Q1 2022 eBay Inc Earnings Call
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.
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 data for 2022, and we do not intend and undertake no duty to update this information.
With that let me turn it over to Jamie.
Thanks, Jeff Good afternoon, everyone and thank you for joining us.
Before discussing our first quarter results I want to acknowledge the terrible human tragedy that continues to unfold in Ukraine.
This is a very difficult time for many and I am proud of how ebay employees and customers have mobilized to support those affected.
At our core ebay exists to help people and communities around the world. This rule is fundamental to our purpose and motivate our workforce. In addition to direct and indirect support for <unk> and citizens. We will continued policy actions to help customers in the region.
These events have had a negative impact on consumer health, primarily in European markets. Despite this unexpected headwind our global results for Q1 were strong.
Let me highlight a few achievements from the quarter.
Focused category innovation expanded and these categories continue to grow faster than the rest of the marketplace $80 million enthusiast buyers continue to shop regularly on ebay purchasing items over 30 times per year.
Sellers are seeing a simpler unified listening experience and we made several improvements to ebay stores in the quarter.
We announced the deal with climate to provide more popular payment methods to German buyers and we started testing the new ebay wallet.
Our advertising business grew faster than <unk> due to increased optimization and adoption of new products and finally, we made significant progress on our re commerce.
Ni and sustainability goals.
So as employers are turning to ebay and this led to financial results at the high end of our expectations, we delivered over $19 4 billion and GMB and close to $2 $5 billion in revenue.
We continue to make the long term investments laid out at Investor day, while achieving a 32% operating margin.
And our non-GAAP EPS was $1 five.
Two pennies ahead of consensus.
Given the challenges our customers are facing around the world. We are pleased with our performance to start the year since.
Since late February when the war in Ukraine began we have seen lower e-commerce traffic inflation in gas prices and home energy costs, and historically low consumer confidence, particularly in the UK and Germany.
As we look forward to the rest of 2022, we find ourselves in the most dynamic macro environment I've seen since returning to ebay as CEO , we expect more near term headwinds to ecommerce growth rates. This year and our revised guidance reflects our best view based on recent trends, Steve will go into more detail about our full year expectations later.
During these uncertain times one thing that remains clear is that the tech led re imagination is improving the underlying health of our business and we are on track towards our long term growth targets. One example is in focus categories.
The investments in trust user experience and marketing are driving higher customer satisfaction, leading to faster GMB growth in Q1, excluding trading cards focused category GMB grew nine points faster than the rest of the platform. This growth is on top of last year's stimulus driven surge, which drove exceptional volume in many high ASP.
Products.
Despite challenging year over year comps trading cards remains one of our healthiest growth businesses in the first half of 2021, we saw an unprecedented surge boosted by mobility restrictions and stimulus since that time volume has remained elevated and in Q1 <unk> was more than double the size of pre pandemic levels.
As a leading trading cards platform, we continue to innovate our experienced increased trust between buyers and sellers in.
In Q1, we launched authenticity guarantee for upgraded cards above $750 <unk>.
Just this week, we expanded authentication to greater cards by signing a strategic partnership with PSA The global leader in trading card grading and authentication.
We expect this partnership will increase customer satisfaction and result in more GNP growth.
We are incredibly excited for the launch of the <unk> this quarter, which will transform our collectibles business items.
Items and the vote will be able to securely transfer between sellers and buyers in a matter of seconds without the need to ship or the need to re authenticate.
We see an opportunity to hold up to $3 billion of inventory in our next years, creating significant GMB and revenue growth potential.
Looking beyond collectibles, we continued to expand coverage of focus categories to more products and markets. Let me share a few examples.
At the end of March we started authenticating high value handbags in the UK and Australia. We also expanded the number of handbag brands covered by our authenticity guarantee and began to authenticate men's bags in the U S.
Another focus area in Q1 with ebay refurbished.
After success with certified products direct from manufacturers, we have significantly expanded the program across smart watches tablets laptops and desktops.
Buyers can shop for embedded sellers across a wide range of refurbished inventory backed by ebay money back guarantee and warranties.
These trusted products contribute to ecommerce, which saves consumers money and reduces carbon emissions.
The luxury watch category continues to grow at positive double digit rates on top of last year's strong growth rate.
To date, we have authenticated watches over $2000 across three markets. This quarter, we added the ability for buyers to request expert verification for a fee for watches valued between one and $2000.
This additional service marks an important milestone in our journey to increase trust through authentication. This feature it's portable to other categories and markets across the platform and demonstrates the scalability and effectiveness of our playbook.
And our secrets category, we reintroduced final value fees in the U S. In January and growth momentum continued these fees are lower than most other platforms and customer satisfaction remains near historically high levels.
Sneaker GMB is also growing significantly faster than the rest of the business in our international markets. We repeated the successful approach first deployed in the U S, which includes authentication influencer partnerships and increased social marketing investments.
In parts and accessories supply chain constraints and low vehicle inventory are driving up the price of new and used cars.
These trends are driving more consumers to extend the life of their current vehicles.
With approximately half a billion P&A listings, we are well positioned to supply all the parts they need.
