eBay Inc (EBAY) 2016 Q1 法說會逐字稿

Good day ladies, and gentlemen, and welcome to the eBay first-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to hand the conference over to Selim Freiha, Vice President of Investor Relations.

Please go ahead.

Good afternoon.

Thank you for joining us, and welcome to eBay's earnings release conference call for the first quarter of 2016.

Joining me today on the call are Devin Wenig, our President and Chief Executive Officer, and Scott Schenkel, our Chief Financial Officer.

We're providing a slide presentation to accompany both Devin's and Scott's commentaries during the call.

All revenue and GMV growth rates mentioned in Devin's and Scott's prepared remarks represent FX neutral year-over-year comparisons, unless they clarify otherwise.

This conference call is also being broadcast on the Internet, and both the presentation and call are available through the Investor Relations section of the eBay website at investors.eBayInc.com.

You can visit our Investor Relations website for the latest Company news and updates.

In addition, an archive of this webcast will be accessible for 90 days through the same link.

Before we begin, I would like to remind you that during the course of this conference call, we will discuss some 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.

In addition, management will make forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties.

These statements include but are not limited to, statements regarding the future or performance of eBay Inc., and its consolidated subsidiaries, including expected financial results for the second-quarter and full-year 2016 and the future of growth in our business.

Our actual results may differ materially from those discussed in this call 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 Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q.

Copies of which may be obtained by visiting the Company's Investor Relations website at investors.eBayInc.com or the SEC's website at www.SEC.gov.

You should not rely on any forward-looking statements.

All information in this presentation is as of April 26, 2016, and we do not intend and undertake no duty to update this information.

With that, let me turn the call over to Devin.

Thanks, Selim, and good afternoon, everyone.

In Q1, we delivered our third quarter in a row of solid results.

Our business continues to consistently grow, while we make progress against our key strategic objectives.

Overall, total GMV was up 5% for the quarter while revenue was up 6%.

We grew active buyers 4% year over year, adding 6 million buyers to our platforms over the past year.

GMV on our Marketplace platform grew at 4% year over year, and StubHub and classifieds both had strong performances, growing revenue at 34% and 17% respectively.

Finally, we continued to be good capital stewards, repurchasing $1 billion worth of our stock at attractive prices and acquiring new technology and talent to bolster our Motors vertical.

Repositioning our business for long-term success is a multi-year journey, and my focus is to drive the best choice, the most relevance and a powerful selling platform while delivering growth and opportunistically returning capital to shareholders.

Three quarters into our new strategy and one quarter into 2016, we are making progress on executing our plan.

First, our effort to drive best choice is about providing the greatest selection of inventory for our consumers.

This encompasses new everyday items to rare and unique goods, with incredible deals you can only find on eBay.

We have aligned our regional organizations more closely against our key verticals, which in turn enables them to think and act more like merchants.

In Q1, we continued to increase the inventory available on our platform, with over 900 million live listings available at any time.

We're also working to bring even more unique and differentiated inventory by acquiring new small business sellers and brands.

In Q1, we announced integration partnerships with BigCommerce and InkFrog, enabling sellers to more easily list their inventory directly on eBay and access our enormous global buyer base.

We also launched brands like Vince Camuto and Samsonite on our US platform, and I'm excited to announce we just signed a partnership with Adidas to open showrooms on eBay across the our key European markets later this year.

In addition to these efforts, you can expect several exciting new category launches soon.

Next, having the most relevance means a shopping experience that is simple, data driven and personalized.

We intend to deliver a differentiated eBay shopping experience that enables buyers to find, compare and purchase items they need and want and to clearly understand the unique value that eBay brings.

One of the key foundational changes we're making to our Marketplace platform to drive the most relevance is to shift to be more product based.

This initiative, which we call structured data, is how we are organizing our vast inventory and beginning to better aggregate insight into supply and demand.

This is ultimately the foundation on which we will build better user experiences, and improve discoverability on and off eBay.

In Q1, we rolled out the second phase of our mandate for sellers to provide product data when selling on our platform.

Going live in France, Italy and Spain for the first time, while also increasing coverage to eight more categories.

This brings our mandate coverage to find as the percentage of addressable live listings where product identifier is required to approximately 60%.

We have also continued to make progress in our data processing efforts.

However, that effort does tend to trail the expansion of the mandate by a quarter or two.

In Q1, we added 16 million unique products to our catalog, in addition to 1.6 million new user product reviews.

While most of our early efforts with this initiative have focused primarily on our sellers and our inventory, enabling improved buyer experiences is what will ultimately drive value in our ecosystem.

It also takes the longest to get right, but we are making progress in some early use cases that give us confidence that we are on the right track.

Browsing on eBay is one example of where we started to change our shopping experience in ways that we have not previously been able to.

We recently launched an entirely new browse experience which takes advantage of our structured data catalog, enabling us to instantly surface products with great savings, best-selling items and more.

In this experience, consumers can easily navigate to shop by brand or see our best deals.

