Operator:

Ladies and gentlemen, good afternoon, and thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Thank you. And I would now like to turn the conference over to John Egbert, Vice President of Investor Relations. You may begin.

Jamie Iannone:

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. Our strong Q2 results marked a notable step toward our goal of achieving sustainable, profitable growth over the long-term. Our gross merchandise volume grew 1% to $18.4 billion in Q2. Revenue increased 2% to $2.57 billion. Non-GAAP operating margin rose by 1.0% to 27.9%. Our non-GAAP earnings per share rose by approximately 15% to $1.18. And we've turned over $1.1 billion to shareholders through repurchases and dividends during the quarter. I'm proud of our teams for delivering these results amid continued macroeconomic headwinds, ongoing geopolitical uncertainty, and an evolving regulatory landscape. Now let's walk through some of the key drivers of our Q2 results. Focus category GMV grew by over 4% in Q2, outpacing the remainder of our marketplace by approximately 5 points. After Motors Parts & Accessories, or P&A, which continued its trend of healthy growth, collectibles was the second largest contributor to GMV growth among focus categories in Q2. In mid-May, we closed a series of transactions with Collectors, parent company of PSA, and a leading provider of authentication and grading services for collectibles. Since then, we've made significant progress toward integrating Goldin, expanding our relationship with PSA, and elevating the eBay collectibles experience. We support the latest Goldin 100 auction, help drive awareness for the successful global premiere of King of Collectibles Season 2 on Netflix, and the Goldin team began hosting events on eBay Live. During Q2, we completed the transfer of trading card assets to the PSA vault ahead of schedule, and all PSA customers can now easily sell on eBay at the time of grading without having their cards shipped back to them. Since going live in late June, the PSA storefront has already sold tens of thousands of trading cards on eBay, and I'm excited for our companies to jointly drive innovation on behalf of hobbyists for years to come. eBay refurbished was also a significant contributor to GMV growth and was our fastest growing focus category year-over-year, as our combination of trust, value and quality continues to resonate with customers. Our selection of refurbished inventory continues to grow as we expand existing partnerships with OEMs like Dyson, onboard CVT sellers with access to unique items, and extend the program to new categories. During Q2, we expanded eBay refurbished to golf clubs, bringing warranties and hassle-free returns to thousands of previously owned golf clubs from the world's top brands. In June, we announced a sustainability collaboration with Seagate, a global leader in data storage solutions. We launched Seagate's official storefront on eBay for direct sales of factory-recertified hard drives. Not only are these refurbished products of great value for consumers, but this partnership can also eliminate a significant amount of e-waste by extending the product life cycles of quality hard drives. Consumers' desire to shop sustainably has also benefited our luxury focus categories, which delivered positive year-over-year GMV growth for the sixth straight quarter. As we acquire more sellers with well-priced luxury inventory, we’ve observed a strong correlation with incremental GMV. For instance, we saw a significant acceleration in cross-border demand after the opening of our Tokyo Authentication Center, which led to a meaningful expansion of our luxury handbag inventory. We reached a major milestone for our Authenticity Guarantee Program in Q2. We authenticated our 10th million item since the inception of the program in 2024. A pair of Air Jordan 1 Low Lucky Green sneakers, authenticated in our Las Vegas facility. During Q2, we also introduced optional authentication for luxury handbags priced between $200 and $500 in the U.S., which enables even more buyers and sellers to enjoy the benefits of our Authenticity Guaranteed Program. As our value proposition continues to grow, it's been exciting to see how partnerships have enabled eBay to show up in so many culturally relevant moments recently. These opportunities help us to evolve perceptions of eBay by showcasing our modernized experiences and connect with more enthusiasts shopping in pursuits of their passion. Just in the last quarter, La La Anthony, a Madeleine [ph] client showcased their pre-loved luxury accessories from eBay on the Met Gala red carpet. We saw eBay logos in the cockpits of Lando Norris and Oscar Piastri as the McLaren Formula 1 team took the checkered flag at the Miami Grand Prix. We partnered with Disney to create a customized destination for May the 4th, enabling us to engage with Star Wars enthusiasts around the world as they explored the more than 1 million Star Wars-related collectible products on eBay. And in June, eBay returned as the headline sponsor for Love Island in the U.K., showcasing the power of pre-loved fashion to millions of households nationwide. Next, I'd like to update you on some of the geospecific investments we've been making. In March of 2023, we repurposed our strategic playbook for focus categories to better serve the needs of German consumers. This endeavor has reinvigorated our C2C business in Germany and helped us navigate challenging economic conditions in the region. In Q2, we sustained positive year-over-year growth in C2C volume in Germany as we lapped the full first quarter of this initiative. Healthier C2C trends have also supported our B2C business in the German market. The unique inventory listed by consumer sellers has led to a healthier customer acquisition funnel. When consumers begin selling, they also purchase twice as much on eBay as non-sellers, on average, with most of that incremental volume benefiting B2C sellers. The success of the German initiative influenced our decision to invest in an improved experience for pre-owned apparel in the U.K last quarter. These changes, including a new selling flow that makes it considerably easier to list on eBay, with image guidance, simpler item aspect collection, and a streamlined shipping module with a focused set of couriers and parameters. For buyers, we introduced optimized vertical browsing pages for fashion and new generative AI-powered buying experiences like Shop the Look and Explore. Although we're only a few months in, we're seeing positive leading indicators in the strategically important category. For users of the new selling flow, we have observed a 20 point increase in CSAT, a material reduction in average listing time, and an increase in listings and sold items per seller. A growing number of buyers have engaged with our new AI-powered fashion shopping features and are eagerly awaiting the enhanced personalization and filtering we plan to bring to shop the look and explore in the coming months. These shopping experiences are emblematic of the overall acceleration in the pace of innovation at eBay. Our investments in generative AI and machine learning are simplifying the selling and buying experiences, making our marketplace more efficient and helping us better serve customers at all phases of their shopping journey. To power these experiences, our core AI team is training and fine-tuning large language models using eBay's proprietary data to build even more magical innovations for customers. In Q2, we entered the high-performance computing realm by deploying our first supercomputer, which gave us the capacity to build and fine-tune even larger LLMs on trillions of tokens. Based on publicly available performance benchmarks, our supercomputer is on par with some of the top 50 supercomputers in the world in terms of petaflops of computing speed. Our growing AI capabilities are transforming the eBay experience for customers. For instance, our multi-phase magical listing initiative is helping us solve the longstanding trade-off between listing speed and quality. After fully rolling out generative AI descriptions, we are continuing to test and iterate on the next phase of our magical listing experience, which leverages user uploaded product images to help sellers fill in the category, title, and other item aspects for a listing. A subset of sellers are testing this experience in beta, and we are leveraging their feedback and expertise to train our models and expand coverage to a broader range of categories. Seller CSAT for this beta experience remains extremely positive, and we plan to expand the beta to more sellers during Q3. We are also leveraging generative AI to help sellers improve the quality of their product imagery. In Q2, we rolled out generative AI-powered background enhancements to 100% of iOS and Android users in the U.S., U.K., and Germany. This feature allows sellers to magically overlay their products on top of a variety of visually stunning backdrops. The customer response to this innovation has been outstanding. CSAT for this feature has reached 90%, and more than two-thirds of customers who have tried the feature have applied AI-generated backgrounds to their listings. Within seconds, sellers can easily stage their camping equipment against a beautiful [indiscernible] backdrop, showcase their used skis atop the snow-capped mountain, or display their pre-loved sandals on a beach at sunset. It's exciting to see the creativity of our selling community as they embrace generative AI tools to make their listings more compelling. Turning next to advertising. During Q2, the first-party advertising grew 12% while total ad revenue approached 2.2% penetration of GMV. Approximately 3.1 million sellers adopted a single ad product during Q2, and we ended the quarter with roughly 1 billion live promoted listings out of our nearly 2.1 billion total listings. In early July, we launched a complete redesign of our eBay advertising platform, which fundamentally changed how sellers create and manage their ad campaigns and made it simpler than ever to activate our full range of advertising solutions. This new interface is now available to all sellers across our major markets. It includes a centralized dashboard enabling sellers to make data-driven decisions by leveraging near real-time performance metrics, including impressions, clicks and return on ad spend. For the first time, sellers can also see a list of personalized campaign recommendations aimed at helping them to achieve their sales goals, such as adding new keywords to increase listing visibility or lowering bids for keywords that are driving performance. Additionally, we've enhanced suggested campaigns to highlight new ad strategies for sellers by identifying emerging marketplace trends relevant to their inventory with prebuilt campaigns fully optimized by AI. As part of this redesign, we simplified our first-party advertising portfolio into three distinct solutions that more clearly align with the seller's campaign objectives. We unified our standard, advanced and express products into a single promoted listing solution, serving both fixed price and auction formats. When sellers launch a promoted listings campaign, they can pay on a cost per action basis for general placement, or select cost per click pricing for priority placement. In addition, promoted offsite ads enable sellers to tap into a wider audience through off-EVA channels such as Google. Promoted Offsite uses a dynamic CPC model and automated targeting so users can set up campaigns in just a few clicks after setting a daily budget. And our newest format, Promoted Stores, enables sellers to increase their brand visibility when buyers are browsing or searching for contextually relevant items. Ultimately, we believe the redesigned experience will help more sellers grow their businesses on eBay by broadening the appeal of our full suite of advertising solutions and delivering actionable insights in a more intuitive interface. Our payments platform continues to be a strategic growth driver for our marketplace more than 2 years after the completion of our migration. In recent years, we have added a breadth of popular and locally relevant payment options to offer even more choice and flexibility during the checkout experience. We were thrilled to launch Venmo as a payment option in the U.S. in Q2, enabling us to tap into its more than 90 million engaged users. Venmo's mobile-first checkout experiences and strong adoption among Gen Z and millennial audiences are particularly appealing as we continue to broaden our reach in younger demographics. The early results of this partnership are encouraging as a significant portion of our GMV from Venmo is coming from new or reactivated buyers. Our research has shown us that timely access to affordable financing is a key enabler for small businesses, which makes seller capital a pathway to unlocking more great inventory on eBay. In July, we expanded our seller capital offering with the launch of Business Cash Advance on eBay, a revenue-based financing solution provided by Liberis. This product connects eligible U.S. sellers with fast, flexible and transparent financing for up to $1 million in working capital in as little as 24 hours. Sellers can tap into flexible payment schedules that scale with their sales cycle and easily track their payback progress within the seller hub. In just a few weeks since launch, we've already funded over 1,000 sellers and dispersed millions of dollars of working capital. Now I'd like to share some highlights around eBay's impact as a company. Last quarter, we published our 2023 impact report showcasing how the company is creating economic opportunities and promoting a sustainable future. We remain on track toward our sustainability goals, reducing our Scope 1 and 2 carbon emissions by 59% compared to our 2019 baseline. We also published our 2024 eCommerce report, which analyzes the overall trends and sentiment around eCommerce at a global level. The report found that 86% of consumers surveyed have bought or sold pre-loved items, and 70% plan to purchase eCommerce items this year. Younger demographics are especially passionate about the circular economy, with more than 90% of millennial and Gen Z sellers saying they value eBay's ability to keep items out of landfills. And on the topic of eCommerce, one of the highlights of the second quarter was the Rocket Man Resale event, a partnership with Elton John, who released a personal collection of pre-loved fashion items exclusively on eBay. The event kicked off with a pop-up shop in the West Village of New York City, where Elton shared stories about items from his legendary closet during an eBay Live event. Fans around the world were able to pick up pieces of fashion history, ranging from Gucci jackets and Versace robes, to customized Prada loafers and vintage concert tees. All proceeds benefited the Elton John AIDS Foundation and its mission to be a powerful force in ending the AIDS epidemic. Our broader community also continues to support the causes most important to them. eBay for charity raised more than $47 million last quarter, up 22% year-over-year. Additionally, the eBay Foundation granted nearly $7 million in Q2 to strategic nonprofits, which are addressing and removing barriers to entrepreneurship for historically excluded groups. I'm proud to share that eBay was recently recognized by Fortune as one of America's most innovative companies. We were also acknowledged by Forbes as one of the best employers for new grads, recognizing companies who offer the best early career opportunities. In closing, Q2 was another strong quarter for eBay and an important step toward our goal of sustainable long-term growth. Our GMV growth turned positive due to continued momentum in focus categories, investments in geospecific initiatives, and horizontal innovation driven by our growing capabilities in artificial intelligence. Our advertising business continues to deliver robust growth at scale, and we believe our redesigned ads platform will make it simpler to adopt our full range of ad solutions, helping more sellers grow their businesses on eBay. We continue to advance our payments capabilities by introducing new services, expanding our breadth of trusted payment methods, and reducing transactional friction. And we delivered these results while layering disciplined investments for the future, generating double-digit earnings per share growth, and delivering compelling capital returns for shareholders. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

[Operator Instructions] And your first question comes from the line of Nathan Feather with Morgan Stanley. Your line is open.

Jamie Iannone:

Yes, overall, we feel great about the momentum we're seeing in advertising. The new features that we just talked about, Nathan, just rolled out, so it's really early in the experience for those. We did test them in Australia before rolling them out to all the other major markets. When you ask about campaign adoption and other things, what's exciting about this new overhaul is, first it gives you a great performance snapshot of all of your campaigns in a redesigned interface. But secondarily, we now have daily recommendations for advertisers about things they can do, add keywords, manage their business, changing a campaign to make it better. And we have new types of suggested campaigns as part of this as well. Things like trend based suggestions. So you're seeing a -- we're seeing on the site, something popping whether it's around Christmas time or some other kind of event happening, tied to listings that a seller would have. And we're now doing trend based suggested campaigns all driven by AI. So we're excited about what we're seeing from the early results, but it's really kind of early stages in this. In general though, every time we've made it easier and simpler to adopt our ad products, it's resonated with sellers and helped drive the penetration up to what we're seeing today. Steve, maybe you just want to comment on our overall ad business.

Nathan Feather:

Okay, great. Thanks. And then one more quick one. Now that you have for a supercomputer fully online, have made a lot of improvement from the seller side of things, interesting to think, over the next 12, 24 months, what are the key friction points do you think are really immediately addressable with the help of some of the Gen AI features? Thank you.

Nathan Feather:

Great, I appreciate it.

Colin Sebastian:

Thanks, and good afternoon. Maybe first a follow-up to one of the previous questions, specifically kind of updating your thoughts around the growth of advertising longer term. Are you still thinking that that the attach rate or take rate can expand another couple of other basis points? Or could even be higher than that as you roll out more capabilities and as Gen AI tools are sort of incremental to what you were probably thinking about a few years ago. And then maybe, Steve, just a clarification on the capital allocation. I guess outside of the incremental buybacks, are you keeping dry powder for additional M&A? And if so, what are some of the areas of interest or focus? Thank you.

Steve Priest:

Yes, of course. Colin, good to speak to you. As we always said, we focus on a balanced approach to capital allocation, and our first priority continues to be investing in the long-term growth of the business through the Build Buy Partner framework, and you've seen from the execution, you've seen from the momentum, you've seen from the growth that we saw in the second quarter that we're putting the money to good work. I think what's tremendous about our competitive advantage is the balance sheet that eBay has that affords us the ability not only to invest in the business, but to continue to give very healthy capital returns to shareholders. In fact, we've just increased our target for 2024 to at least $2.5 billion in share repurchases, in addition to the 8% increase in quarterly dividend that we've done for the last three quarters. And over the last couple of years, we've continued to demonstrate that continued commitment to returning excess cash to shareholders, and there's no change in our philosophy in doing that. So I'm pleased with where we are, pleased with the balance, and I think, as I said, our balance sheet is a distinct advantage for us here at eBay.

Operator:

And your next question comes from the line of Ygal Arounian with Citigroup. Your line is open.

Steve Priest:

Hey, I'll pick up the first one. Steve here, good to speak to you. Just in terms of the international dynamics, just as a reminder, the GMV is reflected in the geography where the seller is domiciled. So specifically talking about the sort of international dynamics that we're seeing, undoubtedly, we continue to see a very uneven and dynamic environment, particularly in Europe, as discussion spend is pressured based on some of the discussions we've had over various quarters. With the investments we're making, particularly in C2C, around the German initiative and more recently in U.K pre-loved fashion, that's helping to offset some of those headwinds that we've seen. But the other element in terms of international, where we continue to see momentum, is in our cross border trade, particularly out of Greater China and Japan. We've seen a really healthy level of inventory. There's good focus category penetration coming out of those markets. We've continued to invest and so we talked about last quarter the authentication center that we have built and partnered with in Japan, which has continued to drive a great level of luxury inventory to our U.S and European customers. And so for the second quarter, we did see some sequential improvement in international GMV that grew over 1% on a year-over-year FXN basis, really is a reflection of the momentum and the investments that we're driving forward. Jamie, over to you on your second question.

Ygal Arounian:

Thank you.

Lee Horowitz:

Great. Thanks for the question. Steve, by the end of this year, you guys will have put a lot of work into product and to expand the eBay platform and improve things and brought margins sort of below your typical range. When we think about the path forward, we'll appreciate that you still have many gross investments that you want to get behind. Your product and debt expense will be up pretty meaningfully relative to 2022. So as we look beyond this year, do you think that the investment cycle that we're sort of in has substantially laid the tracks to drive future growth from beyond 2024, 2025, and thus the need for incremental investment is thus much more subdued going forward?

Lee Horowitz:

Great. And then maybe one follow up sort of on the second half [indiscernible] and all of the products that you guys are bringing to bear for the platform. You guys obviously have a lot of irons in the fire in terms of improving the platform, but is there any way to size sort of the incrementality in terms of GMV that you expect from some of these horizontal investments, some of these new focus categories that you expect to see in the second half? And if not a number, which amongst the broad array of products that you have do you think holds the most promise in terms of driving meaningful incremental dollars of GMV in the second half and beyond. Thanks so much.