We have been investing in full funnel marketing for parts and accessories since December and we're starting to see modest gains in initial consideration.
This includes partnerships with leading influencers and enthusiasts to showcase our vast inventory selection.
A recent example, with the ebay auto parts show in New York, where several top Influencers showcase that we steward and custom vehicles. These do it yourself enthusiasm crafted re concept cars using unique and hard to find parts on ebay. This event generated 3 billion media impressions in one week supporting the momentum we have.
Seeing in the PMA category.
While sellers and buyers love, what we're doing and focus categories. We are also making sitewide enhancements to help all sellers grow their business.
In Q1, we made several significant changes to further modernize our stores experience first our new storefront page provides the ability to tell their story showcase their brand and increase trust and their business.
We optimized Seo for stores to drive more free traffic.
Third we increase the prominence of store inventory and made it easier for enthusiast defined stores throughout the buyer journey.
To support sellers and help them grow their buyer base. We also increased the ability for buyers to save dollars for future purchases.
Now when buyers purchase items. They are prompted after checkout to save that seller. This has driven a Ford X increase in the number of safe sellers to date, which leads to more purchase frequency new buyers to save a seller in their first 90 days or more than twice as likely to repurchase an item.
More sellers are sending coated coupons to drive repeat purchases to date over $7 5 million buyers have purchased an item from a seller funded coupons.
Turning to approximately $500 million in GMP.
To help sellers improved targeting they can now categorize their buyers and unique groups for customized marketing campaigns.
Our payments platform is enabling new services and reducing transactional friction for sellers and buyers. We signed an agreement with pharma in early March bringing two popular payment methods pay upon invoice and installments to our German buyers.
Testing is underway and we are on track to make it available to all German consumers this quarter.
We started testing and scaling other payment capabilities in Q1, including the new digital wallet, we announced at Investor day, when sellers earn money that balances Stuart on ebay and readily available for them to purchase items or pay for selling expenses like shipping labels. We will continue to optimize this feature and expand to more customers during the year.
Approximately one in five transactions occurs across borders and our payments platform is reducing friction on these purchases.
In Q1, we started giving buyers the option to pay in their local currency. In addition to the currency of the listing.
This feature simplifies cross border trade and also enabled incremental payments revenue to fund further innovation.
I am excited by the pace of innovation in payments after completing the migration last year, we are moving quickly to reduce friction launch new services and leverage our scale to benefit sellers and buyers.
Another area, where innovation is driving growth as advertising in Q1, our ads business once again outpaced volume.
Revenue growth was driven by promoted listings, which generated $222 million in revenue up 2%.
This was $19 faster than <unk> and then it has accelerated due to product innovation.
Our standard promoted listings product, which still drives most of our first party AD revenue continues to drive growth through increased adoption and conversion optimization and we see further runway in the quarters and years ahead.
The three new products launched last year are early in the growth cycle, but are up more than 50% versus Q4.
The first product promoted listings express is increasing conversion and price realization for aten sellers.
Typical auction that Leverages. This feature is attracting several hundred more buyers for listing.
The second product external promoted listings is now open to our entire global seller base similar to standard promoted listings sellers choose the value of their AD spend we continue to expand the list of affiliate partners in the program to drive more traffic directly to sellers with promoted listings.
The third product promoted listings advance while still in limited beta has been scaled to more professional sellers in Q1, we expanded the number of AD groups, providing more bidding capacity and flexibility.
This product will take time to reach its full potential and we see opportunities for significant growth.
We are continuing to invest in our advertising platform and expect AD revenue to outpace volume for the foreseeable future.
We continue to make meaningful progress on ESG, let me share a few highlights first.
Firstly on re commerce in 2021, our platform generated over $4 billion in positive economic impact from the sale of used and refurbished goods. This.
This activity avoided one 5 million metric tons of carbon emissions equivalent to taking 300000 cars off the road for a year.
E Commerce on ebay is growing due to our focus on nonhuman season categories demand for refurbished and used goods is growing in many categories and we are well positioned to hit the long term goals I shared with you at Investor Day.
Secondly, I'm proud of our team's efforts around the Eni we are about to publish our sixth annual diversity equity and inclusion report. This report provides insights into our four strategic objectives increased representation cultivating a sense of belonging engaging our communities and building inclusive technology.
Aligning and executing on these objectives is how we bought a richly diverse truly equitable and fair Leslie inclusive place to sell by and work.
The third area of progress I would like to highlight is reducing our impact on the planet.
Last year, we set ambitious long term science based targets for the full year 2021, we've reduced scope, one and two emissions by 26% versus 2019 for scope three which includes the impact of shipments on our platform, we reduced emissions by 7% versus 2019, despite volume growth.
Lastly, 90% of our energy now comes from renewable sources, and we remain a carbon neutral company.
You can find more details about our sustainability programs and our annual impact report later this month.
I'm always impressed by the generosity of our sellers and buyers in Q1 EBIT for charity raised over $36 million up 2%, We recently announced the Grand finale of the power of one charity auction with Warren Buffett.
Launching on ebay over 20 years ago over $34 million has been raised to support glide a nationally recognized center for equity.
The ebay foundation, whose mission is to remove systemic barriers to entrepreneurship committed $11 million to nonprofits in Q1 in.
