Q4 2021 eBay Inc Earnings Call
<unk> growth rates mentioned in Jamie 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 <unk>.
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.
<unk> 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.
All information in this presentation is as of February 20, <unk> 2022, 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'll begin by sharing highlights since our last earnings call. Then I will focus on the near term progress, we're making towards our strategic vision and finally provide a short preview of our Investor day in two weeks 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.
The fourth quarter marked another solid quarter for sellers and buyers on ebay.
They benefited from investments in our strategy to drive sustainable growth on our marketplace. We are simplifying the seller and buyer experience, increasing customer satisfaction and improving our underlying growth trajectory.
Let me highlight a few achievements from the quarter.
We are seeing faster GMB growth and focus categories that now represent approximately 20% of global volume.
We successfully completed a multi year payments transition on time with more customer benefits and with greater financial impact than expected.
Our advertising business grew faster than marketplace volume as more sellers adopted new AD products, we delivered revenue growth at the high end of our expectations and earnings growth above guidance and finally, we continued to execute our ESG agenda. In addition to being carbon neutral we made progress on our long term sustainability targets.
And EBIT.
Finished a record breaking year.
I am very pleased with our Q4 financial results, we delivered 5% revenue growth on the back of payments migration and promoted listings growth. We also delivered $1 <unk> of non-GAAP EPS more than the high end of expectations for.
For the full year revenue was up 15% and non-GAAP EPS was up 21%.
As proud as I am of our team for delivering these results I am more excited about <unk> future based on the response from our customers to the strategy. We are implementing this is evident in focused categories. We are delivering best in class customer satisfaction and it is leading to faster <unk> growth in Q4 focus categories grew $15 fab.
After than the rest of the marketplace.
<unk> category, we are focused on is motor parts and accessories or PMA for sure. This is one of our largest categories globally and is full of enthusiasts who are passionate about what they trade on ebay. Many are very active buyers who shop in multiple categories with over 60% of the EIA spend coming on products outside PMA starting.
In December we began investing in top of funnel marketing across TV radio and social channels in partnership with key industry. Influencers. These ads highlight the valuable choices PMA enthusiasts have on ebay across hundreds of millions of listings. In addition, we implemented monetization changes to higher priced items and saw an increase in.
Listings during Q4.
We are leveraging the scale of our supply in new ways with input from a P&A sellers, we simplified our global category structure. This makes it easier for buyers to find unique parts from around the world unlocking more cross border trade. These.
These initial changes that modestly better performance in <unk> during Q4 relative to the overall business. It's early days and we plan to make further investments this year to improve our trajectory in this category.
And focus categories, where we have been investing for several quarters, we have seen growth sustain at higher levels sneakers over $100 continued to grow double digits globally.
Access in the U S is being replicated in other major markets.
Part of that success is authentication, which is scaled the five countries over the past year and in Q4, we started authenticating cross border transactions into the U S.
But we're not stopping there last quarter, we acquired sneaker com, a leading authenticated with operations in the U S U K, Canada, Australia, and Germany by bringing additional capacity in house, we increase the scale and flexibility of our operations. We also introduced <unk> to view on select listings.
This capability increases trust for buyers shopping for unique high value pre owned items.
Our success in driving customer satisfaction is over 90% and sustained double digit GNP growth, we have reintroduced monetization in the U S for sneakers over $100. The initial customer feedback has been encouraging and sellers continue to benefit from a lower take rate than many other platforms.
Those are also lifting more luxury watches on ebay, we saw a double digit increase in supply quarter over quarter and totaled <unk>. In this category continues to grow at strong double digit rates in the U S and Germany and the UK authentication is also leading to higher customer satisfaction.
And luxury handbag, we saw acceleration in Q4 to positive double digit growth in the U S. Based on the success of authenticity guarantee we are growing the number of brands covered by the program.
In addition, we've expanded selection by Authenticating cross border imports from Japan, a key source of unique inventory and just a few weeks ago, we announced authenticity guarantee for our single on greater trading cards sold for over $750 in the U S. We plan to expand this offering to include graded autograph and pass cars so for more than two.
$250 later this year.
As we exited 2021 are certified refurbished program have expanded to over 320 brand. This program now includes brands like Microsoft Dyson, Samsung Galaxy and Kitchenaid and as a reminder, these products are certified by the manufacturer. Unlike new and are backed by a two year warranty and ebay money back there.
Empty higher.
Higher traffic increased customer satisfaction and accelerated GMB the positive double digit rates certified refurbished products from top brands make up a small percentage of the total repo activity on ebay, but are growing significantly faster. This has inspired us to expand further and in November we announced ebay refurbished.
A destination for like new products this expanded.
It's more inventory from top rated sellers.
These trusted sellers are thoroughly vetted to meet rigorous performance standards, so buyers can purchase with even greater confidence.
In Q4, we saw promising early results from this expansion in mobile phones and plan to extend to tablets smartwatch isn't laptops this year.
In addition to improvements in service categories. We made a number of changes during Q4 that benefited sellers and buyers across all categories globally.