Lee Horowitz:

Awesome. Thanks so much.

Nikhil Devnani:

Hi, thank you for taking the question. I wanted to ask about active buyers. This metric has been flattish for a while now, but if eBay is to sustain low to mid-single-digit GMV growth as you look forward, then active buyers, at least enthusiast buyers, probably have to start growing again at some point. So how do you feel about your ability to improve this metric in the quarters to come? And is there anything investors can look at to get comfortable with your audience growth? Maybe some incremental color or detail you could provide on how these metrics might be trending within focus categories as a proxy for what's to come going forward. Thank you.

Nikhil Devnani:

If I could just ask a follow-up to that, would you say that the trends for the enthusiast buyers are a bit more pronounced, at least within the focus categories? Is that a fair statement?

Nikhil Devnani:

Thank you.

Tom Champion:

Hi guys. Good afternoon. Jamie, it seems like there are a lot of conflicting economic signals out there. I'm just curious, broad strokes, what you think of the consumer health both in the U.S. and Western Europe. Just curious, your core take. And then, Steve, maybe for you, can you just take one more cut at the 3Q GMV guide and the growth outlook at flat at the midpoint. Looking at the trend over the last six quarters, there's been clear progress, 1% FX neutral result in 2Q. Why would there be a step back in the third quarter? Thanks guys.

Steve Priest:

Yes, of course. Hey, Tom, how are you? Well, I've been pleased to see the momentum that we've been seeing quarter-after-quarter going forward. And obviously, the positive growth we saw in the second quarter, particularly in this macro environment. It has continued to be a reflection of the investments that we've been making over the last 18 months or so and the returns that we're seeing on the business. Obviously in the Easter we saw some benefits in the second quarter with a 50 basis point tailwind associated with Easter timing, but even having said that we were approaching about a point of positive GMV growth. The environment we're in continues to be very uneven and dynamic and we are sort of seeing some specific one-off impacts as we sort of think about this quarter with elevated year-over-year demand for summer travel, some one-off global sports events which are making their month-to-month trends a little bit uneven. And so as we contemplate the third quarter guide, we continue to take that uncertainty into effect. And the guide that we've put out there balances that perspective. But overall, I feel like we've had strong execution to date in this continued uncertain economic and regulatory environment. And I'm really remain encouraged with the momentum we're seeing. And we're confident we're on the path towards long-term sustainable growth.

Operator:

Yes, and your final question comes from the line of Ross Sandler with Barclays. Your line is open.

Jamie Iannone:

Yes, I [technical difficulty] talk about any one seller, we have millions of sellers on the platform. What I say about collectors -- collectibles is that we feel really great about the innovation that we're driving in that business. Goldin coming on brings the world's most desirable inventory in collectibles onto the marketplace and new capabilities. The reception to Goldin last week at the National was really amazing to see people chanting. We had over 50 eBay Live events that we held there. And the consumer and the hobbyist is really resonating with the steps that we're taking, including bringing in Ken Goldin and his team into the business. They had a leading show with King of Collectibles Season 2, hitting great records on Netflix streaming. We supported the Goldin 100 auction, so all great there. We're also excited by the partnership with collectors and PSA. It really helps solve something that collectors have been asking for quite some time, which is simplify the process of grading and selling items. So now if you're selling -- sending an item to grade, usually that's going to massively increase the value and you're looking to potentially put that in a marketplace. We've really simplified that through this partnership with PSA and why we're seeing customers really adopt it is we're just making that whole process really friction free. So, we've been a leading secondary marketplace for over two decades. Every quarter we innovate and drive kind of new capabilities. The last one I would just talk about here is our work in eBay Live. In Q2, our eBay Live events grew 50% quarter-over-quarter. We started doing case breaks on eBay and our sellers are adopting them and finding it really great to see new capabilities we've built. We launched new features like Buy Spot directly on the Live Hub, which is a really kind of great feature for case breaks. And I participate in some of those, and they're just a lot of fun. And we launched eBay Live in the U.K in Q2 as well. So we're continuing to see good momentum on that component, which is really also help accelerating these new partnerships and all the work we've done with collections and price guides and new shipping methods over the past quarters and years to really accelerate our collectibles business and I'm encouraging by the stats of what we're seeing.

Operator:

Good afternoon, and welcome to eBay's First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

John Egbert:

Good afternoon. Thank you all for joining us for eBay's First Quarter 2024 Earnings Conference Call. 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 our commentary during the call, which is available through the Investor Relations section of the eBay website at investors.ebayinc.com.

Jamie Iannone:

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. We delivered strong results in Q1, even as we continue to navigate ongoing challenges in the global economy. Gross merchandise volume was roughly flat at $18.6 billion, while revenue grew more than 2% to $2.56 billion. Our non-GAAP operating margin was 30.3%, non-GAAP earnings per share rose 13% to $1.25, and we returned $638 million to shareholders through repurchases and dividends. I'm incredibly proud of our teams for delivering these results as they remain relentlessly focused on reinventing the future of e-commerce for enthusiasts. And I am pleased that we remain on track for GMV growth to turn positive by Q3 or Q4 of this year.

EBay and Collectors have entered into 3 separate transactions designed to streamline and improve the overall experience for hobbyists. As part of this deal, I'm incredibly excited to welcome Ken Goldin to eBay. We have agreed to acquire Goldin, a leading U.S.-based auction house for high-value collectibles, which brings together 2 renowned marketplace brands in the trading card hobby. Many of you know Ken from his fantastic series on Netflix, King of Collectibles:

The Goldin Touch. Combining Goldin with eBay enhances our respective marketplace offerings by expanding the range of inventory available to eBay customers and opening up an expansive global audience for Goldin sellers. We believe this will enable a more well-rounded collecting experience across price points and service models, complementing our acquisition of TCGplayer and recent partnership with sports trading card company COMC.

Stephen Priest:

Thank you, Jamie, and thank you all for joining us today. I'll begin with the financial highlights section of our earnings presentation. Next, I'll discuss our key financial and operating metrics in greater detail. Finally, I'll provide our outlook for the second quarter in context on the full year before we begin Q&A. My comments will reflect FX-neutral year-over-year comparisons, unless I note otherwise.

Operator:

[Operator Instructions] Our first question will come from Nathan Feather from Morgan Stanley.

Stephen Priest:

Nathan, I'll take that. Steve here. Our Q2 guide implies margin expansion between 0 and 70 basis points year-over-year, depending on where we land in the range. That's really driven by underlying advertising growth efficiency gains, partly offset by some of the investments we've talked about and some FX headwinds that we're seeing. You're right, there's a bit of seasonality that we deal with as we go through the year. The second quarter does generally have sequential contraction. That's in line with the last few years because seasonally, Q1 is our strongest quarter for operating margin due to relatively higher GMV and low expenses.

Colin Sebastian:

Jamie, I appreciate the review of all the product initiatives in the marketplace. And I guess in the context of the confidence you have in that acceleration in growth in the back half, I guess, which of these innovations are driving the most incremental activity or conversions on the platform? And is that part of that acceleration that you're anticipating?

Operator:

Our next question comes from Eric Sheridan from Goldman Sachs.

Jamie Iannone:

Yes. Look, our cross-border is one of our great strengths as a business. 1 in 5 transactions or about 20% of GMV goes across borders on eBay, and it's very strategic for us in that for sellers, it opens up a very vast demand opportunity. We've talked for a couple of quarters about eBay International Shipping as an example of one of those things. We've talked about our payments team investing in buyer and seller FX to make that more easy and take the friction out for customers.

Thomas Champion:

Jamie, I'm wondering if you could just talk about your view of the health of the consumer. There doesn't seem to be much consensus out there. And just curious, your view and how that may have changed over the last 90 days.

Bryan Smilek:

It's Bryan Smilek on for Doug. Could you just talk about the velocity of investments across generative AI and any affiliated CapEx needs and then, I guess, on that same line of questioning too, just timing of when you could see revenue uplift from these investments over time?

Stephen Priest:

Yes, of course. So Bryan, I think there's a couple of things I'd say. First of all, our size, our scale and our financial architecture with eBay with the strength of the balance sheet we have is a distinct advantage for us, particularly as we look to exploit generative AI and the benefits that come from that. With regards to how we're thinking about it from a CapEx and an OpEx standpoint, all of the investment that we've talked about in 2024 from a CapEx standpoint is embedded in the 4% to 5% of revenue, which we've guided for the full year.

Operator:

Our next question comes from John Blackledge from TD Cowen.

Jamie Iannone:

Yes. Look, we're excited by what we're seeing in trading cards. What we saw is that there was obviously a lot of activity during the pandemic, and we were able to hold on to a lot of customers that we acquired and frankly, a lot of customers that got reactivated or reinterested into the hobby. When you look at collectibles, we've been investing in it over quite some time. We've launched a number of features, whether it's price guides, making it easier, [ My Collections ] on the marketplace, we've launched new shipping forms, we've introduced authentication in that product, et cetera, and really built the suite of what collectors were asking us to do.

Operator:

Our next question comes from Richard Kramer from Arete Research.

Jamie Iannone:

Yes. Look, the reason that we have such good seller metrics and sellers are so loyal, Richard, is because we let them build a brand on eBay. They build an eBay store, they have a presence, and we bring them a lot of really unique value propositions. We bring them the scale and breadth of global buyers on the marketplace. We bring them all of the capabilities to market and advertise their products really easily. We just -- we've been working the last couple of quarters on this product I talked about with Offsite Ads, which helps them bring traffic back. And so it's really -- those are really, I think, important to sellers. And what we see is really good feedback from doing those.

Stephen Priest:

Thanks, Jamie. Obviously, we made a difficult decision at the start of the year to go through the reduction in force. From the magnitude of the headcount and the restructuring charges, it's obviously a significant event for us. It was not just about sort of driving cost savings and creating capacity. It was also about sort of driving greater agility, speed in decision-making across the organization, so we can continue to deliver for our customers.

Operator:

Our next question comes from Michael Morton from MoffettNathanson.

Jamie Iannone:

Yes. So look, it's been an important strategic area for us. One of the reasons we launched eBay International Shipping was the whole concept that we wanted you to be able to ship a product from LA to Norway, and it would be as easy as shipping it from LA to Chicago. And we built that product, and eBay takes care of all of the hard work and the background of customs, duties, et cetera. And we're seeing really great feedback in terms of the CSAT and the performance that we're getting from our sellers from that perspective. We built a lot of features like buyer and seller FX, so that the buyer can transact in their currency of choice to make that really easy for the -- for both the buyer and for the seller.

Operator:

We have no further questions. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Operator:

Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the eBay Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to John Egbert, Vice President of Investor Relations. John, you may begin your conference.

Jamie Iannone:

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. I'm incredibly proud of the progress we made in 2023 against our vision of reinventing the future of e-commerce for enthusiasts and our goal of returning eBay to long-term sustainable growth. Let's go over a few highlights from the full year. First, despite significant macro pressure on discretionary spending across our major markets, we saw organic year-over-year GMV growth improved during each quarter of 2023, resulting in GMV growth down roughly 1% for the full year. Focus category GMV grew by nearly 4%, outpacing the remainder of our business by roughly 7 points, and we exited 2023 at approaching 30% penetration. We stabilized our active and enthusiast buyer count as acquisition, reactivation and retention improved year-over-year. Our revenue grew 3% organically to over $10 billion. driven by continued momentum in first-party advertising, expansion of our financial services offerings and the launch of eBay International Shipping. And we made significant investments in tech talent and marketing to support our strategic pillars, including making meaningful strides towards establishing eBay as a leader in generative AI for e-commerce. These results have demonstrated that we have the right strategy which has put us on a path to building a stronger, more resilient company. In service of that goal, last month, we announced significant organizational changes focused on removing layers and simplifying execution in order to better meet the needs of our customers. This involved the difficult but necessary decision to reduce our workforce by approximately 1,000 roles and begin to scale back our alternative workforce contracts. This restructuring better aligns our expenses with the growth of our business and I'm confident it will enable us to accelerate innovation while delivering long-term value for shareholders. Now turning to the fourth quarter. We generated $18.6 billion of gross merchandise volume in Q4, nearly flat versus the prior year. Revenue grew 3% to $2.6 billion. Our non-GAAP operating margin was 26.7%, and we delivered $1.07 of non-GAAP earnings per share resulting in $4.24 of EPS for the full year. Our focus category strategy remained a significant driver of underlying growth during Q4. We focused category GMV outpaced the remainder of our marketplace by approximately 6 points, growing roughly 4% for the third straight quarter. Our momentum in Motors Parts & Accessories, or P&A, continued in the quarter, as volume growth held steady in the mid-single digits. Our eBay Guaranteed Fit programs have benefited buyer trust and retention across the U.S., U.K. and Germany, driving incremental GMV within P&A last year. During Q4, we began rolling out multi-warehouse shipping optimization to some of our largest U.S. P&A sellers that collectively manage millions of listings. B2C sellers can activate these tools via eBay APIs, and this enables buyers to see more accurate estimated delivery dates when purchasing from sellers with multiple warehouses, which has driven a measurable uplift in conversion for early adopters. In 2024, we plan to onboard sellers in other categories to utilize this technology and tighten delivery estimates across eBay more broadly. Our established position in P&A has led to more than 100 million vehicles being saved in the My Garage section of eBay by active customers. In addition to providing better fitment experiences, we are finding more ways to leverage this valuable data to drive utility for our customers. For example, last quarter, we introduced predictive maintenance that offers AI-driven auto part recommendations based on a vehicle's mileage. Features like this help eBay stay top of mind for customers looking for auto parts at a great value. The work we've done in the eBay Authenticity Guarantee program has also been a key driver of our focused category momentum and raising the level of trust on the marketplace. In Q4, we launched our eighth authentication center in Tokyo, Japan, our first center focused primarily on cross-border trade. Our Tokyo center is currently authenticating luxury handbags and will expand to other highest categories over time. Japan is one of the largest and fastest-growing market for personal luxury goods in the world, enabling our global buyers to tap into a wealth of inventory from the world's most exclusive brands with complete confidence. Earlier this month, we also expanded the Authenticity Guarantee Program to cover loose gemstones. This further extends our product coverage within fine jewelry with authentication from our existing partner, the Gemological Institute of America, a trusted authority for over nine decades. In addition to expanding focus categories, last year, we made a significant investment in Germany, our third largest country as measured by demand. We adopted a similar approach to our vertical playbook to address the unique needs of German consumers. These changes included language enhancements and improvements to search, SEO and recommendations, shipping and return label improvements and a complete overhaul of the local pickup experience. In January, we further improved local discovery in Germany by introducing a new MAP-based browsing experience, which services trending and recently listed items through an intuitive interface based on what's nearby and easy to pick up. Overall, our initiative in Germany has outperformed our initial expectations. We've observed C2C seller NPS and customer satisfaction both up 20 points or more versus our previous baselines. Our buyer NPS also increased by double digits as buyers who sell returned to positive growth following the initiative launch. In addition, enhancements made to our QR code technology has helped reduce unpaid items by more than 50% for local pickups. And importantly, C2C volume in Germany returned to positive growth resulting in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. These investments have made our business significantly more resilient to the challenging macro environment in Germany where overall e-commerce growth has been negative in recent quarters. During 2023, we also laid the groundwork to accelerate our capabilities in artificial intelligence and further embed AI throughout the customer experience and our organization. After the first commercial large language models became available from companies like OpenAI and others last year, we immediately found ways to leverage generative AI technology to improve the eBay experience across selling, buying, advertising and marketing. Within a few months, we began fine-tuning open-source LLMs using eBay's proprietary commerce data on our own infrastructure. These models include a smaller number of parameters and thus operated faster and more cost efficiently than commercial LLM when operating at scale. But we also found these fine-tuned LLM could perform as well or in some cases, better than commercial LLM across certain dimensions and use cases, such as generating listing descriptions. To support an even more ambitious AI roadmap for 2024, by the end of Q1, we expect to have doubled our GPU capacity versus the end of last year. Importantly, this investment falls within our historical CapEx budget range of 4% to 5% of revenue. This added GPU capacity, combined with our existing infrastructure, allows us to develop LLMs from scratch pre-trained using eBay's nearly three decades worth of e-commerce data. While we'll continue to take a hybrid approach, leveraging both commercial and open-source LMs, we expect more generative AI services to be powered by internal LLM in 2024, helping make buying and selling on eBay simpler, faster and more magical. In terms of customer-facing features, we continue to iterate on our magical listing experience that has already been used by millions of sellers, which we believe makes it one of the most widely used Gen AI features in e-commerce to date. Generative AI descriptions have rolled out to 100% of users in our top 5 markets. Adoption trends remain healthy. Customer satisfaction continues to be at high levels as we've expanded outside of English-speaking countries and content acceptance rates remain above 90% through the full rollout. The next phase of our magical listing experience is currently being tested by up to 5% of C2C sellers on an opt-in basis. This experience is even more seamless as it leverages our image recognition technology and generative AI to prefill or suggest product titles, categories and other item aspects using photos alone. We are excited to make this experience available to more sellers in Q1 as early feedback from beta users has been incredibly encouraging. I'm also pleased to see the potential benefits our AI tools can have on the billions of listing images across our marketplace as high-quality products photos can have a significant impact on conversion on eBay. Last quarter, we completed the global rollout of our revamped background removal tool in our listing flows, which leverages AI to effortlessly remove background noise from their product images. This tool has enabled sellers to create cleaner, more professional product images and it has received rave reviews from our customers. Building on top of this, we're now leveraging generative AI to make sellers product images even more compelling using our new background swap tool. This feature allows sellers to show their products alongside a wide variety of AI-generated backgrounds. For example, you can display a pair of Air Jordan sneakers on a hardwood basketball court or showcase your preowned hiking boots a top of Pictures Mountain Summit. We are currently testing this feature in beta with 1% of sellers on iOS devices, and I'm excited to see more sellers leveraging these tools to enhance their product images and drive conversion. Now turning to our advertising business, which delivered another strong quarter. Total advertising revenue grew 20% to $393 million, while first-party ads outpaced volume by 30 points. For the full year, we generated over $1.4 billion of total advertising revenue, up roughly 25% for the year and more than double our ad revenue in 2019. The over 2.9 million sellers adopted a single ad product during Q4, and we currently have over 900 million live promoted listings. Our standard cost per acquisition product remained the largest contributor to year-over-year ads growth in Q4. But notably, Promoted Listings advanced, our cost per click unit was the largest contributor to sequential advertising growth. Our CPC revenue and overall advertiser count benefited from the launch of rule-based campaigns in Q4, which allows sellers to automatically promote new listings based on rules that set for inclusion, such as price range, category, brand or condition. Additionally, during Q4, we launched a top-picks carousel for search. which provides a curated set of promoted listings ads comprised of hyper-relevant top-selling items from our highest ranked sellers. Thus far, buyers have been highly engaged with these ads providing added velocity for our sellers. Next, I'd like to share a few milestones around our sustainability efforts last year, starting with eCommerce. eCommerce continues to provide significant value for sellers and buyers during these uncertain times. In 2023, our marketplace generated nearly $4.9 billion in positive economic impact due to sale of pre-loved and refurbished goods. This activity helped avoid approximately 1.6 million metric tons of carbon emissions that would typically be used in producing new goods and kept nearly 70,000 metric tons of waste from going into landfills. Additionally, eBay remains committed to enabling more green energy on the U.S. electricity grid. As part of these ambitions, we have entered into agreements for three offsite renewable energy projects over the past four years. Our portion of the latest project is now fully operational, and the green energy produced will be roughly equivalent to the annual energy usage at our data center in Salt Lake City. Combined with our other two projects, this green energy covers over 40% of our global electricity consumption. And I'm incredibly proud that we source over 90% of our energy consumption for eBay controlled offices and data centers from renewable sources overall, and we remain on track to reaching our 100% renewable target by 2025. Now let's turn to impact. I'm always amazed by the tremendous generosity of the eBay community. eBay for Charity enables sellers and buyers to raise more than $43 million in Q4 and nearly $162 million for the full year. The eBay Foundation granted more than $19 million in 2023 to support historically excluded entrepreneurs and through our employee gift-matching program. I'm honored to be a purpose-driven company that supports communities around the world. For the fifth year in a row, eBay was included in the Dow Jones Sustainability World and North American indices. eBay was also included once again in Just Capital and CNBC's list of America's most just companies which measures corporate performance and efforts in areas such as climate change, DE&I and employee wellness. I'd like to take this opportunity to thank our employees for their incredible work and bringing our strategy to life and their tireless support in our community worldwide amid ongoing challenges in the global economy. In closing, while we continue to navigate a dynamic operating environment, I'm incredibly optimistic about our roadmap for 2024. Our teams are better organized for speed, allowing us to be nimble and make critical decisions more quickly. The foundational AI capabilities we developed last year make us well positioned to unlock the power of our data assets, fundamentally change the customer experience on eBay, and drive efficiency across the company in 2024. We will continue to invest in new and existing focus categories while also improving country-specific experiences like we did in Germany last year. We expect continued momentum in first-party advertising, despite lapping outstanding growth in the prior year, while we grow our financial service offerings for customers. And from a financial standpoint, we are in a strong position to expand margins, drive robust earnings growth and deliver healthy capital returns to shareholders in 2024, while still investing in high ROI initiatives to keep us on the path towards sustainable GMV growth. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