In addition, during March over $2 $4 million, which range from employee contributions and ebay foundation matching gifts many of which went to support Ukrainian relief efforts.
Across a number of other employee and customer channels. The company has raised millions of dollars for Ukraine related causes in several countries customers contributed to give at checkout campaigns that supported the Red Cross nobody Ukraine and save the children.
We are very fortunate to work for a purpose driven company with a team relentlessly focused on helping people and the scale to deliver meaningful impact to our communities.
In closing Q1 was a strong start to the year, we extended focus category coverage and watches handbags trading cards and ebay refurbished and we laid the groundwork to launch the bump this quarter a game changing experience for collectors. We released several new features for ebay store sellers like new storefronts and enhanced SCO.
And we are encouraging more buyers to save their favorite sellers to drive repeat purchases.
In payments, we launched krona for German buyers started testing, a new digital wallet and increased currency payment options for cross border buyers.
Our advertising business has meaningfully outpacing volume growth through optimization and new product innovation.
And we're achieving all of this while executing on an ambitious ESG agenda to support our communities and the world We live in.
Before I hand, it over to Steve I would like to express my sincere appreciation to our seller and buyer community, whose energy and unique inventory make our marketplace truly differentiated in ecommerce I would also like to thank all of our global employees for their tireless efforts to delight customers and support our communities their dedication and focus on improving our <unk>.
Underlying business health everyday.
Lastly, I'm thrilled to welcome Eddie Garcia back to ebay as our new core product leader his wealth of Bofa knowledge and track record of innovation will be great assets to continue to drive the tech led re imagination.
With that I will turn the call over to Steve to provide more details on our financial performance Steve over to you.
Thank you, Jamie and thanks, everyone for joining us today.
Ill begin our discussion with financial highlights on slide nine of our Q1 earnings presentation.
Next I'll provide a deeper look into.
Key operating and financial metrics.
A discussion of our ongoing macroeconomic and geopolitical developments are influencing our business.
Finally, I'll share our forward outlook.
Before we begin Q&A.
Please note my comments will reflect year over year comparisons.
Constant.
Find out otherwise.
Overall, we delivered strong results in Q1, as Jim Hey, revenue and EPS met or exceeded expectations and perform near the high end of our ranges.
Our Q1 results were driven by continued progress against the strategic objectives, we outlined at Investor day, including an expansion and coverage and capabilities of our focused categories.
Unimproved tons in technology.
Sellers and buyers.
Our first quarter revenue was down 5% to $4 billion.
Pricing volume growth by approximately 12 points.
non-GAAP operating margin was 32, 4%.
80 basis points sequentially.
We delivered non-GAAP earnings of $1 five per share down, 2% as compared to our record quarterly EPS results last year.
We generated $546 million of.
Our free cash flow and returned approximately $1 4 billion to shareholders through repurchases and dividends.
We achieved these results despite some backend softness.
With changing market conditions.
Conflict in Ukraine.
I am extremely proud of our team's focus on execution amid these challenging circumstances.
Let's take a closer look at our performance in Q1.
Gross merchandise volume declined 17% as we lap the seven point sequential acceleration during 2021, which was driven by global mobility restrictions on U S stimulus payments with.
As compared to a pre COVID-19 baseline in Q1 of 2019 G&A grew 7%.
We were extremely pleased with the pace of growth.
<unk> and execution with our focus categories during Q1.
Coming off a record surge in growth in early 2021 trading card volumes appear to be stabilizing as a quarterly run rate more than double the targeted levels, indicating continued healthy demand.
Asset class.
Excluding triton costs year on year growth in focused categories archives to remainder of our marketplace by approximately nine points.
We sustained strong positive growth within our luxury categories compared with last year's stimulus driven results included sneakers over $100, while we reintroduced monetization in the U S. In January .
Trailing 12 month, occupiers, where 142 million during the quarter down roughly $5 million sequentially due to the same market dynamics, but importantly, this anticipated decline was skewed towards our low value buyers.
Trends within our high value groups remained healthy.
18 million can you just.
Spent an average of over $3000 across nine categories over the last 12 months.
Average spend RMT, Jeff also rose sequentially on increased low double digits versus 2019.
<unk> increased 17% compared to Q1 of 2019, while international Gms was roughly flat.
Similar to prior quarters, our U S volume benefited from stronger underlying e-commerce growth.
Fisher, Patrick remarks earlier launches a focus category initiatives.
Meanwhile, our international business has experienced softer economic growth and greater exposure to the supply chain challenges impacting cross border trade.
When we spoke at our March Investor Day.
Again.
Modest softness in our European markets, Germany early weeks versus Advisory review crime.
So it's a conflict intensified we followed the headwinds to our business became more pronounced.
We estimate the Ukraine wall represents the low single digit negative impact to our global business in Q1.
Notably these macro headwinds have not impacted our product roadmap or other strategic initiatives.
Net revenue during the quarter was $2 4 billion.
Down 5%.
Positive contributions from payments and ads were offset by comparisons with last year's extraordinary volume growth.
Our transaction take rate increased by 30 basis points sequentially to 12, 1%.