We've started a pilot when our API sellers add video to their listings to date, we have seen hundreds of thousands of listings add video content buyers get a rich shopping experience on individual item pages and in seller stores. Looking ahead, we plan to enable more sellers to tell their story by adding videos through additional listing for us.
Another new growth capability, we are scaling for sellers is coated coupons.
Since launch sellers are realized over $350 million in GMB.
Of our 60000 sellers have driven repeat purchases from almost 6 million buyers.
Fire truck is essential in a third party marketplace and is an area of focus for our technology investments in Q4, we leverage artificial intelligence to significantly decrease the time to detect and remains counterfeits in.
In the categories, where it has been deployed to date most of those things are renewed for a buyer had the chance to see it.
These are a few recent examples of how we're using technology to increase trust, while simplifying seller and buyer experiences.
Moving on to payments in Q4, we completed the transition to a modern payments platform by migrating all remaining sellers away from the legacy system.
This is resulting in a simpler stellar experienced lower fees for most sellers more choice for buyers and better than expected financial results.
Although this marks the culmination of a major multiyear effort in reality. This is just the beginning.
By managing seller and buyer money flows we can remove transactional friction and provide more trusted services, we've been systematically eliminating unpaid items, which removed friction for approximately 10 million transactions. In 2021. In addition, sellers are being paid factor for weekend sales in most major markets.
We're also exploring new ways to allow sellers and buyers to benefit from our scale in the U S. We recently launched a partnership with Chase freedom rewards that increase is top of funnel impressions driving buyer traffic to ebay.
We are excited by the value payments has provided our seller and buyer community and we see more growth opportunities ahead.
Moving to advertising in Q4 AD revenue growth once again outpaced volume due to promotive listings driving approximately $227 million in revenue up 4%.
<unk> grew at double digit rates in both the number of sellers and the number of listings promoted Luke.
Looking at the full year, our advertising business, including both first party and third party AD products surpassed $1 billion up nine.
<unk>.
Driving the next growth cycle in advertising, we expanded the rollout of new products to more sellers and markets during the quarter.
PL Express our auction listings product was fully launched to all major markets. We also integrated this feature into more listening tools to drive further adoption.
For <unk> advanced our cost per click offering we opened access to AI driven recommendations for keywords and then pricing.
While this product remains limited data as we optimize the customer experience, we are increasing exposure and streamlining reporting for sellers.
For external promoted listings, we continue to ramp more affiliate traffic through the EBIT partner network. We also increased traffic from external paid search to promoted listings in European markets participating sellers are seeing increased traffic and conversion, while maintaining control over ad pricing.
We are carefully <unk> the rollout of these new products, while balancing impacts to our buyer experience. Despite the limited release, new AD products provide a material contribution to promoted listings revenue growth in Q4, we expect this to accelerate in the coming quarters as availability and adoption of these new product increases.
Another area, where we made significant progress last year wasn't re commerce volume of prelaunch products grew faster than new products in 2021, driven by demand from younger consumers for the full year, we delivered $2 $7 billion of GMB, and prelaunch electronics and apparel in the U S UK and Canada.
In addition to providing customers great value and unique used goods re commerce activity also helped meet our sustainability goals. These purchases reduced carbon emissions by approximately 540000 metric tons in 2021.
Ebay is a carbon neutral company and I'm thrilled by the recognition. We recently received as a sustainability leader in ecommerce.
For the third year running ebay has made the Dow Jones sustainability World and North American indices, putting us in the top 10% of companies in our industry globally.
EBIT was also included in just capital and Cnbc's. Just 100 list. This list measures corporate performance and efforts in areas such as climate change.
And employee wellness when compared to nearly 1000 companies ebay ranked 88 overall and fourth in retail when it comes to minimizing our environmental impact I'm really proud of the progress our team is making here.
The ebay community continues to demonstrate its tremendous generosity in Q4 EBIT for charity enabled sellers and buyers to raise almost $37 million up 6% and for the year customers rates of $145 million up 18%. The most rate since we started this program almost 20 years ago.
Lastly, we were honored this year to receive glass doors 2022 employees Choice Award.
This award reflects anonymous feedback from current and former employees regarding topics such as crew opportunity culture and values and diversity inclusion just to name a few we are truly honored to be recognized by the people who make ebay the company. It is.
Now I would like to talk about our upcoming Investor day on March 10th and.
In July of 2020, I outlined a clear vision of a winning strategy for the company.
At that time, we increased our focus on sellers and buyers accelerated the pace of innovation simplify the portfolio and revamped our leadership team. We also drove successful multiyear initiatives in payments and advertising both of which exceeded ambitious targets with unprecedented level of change at ebay all happened in <unk>.
<unk> with a global pandemic that massively disrupted short term consumer behavior.
The early results have demonstrated that our strategy is working and the business is stronger than it was before the pandemic. Our focus categories are returning to market rates of growth high value buyers are growing and they are spending more we are empowering sellers by simplifying their experience saving them money and providing tools to accelerate their growth.
Our technology investments are driving a simpler and more sustainable marketplace and along the way our investors have been rewarded with strong earnings growth and significant capital returns.