[Operator Instructions] Your first question comes from the line of Nikhil Devnani from Bernstein. Please go ahead.

Jamie Iannone:

Yes, thanks, Nikhil. I'll cover the GMV one and then I'll ask Steve to talk about margin. So, when we looked at the start of the year here, we talked about, January having some weather impact. You heard that from other folks as well and improvements kind of since then. You saw, January retail sales show the consumer is a bit stretched. But when we look at the overall plan that we have for the year, we feel really good about the strategy that we're executing on. When you look at focus categories, they continue to outperform the rest of the business. For FY '23, it was a 4% year-over-year growth, about seven points ahead of the business. We like what we saw in terms of the investments that we made in Germany and feel really good about the roadmap that we have in front of us, to drive growth in the business in Q3 or Q4, as Steve outlined. You know, I think importantly, when we look at the kind of underlying health of the business, right now we still have U.K. just in our technical recession, Germany commerce growth is still in negative territory. And so, we have those impacts from the market, but the underlying business and what's happening in the core, we feel really good about. And that's what makes us confident in being able to drive GMV growth as we outline there. Steve, do you want to talk about margin?

Nikhil Devnani:

Okay. Thank you.

Colin Sebastian:

Thanks and good afternoon. Good to see the start of performance at the end of Q4. A lot of changes in e-commerce over the past couple of years. Obviously customer acquisition costs are going up a lot, and there's more competition in the market from global players. So I was hoping, Jamie, you could talk about maybe the evolution of e-commerce as you see it and the impact of some of those changes on eBay, and if that leads you to any modifications in sort of the focus category strategy. And maybe related to that with Gen AI, across the platform and the magical innovations. Is there any way to quantify the impact of some of those tests, if not from a volume or revenue - so maybe from listings velocity, or engagement levels with sellers and buyers, testing the tools that might be helpful? Thank you.

Colin Sebastian:

Great, thank you.

Kenneth Gawrelski:

Sorry about that. Sorry, my fault. I was on mute. Sorry about that. Could you - I was hoping maybe you could talk a little bit about – you've talked about - some of the weakness you've seen and continue to see in the macro side, especially in Europe. Could you talk about if there are certain cluster segments, or even categories that you're seeing better trends, or improving trends relative to those that might be still under pressure?

Kenneth Gawrelski:

Thank you.

Justin Post:

Great, thank you. I guess I asked about buyers. You talk about your GMV getting back to growth. What will we see with buyers, and what are you seeing within the metrics as far as churn, or new activations that give you encouragement right now? Thank you.

Justin Post:

Great. Thank you.

Operator:

Your next question comes from the line of Doug Anmuth from JPMorgan. Please go ahead.

Jamie Iannone:

Yes, Doug. One of the things I'm excited by is that, we've had this model of building in a hybrid environment, and having extremely large private cloud, which has allowed us to manage our cost infrastructure, even as we've grown to, now close to 2 billion listings on the marketplace. But more importantly, the benefit of being able to take our 30 years of really rich data of e-commerce and combine that in a hybrid sense, in some cases with open source LLMs. In some cases LLMs that we built, in another case with commercial LLMs, makes us able to do those, in a really efficient manner, without really massively impacting our cost structure, in any meaningful way. Also, having good latency in terms of getting it back, and also being able to fine tune the quality of the data of what's coming back from an inference has been important for us. So, we've used across the board all different models. We started, in some cases, with some commercial models and then moved those to open source, or internal models and as we've refined them and gotten better. And that's been working out really well for us. Like I said earlier to the question about magical listing, when we look at the scale and volume of the millions of listings that we get each day and what consumers are hitting us with. Making sure that we have, an incredible amount of quality in terms of what's happening with the AI and ease of use. And thus far, really positive feedback from it. The models are working well. And what's great is that the team iterates every single week, to make them better. Steve, maybe you just want to cover how we're managing the cost.

Jamie Iannone:

The last thing I'd say is that, that refers a lot to how we're using it with our consumers. I would say internally across the organization, we're also pushing very aggressively, to drive productivity in the organization. So whether that be all of our engineers now using copilot tools as they do development in our customer support centers, we've been using AI to really change the level of engagement we have with customers and the productivity. I call it the success of our employees there, where we summarize contacts from customers to make it easier, summarize initial responses, all the things that we can do, when you think about our scale of, over a million self-service queries a week, in a customer service perspective, AI is incredibly helpful there. So those are just two examples of how we're using it across the board, to drive productivity in the organization.

Operator:

Your next question comes from the line of Lee Horowitz from Deutsche Bank. Please go ahead.

Jamie Iannone:

Yes, specifically on the low price, and if you're referring to like the [T-Move] machine, we really haven't seen a significant impact from them on our business. We really have a differentiated strategy, with what we're doing with our focus categories and going after non-new in season, for the business. And years ago, we really moved away from the low ASP, low quality items on our marketplace. And that hasn't been a focus for us for many years now. So I think, that's the first key differentiation I'd call out. The second is that, obviously some of the competition is spending a lot of money from a marketing standpoint in the marketplace. But one of the great benefits of eBay, is just the vast amount of organic traffic we have. The vast, vast part of our traffic either comes directly to the app or types in eBay.com. So, we're less reliant on paid from that perspective. The last thing I'd say comes back to kind of the CAC, CLTV question, which is, we can have one of the most healthiest CACs out there in the marketplace, because of our ability to drive CLTV, really driving by the moves we've made to not be focused on active buyers, but really on acquiring enthusiast buyers, or quickly moving new buyers up to, become enthusiast buyers. And because of the cross category shopping nature of the business allows us to drive that CLTV higher for us. And then finally, the opportunity to turn them into sellers, or to have buyers who sell on the marketplace also helps with that overall equation. And those are really key differentiators for us at business and why we feel really well positioned on a go forward basis in the e-commerce landscape.

Thomas Champion:

Hi good afternoon. Jamie, I'm wondering, if you could a little bit more about the C2C initiative in Germany, and maybe what's one or two key features that allowed you to, crack the code therein in that geography. I know it's been for a while. And then where do take this next, I mean presumably does it port to the U.K. How do you think about it, extending in other geographies? Thank you.

Thomas Champion:

Thank you.

Michael Morton:

Hi. Thank you for the question. Two, if I could. Just following up on the opportunities around AI, there's a view in the market that it allows you to run more sophisticated campaigns when you have large SKU offerings for big e-commerce platforms. So wondering, if you're seeing a benefit of that now, or if it's something that's always been a part of your business. And then we haven't seen the filing yet, but for the prior quarters, a lot of strength appears coming from China-based sellers. So just wondering about moving parts there, and the sustainability of that in 2024? Thank you.

Operator:

Your next question comes from the line of Alexandra Steiger from Goldman Sachs. Please go ahead.

Jamie Iannone:

Yes, so, when you look at it overall, when you talk about something like the U.K. or Germany, where the consumer is more stretched in cost of living challenges, et cetera. We tend to lean into the deals and values on the marketplace. So refurbished, used. And so it's not really impacting as much their overall business with us, more so in terms of the categories and where they're buying. So, I'd probably say like refurbished is a good example. Refurbished growth is up double-digits. We've talked in the past that, macro has pressured the, spend and move some of the enthusiast buyers, to mid-value buyers. That's a little bit why, we see the enthusiast number flat quarter-on-quarter. But we're pleased with that stability in this environment, because it means, the eBay value proposition is really resonating for those customers. In terms of driving frequency, it's one way where we're looking at things like all the programs that we have, whether that's safe seller, or stores, or the marketing that we put out to our customers. We're now able to use generative AI, to make that experience so much richer. The combination of our internal LLMs, and the data that we have about what's been happening over the 30 plus years. Combined with the ability to really build compelling marketing, to those customers, is coming to a whole new level. And Alexandra, I think we're just at the early stages of what's possible there. And what's exciting at eBay is the canvas that, we have to work with. When you think about, the number of consumers that have transacted with a given seller on the platform and have saved that seller. When you think about 100 million vehicles being in my garage, when you think about, the sizing data that we have for people for apparel, it gives us the unique ability to drive a lot of frequency on the platform.

Operator:

We have no further questions in our queue at this time. And with that, that does conclude today's conference call. Thank you for your participation and you may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Barvesh and I'll be your conference operator today. At this time, I would like to welcome everyone to the eBay Q3 2023 Earnings Call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. [Operator Instructions]. Thank you. I will now hand the call over to Mr. John Egbert, Vice President of Investor Relations. You may begin your conference.

Jamie Iannone:

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. Our teams delivered solid results during the third quarter. We generated gross merchandise volume of approximately $18 billion, while revenue grew 4% to $2.5 billion. We delivered non-GAAP earnings per share of $1.03, up 3%, while returning over $780 million of capital to shareholders. We achieved these results despite continued challenges in the global macro environment. Inflationary pressures and rising interest rates continue to weigh on consumer confidence and pressured demand for discretionary goods. As Steve will discuss in greater detail, we've observed softening consumer trends to date in Q4, and particular challenges in Europe, suggesting we may see a more muted seasonal uptick over the holidays. We are focused on controlling what we can control, being prudent about our costs, leaning into operational efficiencies, and continuing to drive innovation for our customers. Last quarter, I discussed our vision of reinventing the future of e-commerce for enthusiasts, which is focused on three strategic pillars; Relevant Experiences, Scalable Solutions, and Magical Innovation. And I'm pleased that we made meaningful progress against each of these pillars during Q3, which I'll discuss in greater detail. I'll start with our first pillar, relevant experiences. Our relevance in focus categories continues to drive underlying growth in our business, and we've observed a meaningful improvement in our growth relative to the market in every category we've invested to date. Focus categories grew roughly seven points faster than the remainder of our marketplace in Q3. Year-to-date, our focus categories have grown at approximately 4% year-over-year. For context, we estimate market rates of growth in those same categories were in the low single digits on average during the first half of 2023, as several of these categories are comprised of highly discretionary goods, which have been more acutely impacted by the challenging macro environment. We continue to push the envelope of innovation in motors, parts and accessories, or P&A, by developing features that enhance our customer value proposition. These investments have fueled mid-single digit GMV growth for P&A for three consecutive quarters, which is in line with industry growth for this segment of e-commerce in our largest markets. The eBay Guaranteed Fit program has contributed to this momentum by delivering a game changing level of trust. This program enables tens of millions of P&A shoppers to buy with confidence, knowing their auto parts will fit or they'll receive their money back, which has yielded a measurable uplift in conversion. Additionally, we have not observed a material impact on product returns, as our fitment checks have reduced the likelihood of buyers receiving a part that does not fit their vehicle. Given the success this program has had in the U.S., we were incredibly excited to roll out similar programs in the UK and Germany during Q3, where our unaided awareness among P&A shoppers is significantly higher than it is in the U.S. The Guaranteed Fit program is underpinned by multiple years of investment in P&A technology, including our acquisition of myFitment. We have been steadily onboarding sellers into the myFitment toolkit, to enhance their P&A listings with more robust fitment data, which improves findability for parts and protects buyers from unnecessary returns. By the end of Q3, roughly two-thirds of large U.S. P&A sellers have adopted the toolkit. On average, sellers are observing conversion uplift of double digits or higher for listings enhanced by this toolkit, driving incremental GMV for eBay. In early October, we reached a major milestone with 2 billion pieces of fitment data added to live listings using myFitment's technology. While this is outstanding progress, we continue to invest in simplifying the onboarding process, making it faster to import listings, and identifying more vehicle matches for our more than 550 million live P&A listings. During Q3, we continued to deliver relevant experiences for the collectibles category across a number of areas. We generated over $10 billion in GMV from collectibles over the last 12 months, and more than one in four eBay buyers purchased at least one collectibles item over the past year. These buyers carry some of the highest conversion, repurchase, and retention rates on eBay. And they are also among the heaviest cross-category shoppers on our platform, which supports our other categories. Our goal is to remain the world's most loved destination for passionate collectibles enthusiasts, providing access to the most compelling assortment of inventory across multiple categories in a high-trust environment. In service of that vision, during Q3 we launched direct submissions to the eBay vault. This enables any U.S. resident to send in trading cards valued at $250 or higher from their personal collections to the vault, even if they were not purchased on eBay. In July, to coincide with the National Sports Collectors Convention, the industry's biggest event, we announced Vault Enhanced Submission, which now enables us to gather large amounts of high ASP cards in person at tent pole events attended by top collectors. During one weekend at the National Loan [ph], we added tens of millions of dollars of assets under management to the eBay vault, including a signed Jackie Robinson card valued at approximately $1 million. During Q3, we also wrote out a revamped condition grading system for trading cards, which greatly improves transparency for collectibles in this category. New listings now carry more precise details, including whether a card has been professionally graded and the numerical grade, or one of several predefined card conditions. Existing listings will be also migrated to the new standard over the coming months. Sellers have been asking us for this feature for some time, and we believe it will drive improved trust for buyers, better and more consistent price realization for sellers, as well as more robust data and insights around individual card values for eBay. In response to our growing community of collectors and enthusiasts, last year we introduced eBay Live, an interactive live shopping experience within the eBay app. This feature marries eBay's unique scale with an engaging shopping experience that we believe enthusiasts across the collectibles, luxury and fashion categories are increasingly seeking. Buyers can interact with influential sellers and check out in real time without leaving the stream. And sellers have loved this tool as they can move items at scale and increase their sales velocity, while listing items as fixed price or as extended auctions. eBay Live is currently in beta, but we continue to expand its availability to more sellers and categories. While we've been thoughtful about the pace of onboarding as we fine-tune the beta experience, Q3 marked an inflection point as we hosted over 1,000 live events, saw our millionth buyer tune in, and grew GMV from eBay Live by 4x quarter-over-quarter. Now, let me turn to the second pillar of our evolve strategy, Scalable Solutions. We're pleased with the progress we're making with our eBay International Shipping Program or EIS, which makes cross-border trade more seamless and cost-effective for sellers and buyers. We continue to scale EIS during Q3 and now have over 400 million live listings from U.S. sellers shippable to international buyers in more than 190 countries. Sellers have had an overwhelmingly positive reaction to the new program, with customer satisfaction rates approximately 30 points higher than the previous global shipping program it replaced. In October, we launched Combined Shipping for EIS, which allows buyers to order multiple items from an international seller and pay one consolidated shipping fee. Q3 also marked another strong quarter for our advertising business. Total advertising revenue grew 24% to $366 million. First-party ads grew 36% to $345 million or 36 points faster than FX-neutral GMV growth. Over 2.3 million sellers adopted a single ad product during Q3, and we currently have over 850 million live promoted listings. Promoted Listing Standard, our cost per acquisition ad unit, was once again the largest contributor to growth in Q3, driven by continued optimization of placements, ad rate improvements, and the recurring benefit of the halo attribution change we discussed last quarter. Promoted Listings Advanced, our cost-per-click product, was the fastest growing product in our ads portfolio on a year-over-year basis. PL Advanced continues to benefit from the simplifying and automating of core elements of the campaign setup and management processes. In September, we launched Smart Targeting for PL Advanced, which makes creating and managing CPC campaigns easier than ever. Previously, these campaigns took a lot of time to set up and manage, as sellers had to manually select keywords and manage campaigns individually. Now, through Smart Targeting, eBay uses AI to manage keywords on behalf of sellers and optimize campaigns dynamically, all with just a few clicks to set up. As part of the Smart Targeting launch, we've also extended CPC ads to the Similar Items Recommendations module when users are viewing another item, using fully automated targeting and bidding technology. Moving to our third pillar, Magical Innovations. Last quarter, we discussed our Magical Listing experience, which represents the biggest transformation of the eBay listing process in our 28-year history. For over two decades, two of our biggest focuses were at odds with each other, making it as simple and fast as possible to list an item and ensuring listings are rich and comprehensive to maximize sales. Now Generative AI allows us to leverage our treasure trove of images and listing data to quickly create compelling listings. Early users have told us these capabilities will unlock more of the inventory in their closets and garages, which could ultimately keep more products out of landfills. The first phase of our magical listing experience leverages Generative AI to instantly populate the item description within the listing flow based on a product's title, category and other aspects. This feature rolled out to 100% of mobile app users in the U.S., UK, and Germany during Q3. In October, we extended the Generative AI descriptions to 50% of desktop users in these countries. The first phase of the magical listing experience has been incredibly well received by sellers as usage, adoption, customer satisfaction, and content acceptance rates have all been higher than expected. As much as sellers have enjoyed the first phase of Magical Listing, we believe the next iteration will be so simple and easy to use that all of our sellers will love it. This experience will enable sellers to point their camera at an item, take a photo, and eBay does the rest. Behind the scenes, we have powered this experience with our proprietary computer vision technology and Generative AI to seamlessly populate the description, category, and any other item aspects. Our camera-based magical listing experience has been in employee beta for several months and is currently in a limited beta with a number of large sellers. Feedback from our beta sellers has been extremely positive, as they found the new experience intuitive and easier to use. We are incredibly excited to bring this experience to more sellers over the coming months. As part of our magical listing initiative, we also rolled out a vastly improved background removal tool powered by AI during Q3. Sellers have told us that simpler, cleaner images of their products have a significant impact on conversion. Our enhanced tool has now rolled out to all users in the core listing flow, and sellers have told us they are already noticing significant quality and performance improvements from the revamped tool versus our prior version. Overall, I'm incredibly pleased by the progress we are making across all three pillars of our strategy. It is particularly encouraging to see how recent advancements in AI and machine learning can help us address more long-standing pain points for sellers and buyers on eBay in efficient and scalable ways. Next, I'd like to highlight the impact we're having on the communities we serve. In Q3 we released our Second Annual Small Business Report, which examines the sentiment of our global sellers. Despite macroeconomic uncertainty, eBay sellers are confident they can build their businesses and give back to their communities. In fact, more than half of eBay sellers expect their overall business to grow in the next 12 months, and over two-thirds expect their businesses on eBay to increase over the next five years. We also recently announced the winners of our Up & Running Grants. This program is currently in its fourth year and provides entrepreneurs with capital to invest in their businesses, along with training and mentorship to help them grow and thrive. The third quarter also marked the 20th anniversary of eBay for Charity, a program created as a way for people to give back during times of crisis. It has evolved to a global platform supporting countless organizations and causes, and raised more than $1.3 billion for nonprofits to date. In Q3 alone, the eBay community raised $40 million, up 16% year-over-year. All of these efforts demonstrate our purpose-driven community, and we are honored to be recognized for our progress. We're proud to be ranked on the U.S. News & World Report's inaugural list of best companies to work for. eBay was also recognized as a top corporate philanthropist by the Silicon Valley Business Journal and San Francisco Business Times. In closing, I'd like to thank our extraordinary eBay team for delivering another solid quarter and continuing to innovate for our customers. We made significant progress against our long-term objectives during Q3. Our accelerating pace of innovation is fundamentally changing the eBay experience, driving higher customer satisfaction, and paving the way for new growth and revenue opportunities. As the macro environment remains uncertain, we'll be balanced in how we invest in the future, prioritizing our highest ROI investments in order to generate long-term shareholder value. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