Managed payments contributed eight points of revenue growth during the quarter.
As we fully migrated to our proprietary platform, while new initiatives like buyer and seller FX are scaling in line with expectations.
First party ads, primarily promoted listings grew 2% during Q1.
Our case volume by approximately 19 points.
This margin acceleration from roughly 15 points in Q4 once we further optimized our standard promoted listings product and recent conditions to our us portfolio grew in scale and adoption.
Turning to margins, we delivered a non-GAAP operating margin of 32, 4% in Q1, an increase of more than 80 basis points sequentially.
This improvement was driven by lower seasonal spend in sales and marketing, which was offset by volume deleverage as we lapped last year's GMP acceleration.
During the first quarter, we delivered $1 <unk> of non-GAAP EPS down 2% from our record quarterly EPS in Q1 of 2021.
The impact of share repurchases and contributions from <unk> were offset by the lapping of liability tailwind.
We generated a GAAP loss per share of $2 28 with.
With the Delta driven by losses on our investment portfolio amid recent market volatility.
We generated $546 million of free cash flow in Q1 down 37% due to lower volume and the lapping of onetime working capital benefits associated with the managed payments migration, partly offset by lower cash taxes.
As we discussed at Investor Day, we do expect our cash taxes to rise this year due to the timing of repatriation payment and new federal tax treatment of R&D credits.
These dynamics are not new units, you buy and we expect to revert to a more normalized cash tax rate after 2025.
We ended the quarter with cash and non equity investments of $6 3 billion in gross debt of $8 3 billion. If we paid down 750 million of notes during March we.
We repurchased $125 billion of shares during the quarter.
On average price of approximately $57.
This was in addition to.
Portion of shares from our Q4 accelerated share repurchase program the subtle going out in Q1. Additionally.
Additionally, we paid a quarterly cash dividend of $129 million in March representing <unk> 22 per share.
Our investments are detailed on slide 19.
Mining portfolio was valued at over $5 billion at the end of Q1 after a quarter of significant market volatility.
We sold roughly $600 million of IGN and cacao bankshares during Q1.
We will continue to manage our investment portfolio with the goal of maximizing shareholder value.
This includes maintaining our investments where we believe we can generate incremental value for shareholders or monetizing them. When we see an opportunity to do so.
To that end, we sold Orange during Q1 of <unk>.
Average price more than seven times, the strike price of a first tranche of warrants.
Moving to our outlook.
Russia, and Ukraine have historically made up less than 1% of our global volume.
But the war in Ukraine was measurably impacted economic growth and consumer confidence throughout Europe , and other parts of the world.
This conflict of ours as global economies were already contending with inflationary pressures and supply chain challenges.
On top of that rising interest rates my further hindered near term economic growth, while sanctions related to the rule could rise already high fuel prices, leading to additional pressure on consumer spending.
We're confident our business will remain resilient in the current environment.
We're revising our expectations for the remainder of 2022.
Reflect the macro conditions.
Over the last two months.
Despite the near term uncertainty, we continue to invest in a focused categories and other strategic initiatives to achieve our long term growth targets, we outlined at Investor day.
For the full year, we are lowering our FX neutral growth forecast for <unk> <unk>.
By approximately 5%.
The strengthening U S dollar all synergies as our spot <unk> outlook by roughly one 3 billion versus our prior guidance.
We now expect GM vision of between 73 to $75 2 billion.
In 2022, representing a decline between 12, 10%.
We forecast revenue of nine six to $9 $9 billion, representing a decline of between six 3%.
Updated forecast wholesale operating margin between 29, 30% as we expect to mitigate some macro driven volume pressure through cost efficiencies.
We forecast non-GAAP earnings per share between $3 94.
$4 10.
Presenting negative 3%.
Posted 2% growth.
Looking to the second quarter.
Back to Jennifer 18 points there too.
$18 $41 billion of GM.
Representing a decline between 16, and 14% or between two and 4% growth versus Q2 of 2019.
We forecast revenue between $2 $35 billion to $4 billion, representing a decline between nine 7%.
We anticipate non-GAAP operating margin between 26, five and 27, 5% as we scale our planned investments in product and full funnel marketing initiatives.
We project non-GAAP earnings per share between <unk> 80 791.
Representing a decline of between 12 eight.
Percent.
And how does it.
Q1 was another strong quarter for APAC.
We maximum exceeded expectations across all key metrics, despite facing a challenging confluence of geopolitical and macroeconomic developments in March.
We expanded our coverage and capabilities within focused categories, which are delivering innovative new shopping experiences for our community.
Fueling positive underlying growth cannot business.
Advertising and payments initiatives outpacing volume growth delivering incremental revenue at healthy margins.
Helping ebay sellers grow their businesses.
Our balanced approach to capital allocation.
Enabled us to invest in strategic initiatives maintain our best in class margins.
I will return more than double our quarterly free cash flow to shareholders.
And our focus on my comments and sustainable business.
Business practices has enabled us to achieve these results while supporting our people.
Purpose and our planet.
Finally, I'd like to Echo Jamie Thanks to our extraordinary by employees.
Our focus and execution amid the challenges over the last few months has been truly inspiring.