Looking ahead. We're excited next few years as we build on the momentum we have established I look forward to introducing you to a world class leadership team and sharing more about our plans along with a few new initiatives, we will unveil at Investor day.
We have our eyes squarely focused on deepening our relationship with sellers and buyers and building the world's most sustainable marketplace for the E Bay community.
In closing I would like to sincerely. Thank our extraordinary employees for an amazing year. They completed a huge payments transition executed two large disposition and improved the underlying growth of our business while doing so they delivered tremendous sustainability results and supported sellers and buyers during these challenging times with.
That I will turn the call over to Steve to provide more details on our financial performance Steve over to you.
Thanks, Greg and thank you all for joining us today.
Beginning with the financial highlights from the quarter and full year on slide four of our Investor presentation.
Next I'll walk through key operating and financial metrics in greater detail.
Finally, I'll provide a further outlook for closing thoughts before we begin Q&A.
Please note my comments will reflect year over year comparisons.
Instant currency unless noted otherwise.
Overall, we are pleased with our Q4 results as we met or exceeded expectations across all of our key financial metrics capping off an exceptional 2021 for ebay.
I've been inspired by our team's relentless focus and execution amid uncertain economic and operating conditions throughout the year.
Our performance in 2021 demonstrated the progress we have made towards returns a gerbil sustainable growth.
Is ahead.
The revenue grew 5% to $2 6 billion in Q4, there were 15 points faster than volume growth.
For 2021 revenue grew 15% to $10 $4 billion of ICD points faster than volume growth.
Our non-GAAP operating margin was 31, 6% for the quarter for.
For the full year, we generated approximately $3 $5 billion of operating profit.
At 33, 4% margin.
non-GAAP earnings per share grew 24% to $1 <unk> in Q4 for the full year EPS grew 21% to $4 <unk>.
We generated $2 $6 billion of free cash flow in 2021, and returned $7 $5 billion to shareholders through repurchases and dividends.
Let's take a deeper look into our key operating and financial metrics.
As a reminder, we adjusted our definition of <unk> in December following the completion of our payments migration.
The challenge had a modest impact on our historical DMV and active buyer figures, but the impact of the change on a year over year growth for each metric in Q4 was immaterial.
Starting with active buyers.
We ended 2021 with 147 million active buyers on a trailing 12 month basis, representing a 9% year over year decline.
The expected decrease in active buyers was primarily driven by low value bias, which fell 9% versus Q4 of 2019.
Certain high value bias over the same period was 3%.
Although purifiers sold on ebay as compared to pre pandemic levels total high value buyers are up due to growth in high spending.
Price.
And importantly, even as mobility restrictions have been lifted spend for high value continues to expand at healthy rates.
Our buyers purchased $27 billion of tier three in Q4, which marked an 11% decline in landed near the high end of our outlook.
Compared with Q4 of 2019, J&J grew 9% at constant currency, representing a three point deceleration sequentially.
On a geographic basis U S. GMB grew 22% versus Q4 2019, while international Gms declined 1% on an FX neutral basis.
U S and international markets were impacted by softness in overall online shopping activity during the cyber five holiday period, but both geographies improve during the remainder of December .
Consistent with prior quarters numerous factors contributed to the growth differential between our U S and international markets.
Core macroeconomic factors like GDP retail growth and inflation, but pretty noticeably.
Notably stronger in the U S than international markets.
The macro factors by global supply chain disruptions shipping constraints. Another export challenges had a negative impact on growth in international markets.
These dynamics are particularly impacted sellers involving cross border trade, which skew towards non U S markets.
Conversely, our domestic sellers likely benefited from items scarcity due to supply chain issues.
Our domestic J&J has benefited from momentum in collectibles, which is largely a U S phenomenon.
In addition high ASP luxury categories are growing faster than the U S with the.
Rollouts of our innovation playbook is more nascent internationally.
However, as our luxury categories build momentum and we will.
All our product improvements in categories like P&I, which represents a higher share of J&J and international markets growth outside the U S should see greater benefits.
Our focused casualty coverage expanded to approximately 20% of GM, but as you might product improvements and P&I from broadened our country footprint in existing luxury categories.
Focused categories outpaced growth in other categories by approximately 15 points in Q4, demonstrating the impact of our innovation playbook.
Net revenue during the quarter was $2 6 billion up 5% while transaction revenue also grew 5%.
And updated.
<unk> our transactions high rates of 11, 8% was roughly in line with Q3 as we completed the managed payments migration.
Managed payments contribution 15 points of revenue growth in Q4.
It's a $2 billion of incremental revenue in 2021.
Our full year target.
We remain excited about the potential for managed payments to open up new opportunities in financial services for our sellers and buyers.
But in our advertising business promoted listings grew 4% during the quarter, our pricing volume by 15 points with <unk>.
Amy noted we are encouraged by the progress of our new AD products, which began to gradually move the needle on promoted listings growth during the quarter.
Moving down the P&L, our non-GAAP operating margin in Q4 was 31, 6% for.
For the full year, our non-GAAP operating margin was 33, 4%.