Thank you. [Operator Instructions] Our first question comes from the line of Colin Sebastian from Baird. Please go ahead with your question.

Jamie Iannone:

Yeah Colin, thanks for the question. So as you know with focus categories, we don't pre-announce the next categories that we're going into for competitive reasons, etcetera. We do continue to roll out new areas, as well as invest back into areas of the business. So, have a look at this quarter. We launched UK authentication for jewelry in our UK business. We're actually opening up an authentication center in Japan to allow for cross-border trade out of Japan, which is great. We launched or expanded in P&A, our guaranteed fit program. So that had launched just in the U.S. We've seen great results by creating a game-changing level of trust in that category, and we've expanded that now to UK and Germany this quarter and we're excited to see the impact of that on those markets. Our other categories like refurbished continue to do well. We've seen double-digit growth from that perspective. We launched some new enhancements in trading cards this quarter with the new classification system that we've put in place and new direct submission in the Vault. So we're going to continue to balance new focus category opportunities, expansion to other categories like we did with jewelry in the UK, and like we did recently with Streetwear, as well as investing back into focus categories and what's working, because we like the ROI of those investments. Steve, do you want to take the second part?

Colin Sebastian :

Great. Thank you. I appreciate that.

Ross Sandler :

Hey. Steve, just to follow-up on that macro comment. As you guys look across different discretionary categories and price points. Do you think it's just mostly like the macro conditions you described with the consumer weakening around GDP, etc. or are any of these new competitors like Temu and Shein having an impact at the low end as some of your peers have flagged? And then the second question is pleasantly surprised and happy to hear about the operating margin increase next year. So can you just flush that out a little bit for us, is that a function of lapping some of the international shipping investments and kind of discrete R&D investments? What other factors might drive that op margin increase next year? Thank you.

Jamie Iannone:

Yeah. No, I don't think it's in particular any specific other competitive thing. Like your question on Temu, we’ve not seen a significant impact from Temu or Shein on our business. When we look at our cross-border trade as Steve talked about, it continues to remain healthy. We believe that's because of our differentiated strategy and our approach. If you remember, we've been talking about this for a while. We've been strategically moving away from low quality, low ASP items, and that hasn't been a focus for us for years. I think the other big difference for our platform, Ross, is that we’re – a vast, vast majority of our traffic is organic. So I think as others are implicated by kind of the paid search or other marketing spend out there in the market, we're less so and more resilient, just because so much of our traffic is driven organically on the platform.

Operator:

Thank you. Our next question comes from Nikhil Devnani from Bernstein. Please go ahead with your question.

Jamie Iannone:

Yeah. So first on the initiatives, we're still obviously in planning for next year. But I'd say a couple of things. As Steve talked about the cost structure, one of the things we're looking at is how do we leverage AI and technologies so that our costs don't grow as our volume grows? So I'll give you an example of, one of the areas we've been investing a lot in is our customer support. And so if you look at like our GCX expenses, our customer support expenses, we've been rolling out conversational help bots over the course of the last few quarters, really advancing what we're doing there so that we can, focus a lot of our efforts into handling more calls and greater volume with higher customer satisfaction. As an example, we just launched that as a trial in Germany. We've had that live in some of our English markets. An example of some of the initiatives that we're going to do next year to manage the business and make sure that as Steve said, we're going after the growth opportunities in the business, while being prudent about our expense structure. When you think about focus categories and what's driving the success there, I would say it's a couple of things. One is that, if I look at like for P&A, for example, this is our third quarter of seeing mid-single digit growth, which is in-line with markets. And we're just now launching Guaranteed Fit, which is one of the big value propositions for us in that category, to our markets, our second and third largest markets in UK and Germany, where we do have a leading marketing position from that standpoint. And what we're seeing is that, the new work that we've been doing in Fitment, for example, has really been helpful. I talked about 2 billion new Fitment combinations based on my Fitment, and then our sellers are seeing double digit increases in their conversion. So to your point I think, we're doing a better job with our full funnel marketing in each category, acquiring enthusiasts into those categories. And then when we bring them on, we're having a better experience for them in converting them into sales and converting them into repeat buyers, because of the changes we've made in trust, because of the changes we've made in the experience. I mean, think about like our luxury category. This is the third quarter where we're seeing positive growth in luxury, even in this market, and you're seeing kind of what's happening and what others are saying. And it's because of the customer value proposition that we're bringing to these categories that we're seeing those results. So we're going to continue to innovate and push forward on that strategy, because we like the results that we're seeing and the consumers responding. And then we're enhancing the focus category work with a lot of site-wide investments. And those site-wide investments not only help us in focus categories, but they help us in our other core categories in the business. So I'd use the example of magical listing. It certainly helps sell a sneaker faster or a training card or a watch or a handbag, but it also helps sell a musical instrument faster or a board game or a book or all the things that people sell on eBay, because we're taking so much time out of the listing process that we're looking to unlock more of what's in people's closets, garages and basements with this technology. And we think that those investments will help both focus categories and our other core categories on the business.

Operator:

Thank you. Our next question comes from the line of Thomas Champion from Piper Sandler. Please go ahead with your question.

Jamie Iannone:

Yeah, thanks, Thomas. So look, on EIS, we love the success we're seeing in the program. It's making cross-border trade much easier on the program. eBay handles everything for the seller, the customs, the duty forms with buyers. We intermediate the returns, and we protect sellers from item not received complaints. So we continue to ramp the program over time. Half of our big three inventory is not available to be shipped internationally, so we're excited about the goal of this program, which is basically make it super easy for sellers, so they don't have to think, and we handle all of that cross-border trade for them. We continue to scale it during Q3. We now have over 400 million live listings. We launched some new features with the program, for example, the ability to combine shipping. So for example, I was with a seller or a buyer, a collectible buyer in Japan of trading cards, whose buying trading cards out of the U.S. Now he can buy multiple trading cards. We can combine them in a single shipping invoice, just making the whole EIS program a lot better. The last thing I'd say is that, when I look at the program overall for sellers, it has a 30-point higher customer satisfaction than the previous program that we've had. So all of the work that we did to bring things in-house last year, Steve talked about the financial implications, we're seeing that in CSAT and sellers, and we're seeing them react in terms of what's available internationally. Steve, do you want to handle the second part?

Thomas Champion :

Thank you, guys.

Lee Horowitz:

Great. Thanks so much. Two, if I could. So, the macro environment is obviously a massive challenge for the business at the moment, but as we look out to next year, can you maybe help us better understand what leverage do you think you have at your disposal to perhaps get volumes back to even modest growth if the macro environment proves to be persistently weak in the medium term? And then, just to contextualize some of the comments around slower cost growth into next year relative to revenue, I think investors will be pleased to hear it, but is this a more cautious stance on investment impacting in any way the pace at which you think you can roll focus category coverage out over the next 12 to 24 months, or are those investments already fully baked and the pace shouldn't be impacted in any way? Thanks so much.

Lee Horowitz:

Helpful. Thank you.

Michael Morton:

Thank you. I appreciate the question. If we could start maybe with authentication. For a few quarters now, you've highlighted as a headwind to gross margins, which makes sense. And I'd love to note, this is a line item that we should expect to see some leverage on as we go forward in the future. It's just tricky to think about as we're all like marketplace analysts, right, And there's really high income and margins. But when you're doing something like authenticating, like if you double the amount of shoes you're authenticating, like if people are touching boxes, its inventory. So any thoughts there on how we should think about that line item going forward in the next 12, 24 months? You don't need to get too detailed, but just the leverage aspect. And then just talking about the leverage that you saw in sales and marketing, I understand and appreciate that you have a lot of direct traffic, but so do some other marketplaces that have seen a lot of increased competition across social, in search. So just impressive to see that leverage and would love to – and I know you guys have invested in full funnel advertising over the last 12 months to really get your improved product out there. So just to help us understand how you're seeing that leverage when other marketplaces are having such a challenging environment would be great as well. Thank you.

Jamie Iannone:

Yeah, look, we've shifted our marketing strategy as we've talked about, and we're telling our story in new and different ways. Rather than focus on those large brand campaigns, we've been doing really targeted marketing spend to enthusiasts in our focus categories through this full funnel approach, using a real full funnel, mid, lower, upper. And all of that full funnel makes our lower funnel work harder. We've been doing partnerships with influencers, leveraging social media in better ways. And so the whole shift in our marketing strategy is not to just go after kind of active buyers and a big brand campaign, but really market the value proposition that we have on the platform with a really targeted approach to go after enthusiasts in that category. And that's why I think you're seeing the results that we've talked about in P&A, which is our third quarter of in-market lines of growth in the mid-single digits is because of the effect of the marketing programs.

Michael Morton:

Thank you.

Eric Sheridan:

Thanks so much for taking the questions. Maybe two if I could. Going back to the comments on the broader softening of the e-commerce environment, how does that typically show up in your model? When you think about what you've seen in the UK or Germany, is it slower buyer growth? Is it less velocity or repeat behavior on the shopping level, is it basket size? How should we be thinking about the signals you're watching for elements of the softening versus what might be a recovery as we move through Q4 and into next year? That would be number one. And then when you look about the seller services side of the equation, I know you've made a lot of progress on ads and payments and shipping. What do you think the biggest friction points still are to continue to solidify the seller services side of the equation for the marketplace, especially if the macro environment does become a little more uncertain and sellers are looking for assistance from marketplaces? Thanks.

Jamie Iannone:

Yeah, on seller services, Eric, it's really been across the board. If you think about our B2C sellers, it's been a key focus for us for over three years now. We started with eBay stores and a lot of innovation that we did when I first got back to eBay. Since then, we've been building out the ad portfolio, as we've been talking about each quarter. We continue to enhance our shipping profile and our shipping services. So one example is like in our P&A category, we now have the ability for a B2C seller to say, I have multiple warehouses that I can ship out of, and we'll ship out of the one closest to the buyer to get it faster to the buyer. In our German business, we just launched a more expedited returns process, which helps sellers manage returns in easier ways. EIS is helping them get more global scale demand. Payments is giving them more payment choices. So, when you think about it, I was just with a seller in Australia who sells tires, and he's like, I love the integration that you guys did with Afterpay, because in this economy, a lot of people buying a new set of tires are using the buy now, pay later solutions. So I would say it's a combination of all of the things that we've done that are really being great services for B2C. At the same time, we've been investing a lot in the C2C experience with things like the magical listings, really letting them list with a whole lot more ease. As I've talked about last quarter, the customer satisfaction for a brand new product there is amongst the highest I've ever seen. And what casual sellers are telling us is this is going to allow them to unlock more inventory because of how easy we're making it. And that's now scaled out to 100% of our business across U.S., UK, and DE. So we continue to invest a lot in our sellers. We continue to grow the number of live listings on the platform, and we continue to raise the customer value proposition that we're giving them on eBay.

Operator:

Absolutely. Our final question comes from the line of Deepak Mathivanan from Wolfe Research. Please go ahead with your question.

Jamie Iannone:

Yeah Deepak, the only real couponing and promotion stuff we do, we do it in conjunction with our sellers, where they are kind of funding those coupons. And that does work, and that's in partnership with our sellers. We sometimes also do that with our external promotional listings products that we've been talking about, one of our new ad products. But we really moved away from the couponing that was unhealthy that we did back in 2019. And we have no plans to reintroduce that type of couponing because it wasn't driving the type of ROI that we wanted. The bigger point for eBay overall has been the shift in strategy to focus on used, non-new in season and refurbished. Because when customers face these inflationary environments, they're continuing to look at eBay for better value. Our refurbished business is up double digits, because people are getting like-new products for 40% off. Our used business is growing faster than our new business, because of the demand that people see and the values that they can get on eBay. So we just did a survey, and we found that 90% of consumers that responded to the survey said that they purchased pre-loved goods on eBay in the past year. So our play on value is really the new strategy of what we're going after of driving those businesses, and that's what's resonating with our customers. Steve, do you want to talk about the cash implications of taxes?

Operator:

Thank you, ladies and gentlemen. We will conclude today's conference call. Thank you for participating. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. Thank you. It is now my pleasure to turn the call over to the Vice President of Investor Relations, Mr. John Egbert. Sir, please go ahead.

Jamie Iannone :

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. We delivered another solid quarter in Q2, exceeding expectations across all key metrics while investing in a disciplined manner to support our long-term objectives. Before I jump into the details around our second quarter results, I'd like to discuss the evolution of our strategy. Three years ago, I articulated our ambition of becoming the best global marketplace to buy and sell through a tech-led re-imagination of eBay. This would help us realize the enormous untapped potential of this company and put it firmly on a path to sustainable long-term growth. Since then, we've renewed our focus on products where we are uniquely positioned to offer meaningful choices and value for our customers. We've accelerated innovation to adapt to the changing needs of buyers and developed world-class shopping experiences in our focus categories. And we've changed our marketing strategy to support these experiences, pivoting to a full funnel approach aimed at attracting and retaining enthusiast buyers. These accomplishments make it a logical time to embark on the next phase of our journey. The foundational work of our tech-led re-imagination will continue, including our prioritization of non-new products, expansion of focus categories in ads and payments initiatives. And now we're raising the bar for innovation and have set our sights on an even more ambitious vision which is reinventing the future of e-commerce for enthusiasts only at eBay. We will achieve this vision in the coming years by focusing on 3 key pillars

Operator:

[Operator Instructions]. Your first question is from the line of Eric Sheridan with Goldman Sachs.