We continue to innovate and we remain on track to deliver on our product roadmap, we laid out at Investor day.
And with that Jamie I will now take your questions.
Okay.
And ladies and gentlemen, as a reminder to ask a question you will need to press star one on your telephone can withdraw your question press the banking.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Colin Sebastian from Baird. Your line is open.
Alright, Thanks, good afternoon guys.
Two questions for me I guess I guess the message here is the tech led re imagination is on track, but you hit these macro headwinds that depressed volumes in the near term so with that context, Jimmy I was hoping you could drill down a bit more on on growth and enthusiast buyers and in particular, how does how do you expand the size of this group.
Drive more engagement and if this relies on converting.
Less active buyers since you're enthusiastic those that are already on the platform and I have a follow up.
Yeah. Thanks, Thanks for the question Colin.
<unk>. So when you look at our enthusiast buyers, we have $18 million of them they drive 70% of our GMB.
That group is a very productive group for us.
Shop more than 30 days they.
They spend over $3000 and even though some of them are.
Our mid valley can move in and out of mid value. When you look at our mid value buyers that we outlined at Investor day, there actually.
Of the cumulative lifetime value of most other platforms. So theyre also very valuable customers as well so the key things we're doing as a driving our focus category strategy. When we look at those enthusiast buyers, 94% of them shop and focused categories. So that's a big opportunity 25% of them are selling on ebay.
That obviously drives the flywheel of our performance when we look at it versus 2019, it's not just about the numbers, but how do we get that group to buy more so versus 292019, they are buying double digits more on the platform and that has to do with getting them to go cross category getting them to be more sticky within.
Their focus category are there initial category.
And then all of the pieces that we know kind of drive retention and the last one I'll just pick up on is it is also tied into our seller strategy. So part of the things that we announced this year this quarter with sellers things like new ebay storefront enhancements to the ebay coupons improvements to spo. It's all about how do we is it just not E Bay.
And our platform driving retention of those enthusiastic buyers, but how do we put more tools in our sellers' hands. So that they can drive the retention of the buyers as well so.
So feel really good that the strategy is working and the plans are intact.
Well that's helpful. And then secondly, maybe for Steve It looks like guidance for the back half of the year implies somewhat normal sequential seasonality on volume for Q in Q3, and Q4 off of that lower Q2. So I guess I would suggest the outlook assumes no improvement or no worsening in the macro environment. If that's the right way to think about it.
Hi, Colin anticipate here as you can imagine we've invited.
In terms of how we've looked at the outlook for the remainder of 2022 based on the size of uncertain and challenging environment.
Alright.
Youre correct in terms of your assumption as we go forward with regards to seasonality just as a reminder.
Nevada first.
Last earnings call, we do have a half one half two underlying story for 2022 as we lap some of the significant tayo.
<unk> professor of Covid and 2021 in the first half as we go forward, but we.
Despite the I suppose at a macro level, we do see this overall softness driven by the macro economic environment, but we still expect such a seasonal shape.
<unk> as we go forward.
Great. Thank you. Thank you.
Our next question, we have Eric Sheridan from Goldman Sachs. Eric Your line is open.
Thanks, very much for taking the question maybe two if I can just following up on <unk> and following up on the macro issue are you seeing different behaviors in the macro environment between your high value buyers at low value buyers that would that inform any decisions maybe accelerating some of the investments you want to make in terms of it.
Proving the skew of your buyer base as we go through 2022.
That would be.
Sort of question.
Number one and then secondarily you pointed out the gap between <unk> and <unk>, which was quite wide how should we think about that gap between ads outperformance relative to GMT beyond just what you reported in Q1 given against your renovation KOB run ads longer term. Thanks, so much.
Yes, thanks, Eric So look when we think about the impact of macro it's really across the board.
We can look at obviously, our own traffic and traffic of our competitors.
And specifically in Europe are more so in Europe .
Coincidental with the war, we saw the impact overall to the business. So theres various movements I would say last year with the pandemic, we moved our mid value up into enthusiast buyers as we looked at the segments.
But really it's kind of across the board you know everyone's energy prices are going up.
Cost of fuel inflation et cetera.
Your second question, we're really happy with the performance of ads being at 19% above <unk>.
<unk> this quarter and we talked about kind of the growth that we're seeing in the new products. Although the large part of it is still our core product, which is the promoted listing standard.
Continue to drive optimization continue to drive adoption, we are still in the early stages of the new products out advertising.
Right next question.
And then we have Tom champion from Piper Sandler Tom Your line is open.
Great great. Thank you.
Good afternoon.
Jamie maybe you could talk about the.
Focus category growth of 9%.
I think it was 15% previously.
Help us interpret that in terms of.
Ongoing sustainability already.
Thank you. Thank you yeah. So a couple of things one is really pleased to see that nine points faster growth in terms of the focused categories.
We are lapping some stimulus from last year in our numbers. So that's certainly a factor and then over time Tom.
I would say as we increase our coverage our focus categories. Obviously, the Delta will decrease just because of the math of more of the numerator being in the denominator as well, but as we look at this as a multiyear the strategy that we laid out at Investor day is right.
Getting them to grow at or above market growth rates.