Increasing by close to 200 basis points versus 2019.
This leverage was particularly notable given the incremental contribution from managed payments, which generates material operating profit, but it's dilutive to reporting operating margins.
Cost of revenue rose by over four points as a percentage of revenue in Q4 year over year due to the variable payment processing cost for managed payments for the migration behind US we expect gross margins to stabilize around the current run rates in the short term with normal seasonal fluctuations from quarter to quarter.
Other operating expenses declined by over four points in aggregate.
Offsetting the decline in gross margin was payments revenue biosphere of fixed expenses.
Turning to earnings per share.
During the quarter, we delivered $1 <unk> of non-GAAP EPS up 24%.
Contributions from payments and advertising in conjunction with share repurchase offset by lapping of mobility <unk> last year.
We generated a GAAP loss per share of $1 47.
Due primarily to mark to market losses on our investment portfolio.
We generated $372 million of free cash flow in Q4 and ended the year with cash and non equity investments of $7 3 billion.
As well as gross debt of $9 1 billion.
We repurchased $3 billion of shares during Q4 and average price of approximately $70 per share, but the majority of our buyback executed through accelerated share repurchase programs.
Additional ISR details will be available in our 10-K filing.
We also paid a quarterly cash dividend of $107 million in December representing <unk> 18 per share.
Our investments are detailed on slide 13, after closing our premier and career deals, which yielded approximately $5 billion in cash our remaining investment portfolio is worth over $8 billion in aggregate at the end of Q4.
Our remaining advent of shares were valued at $5 4 billion.
We had approximately $1 1 billion in shares.
After exercising our first tranche of warrants during Q4.
Including the estimated value of our remaining warrant tranches.
So adding investment amounted to $1 5 billion.
Is taking to care bank is worth roughly 7%.
And finally, the fair value of our nearly 20% ownership interest in CE Mark in Korea was approximately $700 million.
Moving to our outlook beginning with the full year on slide 14.
To summarize 2022 will be the tale of two halves.
During the first half of the year, we'll lap significant mobility and macro headwinds from 2021 is.
As margin pressures as we scaled investments sequentially.
During the second half, we should observe the cleanest year over year comps, we've encountered since entering the pandemic.
The underlying growth in earnings power of our business.
For the full year, we forecast GM rates declined by 5% to 8% on an FX neutral basis with an FX headwind of roughly 200 to 300 basis points to reported growth.
We anticipate that <unk> decline in the mid teens on an FX neutral basis. During the first half as we lap a period of significant global mobility restrictions on the use stimulus effects.
In the second half, we expect flat to modestly positive GMB growth and anticipate exiting the year growing volume at 2% to 3% in constant currency.
Notably the quarterly phasing of CMV should more closely approximate pre pandemic seasonality moving forward, assuming mobility and macro factors remained relatively stable throughout the year.
We expect our 2022 tight rate to expand by roughly one point driven primarily by a full year of managed payments and increased revenue contribution from promoted listings as we scale our new products.
We forecast 2022 revenue of 10, three to $10 5 billion.
Representing FX neutral growth of <unk>.
A positive 3%.
During the first half we expect revenues to decline in the low to mid single digits before accelerating in the second half to grow in the mid teens.
For the last the managed payments rollout.
We expect non-GAAP operating margin of between 30 and 31% in the ship the second quarter should mark the low point for margins during the year as we lapped difficult comps and ramp up our pace of investment.
Our investments and focus categories last year had a measurable positive impact on growth. Thus, we are doubling down on investments in products, a full funnel marketing initiatives in 2022.
And these categories. We're confident these investments will improve customer satisfaction rates and drive sustainable growth.
In the years ahead.
We forecast non-GAAP EPS of between $4 20.
$4 40 in 2022.
During the first half of the year, we expect EPS to be down low single digits year over year as we lapped last year's outstanding growth and Scott investments. However, at the midpoint of our outlook implies EPS will grow in the high teens during the second half of <unk> positive on revenue outpacing volume.
Our board recently increased our share repurchase authorization by $4 billion, bringing.
Bringing our total authorization to approximately $6 billion.
We're also raising our quarterly dividend by 22% to <unk> 22 per share.
Since establishing our dividend in 2019.
Looking at our first quarter guidance on slide 15, we forecast revenue between $3, four three and $2 $4 billion representing.
7% constant currency.
We expect our take rate to be roughly stable sequentially in <unk>.
Client <unk>.
17% to 19% year over year on an FX neutral basis.
Margins between 31, five and 32% in Q1.
Modestly versus Q4 at the midpoint, but down 5% to six points year over year as we lap extraordinary volume leverage last year due to COVID-19 .
We project non-GAAP EPS between $1 and one.
And $1 five in Q1, representing a year over year decline of 6% to a decline of 3%.
In closing 2021 was an outstanding year for API, we delivered strong Q4 and full year results. Despite a challenging operating environment.
Uncertain macro conditions and constantly changing consumer behavior throughout the pandemic.
Our focus categories meaningfully outpaced overall volume growth due to increased customer satisfaction rates offering demonstrable place.