This is a great example of how eBay is enabling people to find their version of perfect, the right product at a great price, one click away.

Search on eBay is also starting to benefit from our efforts in this area.

We recently launched the ability for users to search on eBay using a product identifier directly in the search bar, quickly returning relevant items.

Finally, we're making progress on building new product and search pages which are starting to drive healthy SCO traffic from search engines.

While SCO traffic from non-structured data pages continues to decline, we have been able to offset much of that decline by shifting traffic to these new pages, which now represent 10% of total SCO traffic with higher overall conversion rates.

Mobile is another key area of focus for us.

Our mobile team has been hard at work on a new mobile release which is currently in testing.

We will roll this out more broadly to customers soon, and we will rapidly iterate that to get our mobile experience back on a strong track.

Looking forward, you will see us adopt a more consistent cadence of iteration on mobile throughout the course of 2016.

Having the most relevance also means ensuring that we are present where buyers are spending time online.

As part of this, we continue to build upon our effort to diversify our traffic and leverage social channels more heavily.

We recently became the first brand to test an audience match campaign on Snapchat, and we have seen great engagement thus far among Snapchat's large active community.

And we just announced the pilot integration that enables eBay users to receive activity notifications through Facebook messenger.

Finally, the third main area of focus for us this year is to deliver the most powerful selling platform, enabling a simple selling experience for our business and consumer sellers.

In Q1, we rolled out the new seller's standards that were announced last fall, and we recently announced our spring seller update.

With a significant investment into our anchor store benefits and planned improvements later this year to our suite of APIs, and the availability of eBay branded shipping supplies.

Over 25,000 sellers are now using our new seller hub data to manage their businesses, providing them with the tools and data needed to manage their selling activities in one convenient place.

We will be rolling seller hub out to all of our sellers this summer.

We also continue to scale our eBay Valet service to enable consumer sellers with a simple yet powerful way to approach selling on eBay.

And we expanded our partnership with Ship in Q1, further simplifying the selling experience on eBay by enabling your sold items to be picked up at your home and packed and shipped for you.

Elsewhere in our business, StubHub is enjoying strong growth while driving innovative user experiences.

StubHub continues to benefit from product experience changes we made in Q3 last year, in addition to having a strong concert and sports landscape in Q1.

We also made several enhancements to the StubHub user experience in the quarter, including a new recommendation engine which enables users to quickly determine the best value for their tickets.

And we recently launched a test of virtual reality technology which enables fans to get an immersive view from available seats.

Our Classified platform saw accelerating growth, primarily driven by strength across our portfolio in Germany and with Gumtree in the UK.

In Germany, the acquisition last year of the leading European motors enthusiast committee, Motor Talk, has enabled us to further enhance our market leading presence in the Motors vertical.

In the UK, we launched a complete redesign of the Gumtree experience in Q1.

In summary, we are making progress on our strategy and on the financial framework we laid out in January.

The product experience flywheel is clicking into gear, and over the next two quarters we expect to make significant progress on launching new user experiences.

I look forward to updating you along the way as we continue to reposition eBay's business for long-term growth and success.

With that, let me turn it over to Scott to provide more details on our Q1 results.

Thanks, Devin.

During my discussion, I will reference our earnings presentation beginning on slide 10.

As Devin summarized, our focus is to drive the best choice, the most relevance and a powerful selling platform while delivering on our financial commitments and positioning eBay for long-term success.

When I reflect on the last nine months of executing our new strategy, I feel good about the progress we are making and the stability we are seeing in the business.

At the same time, it is important to keep in mind our progress.

Due to the scale of our global marketplace, it will take time for the green shoots we are seeing to start materially impacting the business.

While we execute our plan, we will continue to deliver what we promised.

In Q1, we generated $2.1 billion of total revenue, $0.47 of non-GAAP EPS, $483 million in free cash flow and we repurchased $1 billion of our stock.

Let's start at the top of the funnel with Q1 active buyers on slide 11.

We added over 800,000 active buyers in Q1, growing trailing 12 month active buyers by 4%.

As we have discussed, we look at active buyers in three cohorts: retained, reactivated and new.

Growth in retained and reactivated buyers remains stable, as we utilize marketing programs and promotions to drive engagement and retention.

However, SCO headwinds continue impacting new buyer acquisition, driving 1 point of deceleration versus Q4.

On slide 12, we enabled $20.5 billion of GMV in Q1, growing 5% versus last year.

By geography, the US generated $8.5 billion of GMV, up 3%, while international delivered $12 billion of GMV, up 6%.

Moving to revenue, we delivered net revenues of $2.1 billion, up 6% versus last year and accelerating 1 point versus Q4.

We generated $1.7 billion of transaction revenue, up 3%, and $460 million of marketing services revenue, up 19%.

Transitioning to our Marketplaces platform on slide 14, Q1 GMV grew 4% year over year, in line with the prior quarter.

While we face the ongoing challenges of SCO, the continued impact of mobile headwinds and the pressure on our C2C business, we are encouraged by delivering stable quarter-over-quarter growth.