Jamie Iannone:

Yes. Look, we're excited about the evolution of our strategy here with reinventing the future of e-commerce for enthusiasts. When you look at the pillars, Eric, first on relevant experiences, we've had a lot of success with this to date, right? Our focus categories have been about creating relevant experiences in specific categories and we've seen a CSAT change, a GMV change, et cetera. And so we're expanding this now to kind of every site-wide experience that we have on the site, including a new design for Gen Z shoppers, including going to every e-mail, every notification. And frankly, new technology and tools enable us to do that. And so we feel really great about that and the impact on customer satisfaction and on GMV. On the scalable solutions, think about all the foundational work that we've done in payments and really being able to take that to the next level with things like financial services and building on that or eBay International Services. When you combine the scale of eBay in 100 countries with the GMV that we do, we're able to roll out programs like the EIS, eBay International Shipping, and open up that opportunity for our sellers and just drive a lot more cross-border trade and a lot easier experience for our sellers. And then think of magical innovations is really raising the bar on the experience that we're going to have on the site. I talked about some of the new AI products that we're launching. I mean, these are products that are out the gate having over 80% customer satisfaction, having sellers tell us this is going to unlock more inventory because you're making it so easy to list on the platform, products like live commerce. We've now done over 300 live commerce and sellers and buyers are getting really engaged in that. And so that opportunity for us is to drive that customer lifetime value for a buyer as well as attract those new buyers on the platform. What I'm excited by is really the intersection of a couple of these. When you think about the intersection of relevant experiences combined with scalable solutions, only eBay can provide that, and that's why we think we're going to be able to reinvent the future of e-commerce in a really uniquely eBay way.

Operator:

Your next question is from the line of Nikhil Divani with Bernstein.

Stephen Priest:

Let me give you a little bit of color on the year-over-year margin. Obviously, we have seen some modest deleverage associated with the current macro environment, which obviously reflected in our full year GMV commentary, and that's bringing a lot of pressure on margins. I would refer probably to 4 discrete items that have impacted 2023. Firstly, we've talked about eBay international shipping. This is both strategically important for us as we open up the aperture across 132 million buyers across 190 countries and gives us a great opportunity to drive more commerce through eBay and, at the same time, drive accretive operating profit dollars. As a reminder for you all, we are now the principal in that relationship versus an agent and, therefore, the accounting treatment has impacted our margins in '23. The second item will be around M&A. We have been more acquisitive of late to drive sustainable long-term growth in the business. And as I mentioned in our prepared remarks, we would expect EIS and M&A together to be a 1 point headwind to margins in '23. The third element, which is slightly nuanced is the FX fluctuations and lapping that we have seen or will see through the second half of the year. We did benefit from significant hedging gains in the fourth quarter of 2022, which we will ultimately lap. And in totality, that will equate to 0.5 point of FX-driven margin dilution for the full year and 2 points in quarter 4 alone. And then finally, obviously, the reinvestments in our business. We are seeing focused category momentum, 7 points of growth over the core platform, horizontal investments in search and buyer and seller experience are driving dividends. And obviously, the investments in our monetization initiatives like payments and ads is bearing fruit. And so as I think about margins for 2023, we have some unique items, as I've said, such as eBay International Shipping, the M&A and the FX fluctuations we've talked about. But we've also been investing in the business because we feel very confident about the trajectory of the business and how it's driving long-term sustainable growth. I think that as it pertains to 2024, I'm not going to get ahead of myself. We've given you a lot of color for the third quarter. We've added some color for the full year. We are -- remain committed, as I mentioned to Eric, to the medium-term goals that we've put out at our investor event. This will really -- the timing will be the function of the duration and severity of the macro headwinds we're currently facing. And obviously, we'll give additional color for '24 in the quarters ahead.

Jamie Iannone:

First of all, our strategy when we go back to it in terms of relevant experiences on the site, we're doing a lot of work outside of just the work that we're doing in focus categories. In fact, the majority of our investment is going there. So if you think about the magical listing experience, that's going to help unlock C2C inventory across every category on the site. The second thing I would say is that when you think about our model and what we laid out, we have a real multiplier effect on our buyers. So as we continue to roll out focus categories and as we're seeing success there, that actually helps lift all tides across the eBay marketplace. So take a sneakers buyer. The average sneaker buyer comes in and buys sneakers over $100, they're going to spend $400 in sneakers but then $2,000 on the rest of the platform outside of that. And that nature really allows us to help grow the overall marketplace, including our non-focus categories. The last thing I'd say is when you think about things like the scalable solutions that we're building, take eBay international shipping, that's going to help every category. That's going to help focus categories like handbags coming out of Japan, et cetera, but it's also going to help our non-focus categories. And when you think about cross-border trade on the platform, it's really 1 in 5 transactions or 20%. So it you a lot of opportunity, both in our focus category work and the non-focus category work, and we feel committed and confident in our ability to get those to fly in the medium term.

Michael Morton:

I would like to maybe start off with EIS being deployed in the U.S. currently. If we could talk about any contributions you're seeing at this point to U.S. GMV. And maybe some color on timing and kind of contribution expectations going forward would be great because it seems like it's a program that you're very excited about. And then a second question, we've talked about the full funnel marketing spend in the past, and you've mentioned millennials and Gen Z and the active buyer numbers have been improving. I was -- would love to dig down on those cohorts maybe a bit or if you could kind of bucket the strength you're seeing in active buyers. Are you having some effectiveness in converting the millennials and Gen Z who have maybe grown up in a different era of interacting with marketplaces?

Operator:

Your next question is from the line of Ken Gawrelski with Wells Fargo.

Jamie Iannone:

Yes. So look, on the first one, clearly, inflation and rising are impacting discretionary demand. I think what makes our platform more resilient is that consumers can come here and find amazing values. So if you think about the refurbished category, which has been a focus category of ours, that grew double digits year-over-year and was the second largest contributor towards our focus category outperformance. In general, on the platform, we're seeing used growing faster than new. And that's what's great about eBay on the buy side. On the sell side, it is also a place to make extra income. And so we're really leaning into what we're doing on a C2C standpoint, including the new Magical Listing rollout because tougher economic times are an opportunity for us to bring more sellers onto the marketplace. When you think about the kind of a lower ASP market or the cross-border trade, as you mentioned, we noted that this quarter, we're actually seeing some strength in the cross-border trade of our business. That has to do with supply chain easing up and there being an opportunity for those sellers to export items in. And so we're actually seeing good health in what we're doing from a cross-border trade business. We've been doing a lot to enable that and make it easier. I talked about eBay international shipping, but we've also been rolling out new capabilities and payments over the past couple of quarters. with buyer and seller FX to make the payments process of that easier. And we've been working on with some of our sellers to do forward deploying of our inventory which has just helped kind of ease some of that supply chain pressure. So overall, we feel really good about the values that people are getting from this and the initiatives that we're investing in to make it easier for our sellers to export items throughout the globe.

Deepak Mathivanan:

Two quick ones from us. First, can you add additional color on the factors driving strong trends in the first-party ads business? Are sellers also seeing additional performance gains or is this primarily driven by expansion in ad load in some of the areas of the website? And then second, on M&A, Steve, you alluded to kind of being acquisitive, how should we think about the appetite over the next few quarters? Are there any specific areas where you think there are additional opportunities?

Stephen Priest:

Yes. So we've been very thoughtful and considerate as we've looked to M&A, it's really to structurally improve the core marketplace. And so if you think about where we've , my shipment is really helping fuel and support the growth in parts and accessories, our biggest focus category. We recently launched in the TCG Player, which is supporting our trading card business. And Certilogo, which is the most recent acquisition really supporting our fashion category. So we've been very, very thoughtful about the entities that we lean into and partner with or we ultimately buy to really support the long-term sustainable growth of the platform, and we'll continue to be thoughtful. And as a group, we look at each potential acquisition on its merits and make the best decisions to drive long-term sustainable growth and shareholder value.

Operator:

Your next question is from the line of Tom Champion with Piper Sandler.

Stephen Priest:

Tom, I'll pick up the first one and the third. I'll let Jamie comment on the second. So the first one with regards to international versus U.S. GMV dynamics, there's a couple of items that are worth reflecting on. As a reminder for you all, the GMV is reflected on the geography where the seller is domiciled, i.e., where the sale takes place. So first, it's associated with lapping dynamics. If you recall, Europe, in particular, got hit harder as we sort of went through the awful events of the war in Ukraine and the economic fallout associated with that. And they got hurt earlier, and we started to lap through that versus the U.S. in the first half of 2022. Secondly, we saw the supply chain challenges that we're also lapping and the easing of those supply chains, particularly for our cross-border business that Jamie talked about earlier is helping drive international GMV momentum as we have an increase in cross-border trade, obviously fueled by some of the benefit from eBay international shipping. The one thing I would say on the overall GMV basis, I continue to be very enthused by the overall level of momentum because we're leaning not only to focus category in the U.S. but also internationally, and those investments are bearing fruit across all of our geographies. Jamie, do you want to just touch on the other question before I talk about capital...

Stephen Priest:

Tom, specifically pertaining to your question on capital returns, we remain committed to the return of 125% of free cash flow as we talked about to shareholders through stock buybacks and dividends between '22 and '24. As I look over the last 18 months, we've returned $4.4 billion to shareholders, which is 130% of free cash flow. Specifically around certain assets that we hold, I'm not going to share any specific details on any of our specific investment stakes, but it will continue to be our priority as it's always been to drive a disciplined approach and to maximize shareholder value through the investment portfolio.

Operator:

Your final question comes from the line of Doug Anmuth with JPMorgan.

Jamie Iannone:

Yes. No, Wes, we're seeing good supply from our sellers in that category. I mean if you look overall in the business, supply is in great shape. We did.9 billion listings on the platform. We have over 500 million in P&A. The key for us has really been helping sellers make sense of -- I mean helping buyers make sense of all that inventory. And as we roll out the new fitment changes, as we've rolled out guaranteed fitment, we're finding that the experience is just so much easier for all of our segments of key buyers, whether they're now using the My Garage feature on the site. We just launched these 2 new AI features which enable us to make the buying experience so much better. Once we know your car, we can tell you, here's the key upgrades to do. We can help you with things like your engine codes. And look, this is the second quarter of mid-single-digit growth, which we believe is at market rates of growth. And so we're feeling great about that. As I said, our buyers in P&A are growing double digits faster than the rest of the markets when you look at our new and reactivated buyers. So we're pleased with what we're seeing. We're continuing to invest and roll out new features and new capabilities. We're seeing particular strength in CBT right now. But overall, really pleased with what we're seeing in our motors P&A, and frankly, across our focus category portfolio.

Operator:

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be question-and-answer session. [Operator Instructions] John Egbert, Senior Director of Investor Relations, you may begin your conference.

Jamie Iannone:

Thanks, John. Good afternoon, everyone, and thank you for joining us today. I am pleased with our strong performance during the first quarter. We delivered better than expected results across our key financial and operating metrics despite continued challenges in the macro environment. Our emphasis on non-new-in-season goods, advancements of our focused category strategy, site-wide innovation for sellers and buyers and investments in trusted experiences have enhanced the durability of our marketplace and kept us on the path to achieving sustainable long-term growth. We generated over $18.4 billion of gross merchandise volume in Q1, representing a 3 point acceleration in organic year-over-year growth sequentially and over 4% organic growth versus the first quarter of 2019. Revenue eclipsed $2.5 billion and grew 2% organically, outpacing GMV by roughly 5 points, primarily due to contributions from advertising. Our operating margin was 29.6% and we delivered non-GAAP earnings per share of $1.11, up 5% year-over-year. Our financial results provide clear evidence that our strategy is working and driving underlying growth in our business. Our progress is most evident in focused categories, which outgrew the rest of our marketplace by roughly 8 points during Q1 and grew low-single digits year-over-year overall. Our largest focused category, motors, parts and accessories, or P&A, accelerated a few points sequentially and was the largest contributor to GMV growth in Q1. Based on the data we are seeing, we believe P&A grew at market rates of growth for this category during the quarter, which is a testament to the results that are possible when we are laser focused on driving customer satisfaction and awareness in even the largest categories. In February, we launched the eBay Guaranteed Fit program in the U.S., which enables millions of P&A shoppers to buy with confidence knowing their auto parts will fit or they'll receive their money back. We accompanied the launch with a full funnel marketing campaign across TV, streaming video, audio and social channels to drive awareness and consideration of this compelling trust unlock. We're pleased with the initial reception of the Guaranteed Fit program and are excited to extend it to the U.K. and German markets later this year. We also recently began a major revamp of how shoppers buy tires on eBay. We overhauled our tire installation experience on desktop and mobile web in Q4 and expanded the improved experience to mobile apps in Q1. Now buyers can more easily evaluate installation options as they browse and compare tires that fit their vehicle. Across five major markets, buyers can ship tires directly to one of over 10,000 local auto shops for installation rather than having to take delivery of these hard to transport items. While we are still in the early stages of connecting online sales to off-line installations in P&A, these initial launches are already driving a meaningful uplift in the attach rate of installation services to tire purchases. Within our focused categories, our eBay Refurbished program also continues to be a standout. In the current economic climate, our range of refurbished goods has proven to be more valuable than ever and consumers are increasingly aware of the sustainability benefits of purchasing these products. Building off its record holiday quarter, growth in eBay Refurbished GMV accelerated notably during Q1, posting double-digit year-over-year growth. We added dozens of new categories to the program last quarter, including computing and video game peripherals. We also signed up more brands and OEMs in existing categories to sell refurbished inventory directly on eBay. Additionally, in recent months, we've taken steps to make the onboarding process for small business sellers in the eBay Refurbished program faster and more scalable by automating elements of the sign-up and eligibility check processes. This is important because small business sellers make up the majority of refurbished goods sales on eBay and bring some of our most unique and valuable inventory to the platform. Our work to improve the site-wide experience on eBay continued to build momentum in the first quarter. While eBay has operated a core AI platform for years, an upgrade to this platform last year has meaningfully accelerated our AI development philosophy across multiple areas of our organization. In search, we continue to improve retrieval and ranking using state-of-the-art deep learning models and better leveraging the vast amount of structured listing data on our marketplace, which delivers more relevant choices to our buyers. A series of search deployments we made during Q1 led to a measurable uplift in conversion that we estimate would amount to roughly $1 billion in incremental GMV on an annualized basis. This demonstrates the value that a relatively small number of AI-powered enhancements can generate for a marketplace of our scale. Another key area of foundational improvement is our proprietary computer vision technology. With 1.8 billion live listings and billions more images from historical sales, eBay is one of the few companies in the world training deep neural networks using tens of billions of images directly linked to commercially relevant data elements. Leveraging these assets, our product team recently reengineered our visual similarity models, which has dramatically improved the speed and efficacy of image search on eBay. This change has driven more relevant search results and a substantial increase in adoption, image query volume and purchase behavior. It also enables new features like the See Visually Similar results module, we are testing within select subcategories of furniture and home decor. These capabilities are powerful unlocks in helping eBay buyers discover more of the unique and hard to describe items on our marketplace. For example, if you have an antique vase that breaks, you can now just take a picture of the pattern and find an exact match for a potential replacement on eBay. Our advancements in computer vision also have profound implications for the selling experience on eBay. Over the coming quarters, you'll see us testing new experiences, harnessing our improved visual and contextual understanding of product images to assist our sellers in listing products. For instance, sellers will soon be able to pre-populate categories and item specifics from a single photo, enabling them to spend less of their time inputting inventory and more on growing and managing their businesses. eBay is also well positioned to benefit from recent leaps forward in generative AI capabilities. We are in the process of integrating the ChatGPT API into our core listing flow and will soon launch a beta release of a plug-in that enables sellers to automatically generate text for their item description based on known product attributes. Generative AI has a number of exciting use cases outside of descriptions, and we're exploring numerous potential applications across our marketplace that can enable truly magical customer experiences. I'm excited to share more about these initiatives with you over the coming quarters. For store sellers, we recently launched a centralized tool, making it more seamless to publish and promote their listings across social media. This new feature is integrated into the Seller Hub and makes it easier to bulk post across several popular social channels with content that is automatically optimized for each medium, including engaging carousels that allow shoppers to browse multiple listings in a single post. Thousands of store sellers have already linked their social accounts to date, and on average, they observed 40% higher click through rates on content published using this new tool versus what was previously available. Last quarter, we talked to you about the February rollout of our new eBay International Shipping program, which makes it as easy for eBay sellers to ship from Silicon Valley to Sydney as it is to ship to St. Louis. The revamped program is not only making cross-border trade more seamless and cost effective for sellers and buyers, but it also improves trust in eBay's coordination of the end-to-end shipping process. During Q1, we fully ramped this program to sellers in the U.S. and migrated 100% of listings from our previous global shipping program. While its early days for the new program, we're already observing a positive impact on customer satisfaction. Over the long term, we believe eBay International Shipping will increase cross border inventory available to buyers, improve sales velocity and price realization for sellers and ultimately drive incremental GMV. Now transitioning to advertising. Our advertising business continues to deliver robust growth at scale despite challenges in the broader digital ad market. Strong demand for Promoted Listings drove first-party advertising revenue of $285 million, up 31% or more than 30 points faster than GMV growth for the third straight quarter. Total advertising revenue grew 23% to $317 million. During Q1, over 2 million sellers adopted single ad products, and we reached more than 750 million live Promoted Listings. Our standard CPA product was once again the largest contributor to advertising growth, benefiting from continued optimization and performance improvement. In Q1, we rolled out a new machine learning model for ranking CPA ads that improved sales philosophy for sellers and conversion for buyers. This ranking model also enables us to evaluate the expected performance of multiple ad products alongside each other rather than making ad-serving decisions in silos. This change will be beneficial as we continue to expand our multiproduct advertising portfolio. Our emerging Promoted Listings products also continued to scale and grew mid-single digits quarter-over-quarter during the seasonally slower Q1. This growth was led by Promoted Listings Advanced, our cost per click format, which benefited from an upgraded relevance model deployed in the quarter as well as the inclusion of CPC ads within more of our existing ad services. Now let's discuss the impact we're having on the communities we serve. I'm pleased that we continue to make meaningful progress on our key ESG initiatives. Just yesterday, we published our seventh Annual Diversity Equity and Inclusion report. This report provides insight into our four strategic objectives

Operator:

[Operator Instructions] Your first question today comes from the line of Nikhil Devnani with Bernstein. Your line is now open.