Innovation playbook is working.
We generated $2 billion of revenue for managed payments. This year. After completing on my question and still see many more opportunities to leverage financial services to reduce friction for sellers and buyers on API.
We delivered over $1 billion of advertising revenue this year and significantly broadened our portfolio to meet the needs of more sellers.
And grow their businesses underneath that.
We made prudent investments in people products and technology to support our strategic pillars. We believe these investments will drive durable growth in our marketplace in the years ahead.
We grew non-GAAP EPS by 21% on top of strong earnings growth in the prior year generated $2 $6 billion of free cash flow.
Unlock billions more through our portfolio divestitures and returned seven $5 billion to shareholders through repurchases and dividends.
We are proud to have taken meaningful steps to improve our environmental impact this year by achieving 100% carbon neutrality setting ambitious science based targets for the future and the continuous progress we are making as we focus on driving re commerce of Ifs.
Circular economy as a whole.
I would like to Echo Jamie stocks, so our incredible employee base as a tireless efforts have been instrumental in bringing our strategy for us.
So have added sellers and buyers and the ebay community.
Response to our investments in trust and innovation.
Conviction that we're on the right path.
Were excited to unveil more details about our future roadmap very soon.
So the investment community.
Appreciate your continued interest.
For our virtual Investor day.
Amongst the team.
Yeah.
Jamie and I will now take your questions.
Operator.
Thank you, ladies and gentlemen to ask a question simply press star one on your telephone keypad again to ask a question. Please press star one on your telephone keypad.
Your first question comes from the line of Scott Devitt from Stifel. Your line is now open.
Thank you for taking the question I have two the first year.
<unk> International GMB growth rates have been diverging recently favoring the U S for a variety of reasons and so as we get through to the second half of 'twenty two.
And which overall GMB improved to flat to modest modestly positive maybe begin lapping.
Stimulation mobility dynamics supply chain cross border and differences in the reopening timing in various countries.
Should we assume that U S versus international growth dynamics converge, even maybe favoring international due to cross border.
Are there any specific countries you point out in one direction or the other.
Relative to the overall growth rate of the business when we get back to that kind of normal period of time again, and then secondly, I know you just divested a number of businesses, but valuations of companies that could be bolted onto the platform change considerably just in the past few months and I'm curious if the environment change.
Considering acquisitions within the marketplace category. Thank you.
Yes.
Hi, Scott This is Jamie so on the U S versus international as we can.
Talked about last quarter, there's a couple of dynamics that are impacting the differences in the growth rate first on the macro side.
<unk> markets GDP growth.
Inflation growth retail growth are different and lower in Europe than what we're seeing in the U S.
We've talked about the supply chain challenges, which have a bigger impact on our international business and in our U S business.
In some cases in the U S were favored by things like video graphics cards, which are in high demand at the same time, we have a strong cross border trade business and some of our stores are impacted by some of the supply chain dynamics and export challenges and that hits, our international segment more than our U S segment. The third component is really there.
Our focus categories are much more nascent in our international business than in the U S. So think a category like watches which is demand for several quarters in the U S. We just rolled that out to UK and Germany this quarter.
With some of our other products and focused categories, where they are still rolling out to our international markets and as we've seen it takes a few.
Quarters for us to achieve the growth rate levels that we saw in the U S. But we believe that playbook will apply and that will help the convergence that he talked about the last thing is really just the collectibles difference between the two markets.
<unk> cards and that that whole segment is stronger in the U S than it is in international So it's a long way to say that there is a number of factors that are at play there, but yes, we believe over time as the categories rollout that will drive the convergence as well as some of the macro effects like the supply chain and other pieces changing over time.
On your second question on M&A, Yes, we are continuing to look at M&A as an opportunity to accelerate our tech led re imagination. We've said we will be opportunistic to look at areas that are asset light and consistent with our business.
To drive the strategy that we've laid out. The example, I would point to is most recently sneaker tonne and that investment with authentication property is in services in five different countries and.
Enabling us to accelerate even faster what's happening on sneakers, where we've seen really great success in fact.
We think the playbook has worked well enough now that we actually re monetizing sneakers this quarter for sneakers over over $100. So it gives us scale and it gives us flexibility and that was the point of the acquisition.
Thank you.
Thank you and your next question comes from the line of Ross Sandler from Barclays. Your line is now open.
Hey, guys.
Following up from Scott's question Luke.
At the exit run rate for 'twenty two.
And go through as we talked to you I think we're hoping to see a little bit more than 2% to 3% GNP growth with all the category activity.
Initiatives that youre working on so I guess why are we seeing higher growth.
Once we kind of hit the easier comp period, where we still cleaning up some of the lower quality buyers anything that you recall out.
Terms of why that growth rate is quite up to the E. Commerce averages at the end of 'twenty two and then Steve you mentioned new opportunities in managed payments now that we're 100% covered.
To elaborate a little bit.
What you guys are targeting.
Potentially rollout and payments that would be great.
Hi, Ross Steve here.
Thank you for the question, but the other thing I would say is that we've made very significant progress in our growth.
