring them onto the platform.
That's what drives the real health of the business is the growth of that the growth of those high value buyers and how we're doing in connecting doesn't theres DSO. So good good question because the two really tie together.
Great Great that was very helpful. Thanks.
Thank you.
This concludes the Q&A session for today. Thank you for participating you may now disconnect.
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