Total revenue for Marketplaces platform grew 3%, accelerating 2 points versus Q4.

Transaction revenue grew 1%, up 1 point sequentially, driven by international acceleration.

In the US, we invested more heavily in contra revenue this quarter, as we continuously experiment with a wide variety of promotions to see what is most effective in driving customer lifetime value.

However, our global transaction take rate was flat versus Q4, as the increase in US contra revenue was offset by a decrease internationally.

Marketing services revenue grew 19%, accelerating 10 points over Q4.

US advertising contributed to the strong quarter, as a result of growing our mobile ad placements and improving yield in programmatic display ads.

In addition, the PayPal operating agreement is included in our MS&L revenue stream, adding 10 points of growth year over year.

Moving to slide 15, Q1 was another standout quarter for StubHub.

We delivered GMV growth of 29%, and we grew revenue by 34%.

We had a strong quarter in sports and concerts, in addition to launching a number of product innovations like ticket recommendations which helped fans find the best of value for the tickets they want.

In addition, we continue to see the impact of the product improvements launched last August, including pricing display changes and our updated mobile app.

While we are very excited about the direction StubHub is headed, it is important to keep in mind we will start lapping the favorable comps from some of those changes in Q3.

In Q1, Classifieds delivered a strong quarter of growth, up 17% year over year, accelerating 3 points versus Q4.

The strong performance in Q1 was driven by our sites in developed markets such as eBay Kleinanzeigen and Mobile in Germany and Gumtree in the UK.

In addition, we launched in-app chat for our mobile experience, allowing buyers and sellers to message each other and facilitate even easier, faster buying experience.

We also further extended our vertical experience in Kijiji, Canada, with motors and housing.

Finally, we continue to deepen the connection between our Marketplace and Classifieds platforms.

We are piloting a number of different programs regionally, including exposing listings from eBay on our Classifieds properties and providing a tool for C2C sellers to identify which platform can help them realize the best price.

Turning to slide 17, and major cost drivers.

Cost of revenue increased 240 basis points year over year, driven primarily by the addition of PayPal processing costs and increased investment in site availability.

Q1 sales and marketing expense was relatively flat year over year, while product development increased 50 basis points driven by the impact of the stronger US dollar.

G&A was flat year over year, as standup costs were offset by a one-time insurance recovery.

Pulling all of that together, we delivered a Q1 operating margin of 33.4%, down 220 basis points versus last year.

Operating leverage and transaction losses and the insurance recoveries were more than offset by the increase in cost of revenue, as well as the impact of foreign exchange and standup costs which has cost us roughly $140 million and 100 basis points respectively.

I'd like to take a moment to update you on our hedging strategy.

On our Q2 earnings call last July, I explained that our revenue was fully exposed to movements in currency, and that for 2015 we had implemented hedging strategies to economically protect our full-year net income.

Some of which left us exposed to potential volatility in our quarterly results.

In 2016, our revenue remains fully exposed to movements in currency.

We have implemented hedging strategies that allow us to limit the potential quarterly volatility, and minimize the effects of FX in our current-year earnings.

Based on how those strategies are accounted for, we will see the impact of hedging gains and losses in operating margin and OI&E while net income is economically protected.

Moving to slide 18, in Q1, we delivered $0.47 in non-GAAP EPS, down $0.01 versus Q1 2015.

As revenue growth, the impact of share repurchases and cost control were more than offset by the impact of a stronger US dollar and standup cost.

The impact of the stronger US dollar cost us roughly $0.03 of EPS, and standup costs an additional $0.01.

On slide 19, in Q1, we generated free cash flow of $483 million, up 19%.

Largely due to higher cash earnings driven by an increase in revenue, and lapping separation-related costs incurred last year.

CapEx was 7% of revenue in Q1, and our full-year CapEx guidance remains 7% to 9%.

Moving to slide 20.

We ended the quarter with cash, cash equivalents and non-equity investments of $10.3 billion, including $3.4 billion in the US.

As a reminder, our capital allocation policy is designed to manage the capital structure that optimizes our flexibility, access to debt and our cost of capital to drive long-term shareholder value.

After retiring $850 million of debt last year, we accessed the debt markets in Q1, raising $2.5 billion in debt.

We plan to use the debt for general corporate purposes, as well as share repurchases and M&A activity.

We remain a strong BBB credit rated company, with a gross debt to EBITDA ratio below 3 times, and we believe we are well capitalized with the means to deliver our current plans.

We will continue to be in an inquisitive company, disciplined in our approach, utilizing M&A for geographical expansion and tech and talent acquisition.

Over the last nine months, we have made a few small acquisitions that fall into these categories.

The most recent being the acquisition of Cargigi that we announced in March, a great addition to our eBay Motors platform.

In Q1, we repurchased 42.3 million shares at an average price of $23.67 per share, amounting to $1 billion in repurchases.

We ended the quarter with $800 million of share repurchased authorization remaining.