Over the last couple of years as you recall prior to the pandemic as we left 2019. The overall 2019 the business is shrinking minus two we actually exited 2019, a minus four.
As we've gone through the pandemic, we've made the right investments.
Really driven.
Modulation and really driven our focus category playbook, which is working very very effectively as you cycle through the pandemic as we've said the second half of the year. The first half. We obviously are lapping very significant liability challenges.
Associated with the pandemic last year as we come through the first half and get into the second half.
There is obviously the latest comps that we've got from the pandemic, but we've always said over the last couple of years really imagination is a multi year process.
Slide show you the progress that we've made the momentum is working regarding category by category and as we've said we're exiting the year.
Our expectations to exit the year.
Two 3%.
So the thing with the focused categories I'd also like to add is the those.
Those areas that we blend into our growing about 15 points higher than the rest of the platform and so again. It is very very clear the strategy is working and it will continue to take some time.
The second thing I would.
I talked about is obviously our managed payments.
<unk> by the team very proud of what was achieved in 2021 hour describe it has been at the end of the beginning.
We completed the transition enabled us to drive a seamless experience for our customers both from a risk from a commerce standpoint on a payment standpoint gives us the opportunity to eliminate things like <unk> or unpaid items, which is continuing to take friction away from the platform I think.
Increased trust, but again.
We have opportunities as we go forward.
Im really excited that we have the other change to have Judy lager, who is leading our payments platform on the initiatives going forward, who will be joining us at our investor event on the 10th of March who will be sharing with us how long the term structure looking.
Looking forward to you dialing in.
I'm seeing it from the terms of March.
Thank you moving on your next question comes from the line of Stephen Ju from Credit Suisse. Your line is now open.
Okay. Thank you so Jamie.
<unk>.
He's been Smbs and individuals and it seems like the AD products that seem to be fairly popular.
So those are those that are doing a lot of that automating of spend for them. So there are some sellers may decrease savvy and they might want to do that as the campaigns on their own but I would imagine more folks would probably rather have you begun to spend before them. So can you talk about where you may be in terms of simplifying tla's for your sellers.
Expand the adoption rate.
And expanding on that do it for me theme can you talk about where you may be in terms of the adoption rate for your external promoted listings product. Thank you.
Yes. So thanks for the question. So we agree with you. So we think the benefit of having multiple advertising products as to a plc now in multiple types of salaries. The multiple types of advertising occasion. So we built our first billion dollar business over the last five years on a single product, which is a CPA based products and.
And we've introduced three new products expressed which is a fixed price easy to understand product.
<unk>.
Which is really just an opt in product for our external promoted listings. So that one is pretty straightforward and then advance which is actually quite sophisticated product for smbs ones that are more used to keyword bidding campaigns daily budget levels, CPC announced et cetera.
So what I would say is that.
We are happy because the CPA based product or product that's out there for five years is actually a pretty easy product in a low risk products meeting and I only pay when I sell the products from that perspective.
But we're also excited that the new products actually round out the portfolio of opportunities to drive advertisement the advanced ones like <unk>.
<unk> are still in the nascent stage. So we're still have a limited data with those products.
And it's really it will take time, just like it did for multi years with the CPA to build the optimization to drive trial to drive adoption et cetera, but exactly what you said is why we have the portfolio of products and yes, we continue to look at ways that.
Artificial intelligence and other things to make not only the products easier for sellers to adopt but also make them more effective in terms of the rollout for the return on AD spend that we're seeing thus far we've been really pleased with the rollout of the salaries are getting on sales is that there's continued opportunity and our advertising portfolio.
Thank you. Your next question comes from the line.
Your line is now open.
Alright, great. Thanks, two questions first.
On the focused categories based on the current G&A guide.
Do you expect to fill this category to sustain.
Percent differential versus non focused.
Categories in fiscal two two and then second question on margin Flash investments.
<unk> 22, op margins a bit higher than that.
The 22 out margin guide you cited some investments could you discuss the investment spend that kind of being phased in figure out.
Thank you.
Yes, so I'll start with the first 100 <unk> you can take the margin question. So on the focused categories year over over time, we will be adding a focus categories. Our next one is parts and accessories.
And that category is a very large tam.
Hi ground ebay, one where we're coming from a position of strength, especially in the UK and Germany, we have a market leading position. There are some differences in our trading cards had a very strong year in 'twenty, one and so.
Thus far the category is performing well.
To your second question, if I just back up and take sneakers sneakers had been declining for three years, John at double digits, we invested in the category.
We drilled vertical specific marketing campaigns, we built in a past experience that had over 90 customer satisfaction and what you saw there is that the business really and in fact the <unk>.
Category is still helping now that we're actually re monetizing it. So we just reintroduce monetization over $100.
First for sneakers and Thats part of the investment that we're looking to do in 'twenty. Two is to continue to rollout this winning formula that we have in the playbook to additional categories high.
Hi, John Steve has so let me just give you a little color on the overall margin position as we've guided the full year.
Arjun for 2022.
30% to 31%, there's a number of items apply here number one.