Stephen Priest:

Hi, Nikhil. Steve here. Great to speak to you, and thank you for the question. As you are more than aware, we're not fully guiding the full year at this point due to the uncertainty of the current macro environment. But let me give you a little bit of color with regards to the expense commentary that we shared on the call. Last quarter, when we talked to the markets, we talked about targeting total expense growth for 2023 of approximately 2% increase with onetime factors, as we talked about, like M&A and the rollout of eBay International Shipping, contributed a significant amount of that year-over-year expense growth. The mid-single digit guide that we provided you with today assumes the current weaker U.S. dollar exchange rate that we've seen continues for the remainder of the year. This FX impact accounts for the majority of the delta versus the prior outlook. And obviously, we will have corresponding positive impact on both GMV and revenue. In addition, the top line performance of the first quarter, we are pleased with the levels of execution that we had during the quarter, is providing us with incremental investment capacity for 2023. And so you're seeing us continue to invest in the business because we're getting such a strong return on investment as we go forward. And this is really aiding towards our drive towards long-term sustainable growth.

Stephen Priest:

As you can imagine, Nikhil, we haven't guided long-term margins. I think what I would say is I'm very encouraged by the earnings power of eBay, both from ultimately driving improved net earnings and ultimately strong free cash flow coming over the business. The things that we're thinking about as we go in '23, margin will be a function of the underlying GMV momentum, which is ultimately impacted by the macro environment that we operate in. As we’ve talked about, the impact of recent M&A where we’re leaning in on the EIS program, that will drive long-term increases in operating income for eBay will drive about 100 basis points of margin dilution in ‘23. And as we’ve said, we’re going to continue to lean into the short term and drive operational efficiencies through the structural cost program. And we’re well on track and slightly above the $100 million that we laid out for 2023. That enables us, as I said earlier, to reinvest in the business and drive long-term sustainable growth for eBay.

Operator:

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.

Jamie Iannone:

Yeah. Look, the first thing I'd point to, Eric is the 8-point outperformance of focused categories over the rest of the business. In these areas where we're investing in, we're seeing the right types of growth. When I look at a category like P&A, which is our largest full funnel marketing to date, you look at the results this quarter, where we're at market rates of growth and we're really excited by what we're seeing there. I think enthusiast buyers as well in the quarter and active buyers were strong. For the third straight quarter, we had an aggregate new and reactivated buyers growing positively. And our new buyer growth was positive for the first time in eight quarters. And let me give you an example of how that ties into marketing. So in P&A, where we've had this large full funnel marketing campaign, new and reactivated buyers actually grew double-digits faster than the overall marketplace during the quarter. So this has been a shift for us that we’ve been talking about all along, which is moving from just lower funnel optimization to more full funnel, driving long-term consideration, which takes a little bit of time. But the results that we’re seeing off of that spend are great and are creating a really healthy business as evidenced by what we’re seeing in the focused category outperformance.

Wesley Sanford:

Hey. Thanks for taking the question. This is Wes on for Doug. Maybe one for Steve and one for Jamie. I think the gross margins were a little bit of a bigger headwind sequentially this quarter than we were thinking on the EIS rollout. Did you roll it out faster than you had originally anticipated and how should we think about gross margins as we go through the rest of the year? And then maybe one for Jamie a little separately but had been talking a lot around eBay Live and kind of what you're doing in the collectible space. So was just hoping to learn a little bit more about what -- how you're looking to go after the category beyond trading cards and comics looking ahead. Thanks.

Jamie Iannone:

Yeah. And then on live commerce, this is something we began experimenting with Q2 of last year, hosting a few pilots and experimenting with it throughout Q2. We did expand it into luxury in Q4 with some events for handbags and jewelry. We also created a central hub and discovery entry point for our live commerce events in Q4, which means now users can subscribe to a specific channel or receive updates and notifications of upcoming events. This year, we hosted about 15 eBay Live events with over $500,000 of in-event GMV across collectibles and luxuries. And at the end of March, we started hosting our first short auctions, think like 30 seconds for handbags and collectibles. In general, these are getting 5,000 and 15,000 buyers. We're seeing great engagement from that standpoint so we're going to continue to pilot and learn and experiment with this technology, but exciting initial results thus far.

Michael Morton:

Thank you. Thank you for the question. I was wondering if we could maybe dig a little bit deeper on the spend buckets you're clearly investing in the business and the returns you're seeing there. And also how it could be feeding into the improvement and the decline rate for active buyers? And any color you could give us on the buyer level maybe inflecting, starting to grow going forward? And then just the second question is, there's this macro environment we're all living in. Any changes in behavior you're seeing around your luxury products, trade down, new buyers coming who might have purchased new? Anything around that would be great. Thank you.

Jamie Iannone:

Yeah. Just in general, our luxury and fashion focused categories and on aggregate accelerated in line with our business overall. We continue to expand brand coverage on the platform, et cetera. So think about kind of very similar to what I said last quarter, which is some, a little bit of ASP pressure really made up for by the volume that we’re seeing on the platform. In general, our shift to non-new-in-season and that focus has really helped us in this environment because people are looking for values. And the ones that they can get on our platform make us much more resilient from that standpoint.

Operator:

Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Your line is now open.

Stephen Priest:

No problem, Deepak. So in terms of eBay International Shipping, both got really great strategic benefits but also good sort of financial benefits. So if I take a step back, think about our cross-border trade, which accounts for about 20% of the sales that take place on eBay. And as we came into the eBay International Shipping program, only about 50% of our 1.8 billion listings on the platform are available for global trade. And so we looked through the lens of how do we increase the level of inventory to the global buyers on eBay? And eBay international Shipping certainly facilitates that. The beauty of the program is that we have gone from an agent to a principal. It gives us much greater control over the overall process. So it enables us to drive greater levels of trust, particularly for our sellers. It enables us, with the size and scale of eBay, to leverage much better contracts in terms of the shippers. And it also enables us to pass through any increases in cost through to the shipping program and the sales that go forward. And so as you said, there's an accounting change because of the agent to principal relationship where we recognize both the gross revenue and the cost. And previously, it was net revenue. But as we said in our prepared comments, it's a good -- it provides good earnings dollars growth for eBay, and we would expect by the fourth quarter for it to mirror the margin profile of the wider business at that point. Jamie, over to you.

Deepak Mathivanan:

Great. Thank you so much.

Trevor Young:

Great. Thanks. First, just dovetailing on one of the earlier questions on luxury. Just bigger picture, what are like the two or three things that might bring luxe buyers and sellers to eBay versus some of the smaller competitor platforms that are focused on that category? Just trying to understand like what helps eBay win. And then on a different category, home and garden, I think it's still 1 of the top five on the platform but hasn't really migrated into focused. Is that an opportunity over the next two to three years to maybe carve out some pockets within, therefore some more curated selection and unique inventory or is that just too broad of a category to really drive those enthusiast buyers?

Trevor Young:

That’s helpful. Thank you, Jamie.

Lauren Schenk:

Great. Thanks. And two, if I can. Just one on the expense side. Is there a way that you could help us think about what percentage of your expense base is not denominated in U.S. dollars? I just thought it would be a relatively small portion. And then secondly, it's encouraging to see that new and reactivated customer growth is up. But just given the slight decline in buyers, I mean, consistent with last quarter, does that imply churn? Is that as well? And if so, is that isolated in any specific categories? Thanks very much.

Jamie Iannone:

Yeah. Lauren, I would say our active buyer count is exactly where we expected it to be. I’ve been talking for several quarters about some near-term pressure that we thought we would see based on the macro environment, but that I thought we would see stabilization in the metric, and that’s exactly what we’re seeing here is that we’re acquiring buyers in the right way now. We’re building and turning them into enthusiast buyers, and our enthusiast buyers are buying 70% of the GMV on the platform. And so we’re excited that we saw kind of a more modest change in stabilization. And the P&A stats that I talked about with buyers is also really encouraging because it shows when we invest, we’re actually seeing what we want to see with new and reactivated buyers on the platform. So as things change from that standpoint, we’ll continue to update you, but we actually feel really great about what’s happening on the buying side.

Operator:

Your next question comes from the line of Stephen Ju with Credit Suisse. Your line is now open.

Jamie Iannone:

Yeah. Look, we've always considered shipping as variable, so we can pass through those expenses to the seller from that standpoint. What we give them is the benefits of scale. So when you look at eBay's scale advantages in being able to work with providers from that standpoint and being able to manage things efficiently. When you buy your label through eBay as an example, you're getting a very good discount versus what you would pay if you just walked in and tried to do those shipments on your own. And so we're going to continue to bring our scale to benefits like this. This one is really about opening up that inventory. So we wanted to almost be invisible to the seller based in the geography that they're shipping internationally. So the example I talked about is, if I'm sitting in Manhattan, I can ship a product that's actually going to Spain, but it will feel like I'm shipping a product to Albany because we take care of everything in the background. So it's really about that 20% of GMV that we do in cross-border. As Steve said, less than half of our inventory is available to go across borders. And this is really about creating that unlock. And it's, frankly, one of the powerful weapons of eBay is because as even a casual seller on the platform, we open up such massive worldwide scale demand for you in 190 different countries. So think about the EIS kind of similar to ads or payments. It's us leveraging our scale for the benefit of our sellers.

Operator:

Your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is now open.

Stephen Priest:

Hi, Lee. I'll pick up the macro question. Obviously, we've extensively talked about the impacts of macro on our first quarter earnings, the perspectives of the guide for the second. We haven't seen any discernible change in the underlying dynamic macro environment. From a geographical perspective, as you recall, as we came into the end of the first quarter last year and the awful events of the war in Ukraine, and Europe started to get impacted sooner than the U.S., particularly because of energy prices and the levels of consumer discretionary spend pressure. Obviously, that's caused some differential in the lapping behaviors. We've gone through and start to go through 2023. But no underlying discernible change in the overall macro environment.

John Egbert:

Operator, can we do one last question, please?

Ygal Arounian:

Hey, guys. Thanks for squeezing me in. One more on the advertising side and then maybe I'll just ask about buybacks. So advertising is coming in really nicely ahead of GMV. It looks like it's accelerated nicely ahead of our expectations. And obviously, we've got the legacy products and some of the newer products coming on. But has your outlook on the opportunity changed? Is it being pulled forward to a certain extent, maybe the macro environment leading to more sellers spending more on advertising to try to drive sales? So any incremental color on kind of what's moving the needle there? And then just on buybacks, expectations or use for the rest of the year, how you guys are thinking about it? Just any other color there.

Stephen Priest:

Yeah. Hi, Ygal. What I would say is that our first priority, as we always say is to invest in the long-term growth of the business through our build, buy, partner framework and because we see that as the best opportunities to drive long-term returns for shareholders. The beauty of the eBay model is because of the strength of the financial model and the strong free cash flow that we [indiscernible] gives us the ability to do both in terms of investing in the business and return capital. As you know, we returned $250 million to investors through buybacks in the first quarter in addition to the $0.25 dividend. We haven't guided our capital returns for the rest of the year, but we will continue to be balanced and thoughtful about the approach. We have committed to offset dilution and we'll continue to do that through the year. And then beyond that, we'll be opportunistic in both the timing and magnitude of any further capital returns.

Operator:

This concludes today's conference call. Thank you for attending. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. It is now my pleasure to turn the call over to Mr. John Egbert, Senior Director of Investor Relations. Sir, please go ahead.

Jamie Iannone:

Thanks, John. Good afternoon, everyone, and thank you for joining us today. 2022 was a year of consistent execution for eBay, as we made significant progress against our long-term objectives. Our focused categories drove underlying growth in our business, as we expanded global coverage for our 16 million Enthusiast Buyers. In motors, parts and accessories, or P&A, growth accelerated as we improved our fitting capabilities, increased supply of OEM parts and enhanced trust signals for buyers. We extended authentication to new categories like trading cards and fine jewelry and opened authentication centers in several new countries for handbags. We opened the Vault to store and usually transact valuable items and adoption has grown steadily week over week. We retired legacy technology, simplified the architecture of our core services and improved our tech velocity. Our advertising growth accelerated as we scaled our three newer Promoted Listings products, optimize performance and automated more elements of campaigns. We expanded our financial services portfolio by adding FX conversion, new forms of payments like Klarna and Afterpay, faster debit card payouts and a digital wallet. And we balanced our investments in innovation with prudent cost discipline to establish a strong foundation for sustainable profitable growth for many years to come. Now turning to the fourth quarter. We delivered solid results in Q4 as our key financial metrics came in ahead of expectations despite the ongoing macro uncertainty. We generated over $18 billion in GMV and more than $2.5 billion in revenue. We delivered an operating margin of close to 30%, while making critical investments in product and marketing to support our long-term growth strategy. Non-GAAP earnings per share for the quarter were $1.07, up 2% year-over-year. Our focused category strategy was a major component of our strong financial performance during the fourth quarter. Focus categories grew more than 7 points faster than the rest of our marketplace during Q4, which was 2 points faster than the prior quarter. Establishing a game changing level of trust between sellers and buyers has been an important driver of the momentum in our focus categories. Authenticity Guarantee enables trust in our luxury categories like watches, sneakers, handbags and fine jewelry. We have observed notable turnarounds in GMV growth since we launched authentication, improved the product experience and grew awareness to the great inventory in these categories. In aggregate, our luxury focused categories have grown at roughly double-digit CAGR since Q4 of 2019, proving these investments have been highly effective. We dramatically improved trust in our refurbished offering by introducing warranties and half of returns, which attracted more brand and new categories to our marketplace. Those investments paid dividends in Q4 and with positive year-over-year GMV growth and the biggest sales week ever for refurbished goods during Cyber Week. Trust in our motors, parts and accessories category is most reliant on equipement for ensuring the compatibility of auto parts with a specific vehicle. During the last few months, we have taken major steps forward with our fitment capabilities. We acquired myFitment in Q3 to help sellers populate their listings with accurate fitment data, which ensures compatibility for buyers. In Q4, we began making myFitment's technology accessible to all buyers, starting with a pilot group of P&A sellers. Listings enhanced by this technology are seeing a measurable uplift in conversion, and we will expand this program further in 2023. Our significant investments in fitment over the past few years allowed us to launch a prominent Fit Your Vehicle badge in Q4. Similar to the Authenticity Guaranteed logo, we show on luxury goods, this badge provides a clear indication of which parts fit your vehicle throughout the buyer journey across search, merchandising, view item and checkout. This is no small feat with over 500 million active P&A listings on eBay and the increasing complexity of vehicles in the marketplace. These advancements have significantly elevated our capabilities for P&A shoppers, and I'm pleased to share a new program we launched just last week called eBay Guaranteed Fit. This program is the breakthrough for trust and P&A that Authenticity Guarantee is in luxury and warranties are for eBay refurbished. It provides buyers with assurance that eBay will stand behind them if a part doesn't fit their vehicle. Guaranteed Fit is a huge milestone for the P&A category and the culmination of our multiyear fitment journey. I'm incredibly proud of our teams for executing the foundational work, making this program possible and I'm looking forward to seeing their continued innovation in the category. I'm also excited about our team's work in collectibles, which has benefited from a steady cadence of product development and partnerships, including most recently, our live commerce beta. During Q4, we scaled up a number of eBay live events with select sellers, bringing a healthy level of viewers, engagement and GMV to participating sellers. We also introduced the eBay Live Hub, where users can subscribe to channels and receive notifications about future events. This hub will serve as a central discovery point as we broaden the availability of live commerce to more sellers and categories this year. Our acquisition of TCGplayer has also greatly enhanced our collectibles category. And in Q4, we began developing synergies between our respective marketplaces. In addition to its customer base of nearly 800,000 hobbyists, a major competitive advantage for TCGplayer is its relationship with thousands of local brick-and-mortar hobby shops with many subscribing to its point of sale and channel management solution. Due to this software, sellers can now more easily streamline listings and inventory on both TCGplayer and eBay. TCGplayer also further diversified its marketplace by introducing Comex during Q4, which is a natural adjacency to collectible card games. eBay's historical sales data enabled TCGplayer to launch Comex with robust pricing intelligence, which will help us scale this offering. While our integration is in its early days, I'm incredibly excited to see what TCGplayer community will bring to eBay over time. One of the key pillars of our strategy is being the platform of choice for sellers. eBay's scale and global footprint represent key advantages for our platform as we work toward achieving this vision. In 2022, roughly one-fifth of our GMV was facilitated through cross-border trade. Sellers who activate their listings internationally can reach buyers in over 200 countries globally. However, less than half of the inventory in our top three markets is currently available for export due to the friction associated with these transactions. To unlock more valuable inventory for global buyers, last fall, we announced a major revamp of our cross-border capabilities with the launch of eBay International Shipping. Under this program, eBay handles any customs forms, coordinates duties with buyers, and intermediates returns. Sellers are protected from item not received complaints, while buyers benefit from greater selection and lower shipping costs. The program is resonating well as we gradually ramp enrollment for sellers, while buyer satisfaction on eBay International Shipping transactions reached 80%. Steve will discuss the financial implications of this program, and I'm confident it will increase cross-border inventory and drive incremental GMV for eBay. Investments in AI are also improving customer perception of our shipping capabilities. In Q4, we deployed a new machine learning model for estimated delivery date in the U.S. and select international markets, enabling us to make more accurate delivery predictions to buyers. Applying this model in the US reduced the average delivery estimate by one and a half days for all domestic listings, resulting in a noticeable uplift in conversion. A separate model deployed for eligible Authenticity Guarantee products resulted in an average reduction of approximately two days for US listings. These rollouts are just the latest example of our ability to leverage AI to make our existing processes more efficient, which will be a continued focus for us in 2023 and beyond. Moving on to ads. Our marketplace continues to benefit from innovation in our advertising business, which delivered strong growth in Q4 despite headwinds in the broader digital ad market. Promoted Listings drove first-party ad revenue of $276 million, up 27% or more than 30 points faster than GMV growth. Over 2 million sellers adopted a single ad product in Q4 and we eclipsed $700 million live voted listings. Additionally, our total ad revenue is nearing 1.8% penetration of GMV. Promoted Listing Standard was again the largest contributor to growth, both on a sequential and an annual basis as optimization gains from prior quarters continue to benefit ad rates. In Q4, we also improved our merchandising algorithms to show a greater diversity of products, which improves buyer satisfaction, while also preserving relevance and conversion. Our newer ad products also continued to scale nicely in Q4 and grew more than 20% quarter-over-quarter. Promoted Listings Advanced, our cost per click product continues to be a standout among the new products. Seller adoption of Advanced has grown, as we have expanded access and automated more elements of campaign management to make this powerful ad unit easier to use. In Q4, we launched Quick Setup, a one-click campaign creation solution for sellers, where eBay automates and optimizes the campaign structure, ad groups targeting and keyword bids for CPC advertisers. We also introduced multiuser account access across our full suite of promoted listings, which enables eBay sellers to delegate campaign management to trusted third parties like brands or ad agencies. Turning to payments. We continue to roll out additional payment services to support high ASP transactions and improve fire conversion. During Q4, we introduced split payments in the US for transactions over $1,000, enabling buyers to spread large purchases across two credit cards. We've already processed transactions from thousands of buyers at an average order value of over $3,000, and we're excited to expand this offering globally later this year to better support our focus categories. Additionally, building on the success of Afterpay, we recently partnered with Zip to introduce a suite of buy now pay later options to our Australian buyers. Zip supports purchases of up to $10,000, extending our ASP coverage in this valuable market. By managing our end-to-end payments process, we are also able to leverage our own proprietary risk models to assess transaction requests across our marketplace. Last year, our risk and protection team without enhanced controls that allowed us to approve transactions that may have otherwise been declined in the past, enabling over $0.5 billion of annualized GMV and reducing potential escalations to customer service. In connection with risk management, we continue to invest in the security of our marketplace to ensure our capabilities remain world-class. Last week, we announced the acquisition of 3PM Shield, a provider of state-of-the-art marketplace compliance tool. 3PM Shield offers effective solutions for the prevention and identification of counterfeit listings and prohibited items. Combining this technology with our proprietary data, will further enhance the integrity of our marketplace. Before we move on, I'd like to touch on the actions we've taken to sharpen our focus as a company and run our business more efficiently, particularly in light of the uncertain economic environment. Earlier this month, we made the difficult decision to eliminate approximately 500 jobs or roughly 4% of our global employee base. This decision followed a thoughtful review of our organization to ensure our people and roles were aligned with priorities that advance eBay's commitment to long-term sustainable growth. These changes provide additional flexibility for us to invest efficiently and create new roles in high potential areas of our business like new technologies, trusted customer experiences and key markets. There is no easy way to say goodbye to our talented colleagues, their passion and accomplishments over the last few years have helped us get us to where we are today. We are incredibly thankful for their contributions and are committed to supporting them through this difficult transition. Next, I'd like to share a few milestones from our ESG efforts last year, starting with e-commerce. In 2022, our marketplace generated $4.6 billion in positive economic impact through the sale of pre-loved and refurbished goods. This activity avoided 1.6 million metric tons of carbon emissions and kept 73,000 metric tons of waste from going into landfills. E-commerce continues to provide significant economic benefit for sellers and buyers during these uncertain times. And buying pre-loved items shows no sign of slowing down. In fact, just yesterday, we published our third annual e-commerce report, which found that 90% of surveyed respondents engaged in e-commerce during 2022. Cost savings were the most popular motivator for buying pre-loved especially among Gen Z buyers. 64% of whom said its financial savings as a primary reason for shopping e-commerce and sustainability was the second most important factor with people increasingly turning to pre-loved to help the environment. This positions us well as we continue to pave the way as an industry leader enabling economic empowerment and sustainability through our platform. Now, let's turn to impact. I'm always amazed by the tremendous generosity of the eBay community. In Q4, eBay for Charity enables sellers and buyers to raise more than $35 million. And for the year, customers raised over $163 million. This represents an all-time high in fund raised through eBay for Charity, since we started this program 20 years ago. The eBay Foundation granted nearly $23 million in 2022, primarily to non-profit organizations advancing, inclusive entrepreneurship and through our employee matching gift programs. This represents another all-time high for annual foundation grants. I am fortunate to lead a purpose-driven company with a team dedicated to helping communities around the world, while protecting our planet. For the fourth year in a row, eBay was included in the Dow Jones Sustainability World and North American indices. We were also included on CDP's A List for 2022, which recognizes companies that are leading the way in environmental transparency and performance on climate change. Additionally, eBay ranks number one on cross-border commerce Europe's list of the top sustainable marketplaces operating in Europe. Looking to 2023, I'm incredibly excited about the road map ahead of us. Today, I'll offer just a glimpse of a few areas where you should expect to see progress from us this year. We'll continue to innovate for customers in our focus categories and extend to new countries and categories this year. We will continue our work in P&A by expanding the guaranteed FIT program and fifth-year vehicle badge globally. We'll also grow our tire installation capabilities after we began improving the end-to-end tire shopping experience and broaden our network of installation partners in five markets during Q4. We'll ramp assets in the vault and extend eligibility for more collectible items. While integrations with TCG player and known Origin will strengthen our value proposition for collectors. We will also continue to iterate next-gen shopping features like live commerce to better engage with enthusiasts. And we will further develop the category landing pages we debut for sneakers, watches and handbags in Q4, which offer trending inventory and personalized recommendations, powered by machine learning. Sellers across our marketplace will benefit from the expansion of our international shipping program to more markets, which will drive incremental GMV as sellers tap into our global demand. We will continue to scale our advertising offering as we track toward our next $1 billion by 2025, and – we'll simplify and grow adoption of float listings advance, deliver more AI-driven optimization and further expand our ads portfolio. Finally, just as we have done in focus categories, this year, we will adapt our one-size-fits-all approach, to build more relevant and compelling localized experiences in some of our European markets. We will enhance local discoverability, reduce friction through simplified selling experiences, offer new local forms of payment and address other market-specific experience gaps in search, language and return policies. In closing, I would like to thank our extraordinary eBay employees for their accomplishments this year. Their unrelenting focus on serving our community has supported our sellers and buyers during these challenging economic times. I'm confident that with our talented eBay team, our strategic vision and a persistent focus on operational excellence we will continue to develop compelling experiences for customers and create long-term value for our shareholders. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

[Operator Instructions] Your first question is from the line of Colin Sebastian with Baird. Your line is open.

Jamie Iannone:

Yes. So first on the kind of where we are, we're pleased with the progress that we're seeing. So if you think about focused categories outgrowing the rest of the business by 7 points, the double-digit change that we've seen in customer satisfaction, we took on our largest focus category at the end of last year with parts and accessories, and we're seeing that return to market share growth, which is great. It's a very large business. We outlined that at Investor Day being over $10 billion. And the shift that we made to non-new-in-season, I think, is really helping us, especially in these challenging economic times. All the work we did and refurbished to build that as a strong category on eBay. Now we're seeing -- we had our largest week ever during Cyber Week. And during challenging economic times, people really turn to value. And I think we're leaning into where the consumer is headed. I'd point you to the re-commerce Report, which we put out yesterday, which said 90% of the respondents bought re-commerce in 2022 and Gen Z, 64% of them said it was because of the financial value that's provided. So, we think we're right in there. We're going to continue to enhance and build on that strategy. We're doing a lot of additional work in artificial intelligence and bringing that not only to our focused categories, but also to our horizontal businesses. I talk about the work that we did in search as one example of that, the work that we did in advertising with the merchandising there as a second one. And then you see us continuing to expand what we're doing on the horizontal side. I'd just end with eBay International Shipping. Cross-border trade is now one in five transactions on eBay. It's one of the unique value propositions that we have, especially for the individual consumer. And we're making that a whole lot easier with what we're doing with eBay International Shipping, and that's another kind of huge opportunity across the board on the horizontal side. So over the course of the year, I'll get into more and more details about it, but we feel really good about the vector that we're on. Steve, do you want to take the second part?

Colin Sebastian:

Great. Thank you.

Tom Champion:

Hey good afternoon, guys. Steve, maybe a quick one for you. Could you please talk about the GMV growth you've seen internationally, it looks like international FX-neutral exceeded domestic for the second quarter in a row. And I'm just curious, if you're kind of surprised by that result. I think you referenced P&A and maybe luxury driving that. And then curious that the $100 million benefit, I believe, to GMV in the guidance. I think there was some reference to that in the guidance. Maybe, Jamie, just a quick one for you, if I could, can you just talk about authenticity and how you feel like you are executing and whether you've turned a corner there. I think most of the recent acquisitions have been centered around authenticity and removing fake goods. How do you feel about your progress there? And how much further do you need to go? Thank you.

Jamie Iannone:

Yes, Tom. So on authenticity, we're feeling great about what we're seeing in terms of the impact that it's having on customer satisfaction and the execution of it. If you think about it for those focused categories like luxury handbag, sneakers, watches, authenticity is what provides the game-changing level of trust. That's different in other categories. So in refurbish, for example, it's the two-year warranties and the 30-day hassle-free returns. And then something like P&A, we just launched this week Guaranteed Fit, which is really the game-changing level of trust, which is guaranteeing that, that part is going to fit your product, which is really key. The acquisition that we did recently with 3PM Shield, it's really a state-of-the-art market compliance capability that they've built using really advanced AI technologies to help keep prohibited items off the platform. And that's really just continuing the theme of building trust on the marketplace, and eBay as a trusted place to shop, which has paid massive dividends, giving us a great ROI from the investments that we've made to-date, and we feel really good about the progress and where we are.

Operator:

Your next question is from the line of Nikhil Devnani with Bernstein. Your line is open.

Steve Priest:

Hi, Nikhil, thank you for the questions. First of all, with regards to the fourth quarter and coming in, as we said in our prepared comments, really pleased to see some of the execution particularly in a couple of key focus categories like P&A and refurb continue to sort of be highlights for the fourth quarter as we came through it. As we've mentioned, came through towards the top end of the guide. And really, we did have less headwind as we'd expected on an exchange rate basis, with the US dollars we went through. But some core strength in a couple of the focus categories as we come through the fourth quarter. With regards to the sequencing, we're dealing with an incredibly dynamic macro environment and we wanted to give some color for the investor community as we start to think about 2023. And obviously, the macro dynamic has been challenged during 2022. And so in that directional color, we've given a comprehensive guide for the first quarter. We continue to execute in the underlying business. But based on the uncertainty that we are facing at the moment and the continuation of that macro challenge we felt it was most prudent just to sort of lay out that sequencing relating to 2023.

Operator:

Your next question is from the line of Ross Sandler with Barclays. Your line is open.

Steve Priest:

Hi, Ross, I'll take those. So with regard to the GMV sequencing, we haven't guided the full year. We're just trying to give some directional alignment. We're just trying to plan our business effectively around the dynamic macro environment that we're seeing. Again, put a very comprehensive guide up for the first quarter, really pleased with the execution of the strategy, which is working well and leaning into the focus categories that we're still to execute. We mentioned the fact that we do see as many commentators say, a very, very challenged and certain first half of the year. Again, we're just given some direction on alignment about how we think about things as we navigate through 2023. So just providing some color accordingly. With regards to the Investor Day GMV framework, we're leaning in exactly where we said we would, whether it's luxury, whether it's P&A, Jamie talked extensively about the benefits of authentication impacting the business. And so we are seeing underlying positive growth in our business as we execute the strategy, continue to be fueled by the momentum that we're seeing with payments and ads. In terms of the timing of the GMV framework that we laid out at Investor Day, that's really a function of the potential severity and duration of the macro environment that we're operating in, which will obviously have an indication in terms of the timing of when we get to those longer-term targets. And then finally, with regards to inflation, as you imagine, inflation is impacting a number of our businesses across the US and in Europe. Europe has been more pronounced over recent quarters because of -- particularly because of the energy challenges as we go forward. And in addition, you've got some labor pressure being impacted in Europe as well that's impacting the business. Specifically, around eBay, we do have a resilient business, but however, general inflation does have a, I suppose, a mixed impact on our business because we lead into non-new-in-season items, that really just helped impact where consumers are looking for value, and we have a lot of pre-loved and refurbished items on our platform and that performance in Q4 was a great reflection of that. However, because of the macro challenges, we're not immune to the inflationary pressures on the discretionary consumer spending. So, hopefully, that gives you a little bit of color in terms of how we think about the business.

Stephen Ju:

Thank you. So, Jamie, I think we spent quite a bit of time talking through the re-commerce opportunity on this call. Now, given eBay's history with cataloging, I have to think that having increased parameters on how gently or not gently used the same item may be and how that's described from seller-to-seller, that's probably creating a unique sorting problem. So, can you talk about how you are tapping the opportunity and ultimately, sort of the correct results to the user?

Stephen Ju:

Thank you.

Doug Anmuth:

Great. Thanks so much. I just want to shift gears and ask about expenses, Steve, and the 2% growth in non-GAAP expenses and in 2023. If you could just talk about some of the key investments here and puts and takes? And I guess, in particular, how we should be thinking about sales and marketing, assuming that you'll continue to do full funnel margin on the focus categories? Thanks.

Doug Anmuth:

Great. Thank you, Steve.

Deepak Mathivanan:

Hey guys, thanks for taking the question. So first, can you give us some color on the growth in focus categories where you've had the user experience enhancements for a while now, specifically, sneakers and luxury watches and some of those categories. I understand that macro is volatile, but are you seeing sustained share gains in these categories now? Any additional color on recent growth there would be great. And then, Steve, can you unpack the 2023 EPS guide for us for a little bit? Clearly, we recognize that there's a lot of uncertainties. But how should we think about the magnitude and cadence of buybacks for this year? And maybe is it fair to use 2022 seasonality also as a proxy for quarterly cadence on EPS as well?

Steve Priest:

Yes. So Deepak, we've obviously gotten a very comprehensive Q1 guide. And as I mentioned earlier, because of the uncertainty still the dynamic macro environment, we've not given a full year guide at this point. With regard to the seasonality question that you had, that pertains to directional color associated with GMV. And so that's how I would sort of locate that. Specifically thinking about capital returns that we've laid out, just sort of taking a step back, in 2022, we returned $3.6 billion to shareholders through dividends and buybacks, which is 170% of free cash flow. As you're thinking about capital returns, we remain committed to the 125% of free cash flow target that we laid out at the investor event between 2022 and 2024. So we're sort of tracking above that. And as I think about 2023, our priority really to start with is going to be to be committed to offsetting dilution in terms of the such share count, while continuing to balance the capital needs of the business. We have lent in and done a 14% increase in the dividend from $0.22 to $0.25. But for me, our fortress balance sheet continues to be a key competitive advantage in this environment to enable us to continue to invest in the business. So I hope that gives you a little bit of color about how we're thinking about 2023.

Operator:

Your final question comes from Mark Mahaney with Evercore. Your line is open.

Jamie Iannone :

Yes. Thanks, Mark. So on the ad side, like we said at Investor Day, we have line of sight to 3%, which we still feel great about. If you look at the performance, Promoted Listing Standard continues to be the workhorse of the product, and we're continuing to drive additional penetration there, hitting 2 million sellers and 700 million listings. But we're also excited by our new products. They once again grew 20% quarter-over-quarter and we're making it easier for sellers. I talked about Quick Setup, which makes it much easier to come into the program and use the program. And then we're working on things like multi-user access, which we just launched which enables more flexibility to actually bring in an ad agency to help you manage your ad campaigns. So I feel great about the potential there, growing 30-plus percent over volume and what we're seeing. On the focused category side, been really happy with the performance of the marketing spend. If you think about it, we've shifted our model from being really kind of lower funnel optimization to doing more full funnel. And that's driving more enthusiast buyers into the platform, and it's allowing the overall spend to work a little bit harder. But at the same time, it's really allowing us to bring buyers in and then leverage them across multiple categories. So if you think about like a sneaker buyer, they will come in and buy $450 in sneakers, but then they'll buy $1,900 in other products in other categories. A handbag buyer will buy $2,500, but then spend $5,000 elsewhere. So when you look at the return on marketing spend, usually full funnel has a longer return on it, but we think it's the absolute right spend. We're seeing the right change in consideration and we're really driving, I think, the unique value proposition that we have to offer at eBay. So, you're going to continue to see, just like we've done in parts, really specific marketing tailored to those enthusiasts with the right full funnel approach, because we like the performance of what we're seeing.

Jamie Iannone:

Thanks.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. It is now my pleasure to turn the call over to Mr. Joe Billante, Vice President of Investor Relations. Sir, please go ahead.