What I would say I'm really happy about this quarter is that we're seeing the same type of deviation between focused categories in international that we saw in the U S. In terms of their outperformance of the rest of the site. So we've been talking for a couple of quarters now about how international was more Nathan and we're starting to see that traction in the focused categories. When you talked about some of the <unk>.
New launches that we're seeing internationally.
Right Good question Deepak.
From Wolfe research your.
Your line is open.
Great. Thanks for taking the question just sticking with the macro discussion another pipe lower revision on fully at GM. We guide maybe can you elaborate a little bit on what segment, you're seeing now to arrive at the 100 basis points reduction I mean, a lot of uncertainty is still kind of ahead of us sort of this revised guidance.
Right.
What you're seeing now or is it also a factor in potential unfavorable trends in the second half.
And then how should we think about your expectations for 2023 and 'twenty four based on the revised 2022 target. Thank you so much.
Can you talk I'll pick those up.
As I mentioned on the previous question, we've been very thoughtful and deliberate about the 'twenty two guys as we look out for the remainder of the year and really reflecting what we see as ongoing macroeconomic challenges in the overall environment I think I would put it down to sort of three specific areas as we think.
And contemplate the guide that we put out first the continued negative economic impacts of the terrible that trust is associated with the war in Ukraine, and our expectation that those negative impacts will continue through 2022.
Overall.
Continued headwinds from the broader macro environment, you think about things like interest rates fuel prices energy costs, that's putting additional pressure on the consumer.
And that discretionary spend and we're particularly seeing that in.
Europe and a couple of our key markets in the U K and Germany, where we're seeing consumer confidence historic lows and then we are also assuming a third item.
The expected continuation of the supply chain disruptions that we've seen for a number of quarters here that continues to drag on our international business. So we want to think about those three areas. That's what we've contemplated when we looked in the macro environment.
For two.
1022 got beyond 2022, as you recall we were.
Talk to the Investor community back in March our Investor event, and we remain confident.
Our long term guide.
We see these issues as transitory.
Our long term guide contemplates at mid single digit GMB growth.
We remain confident and that we continue to make the investments for the long term future Jeremy talk about the momentum that we're seeing in our prepared comments and so we.
We certainly see that as a longer term perspective, as we navigate these choppy waters in the near term.
Got it okay. Thanks, so much.
Our next question from Credit Suisse. Steven Your line is open.
Hey.
So Jamie your commentary about expanding the authenticated Brad.
It's interesting it sounds like youre, not quite going deeper into the category.
So kind of along with that can you talk about how the parts and accessories rollout, we'll see it I mean is that going to be a gradual rollout of a category by category model by model basis.
And is there a similar opportunity to go deeper into Washington as well.
<unk> talked about also to follow up on Eric's question earlier I think.
Throughout 2021 more than double the number of promoted listings sellers, but that's still a minority percentage of the total sellers I get that there's product that's probably not appropriate for everybody, but what can you do to drive greater solar adoption or is it just a matter of awareness or is there no. It does.
The products, we need to be expanded.
Yeah, Great question, So first the way.
Think about the focused categories, it's not like we invest in the category and that we're done if you look at it we're still investing in sneakers, which we launched quite some time ago. So we continue to make innovations even in categories that we've launched the category that you first brought up handbags, we expanded what we're doing and authentication to the U K.
In a beta this quarter, we also expanded in the U S to men's bags.
This quarter. So now currently authenticating in the U S U K and Australia.
So that will be a continued playbook I would say the same thing about parts and accessories. In addition to all the things we're doing around consideration, we're continuing to drive quarter after quarter, New features new capabilities for for those categories.
You mentioned watches at the end that's another category, even though we launched authentication a couple of quarters back for watches.
This quarter, we've got a new capability, which is actually allowing buyers to pay for authentication. If they want it for watches between one and $2000. So to be continued evolution focused.
Focus categories, as we launch new ones and continue to enhance.
Enhance them I'd say, a couple of things about the collectibles category I'm really excited by this quarter.
Vault is on track that we talked about at Investor day, and a lot of potential there to save re authenticating the savory shipping the products on Monday, we announced a partnership with PSA PSA is most popular greater for trading cards and now you can have your cards authenticated by PSA.
Over $2000.
And so.
Like I said before everything is kind of a continued evolution of enhancements to drive customer satisfaction.
On your question on advertising, yes, we feel great.
The thing that makes us feel great about the opportunity for more penetration is the ROE as that we continue to see.
We have strong ROE as for our sellers and so it's obviously easier to get the largest sellers to start using the product and drive that penetration first.
But we are for example, launching a new unified our listing experience, which has a great advertising inclusion this quarter, we announced some optimization tools for our product listing advance.
And look it took us five years to get the.
If we get the standard product to where it is today. So these things do take time to drive adoption to drive optimization, but we feel like the suite of products that we launched is the right one.
Thank you. Thank you.
The next question, we have Ross Sandler from Barclays. Your line is open.
Hey, guys just two questions.
First can you remind me.
Cross border.
<unk> pre pandemic compared to the 20% today and you mentioned the new payment partnerships in this new wallet potentially getting that going in the future.
