eBay inc (EBAY) Q2 2021 Earnings Call Transcript | The Motley Fool

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eBay inc (NASDAQ:EBAY)
Q2 2021 Earnings Call
Aug 11, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the eBay Second Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Joe Billante, VP of Investor Relations. Thank you. Please go ahead.

Joe BillanteInvestor Relations

Operator, just checking. Can you hear us OK?

Operator

I can, yes. Just one moment, please.

Joe BillanteInvestor Relations

Thank you. Good afternoon. Thank you for joining us, and welcome to eBay earning release conference call for the second quarter 2021. Joining me today on the call are Jamie Iannone, our Chief Executive Officer; and Steve Priest, our Chief financial officer. We’re providing a slide presentation to accompany Steve’s commentary during the call which is available through the Investor Relations section of the eBay website at investors.ebayinc.com. Before we begin, I’d like to remind you that during the course of this conference call, we will discuss the non-GAAP measures related to our performance.

You can find the reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call. Additionally, all revenue and GMV growth rates mentioned in Jamie’s and 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 limitations, statements regarding our future performance and expected financial results.

These forward-looking statements involve known and unknown risks and uncertainties, and our actual results may differ materially from our forecast for a variety of reasons. You can find more information about risks, uncertainties and other factors that could affect our operating results in our most recent periodic reports on Form 10-K and Form 10-Q and in our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of August 11, 2021, and we do not intend and undertake no duty to update this information.

With that, let me turn it over to Jamie.

Jamie IannonePresident and Chief Executive Officer

Thanks, Joe. Good afternoon, everyone, and thank you for joining us. Today, I’ll begin the call with key highlights from the second quarter. Then I’ll share some updates on the progress toward our strategic vision. At the end of my remarks, I will turn the call over to Steve, our new CFO, who will discuss our financial performance and outlook in greater detail. The second quarter of 2021 marked several important milestones in the ongoing transformation of eBay, and I want to thank our team for making it happen. We’ve accelerated our pace of innovation while executing several complex transactions.

Their dedication and focus have created tremendous value for our customers and shareholders. Let me start with a few of our portfolio enhancements. We completed the transition of eBay’s Classified business to Adevinta. This deal was originally valued at approximately $9.2 billion, but a closing in June had appreciated to $13.3 billion. Shortly after closing, we announced a deal with Permira to sell approximately 135 million of our Adevinta shares for over $2.4 billion. This agreement fulfills regulatory commitments while returning value to eBay shareholders. We also increased our share buyback plan for the year from $2 billion to $5 billion. In June, we announced the sale of over 80% of our Korean business to Emart for approximately $3 billion, bringing together two leading e-commerce and retail companies that can unlock significant potential in Korea.

We anticipate the deal will close either later this year or in early 2022. These portfolio changes allow us to intensify our focus on the core eBay business moving forward. When I spoke to you last July, I outlined a renewed vision and strategic plan for the company. We set out on a multiyear journey to become the best global marketplace for sellers and buyers, through a tech-led reimagination. Our priorities were to grow the core, become the platform of choice for sellers and to cultivate life-long trusted relationships with buyers, by turning them into enthusiasts. To-date, our progress is very encouraging.

Our underlying growth is positive, and the strategy is working. Q2 results were strong and all key business metrics met or exceeded expectations. Revenue grew 11% driven by acceleration in the Payments migration and advertising growth. We funded incremental investments in product development while delivering $0.99 of non-GAAP EPS above the high-end of our range. As expected, GMV declined 11% when compared to last year when results were heavily impacted by the initial pandemic lockdown. Importantly, compared to pre-pandemic levels two years ago, we are seeing positive underlying GMV growth.

Our customer metrics remain healthy on both sides of our marketplace. Active sellers grew 5% to 19 million globally, as more small businesses and consumers continue to turn to eBay’s global platform to reach millions of potential customers from around the world. This quarter, global active buyers totaled 159 million, down 2% versus last year, and up 3% versus 2019. We’ve been focused on building lifelong trusted relationships with enthusiast buyers. Changes in our marketing mix and product investments have been focused on attracting and retaining these enthusiasts particularly Gen Z and millennials.

In parallel, we’ve discontinued legacy tactics that led to low value, infrequent or one and done buyers. Our buyer base is starting to evolve based on this strategy. These high-volume buyers are growing compared to a year-ago and their spend on eBay is growing even faster. This higher-quality mix of buyers increases value for sellers and will lead to improved health of our ecosystem over the long-term. Moving on from buyer trends to Payments and Advertising initiatives continued to deliver a simpler product experience and meaningful benefits for sellers, buyers and shareholders. Managed Payments is now live in every market globally, and the transition is progressing faster than expected.

During the second quarter, we processed 71% of on-platform buying through managed Payments. We exited Q2 at a run rate over 80% and are on track to process over 90% this quarter. Managing the Payments experiences ourselves enables us to eliminate a pain point that sellers occasionally face on eBay, unpaid items. Changes to checkout have been made to address this issue and today 99% of fixed-price transactions are paid up front. We have also started to address this issue for best offers and options, by asking buyers to provide a Payment method in order to bid. This is a significant win for sellers, as it frees up inventory and reduces their post-transaction costs.

Our Advertising business continues to perform well. In Q2, ad revenue outpaced volume driven by Promoted Listings, which delivered almost $224 million, up 8%. More than 1.4 million sellers promoted over 430 million listings during the quarter. Growth was driven by higher adoption and technology improvements that increased conversion. We see tremendous growth opportunities in advertising, both from our existing Promoted Listings offerings, and from new product innovations. Following a number of successful trials in Q2, we are scaling several new products globally over the next few months. Previously, sellers could only promote fixed-price listings, but now they can increase visibility for a flat fee on options to increase conversion. In June, we also introduced a cost-per-click ad product to sellers in our major markets. Initial results from the first 100,000 listings showed that sellers’ return on ad spend was higher than industry benchmarks.

We are placing more AI-powered recommendations for pricing and keyword bidding into the Seller Hub to help sellers drive particular volume. Finally, we’re beginning to syndicate ads off eBay platforms to drive more buyers to listings. Importantly, sellers maintain control of pricing and visibility while benefiting from the scaled marketing capabilities of eBay. In addition to Advertising and Payments, we’re driving a number of other sitewide initiatives. For…

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