We remain on track with our full-year plans for share repurchases as I laid out in our last earnings call.

Moving to guidance on slide 21.

For Q2, we are projecting revenue between $2.14 billion and $2.19 billion using today's spot rates, growing 4% to 6% year over year.

We expect non-GAAP EPS of $0.40 to $0.42 per share, representing negative 5% to 0% growth year over year.

EPS growth is impacted by the stronger US dollar, which in Q2, will cost us $0.02 of EPS and standup costs which cost an additional $0.01.

For the full year, we are raising the low end of revenue guidance to 3%, bringing our new guidance range to 3% to 5% or $8.6 billion to $8.8 billion as reported.

While the US dollar has weakened since we provided guidance last quarter, we have not assumed the entire benefit in our full-year guidance.

A relatively small movement in rates can have a significant impact on our second-half revenue.

And given the recent volatility and catalysts that could generate more movement, we felt the best approach is not to count on the upside at this time.

If lease and spot rates do hold for the rest of the year, we estimate that all else equal there will be roughly $80 million of upside to our second-half and thus full-year revenue.

All other full-year guidance remains the same.

In closing, we are executing the plans we've discussed for our Marketplace platform.

It will take time, but we are encouraged by some of the green shoots we are experiencing -- we are beginning to see.

StubHub is bringing new differentiated experiences to fans, Classifieds continues to grow, launching new experiences and testing innovative ways to connect buyers and sellers, and there is more innovation coming.

Financially, Q1 was a solid start to 2016, as we delivered on our commitments with revenue and EPS above guidance.

We're on target with our full-year plans to return capital to shareholders, and we are being disciplined in our use of capital and debt while architecting for the long term and we have firmed up our full-year outlook.

Underpinning all of these efforts is our focus to drive the best choice, the most relevance, and a powerful selling platform as we position eBay for long-term success.

Now we would be happy to answer your questions.

Operator?

(Operator Instructions)

Carlos Kirjner Neto, AllianceBernstein.

I have two questions.

Devin, you continue to sound optimistic about the progress of the structured data initiative, but neither JMV nor use of growth have shown any signs of improvement in the results you reported.

When should we see a significantly different and presumably better eBay experience?

[A new that] drive GMV user acceleration, it is going to be a continuous process where we see a jump or should we see gradual improvements in the results?

Secondly, can you tell us what it was the US GMV growth ex-StubHub?

And did you see any positive impact from the weakening of the US dollar in March on the Marketplace of your GMV growth?

Thank you.

Carlos, thanks for the question.

With regard to structured data, let me just take the opportunity to remind you what we are doing.

There are three phases to structured data: there is collecting product identifiers, there is processing those identifiers, and then there is building user experiences.

With regard to collecting product data, we have now expanded that mandate to 60% of our listings.

With regard to what we process, that has lagged the 60% because it takes a bit longer, and our mandate only expanded in the middle of the quarter so that is at 38%.

And we're beginning to build the product experiences that ultimately are what matter to consumers and sellers, and that will drive better business performance.

We measure everything rigorously, so I gave a couple of examples on this call of the experiences that we are already building.

One example is, we're beginning to move our non-structured data enabled SCO pages to structured data enabled pages.

Those pages are now stable to slightly growing at better conversion rates than the 90% of pages that we haven't moved yet, which have been declining for the better part of 18 months.

In addition, if you look at our browse paths, these are entirely new experiences which we are really excited about.

Not just because it makes for a simpler eBay experience, but because I think we're beginning to show what is unique about eBay.

When we talk about unique inventory and great deals, historically, they have been hard to find.

And I think what structured data enables us to do is to really surface those in a way that hits consumers right between the eyes so they can see why shop eBay.

Just back to your question more directly, I will say what I have always said, which is this is a long-term process.

There isn't a moment where it is all fixed and everything jumps up.

In fact, I think I've consistently said that you probably would not be able to really see these experiences until towards the end of this year.

So this is a slow process which will take time, but we are definitely seeing progress on that journey.

And I'd say it is going about exactly the way we have explained for the better part of six months.

Carlos, on your question on US GMV, Q1 volume purchase by US buyers grew 5% as we highlighted in the deck and the attached materials.

That decelerated 2 points as you can see.

1 point of that deceleration was from StubHub, and the other point of that deceleration was from the underlying buyer dynamics.

And I would characterize them as similar to the deceleration in active buyers.

On your other question around the foreign exchange impact, we have seen some modest improvement particularly in the last month of the quarter around CBT trade corridors, but there does tend to be a slight lag between currency movements and trade flows.

Thank you.

Mark May, Citi.

Quick question, the US take rate declined year on year.

Can you walk us through why take rates are declining here, and what your outlook is for US take rates going forward?

Secondly, sorry if you addressed this already, but Classifieds growth accelerated meaningfully in the quarter.

Can you just give us a little backdrop on what drove that?

Thanks.

Mark, quick elevate up here on the revenue dynamics.