How material could that be and I guess other than <unk>.
Some of the log jam clearing up in China outbound what else can you do to crank up cross border.
Question is.
You normally have.
A downtick in Q2 operating margins season, we will be more pronounced than normal.
So just any color on those investment levels.
From some of the <unk> weakness youre talking about previously thanks a lot.
Hi, Ross I'll pick up the first.
Last quarter, we've pretty steadily.
20% of our business has been somewhat from a cost standpoint, as we come forward.
We haven't seen any major changes, obviously as we've gone through the supply chain challenges.
We've been saying over numerous quarters that we've talked about extensively that was continuing to pour.
Some additional pressure on that maybe I can just kick off on a few items on payments and then and then Jamie to sort of continue to address other items associated that after <unk> already taken by exceptional execution. The team has gone through over the last 18 to 24 months.
The integration of the whole payments platform and it gives us a great opportunity to continue to.
Drive value for our shareholders as you go through that whether that's through faster.
Faster payouts.
Hello FX.
Higher SaaS pay items.
We talked a lot about on our investor event generates.
That's $300 million as we go forward the wallet, we're very excited about and not something you also talked about the Investor day, Jamie do you want to just elaborate a little bit more from your perspective, Yes, Ross I'm happy with our pace of innovation. So the quantity deal that we announced which we'll be launching this quarter actually allows us to accept forms of payments, which are very popular.
In Germany, which we've not been able to accept.
Primarily pay upon Invoiced and financing.
And so thats one component Steve talked about the digital wallet, which is in beta now, which obviously helps us with the flywheel also help sellers because they can store balance for their selling cost like shipping et cetera, and then.
To your question on the cross border trade, we are doing things to help them.
They are having somewhat of an impact being able to forward deploy inventory through a partnership that we've done but our cross border trade element as Steve said had been roughly roughly steady.
And then Ross just to pick up your question around Q2 margins does naturally.
And underlying seasonal impacts that we sort of go through but as we talked about on our last earnings call. We did expect Q2 would be our lowest margin for the year based on the phasing of our investments as you can imagine we're all leaning in.
Just on the macro environment.
So short term costs, but we are continuing to invest in product full funnel marketing and making sure that the longer term strategy stays on track and so there is some of the dynamics at play with regard to our second quarter margin profile that you've heard about today.
Our next question from.
Dan Your line is open.
Great. Thank you good afternoon, everyone.
Jamie welcome back any Garcia in your prepared remarks, and that's a change.
Since we last saw you all at the Investor day could.
Could you elaborate maybe a little on the transition from Peter Thompson to him and then.
Is there any new particular direction or new initiatives that you expect to.
<unk> as he takes over responsibility for your product put a stamp on things so to speak.
Thanks.
Yes.
Departure of Peter in that transaction I went out and tried to find the absolute best product person in the world that I could find and he has a really unique ability he combines product UX and technology like no other executive that I've met.
And importantly, too has a decade of background with ebay, which is extremely valuable can come in and really hit the ground running and he's already started I think he's on day eight today.
He's doing a great job. So really excited to have him here I would say no nothing changes in terms of the product roadmap. He's got a great team of leaders underneath them, we have a strong organization and the roadmap is very solid for the year I mean, if I just look at payments as an example.
This quarter, they announced they announced the deal with foreigner at Investor Day, there are about to launch it they launched a new capability to Dubai or FX or the buyers can pay in their local currency, they've made enhancements and ramped up stored value all of that within a single quarter. So I'm happy with our pace of innovation across the board and just thrilled that Eddie can be part of the leadership.
Team and help us push forward on the Tech led re imagination.
Okay, great. Thank you. Thank you.
Our next question comes from the line of Richard Kramer.
Richard Your line is open.
Thanks, very much Jamie.
No.
Theres, a big Echo here, Jamie you mentioned quite a bit about the focused strategy and laying that out but it still seems to leave H E b.
Hey vulnerable to vertical.
<unk> category, which had some social commerce for community housing to engage users.
How far might you see stores evolving to allow them to have their own maybe think brand for Ids.
And tried to engage users in.
In more ways than just simply Palmer, our buying and Steve I guess the other question. If you look at the guidance for 6%.
Seven points.
Upside from payments and ads is that simply.
A lapping the payment saturation or completion or do you imply some sort of slowing of ads over the course of the year. Despite all of these new formats. You management. Thank you. Thank you Richard Great question I'll take the first one Steve should take the second so absolutely one of the benefits that ebay has versus any vertical specific marketplace is our scale. The fact.
We can get buyers to buy cross category that we can acquire them at a lower cost.
And if you look at let's say of parts and accessories buyer theyre going to come in and buy $200 in parts and accessories, but then $500 elsewhere on the site, but we are leaning into the areas that you're talking about how do we make it easier for buyers and sellers to transact on the marketplace. How do we build retention between them. So I'd point to a couple of things that we've launched in the last few quarters. The first is our <unk>.
New member to member messaging system, it's very simple and easy to use it's chat like interface very familiar for Gen Z customer to interact between a buyer and seller and Thats a huge improvement over the legacy products that we've had out there for a long time, we've been opening up the ability for couponing and reaching back out to interested.