We've got volume.
Deleverage that's happening in the overall business as we cycle through the lapping of the pandemic, which is much more significant.
The first half as you can imagine secondly, as we sort of.
<unk> the payments.
<unk> that we run through <unk>.
On the flip side, we have been getting a lot of work on our operational efficiency and going deep on our cost structure to identify opportunities to take cost out of the business to a $9 to guide further reinvestment and then finally, we obtained as Jamie said really delighted with the trajectory that we have.
With regards to our focus categories think about sneakers thinking about what you think about the 15%.
<unk> point increase over the co platform and that's been the result of investments that we've made to really change the tide and Thomas Hyde on the focused properties at heart, So we're going to be leaning in.
We're going to be leaning into full funnel marketing as regard catching you by <unk> 22.
To be an investment year as we go forward.
You too.
It will be the lowest points of the margin for the year. When firstly, we do continue to lap through that significant carve it lapping from last year, but also the phasing of the investments as I start to ramp in the second quarter.
Through the rest of the year as we go forward.
The macro picture, but also the shape of the margin trajectory as we go through 2022.
Thank you.
Thank you. Your next question comes from the line of Eric Sheridan from Goldman Sachs. Your line is now open.
Thanks for taking the question.
Further on volumes that sort of thing.
Sales with some of the questions you've gotten so far if we would compartmentalize.
Buyer growth going forward, how should we be thinking about the headwinds you're facing in sort of a post pandemic environment.
Elements were yourself or not choose to buyer growth, let's say adjacent changing buyer growth and where there could be tailwind to volume growth from some of the new vertical wise.
Experience as you're trying to build out the platform over the medium to long term so sort of.
Don't know if theres, a way to sort of characterize it that way, but if we were to think about those three buckets and elements of headwinds and tailwind in our feeds back in and typically about volume growth going forward. Thanks.
Yeah. So look on high value buyers, we've talked about the shift in strategy where back in 2019.
On the total number of active buyers.
Our refocused the organization since last July on this idea of turning buyers into enthusiasts and really focusing on our high value buyers.
How about buyers and you look at it I really made up of two groups.
Fireeye over.
$800 in shops, six times a year when we look at high value buyers in total this quarter thereafter.
Percent year on two year, whereas our low value and are down 9% year on two year. So this is a very conscious strategy to not be low ASD couponing and some of the stuff that we would get it to your question both of these metrics.
Some buyers are trailing 12 metric.
Trailing 12 month metric. So we are seeing is a slight deceleration from the infrequent sellers and thats something that we had planned to see and we'll likely see for coming quarters in some time period, but the second group the enthusiast buyers.
It grew again this quarter and we call those our enthusiast buyers I've met a lot of these type of coffee and they opened up the EIA app they shop ebay across multiple categories and when you look at the spend it's a very healthy spend level two plus dollars. So we're getting very sharp and nature of those buyers and so take one.
Just because when we are constant and watches.
So I understand $7.
This multiplier effect on ebay from being able to acquire somebody NDA process, the vast breadth that we offer.
So youll see different patterns over time.
Continue to see some deceleration from these infrequent sellers.
And quarter to quarter, we may see some changes in high value buyers, but overall when we look at the trajectory of what we're doing is we're making the business a whole lot healthier by focusing on this group getting them to go cross category and frankly acquiring enthusiasts right into our focus categories.
This strategy will have and that will go into more detail on investor day on March 10th on that.
Jamie.
Thank you. Your next question comes from the line of clean So thats.
Derrick Your line is now open.
Maybe two for me as well.
A follow up.
On the comments around sustainable growth then focus category is.
<unk>.
Fully incremental vertical category change embedded in guidance for the first half and beyond easier comps in the second half growth to grow enhancements you haven't really talked about yet and then maybe Steve Secondly, there were some changes to seller pricing announced recently I Wonder if you could perhaps unpack.
The size of that impact from from those changes.
Take rates and how that flows through the year in terms of the guidance.
Yes.
<unk> seen Tom I don't like to talk about where we're going next for competitive reasons.
And kind of giving away what is our next focus area. So the other one that we've announced is.
As going after pricing accessories, Max as a large category dominant market leader position and a great opportunity for us we've talked about investment you're starting to see full funnel marketing.
What we're doing in parts and accessories from our leading position as well as a number of product changes by opening up our our global category structure to make it easier to do cross border trade business, putting all of our parks into the vehicles apps et cetera.
And so we'll we'll go into a lot more gas on <unk>.
Yesterday, and what we're seeing in the focused categories that we've worked on and our path forward, but thats all.
Hi, Collyn.
Thanks for the question I'll talk about tied right. So I guess as a reminder, our tight right ballpark run 12% bye bye to that final phase play on payments, we're not out there.
There is a little bit of Theres, a number of items that we're going through as we try to introductory of 2022. The first thing is obviously stopped payments.
Some of that trajectory that we saw grow significantly through 2021.
We'll cross sell off we're obviously continuing to see some of the.
Momentum.