So as we laid out, but I know everyone is processing this real time, total revenue grew 6%, up 1 point quarter on quarter.

The Marketplaces revenue grew 3%, up 2 points quarter on quarter, and then StubHub grew 34% which is flat quarter on quarter, and Classifieds grew 17% which was 3 points up quarter on quarter.

Specific to the US, I would characterize it this way.

There is a 1 point incremental gap in the US Marketplace transaction revenue versus GMV growth quarter over quarter.

That gap expanded as we ran a number of different promotions in Q1 to test the efficacy of our marketing spend, some of which shows up in contra, so modestly more contra quarter over quarter.

With regards to Classifieds, we called it out in the prepared commentary.

But our primary markets in our developed countries such as Germany with Kleinanzeigen, [Mobile] as well in Germany, as well as Gumtree in the UK, really continue to show strong or stronger growth quarter over quarter.

Thank you.

Heath Terry, Goldman Sachs.

Devin, you guys have talked a little bit about some of the things that are going on in the competitive environment.

We have seen a lot of start affectivity, particularly around the fashion category and the local classifieds market.

Curious if you are seeing any changes in the competitive behaviors in those segments in a way that is either beneficial or not for eBay.

And to the extent that the opportunities or opportunities to become available, how acquisitive do you feel like eBay is or that you are likely to be in those areas?

Heath, thank you for the question.

I guess I would -- if I step back and look at the macro landscape, I would say we have a growing online sales environment offset by a fiercely competitive global landscape.

It has always been that.

I don't think that the competitive landscape has materially changed, at least in the last six months.

But there are some shifts inside of that in, and there is no doubt that there are certain categories like fashion that are getting more competitive.

I will just remind you and everyone that we're going to compete, but we are going to compete by being different.

We want a sharply different eBay that isn't like anybody else, and that doesn't mean that competition doesn't impact us.

But this is not a zero sum game in a growing environment, and my view of how we win is to be distinct and sharply different, not like anybody else.

With regard directly to your question around acquisitions, we have said it for a couple of quarters, we will be acquisitive.

We have phenomenal financial flexibility and strong free cash flow dynamics.

We are disciplined in the way we acquire; we don't swing wildly at things.

But there is no doubt that in this environment there are opportunities and when we see those opportunities we will capitalize on them.

Great.

Thanks, Devin.

Mark Mahaney, RBC Capital Markets.

Two questions, a product one and a marketing one.

Devin, I think you talked about the mobile release that would be upcoming.

Could you talk a little bit about some of the features in that, or maybe what they will address that may have been suboptimal in the eBay mobile experience?

And then you talked about some of that SCO headwinds, and I don't want to get too literal about it.

But are you referring to the removal of some of the right rail ads on Google, the implementation of the fourth desktop ad?

Is there something in particular you are referring to in terms of the SCO changes, or do you find that those are just constant things that you are dealing with?

There's no particularly greater challenge, SCO challenge, than what you've had in the past, just constant challenge?

Thanks a lot.

Thanks for both questions.

Let me start with mobile.

Let me remind you that we did something very substantial which was for our long-term success last September, and that was to replatform our mobile experience so that we didn't have multiple groups developing for multiple mobile operating systems.

We're now on a common platform where we can speed up and scale.

With that said, we did disrupt our atlas system a bit as we've signaled on the last couple of quarters, and we're pretty clear about why that happened.

It was a couple of different issues.

There were a couple of UI changes.

There was a bit of speed decline in the app itself.

And we have been iterating on that, and we have been in testing, as I said in my remarks, and you can expect a significant new app release very soon.

With that said, this isn't going to get solved and it is not a one-shot deal.

That fact that we're on that common platform means we'll iterate quickly, but I'd say we have growing confidence that we will get back to a really strong track on mobile soon.

With regard to the second part of your question, it actually has nothing to do with Google's right rail changes.

We were an early adopter of PLA, so their changes on the right rail do not impact us at all.

The SCO challenges really stem all the way back to May of 2014.

When, if you remember, without a structured data underpinning, our pages that we exposed to search engines, not just Google but all search engines, were not really attached to our marketplace.

And there was a significant penalty that really has continued for the better part of 18 months.

In many ways, that was the impetus to move to replatforming the business, so that the new pages that we put on which now represent 10% of traffic are on a much more stable foundation.

So for us, SCO, is -- I don't think it is just the day-in and day-out challenges.

There is a major challenge which we are addressing head-on with the long replatforming around structured data, and it will take time but we are seeing progress there.

Thank you, Devin.

Eric Sheridan, UBS.

One topic we get asked a lot about by investors, I would love to get your opinion here on the call, would be about the shift between commoditized and non-commoditized e-commerce.

A couple of little nuances there.

What are the headwinds to the business from deemphasizing commoditized e-commerce as you have referenced it as you move through 2016?

And how might that traject towards better growth in 2017, 2018 when you have more leverage for the non-commoditized products in subsectors that you want long-term leverage to?

And maybe a second question, more of a housekeeping matter.

