eBay Points To Payments As Key Q4 Highlight

Amid an international slowdown that marked volume purchases into the end of the Q4, and activist shareholder letters that marked the past week, eCommerce giant eBay posted Q4 results that, in some cases, met and even beat expectations. The firm outlined a strategy that focuses on technology, payments intermediation and capital allocation.

By The Numbers

The company said revenues were up 6 percent on a currency-neutral basis to $2.87 billion, while non-GAAP earnings came in at $.71 per share. That compares with estimates of just over $2.8 billion and $.68 per share.

Gross merchandise volume (GMV) across the platform was up 1 percent to $23.2 billion.

Active buyers were up 4 percent year on year, adding 2 million new buyers to its platforms, bringing it to 179 million. That 4 percent growth rate, said management on the post-earnings conference call, was consistent with rates seen over the past several quarters, and a rate that was a deceleration from past years.

The company said that, in the U.S., the GMV was down 1 percent, outpaced by 5 percent growth seen internationally, and to respective volumes of $9.8 billion and $14.9 billion in the quarter. The total pace slowed from the mid-single digits seen through the past several quarters. CEO Devin Wenig said the slowdown, in part, reflected pressure on buyer conversion, though the company will be bringing its efforts to bear on converting new buyers.

As for international results, commentary on the call stated that the United Kingdom and Germany represented a drag on results, partly tied to macro concerns and marked by slowing consumer spend into the end of the year, particularly in December.

Supplemental materials showed that Market Services & Other (MS&O) revenues — which stem from marketplace, StubHub and classified sales — were $582 million, up a bit less than 1 percent. StubHub was down 1 percent year over year, as the ticketing business contributed $314 million, and down eight points on softness seen with the World Series. Classified revenues were up double digits at 11 percent to $263 million, and management called out ongoing strength in Germany for this business.

Beyond The Numbers … And The Quarter

Wall Street not only focused on the initiation of a dividend, but on the fact that the slowdown in growth might spotlight some of the concerns of activist investors, such as Elliott Management, which has advocated that the company should spin off the classified and StubHub operations.

Wenig and CFO Scott Schenkel said that, moving through the year and into 2020, observers would see a “different eBay in 2020” — with a nod to efforts to convert buyers, and entice them to visit the platform with greater frequency. The company will also leverage data in those efforts, and artificial intelligence (AI) will let the company offer tailored listings.

In addition, during the call, eBay trained a spotlight on newer initiatives, such as promoted listings. Revenues from promoted listings are up 150 percent to 200 million listings, according to the commentary, from across 600,000 active sellers.

As previously noted in this space, eBay has been eyeing payments intermediation as a growth leg moving forward. Almost exactly a year ago, the company said it would change the way buyers and sellers transact — completing their transactions within the site. The strategy is multi-year in terms of implementation, said the company, stretching through 2020. The goal, as stated then, was and is to become a payments ecosystem.

Observers got a glimpse into the roadmap and traction last quarter in October, when the company said it had intermediated $38 million of GMV. With the latest set of results (since launch on Sept. 25 through the end of the month), the GMV intermediated came in at $143 million cumulatively, and total sellers in the program grew by more than 40 percent through the period. Sellers totaled more than 3,500 in Q4, and savings realized to date have come in at $1.2 million. Sellers, according to the supplemental materials, have seen a 25 percent reduction in payment processing fees.

Management said on the call that it will bring the intermediated payments feature to a second market next quarter, beyond the U.S. The business has the potential to give eBay as much as $2 billion at scale. Looking forward, Wenig said, for eBay, “this is how buyers will pay and sellers will be paid,” while “confidence is growing every week” among intermediated payment participants.

During the question-and-answer session with analysts, management stated that, in past years, the company has been able to re-accelerate growth, particularly with GMV. While 2019 may be viewed, as one analyst termed it, as “a reset year,” the foundation is solid for 2020 to be a return to form. Among the levers eBay intends to use headed into 2020 are those tied to technology, as the company builds out its product catalog (also known as its “product expert program”) and structured data.