Buyers on the platform that are that have transacted with you and really the as you talk about stores is really the opportunity to let sellers build a brand and communicate with buyers. So this quarter, we launched our new storefronts on.
For our ebay store sellers, we actually improve the ability for them to drive more SCO via their stores on the platform. We've added video into the stores platforms. So now you can tell your story about an ebay seller and thats very appealing and will continue to build more of those features to improve the interactions between buyers and sellers because it's.
One of the very unique capabilities of ebay is that vast army of sellers that we have helping drive retention and buyers and helping drive engagement. There. So great question. Thank you I'll take the second part.
I think youre talking about a $6 delta between the FX neutral <unk> and FX neutral revenue outside of the us.
The dynamics in play number one you're right, we're sort of lapping through the completion of managed payments as we've transitioned from 'twenty one to 'twenty two salary see.
Less of a tailwind associated with that but on the flip side. The other two items is the continued momentum.
With regards to the investments, we're making in both payments with some of the items that Jamie talked about earlier in terms of the execution from the team and what's been driven associated with that and then the continued success in the <unk> platform as we mentioned.
In the first quarter as described 19 points faster than <unk>. So it's really the combination of those three factors that I talked about that gets the implied guide going forward.
Okay.
Our next question we have John .
From Cowen John Your line is open.
Great. Thank you good question Austin.
First could you expand a bit on how the trading card segment performed in the first quarter and how does the launch of our bulk trading.
Trading card and overall, our collectibles business and then second.
e-commerce vertical where the biggest headwinds AMD or perhaps other topics.
And <unk>.
Thank you. Thank you.
Yes, so I'd say on trading cards.
What we said in there is that we're obviously lapping kind of the massive stimulus that we saw.
Last year.
We're settling out at twice the level of <unk> that we were beforehand, and we're really kind of leaning in to fuel the growth in trading cards. So to your question on involve the beauty of the vault is a lot of for a lot of collectors.
Not something that they need to have around their house.
They want to be able to trade and you could see trades happening in the middle of the game. We're lucky all of a sudden is on fire and people want to start trading that that trade it becomes really seamless when it sits inside the vault <unk>.
Our dedicated underway in it doesn't have to be shipped anywhere validated et cetera, and so you could see this billions of dollars of inventory, we could start to drive turns on that.
On a much more rapid basis. So we're excited by that we're also excited by the <unk> partnership that we announced on Monday, which complements what we've been doing for unrated cards over $750 because it builds more authenticity and trust into what we're doing from a from a trading cards perspective, so that builds on top of.
On top of last year's.
Launches that we had like the improved shipping labels the computer vision that we're working on in that category.
Et cetera, so really excited by that when I look at the rest of the categories watches continues to be strong with sustained double digit growth on top of last year's.
Strong growth rate.
We've been able to re monetize sneakers and keep the momentum.
In that category.
Strong growth in handbags, as well and we talked about some of those announcements in the business.
So across the board I think.
We are the strategy that we have is working and we're seeing the change in customer satisfaction in the change the business and the <unk>.
The deviation that these categories are able to create and then we're starting to see that expand internationally.
Operator, we've got time for one more.
Thank you Anne for Arena.
Justin Post from Bank of America, Justin Your line is open.
Great. Thank you.
Couple of questions.
Been a lot of write downs in the group and obviously the ecommerce group is under pressure you have the advantage of really strong cash flow.
How are you thinking about the asset opportunities, bringing things and to ebay and then secondly, just on the <unk> it was down quarter over quarter.
Which has happened in the past sometimes did you see a slowdown there related to Ukraine as well.
Gas prices are a factor.
Yes, so on the first one we continue to look at build buy and partner in those opportunities we talked about sneaker Khan at the Investor Day, and why we did that and how it made sense to accelerate.
Our focus in what we're doing in that category and we continue to look at opportunities that we think will help.
Push that further in terms of new features new functionality or new audience, but we do look at it as a build buy and partner. So a great example is what we announced.
Monday, which is a partnership with the most popular grading to really build an opportunity to tie that closely into.
The best marketplace that exists for trading cards on ebay. So we'll continue to be opportunistic across all of those different elements.
As we go forward as long as they align with our strategy and we think create value for shareholders.
On the international versus <unk> I'll start off and then Steve you can jump in.
Clearly a more profound effect in our international business when I talk to our ebay errors in the U K, they're getting their April energy bills and there are multiple of what they were before so definitely more of an impact, but but definitely an impact.
Across the whole lot, including our U S business do you Wanna expand.
Give a little bit of extra color I think let me bifurcate, while we've seen between international and the U S in terms of consumer sentiment.
U S and UK consumer sentiment is pretty much historic lows bites on what I say, but as you can imagine some of this is percolating to the U S in terms of inflows.
Inflation going up higher prices at the pump.
And also you know that the inflation that's going forward. So.
The U S is not immune to this it's more we saw in the first quarter. So some deeper penetration and challenges in our European business, but I think it's a fair comment.
Just in that there has been some some slowdown.
We go further forward during 2022.
Cloud level, you can see that implied in that guidance and platform.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all it's pretty Big meeting you may now disconnect.
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