But we haven't been able to find the EPS guide for the full year on either the slides or the press release.

Just curious if we were missing it somewhere.

Thanks so much.

I will take the first part; Scott can take the second part.

With regard to -- look, we are a very large marketplace, with last year $85 billion of sales, so we sell a lot of everything.

Let's be clear.

But ultimately our success will not be the ninth party reselling an electronics device at razor-thin margins.

There will be plenty people doing that.

What is unique about eBay is the spectrum of value, the choices that you get.

It is not just that new iPhone, it is the used iPhone, it is a manufacturer refurb.

It's 11 versions in between that frankly only sit in our Marketplace.

And then as you move down the tail, you get things that are not just version unique, you get things that are completely unique like collectibles and rare items, and that is an important part of who we are.

So obviously, we're going to sell a lot of different things and we will sell commoditized items, but the reality to the question before about competition is not all competition is the same.

Where it is commoditized items, obviously that is where competition is the greatest.

We still so a lot of it.

But that is where the competitive environment impacts us the most.

In many ways, that is why we want to move to being sharply different, and moving to being distinct, and moving to doing the things that only we can do.

And that is our strategy.

So there is no doubt that there is a headwind from what I call commoditized items that require instant shipping, I do not think that is a lot of things but that isn't our strategy and we're not going to compete by being a logistics company.

We're going to compete by giving people the greatest choice, the greatest deals and unique value.

That is who we are.

Scott can answer your EPS question.

Hey, Eric.

For EPS, we have a chart in the back for Q2, for the total year I would refer you to my prepared remarks.

And in short it was we are raising the low end of revenue guidance to 3%, bringing the new guidance range for revenue to 3% to 5%, or $8.6 billion to $8.8 billion.

And then I flagged that there would be -- I have that second half effectively at January 27 foreign exchange rates.

And if you equated that to spot today, that there would be roughly $80 million of upside to our second half and thus full-year revenue.

But all other full-year guidance, it remains the same.

Great, thanks for the color.

Scott Devitt, Stifel.

I had two questions.

The first one is, how you are thinking about managing the Marketplace business for growth versus profitability from here over the longer term.

And then secondly, you have been very clear, Devin, that structured data improvements in the results are going to show gradually over time.

My question is, do you think that structured data or something else may be able to ultimately move the Marketplace growth to levels above the current low single digit GMV growth rate, or do you think of it more in terms of sustaining the current growth rate of the business?

Thanks.

Thank you, Scott.

We don't wake up in the morning and declare that we are growth or a profitability company.

Our job is to grow value for shareholders, growing over time the free cash flow of the business.

We want to grow faster.

We are not managing to a lower growth rate.

What we're doing is making investments that we think are really important for the long term of the business like the replatforming.

The hope obviously is that when we get that done, we can push the efficient frontier of growth and profitability out.

In other words, we can grow faster and maintain reasonable margins.

I don't look at it as black and white.

I think that where we see good opportunities we should invest in them.

That doesn't mean I think with three to four quarters now under our belt, people understand we're not simply going to collapse the financial architecture and swing wildly at things and grow at all costs.

But I also want to be clear that I will invest in opportunities where we see them.

We are running the Company not for a quarter or a year; we're running the Company to build the next 20 years of eBay.

So that means being disciplined, but also investing in opportunities that it can expand what we do and grow the business.

With regard to the structured data part of your question, yes, I appreciate you saying that because we have been very consistent saying it will take time and it will be gradual.

I think today if you look at our prepared remarks, I just wanted to broaden that lens a little bit.

Structured data gets a lot of press, but it is not the only thing we are doing.

We're actually making a substantial number of changes to the Company.

From the way we're organized, to the way we acquire inventory, to the way we replatform, to the way we expose that inventory in the product.

I think you will see parts of the eBay shopping experience change more in the next several months than they have arguably in years.

So there's a lot into what we're doing.

And obviously for us, we hope that if we do that, fast forward a couple of years from now, it is a different business and it's a business that is growing faster.

That is our hope.

Thank you.

Justin Post, Merrill Lynch.

I had a few questions.

Devin, you mentioned a new site experience rolling out over the next six months.

Can you give us some specifics on how that will look?

Secondly, maybe talk a little bit about the marketing spend to support that.

Is that part of what is going on in 2Q?

And then lastly, auctions, it looks like a headwind although I imagine some of that is just shopping shifting to a new format.

But do you see an end in sight where auctions could be stable at some point?

And maybe just tell us how much of GMV that is right now.

Thank you.

With regard to the site experience, there is a couple of examples that we have included in the attached slides.

I think that, to step back from the slides for a second, there is amazing inventory and amazing deals on eBay.

But we have been really honest saying that they're not always easy to find.

We have had one tool in our toolbox, and that has been Search.

And if it does not show up in the first eight listings in Search, oftentimes there are incredible things that consumers want but they cannot find it.

To be honest, that has gotten worse with mobile because consumers' patience on 3.5 inches of real estate is a lot less than it is on a desktop.

