eBay Inc. (NASDAQ:EBAY) is a global commerce leader that connects people and builds communities to create economic opportunity for all. The company's technology empowers millions of buyers and sellers in more than 190 markets around the world, providing everyone the opportunity to grow and thrive. eBay's Marketplace platforms, including its online marketplace located at www.ebay.com and its localized counterparts, its off-platform businesses in Japan and the United States, and its suite of mobile apps, together, create one of the world's largest and most vibrant marketplaces for discovering great value and unique selection.
Business Overview
eBay's Marketplace segment is its sole reportable segment, reflecting the way management and the chief operating decision maker review and assess the performance of the business. The Marketplace segment includes the company's online marketplace located at www.ebay.com and its localized counterparts, its off-platform businesses in Japan and the United States, and its suite of mobile apps.
eBay has a long and successful history as a pioneer of e-commerce, having been founded in 1995. Over the past 28 years, the company has evolved from a simple online auction platform to a global commerce leader, leveraging its scale, data, and technology to empower millions of buyers and sellers around the world. Today, eBay's Marketplace platforms facilitate transactions across a diverse range of product categories, from automotive parts and accessories to collectibles, fashion, and beyond.
Financials
eBay delivered strong financial results in 2023, with annual net income of $2,767 million, annual revenue of $10,056 million, annual operating cash flow of $2,426 million, and annual free cash flow of $1,970 million. The company's performance highlights the resilience of its business model and the success of its strategic initiatives.
In the first quarter of 2024, eBay continued to build on its momentum, reporting net revenues of $2,556 million, up 2% year-over-year. Gross merchandise volume (GMV) was roughly flat at $18.6 billion, while the company's non-GAAP operating margin expanded to 30.3%, up 70 basis points year-over-year. eBay's non-GAAP earnings per share grew 13% to $1.25 in the first quarter.
Geographic Performance
eBay generates approximately half of its net revenues internationally, with a presence in key markets such as the United Kingdom, Germany, and China. In the first quarter of 2024, the company's U.S. GMV was nearly flat, while its international GMV grew nearly 1% on an FX-neutral basis and 3% as reported due to favorable foreign exchange movements.
The company's performance in international markets has been mixed, with some regions, such as Germany, seeing positive momentum, while others, like the United Kingdom, have faced more challenging conditions. In the U.K., eBay experienced some softness in its C2C volumes during the quarter when new digital sales reporting requirements came into effect, though its B2C business trends remained consistent with recent quarters.
Segment Performance
eBay's focus categories, which include areas such as Motors Parts & Accessories (P&A), Collectibles, Luxury, and Refurbished goods, have been a significant driver of the company's underlying growth. In the first quarter of 2024, focus category GMV grew nearly 5%, outpacing the remainder of the Marketplace by approximately 6 percentage points.
The Motors P&A category was once again the largest contributor to growth among eBay's focus categories, despite facing some headwinds in January due to severe weather patterns in the U.S. The company continues to innovate in this category, enhancing the shopping experience for both buyers and sellers through initiatives such as the MyFitment tool kit and the addition of a Motors DIY guide page.
In the Collectibles category, eBay has accelerated the pace of innovation, rolling out new features like My Collections, price guides, authentication and grading partnerships, revamped condition standards, live commerce, vault storage, and new shipping methods to reduce costs. These initiatives have helped drive improving volume trends in trading cards as many of the new and returning hobbyists who joined eBay during the pandemic remain highly engaged with the platform.
eBay's Advertising Business
eBay's advertising business continued to deliver healthy growth at scale in the first quarter of 2024, with total advertising revenue representing 2.1% of GMV. First-party advertising grew 28% year-over-year, outpacing overall GMV growth. The company's standard cost-per-acquisition units remained the largest contributor to year-over-year ad revenue growth, followed by its cost-per-click advanced product.
eBay has also seen promising results from some of its Promoted Listing products in beta, such as Offsite Ads, which enables sellers to more actively participate in extending the reach of their listings through cost-per-click ads placed on external services. The company has ambitious plans to further optimize these ad units and increase seller adoption throughout 2024.
Generative AI Initiatives
eBay has made significant strides in establishing itself as a leader in generative AI for e-commerce. In the first quarter of 2024, the company doubled its GPU capacity versus the end of 2023, enabling its teams to accelerate the training and fine-tuning of foundational large language models to power a number of consumer-facing features and internal productivity tools.
Consumer-facing features powered by generative AI include Explore, an AI-powered shopping feed that provides personalized recommendations, and Shop the Look, which leverages generative AI to create shoppable content and fashion recommendations. Internally, eBay has implemented generative AI technology to support its Global Customer Experience organization, improving the accuracy, consistency, and quality of customer support. The company has also developed proprietary coding assistants and knowledge base tools to boost developer productivity and accelerate its overall tech velocity.
Outlook
Looking ahead, eBay expects its FX-neutral GMV to turn positive in the third or fourth quarter of 2024. The company forecasts revenue to outpace GMV growth by approximately 2 percentage points on an FX-neutral basis for the full year, with FX representing close to a 1 percentage point expected headwind to total spot revenue growth.
For the second quarter of 2024, eBay expects GMV between $17.8 billion and $18.2 billion, representing FX-neutral growth between negative 2% and flat year-over-year. The company anticipates generating revenue between $2.49 billion and $2.54 billion in the second quarter, with FX-neutral growth between negative 1% and positive 1% year-over-year.
eBay maintains its outlook for non-GAAP operating margin to expand by 60 to 100 basis points for the full year 2024, with FX representing a year-over-year headwind of roughly 50 basis points, largely offset by a 40 basis point tailwind from the change in accounting estimate associated with the extension of the useful life of servers and networking equipment.
The company expects capital expenditures to be between 4% and 5% of revenue for the full year, in line with its historical average, and its non-GAAP tax rate to remain stable at 16.5%. eBay projects just under $2 billion of free cash flow in 2024, with the majority generated in the second half of the year.
Risks and Challenges
While eBay has demonstrated resilience in the face of macroeconomic headwinds, the company continues to navigate a dynamic and challenging environment. Factors such as inflationary pressure, foreign exchange rate volatility, elevated interest rates, and lower consumer confidence have impacted discretionary e-commerce spending, particularly in certain international markets.
Additionally, eBay faces ongoing competition from other e-commerce platforms and marketplaces, both domestically and globally. The company's ability to maintain its competitive edge and continue to attract and retain both buyers and sellers will be crucial to its long-term success.
Conclusion
eBay's strong first-quarter performance and its confidence in delivering positive GMV growth and double-digit earnings growth for the full year 2024 highlight the company's resilience and the success of its strategic initiatives. By focusing on its core strengths, such as its global reach, diverse product offerings, and innovative technology, eBay is well-positioned to navigate the current macroeconomic challenges and continue to create value for its shareholders.