Jeremy sort of alluded to earlier and then there's obviously puts and takes in terms of cost degree mix category pricing as we go forward in the prepared comments, we talked about an incremental one point as tight as we go through 2000.
'twenty two.
Finally going to be a result of the payments rollout for the fully reflect as we go forward. The other thing I would say is that we continue to drive great value for our sellers. If you think about price of payments rollout.
We actually brought the combined.
Tight right down as a result of going through managed payments. So we still.
Extremely good value for our sellers as we go forward.
By bringing the platform of choice for those growth sellers as we go forward.
Example of that is in sneakers right. So I talked about as we monetize or sneakers.
A great value for buyers and sellers.
There's other places that they can sell and buy sneakers. So we feel great about that and all the feedback that we've gotten from the community will continue to make other small changes like we gave in parts and accessories and watches and in certain categories constantly with this viewpoint of how do we provide the right value for.
For our sellers on the platform to make sure we're bringing the best inventory out.
Yes.
Okay. Thank you.
Thank you. Your next question comes from the line of <unk> <unk> from Keybanc capital markets. Your line is now open.
Thanks for taking the question two quick ones for me I guess first maybe you can talk about it with some of these changes in the pricing structures of the thoughts and the last question do you see any adverse impact in terms of the number of sellers or the performance level. When you reprice. Some of these categories tactically and then as a follow up to that as you look across the rest of the portfolio.
Do you think that there are other opportunities for you to take price.
Given the strong momentum that platform have thank you.
Yes so.
In general we actually obviously studied the elasticity quite a bit and what I was saying about sneakers in Australia, which is where we're maintaining a double digit growth in that category and relative to other places that they can sell their sneakers were still very economical and the best value for dealing so so.
I always look at.
Our activity, what's our opportunity to bring more demand in certain cases, we do for example, a CFC promotions to bring.
The platform in our various markets.
But we're kind of rebalanced, obviously being a great value for our sellers and.
Ultimately monetization.
I would point you back add to what Steve said about advertising, which is the main factor for us in terms of driving monetization across the board and increasingly take rate other than that we're really just looking at category by category, making sure that we're competitive.
Thanks, so much.
Thank you. Your next question comes from the line of Tom Champion from Piper Sandler. Your line is now open.
Okay.
Thank you good afternoon, Jamie and I am wondering if you could talk a little bit about the impact.
Buyer activity from.
Video content.
And video added to listings and then Steve maybe just a quick one for you not to beat a dead horse on managed payments and the take rate, but noticed the transaction take rate remained flat quarter over quarter.
<unk> <unk> all else equal would think that would.
Go up a little bit is that okay.
Offering a discount or lower.
Core transaction take rate.
In some categories or function of mix just curious if you could.
That results in a little bit thank you.
Yes, Tom so on the videos, but I will say, it's very very early days. So we just rolled out the feature.
Everybody from 2000, and so while we are excited for our ebay store sellers that they can now build a video teller story, one a unique part of ebay and it's not just a transactional model. So if you look at some of these models you know Youre brand doesn't need a whole lot at ebay, we let the seller really build the brand and have access to 160 million buyers.
And so that I think will be really powerful as more and more sellers adopt it the.
And the same thing is true for our listings in bringing video across the platform. One is it just makes the engagement of the platform much more compelling.
I think about an oboe I recently bought on the platform in two quarters. We go through my daughter, It was great lots of pictures and lots of description by Scott video being able to hear it would've been even more compelling you could think about that in a lot of categories. So it's really early days, we're just adopting it for our API based sellers.
And moving it to our core listing flows, but we think over the coming quarters and years will be exciting new element for us on ebay.
Question is from Brian's Fitzgerald from Wells Fargo. Your line is now open.
It's a little bit about growth and pre owned particularly among young buyers and the sustainability push across company. Just wondering if you could talk a little bit more about the sustainability vision, how that aligns with your younger buyer cohorts anything you could tell us about kind of brand awareness in association with.
With that sustainability.
Focused among younger users growth in those younger cohorts. Thanks [noise].
Yeah.
So you think really pioneered re commerce and I think the strategy. We laid out last July of leaning into e-commerce is leading into light where the next generation is going.
And I'm really happy because not only leading into our agenda is but we're keeping products in circulation keeping them out of the landfill, we get a survey recently and 87% of respondents said they had some premium goods in the last 12 months.
And it's really.
Important to adjourn Z because it plays a huge role in there and they're experienced 81% of Jim Z said that buying pre owned items has become more common for them in the last year. So we feel great from a business perspective, but also from an ESG perspective.
Think about what we commerce does we just made the Dow Jones sustainability, well in North America indices for the third year in a row I talked about some of the other recognition that we had as an organization.
We've seen.
Hundreds of millions of dollars.
In terms of.
Just in the apparel and Preloved electronics, so from ESG standpoint, we think ESG so quarter, what ebay does that we should be in every ESG funds. So both of our business and ESG standpoint, we think we're leaning into a great factor of growth.
Great. Thanks, very much appreciate it.
Yeah.
And two ladies and gentlemen, this concludes today's conference Oh. Thank you for your participation human disconnect.
Hi.
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