So the whole effort here is to improve discoverability.

If you look at some of these new browse pages we are building, it is really simple.

We will show you the best deal, we will show you the best brand, we will show you the best price.

We want to make things really bulletproof, and very, very simple, particularly in a world that is going all mobile.

So for me, that is what -- there's a lot under the covers about how we are replatforming.

But it is about a great, simple elegant consumer experience that exposes the best of what we are about, which is our vast inventory.

With regard to the marketing spend, we are experimenting more, as I said last quarter, up the funnel.

Right now it is experimentation.

You will see us a little bit on television, and you will see us in other areas this quarter.

But to be clear, that is not -- we're not materially increasing our marketing spend at this point.

We are repurposing spend that was down the funnel to up the funnel, and what we're doing is we are testing.

You will see a lot of media mix testing.

We're trying to figure out the efficient frontier of what we can do, and I do not want to do any significant brand work until the product has gotten -- has moved on.

Because what I don't want to do is spend a lot of money to bring people into a user experience that is changing.

So as the user experience evolves and as we get more comfortable that where it will never be -- we are never done, but as we get closer to where we think we are going to be we will consider leaning into that spend and doing more.

But my view right now is that that would come out of -- we spent a lot on marketing as a business.

There is plenty of allocated spend that we can reallocate to go at that.

If we think there is an opportunity to do more, vis a vis the other question, we will do it.

With regard to auctions, Scott, do you want to take that question?

Yes, I think auctions has been on a multi-year deceleration.

To your question, is there an end in sight?

I think there is probably an inflection point where we hit the level of GMV that quite frankly is best suited to an auction format, and that is largely determined by our seller base and to some extent our buyer base.

So where that ends, I think as we get down to elements of price discovery that aren't facilitated by either online research or a catalog, I think it will start to see that tail-off decelerate into something a bit more stable, or at least that is what we believe.

And any thoughts on the percent of auction at this point that you can share?

I think it would be a little bit premature.

I think since it is more derivation of the inventory sold on the site and whether our buyers and sellers and how they are finding price guidance and/or determining price, it is a bit hard to say.

Thank you.

(Operator Instructions)

Douglas Anmuth, JPMorgan.

Two things, first, just wanted to follow up on the last one on 2Q and the guidance in particular.

Just trying to understand if there is something more there in terms of cost pressures, just thinking about how you guided in terms of revenue and EPS, and particularly your comments on hedging losses and gains and if that is a factor in there.

Then, just secondly in terms of buybacks.

For the previous two quarters, you had been fairly consistent in the $500 million, $600 million range.

You obviously stepped it up here in the first quarter and I know where you are in your authorization remaining.

But how should we think about levels going forward?

Thanks.

Doug, let me take your last question first.

We have been in the $500 million to $600 million a quarter.

And what we said for 2016 was we would continue on a pace consistent with that plus offsetting dilution.

And we have in effect offset the dilution in Q1, in addition to the $500 million to $600 million per quarter, and we're not changing our expectations in our guidance for the rest of the year.

With regards to Q2 guidance, maybe a few thoughts.

Seasonally, we do experience a deceleration in EPS from Q1 to Q2.

And much like we saw last year, it's really a combination of not only our revenue obviously but our expense profile.

And as such, the guidance is $0.40 to $0.42.

A couple of points worth noting.

First off, the guidance, to your question, assumes spot rates as of today.

I don't -- I'm not -- you shouldn't read anything into that, other than we've put spot rates as of today because it is relatively upon us, and within that we have also guided to the 4% to 6% revenue.

A couple of things within the cost base.

One, we don't have any favorability expected from another insurance favorability in G&A.

So I would expect G&A to pop back up as a percentage of revenue for Q2, and then for the rest of the year that normalizes because we will be past stand up.

Secondly, below the line, we're going to get an impact from the incremental debt that we put on in Q1, so that is factored into the guidance as well.

Great, thank you.

Brian Pitz, Jefferies.

A lot of questions have been answered, but a quick one, maybe just an update on your business in Russia.

How important is Russia for eBay longer term?

And maybe just making some sense, I think Apple had some negative commentary on the macro in some countries like Brazil, Russia, et cetera.

Any kind of insights there on what they may be seeing or what -- if you're seeing anything similar.

Thanks.

To be honest, since sanctions over a year ago and the collapse of the foreign exchange rate, our Russia business has not been at all strong as you would imagine with an import business and a collapsed ruble.

And I don't see that changing.

It is a tiny bit of our business.

And we are maintaining what we're doing there in the hope that at some point it turns around.

The future in Russia for e-commerce should be bright.

There is growing wealth.

There is scarcity of supply.

They're very good dynamics, and we have laid the railroad tracks.

But if you ask me how our business is today, for the better part of a year, it has been a disaster given the sanctions and the currency devaluation.

But it really doesn't show up in our overall results; it is so small.

On the macro, what we said, overall, it is stable.

We did see, as we said last quarter, a little bit of softness in December.

When you look at the quarter, at Q1, there was really nothing to see here.

It was pretty stable, any softness we saw was remediated.

And as a portfolio, it is kind of steady sideways.

It is not inspiring global growth, but it is steady global growth.

Obviously there's puts and takes in that.

We have a global business like Apple does.

Brazil has some Latin American countries have been weak, we're seeing a little bit better macro impact in Europe.

It is a mix effect as it always is.

But if you step back and look at the overall, we really haven't seen much change over the last 90 days.

Great, very helpful.

Thanks.

Richard Kramer, Arete Research.

A couple of questions that I don't think have been touched on.

Devin, you talked about the fly wheel kicking into gear in Marketplace with the new experiences.

Can you talk us through how this might manifest itself?

Should we be expecting this to be reflected in eBay competing more for order frequency, selling higher-value items, or from a pickup in new or even reactivated buyers?

And a couple other quick questions.

Are there some other channels we could look at beyond SCO to revive new buyer growth?

Can you give us the percentage of the GMV or sold items that came through mobile?

Thanks very much.

There is a lot to that.

That is a very good question in multiple parts.

Let me take them from the top.

With this foundation now going in place, we can pick up the pace on what we build on the foundation.

This is still going to take a lot of time.

Back to the first question I received.

I want to make sure that the expectations are set that there is not a moment in time when all of a sudden all of eBay is rebuilt and growth explodes.

It doesn't work that way.

This is a huge marketplace.

Tt is an enormous buyer and seller base, and we have to proceed with some caution.

But I like where we are because the foundation is being laid, and now we can iterate in ways we just haven't been able to do before.

So you are going to see a new suite of apps soon.

You are going to see new browse paths soon.

You're going to see new SCO pages soon.

You're going to see us start to go on offense and launch a couple of new categories soon.

All of that is in the guidance.

None of that is going to materially move things in the short run, but it is evidence that we are moving from more of a defensive platforming to more of an offensive run the business.

With regard to your channel discussion.

It's a great lead into, two quarters ago I said regardless of our SCO issues and fixing SCO, for the long-term success of this business we have got to diversify our traffic and user acquisition.

EBay has had two major irons in the fire, which is CRM and Search outside of its majority which come directly to our apps and to our site.

But the new user acquisition has been dominated by search and by email, and that has to change.

A healthy eBay has got multiple competing channels for our marginal investment dollar.

Two quarters ago I said that social, we're going to invest in it, it is early, it is not simple to get returns on social, and now fast-forward two quarters later and we were getting somewhere on social.

We are now in 14 different channels, we're working with all the big social players.

I think if you asked them, we would say we're being aggressive and even leading e-commerce on many of those channels.

It is still very small, as a comparative -- if you add all those 14 channels up, it is a tiny fraction of what we get from Search, but it is growing fast.

And we're starting to get some traction in areas like I mentioned today like Snapchat and other channels where we are showing the ability to spend and acquire users and traffic.

So that is encouraging.

Again, it will take time, but we're starting to get somewhere.

The third part of the question?

Richard, the thing I would add on to that, that is all right.

And I would say that at this point, the total eBay mobile volume is 44%, and the percent of GMV touched by mobile is 55%.

So this is obviously a larger and larger channel for us.

Any ways to get new buyer growth beyond SCO?

Will new buyer growth come from social, and should you be investing more in [acted] (inaudible) or --?

Sure, new buyers will come from social.

They will come from search.

They will come if we do top of the funnel marketing like we're testing now on TV and outdoor and other places.

The great thing about new buyers is it opens up an entire world of new marketing levers.

But there is a theme here.

We don't run wild; we will be disciplined about it; we're not going to waste a ton of money.

You can waste a lot of money, and we won't do that.

We will test, we will learn, and we will start to open the funnel up as the product changes to where we want it to reaccelerate traffic and new user growth.

I think a lot of that also impacts the cohorts that we look at, and you mentioned one of them, but retained and reactivated buyers.

As we focus marketing not only at the top of the funnel and at SCO and at social to bring in new buyers, it is also about improving our funnel of retained and reactivated buyers.

Thank you.

Operator, we have time for one more question.

Colin Sebastian, Robert W Baird.

It is actually Ben on for Collin.

As we go through the back half of the year or maybe even the next three months, are there any specific categories that we could look to to see the progress being made on structured data?

Or is there nothing that you would like to call out there?

Obviously, our catalog, the 60% that we have covered are things that you would expect to have a catalog in.

And they tend to not be long-tail items like an antique teapot or a baseball card; they tend to be electronics, and fashion, and home and garden.

They are more mainstream categories that have higher velocity and have some structure to them.

But I don't think -- really this is a horizontal replatforming.

It is not really specific to one or more categories.

So I'd point at the horizontal in this case, not in the vertical.

Got it, thank you.

Thank you, operator, you can go ahead and end the call.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference.

This does conclude the program and you may now disconnect.

Everyone have a good day.