Jamie Iannone:

Thanks, Joe. Good afternoon, everyone, and thank you for joining us. Q3 was a strong quarter for the company despite a challenging macro environment. Significant headwinds from inflation, higher energy costs and rising interest rates have impacted discretionary income, and consumer confidence is near record lows in several markets. Our focus on non-new-in-season categories has made the platform more resilient against these headwinds. In the quarter, we continued to execute the tech-led reimagination, and we delivered on our near-term commitments. Focus categories narrowed their gap to market growth rates through higher customer satisfaction, increased trust and more effective marketing. And once again, enthusiast buyers spent more on the platform. This playbook is having a positive impact on GMV in the U.S. and internationally. Site-wide technology investments created a more seamless customer experience, leading to improved conversion rates across the platform. Our advertising business accelerated due to increased seller adoption and the optimization of our ad products. And new payment capabilities remove transactional friction while adding incremental revenue. The execution of our strategy is strengthening our competitive position, which drove better-than-expected financial outcomes in the third quarter. We delivered over $17.7 billion in GMV and almost $2.4 billion in revenue. We invested in marketing and product while delivering close to 29% operating margin. And our non-GAAP EPS was $1 per share, up double digits versus last year. Before I get into more highlights from the quarter, I want to take a step back and look where we are in our long-term journey. As you may recall, heading into the pandemic, volume was declining. Since that time, we have invested in game-changing product experiences and adjusted our approach to marketing. And this has resulted in an improvement in GMV compared to pre-pandemic levels. Specifically, focus categories, excluding trading cards, are up over 20% since 2019 due to improvements in customer satisfaction, trust, product experience and marketing. Trading cards has more than doubled in that time due to market dynamics and the impact of our innovations. And the rest of the platform has improved from declining low single digits to flat based on site-wide product improvements and the benefits of cross-category shopping. Taking a closer look at Q3 volume, excluding trading cards, focus categories grew over seven points faster than the rest of the platform compared to last year. Multiple quarters of improvements in parts and accessories, collectibles, luxury goods and refurbished products are driving better relative GMV performance. Motors parts and accessories is the largest category we have invested in to date, and it is nearing market rates of growth. Investments in marketing over multiple quarters have increased consideration with enthusiasts, expanding the top of the funnel. Most recently, we sponsored an automotive makeover show with MTV U.K. We also kicked off the eBay Motors Parts of America tour, showcasing bespoke car builds using parts found on eBay. Hundreds of thousands of attendees have joined these events to date, and social marketing support for the tour has driven more than 500 million impressions. The key to unlocking trust for parts and accessories enthusiasts is fitment. Over the last several quarters, we made significant progress on the foundational work needed to innovate the P&A experience. This included modernizing our taxonomy to align our business globally and open up new cross-border trade opportunities. We also integrated fitment-based technologies into search, merchandising and advertising recommendations. Now we're able to make fitment more pervasive throughout the end-to-end experience. We have started adding highly visible trust signals throughout the buyer journey in the U.S. and Canada. We also are reducing the number of steps it takes to find parts, and we've expanded the adoption of My Garage, leading to more personalized shopping on every visit. We will continue to invest in trust to deliver even higher customer satisfaction in the coming quarters. In addition, we are working on increasing the quality and quantity of supply in parts and accessories. We recently acquired Mine Pivot, which helps P&A sellers improve listing quality and grow conversion. We are also directly engaging sellers to add more in-demand parts inventory, including certified green parts, OEM, salvage and highest products, keeping our global supply over 500 million live listings. Collectibles is another focus category where sellers and buyers are responding positively to recent innovation. One of the best examples of this is trading cards, where GMV trends remained steady at a trajectory more than double pre-pandemic levels. In June, we launched the eBay Vault, a seamless end-to-end physical and digital experience and have initially opened it for trading cards. The Vault provides a number of benefits, including instant transfer, authentication, insurance, affordable shipping and tax restorage. The combination of these features gives enthusiasts an unprecedented level of control to grow the value of their collections. During Q3, we expanded eligibility for Vault items, and we are seeing continued momentum week over week and are encouraged by the effectiveness of events and accelerating early adoption. While the Vault is in its early days, demand is increasing, and more enthusiasts are preloading their inventory into the Vault to enable faster trading. In addition to innovation, we are marketing our trading cards business across multiple channels. For example, in Q3, we expanded our presence at New York Comic Con to showcase the eBay Vault and continued live commerce pilots, highlighting brands like Funko and Metazoo. Another important investment for our trading card business is the acquisition of TCG Player, a trusted marketplace for collectible card game enthusiasts that operates a leading technology platform. I am pleased that we were able to close this transaction earlier this week ahead of schedule. TCG Player brings strategic omnichannel capabilities, popular with trading card sellers, including inventory management tools, order fulfillment and card optimization. I'm excited to see what we can do together to delight our sellers and buyers over time. In luxury categories, quarter after quarter of innovation has led to higher customer satisfaction and faster GMV growth. This has been true in watches, handbags and sneakers since the introduction of authentication, resulting in higher GMV in every country where we've launched to date. In Q3, we began authenticating jewelry about $500 in the U.S. and are seeing similar results as other focus categories with initial customer satisfaction rates for jewelry buyers over 90%. Focus category is not the only area where we are investing to drive GMV. Significant site-wide initiatives that impact all sellers and buyers are driving volume benefits across all categories. Multiple quarters of technology investment drove site-wide conversion improvements in Q3. For example, in search, we leveraged new deep learning models to better understand purchase intent, leading to increased conversion at the top of search. In addition, search recall has materially improved for low and well searches, enabling buyers to discover more relevant inventory. These capabilities have rolled out to English and German-speaking markets, adding more than $0.5 billion in GMV annually. SEO improvements are driving better growth across the platform. In focus categories like sneakers, we have built a more modern browsing experience, which is driving benefits to our SEO traffic. We also optimized our site to allow significantly more items to show up on search engines, increasing visibility to our newest and best performing listings. For sellers, we have been making investments over several quarters to modernize our technology stack. And I'm excited to announce that we recently completed the migration of all desktop sellers to a single unified listing experience globally. This transition eliminates multiple legacy tools and enables faster innovation, particularly as we invest in new focus category listing experiences. There are a number of benefits sellers are already seeing in the new platform. For example, when listing an item, sellers are receiving better price guidance recommendations that are driving conversion in multiple categories. And sellers can now directly upload videos that can showcase items, highlight unique details or answer commonly asked questions. Sellers are also benefiting from multiple quarters of innovation and advertising. Higher return on ad spend is leading to increased adoption of Promoted Listings and higher ad rates. In Q3, first-party ad revenue was $249 million, up 27% year-over-year. This was more than 30 points faster than GMV, keeping us on track toward our long-term advertising targets despite volume headwinds from the macro environment. Investments in AI have resulted in improved search algorithm performance and more accurate ad rate recommendations that are increasing conversion. This is one factor driving up adoption of Standard Promoted Listings. In Q3, almost 2 million sellers adopted at least one ad product, and our coverage has expanded to over 600 million listings. Our newer ad products are also driving faster growth, which once again grew double-digits quarter-over-quarter. For Promoted Listings Advanced, we expanded availability in search. We also improved the broad match experience and upgraded our recommendation tools, allowing sellers to further optimize their campaigns. Payments capabilities are increasing trust between sellers and buyers by removing transactional friction. The buyer FX experience that we've released earlier this year is resonating with customers. Close to 70% are adopting it for cross-currency transactions, allowing them to pay in their local currency. We also expanded Klarna availability to buyers who cross-border transactions on our German site. Lastly, our risk team improves checkout conversion by accepting more purchase transactions while maintaining low loss levels. In addition to removing friction for buyers, we are adding more services for sellers. Recently, we announced that sellers can request on-demand payouts to a debit card and receive funds within 30 minutes or less for a fee. New payment services are delivering better customer outcomes, and the pace of innovation has put us on track to deliver $300 million in incremental revenue by 2024. As consumers in our major markets face persistent inflation, higher interest rates and rising home energy costs, they are increasingly turning to eBay for better value. This is leading to growth in GMV of used and refurbished goods. In fact, in a recent survey, we found that more than three quarters of sellers use eBay to sell pre-owned goods. Recently, we expanded our efforts to support sustainable commerce with a new seller education offering on eBay Academy. Launched across our major markets, our new course teaches sellers had to assess their current practices and understand how eBay can help them operate more sustainably. Sellers are contributing positively to global communities in other ways. During the third quarter, we raised more than $33 million through eBay for Charity. In addition, the eBay Foundation issued grants to 50 nonprofit organizations that support inclusive entrepreneurship and communities around the world. These purpose-driven efforts help us drive economic opportunity for all. Finally, we're excited to announce that tomorrow, we will be publishing our inaugural small business report. This report highlights our progress towards becoming a seller platform of choice. I've spoken to you in the past about how eBay creates access for entrepreneurs. And through our recent small business survey, we found that seven out of 10 sellers say that eBay help them start their business. We are proud to partner with our sellers, helping them get up and running on our marketplace and providing the tools they need to build scale and grow their business. Sellers recognize these efforts with over half of all sellers surveyed strongly agreeing that eBay helped their small business grow. As a third-party marketplace, eBay only wins when our sellers win. And we have earned trust from our seller community over time. In this report, 95% of sellers surveyed say they rely on eBay for their business with almost one third saying their small business would not exist without eBay. This data helps to reinforce that the investments we are making reflect the role we play in creating and growing small businesses around the world. Having just come off a number of large seller events in our major markets, we continue to be inspired by our seller community, and we are proud to play a key role in helping our customers navigate these challenging economic times. All of this couldn't be possible without our talented and dedicated teams who work so hard to innovate on behalf of our customers. Thank you to the eBay team for all you do every day for our community. In closing, the resiliency of our platform yielded better-than-expected quarterly results despite a challenging macro backdrop. focus categories grew over seven points faster than the rest of the platform and maintained higher levels of customer satisfaction. We acquired TCG Player and My Fitment to better serve enthusiasts in two of our largest focus categories. Site-wide improvements in search, SEO and selling improved conversion rates. Advertising growth accelerated while delivering high returns on ad spend for our sellers. Payments innovation enabled more services and further reduced transactional friction, and we continue to support our small business sellers, helped raise $33 million for charity and drove close to $1 billion in economic impact through e-commerce. All of these accomplishments contributed towards our long-term tech-led reimagination of eBay. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

[Operator Instructions] Your first question comes from the line of Doug Anmuth with JPMorgan. Your line is open.

Jamie Iannone:

Yes. Hi, Doug, I'll take the first one. So part of our strategy and the shift on our marketing was really to approach this full funnel marketing and move away from just kind of lower funnel optimization. And that's worked out really well for us. So if you look, for example, at P&A, we're seeing good strength in P&A. We're approaching market growth rates and what we're doing there. And importantly, we're driving consideration. And that whole strategy has really been around, not just going after buyers, but going after enthusiast buyers. It's why you see us in the parts shows, in the sponsoring like I talked about, the U.K. MTV reboot, it's really aimed at that. And so we started that playbook with sneakers and some of our luxury, and it worked well. We've been expanding it to P&A. And so we're continuing to look at it because what we're seeing is it changes initial consideration for those categories. And then we get the multiplier effect that I talked about at Investor Day, plus it makes the lower funnel work harder, work easier with the support of the upper funnel. Steve, do you want to take the one on buyback?

Douglas Anmuth:

Thanks Jamie and Steve.

Eric Sheridan:

Thanks for taking the questions. Maybe two, if I can. First, curious what is embedded in the guidance in terms of the macro environment changing Q4 versus Q3? Are you willing to give us some sense of the bottom end of the range versus the top of the range, and maybe some elements of how macroeconomic volatility might push you in one direction or another as you look out over the next couple of months? And then looking beyond just one quarter forward, if the macroeconomic activity did become more volatile, how should we be thinking about those investments that you want to make next year, whether it's enthusiast buyer growth or focus categories that are most investments where you're willing to make them irrespective of the margin impact in a downward economic activity environment versus elements of where you can pull on levers to sort of manage margin outcomes if the overall volumes were to slow? Thanks so much.

Eric Sheridan:

Appreciate the color. Thank you.

Colin Sebastian:

Thanks and good afternoon. I guess, first off, I want to go back to the comment, I think, Jamie, you made it around cross-category shopping from focus over to non-focus categories. I was hoping you could dig into that a little bit more with respect to how large an impact that's having, and if that's something that will pick up speed in coming quarters. And then maybe regarding the October trends in the U.S., does that suggest that some of the resiliency of the platform in non-new-in-season that you mentioned in Europe that maybe that's not as applicable in the U.S. market? Or is it just a matter of timing with respect to when these geographies are weakening? Thanks.

Steve Priest:

Colin, and I'll pick up the other one. Specifically, your question about the U.S. as we get into the fourth quarter and the holiday season. It's pretty broad-based. I continue to be pleased to see the delta between our focus category penetration and momentum versus non-focus categories based on the investments that we're making. But as we look forward, as we look into October, it's pretty broad-based across all the categories that we have on the platform. One of the things I would say on an international basis, we are seeing some non-focus category momentum in Germany, in particular, as the German community continue to be concerned about energy availability as we get into the winter, and we're seeing pockets of non-focus category inventory get some momentum on the platform. But overall, I think all this is a reflection of the broader macroeconomic climate that we're operating within.

Operator:

Your next question is from the line of Stephen Ju with Credit Suisse. Your line is open.

Jamie Iannone:

Yes, so a couple of things I'd say. One is there's been some easing of the supply chain as demand has come down, which has certainly helped from that perspective of our sellers. Obviously, currency differences make an impact in terms of certain corridors are stronger depending on the strength of any given currency. But we're leaning into the opportunities in cross-border trade. And I'd highlight two specific things. One is that we've actually with the rollout of buyer effects, made it easier in terms of currency choice for the buyer to buy in their local currency or in their -- in the currency of the seller. And we've seen a 70% adoption of that, and it's been performing well. We expanded that now into 38 currencies. The other thing that we're doing is making it easier starting with our U.S. business to do exports and execute exports on the business. So we've had a global shipping program for quite some time to make it easier. But the new enhancements that we're making or attempting to make it as easier to ship from Northern California to Southern California as shipping an international product off to Central America and really taking the friction out of that for our sellers. So those are the things that I would highlight in terms of the focus of what we're doing on a cross-border business.

Operator:

Your next question is from the line of Deepak Mathivanan with Wolfe Research. Your line is open.

Jamie Iannone:

Yes, so first on focus categories, we're pretty pleased with the performance that we're seeing across the board. I'd highlight a couple of things. First of all, our trading cards business continues to be at twice the volume it was coming into the pandemic. When I look at parts and accessories, the work that we're doing around fitment and specifically around driving initial consideration is helping us move towards market rates of growth there. And as we highlighted at our Investor Day, it's a huge category over $10 billion of GMV. The other thing that I would highlight is that as we've expanded the playbook from the U.S. to international, we're seeing the same type of impact that we saw in the international markets as we saw in U.S., so if I look at our luxury categories, this is sneakers, watches and handbags, we're seeing double-digit year-over-year growth in those categories internationally and higher customer satisfaction, similar to what we saw in our U.S. market. So we're continuing to lean in. You saw our recent announcement of jewelry and authenticating jewelry over $500. That's led to customer satisfaction over 90%. And we're going to continue to push forward and roll out additional categories and continue to improve in the focus categories that we've already launched. Steve, do you want to take the currency?

Deepak Mathivanan:

Got it, thanks so much.

Curtis Nagle:

Good afternoon, thanks very much for taking the question. So I wanted to dig a little more into the strong advertising numbers in the quarter. And I guess just what drove the incremental improvement from 2Q, right? So you guys have rolled out a number of initiatives with the Promoted Listing Advanced and a few other things. Did that pick up more? Or was it perhaps sellers maybe trying to get a little bit more visibility through your platform in a retail backdrop that's just a little more competitive and a little bit more promotional. What's driven that improvement?

Curtis Nagle:

Okay, thanks. It's really helpful. Appreciate it.

Youssef Squali:

Hi, thank you very much. Two questions for me, please. One, at Analyst Day, you guys presented some targets. I think it was mid-single-digit GMV growth in 2023, 2024, and total margin expansion of about 100 bps 2022 to 2024. I know a lot happened since then already. Just wanted to get a sense from you guys, sitting where you sit right now on the back of this performance, if you think those targets are still achievable? And second, on the M&A, I was wondering, Jamie, maybe if you guys have any interest in expanding further into the use of luxury apparel maybe through M&A, just given some depressed valuations for some of the players that we've seen out there. I think through the acquisition of TCG, you guys now have some fulfillment -- order fulfillment capabilities. Wondering if doing the same thing in luxury apparel could be attractive to you? Thank you.

Jamie Iannone:

And let me just take the M&A one. Yes, M&A has been and will continue to be a key part of our strategy. I've talked about the Build By Partner framework that we have. And as you noted, TCG Player was really about helping us in a core category of collectibles and specifically in collectible trading cards, giving us new capabilities and tools and access to local hobby shops. I'd also point to My Fitment, which I've talked for two quarters now about the importance of Fitment, building trust in the parts and accessories category, and so excited by that one. So you should expect us to continue to look at key areas such as vertical expansion or boosting our core strategy, tech and talent and then opportunities to expand our overall capabilities. Always doing it in the framework that I've outlined to Build By Partner that we think has the best return for shareholders.

Operator:

Your next question comes from the line of John Blackledge with Cowen. Your line is open.

Jamie Iannone:

Yes, so on enthusiast buyers. In Q3, we had 17 million enthusiast buyers, which was relatively flat to Q2. And so the way you think about that is we're no longer facing the tough lapping from our comps related to the COVID dynamics. But we do expect some pressure on that count in the coming quarters as a result of the current macro environment. But when we look at it, the vast majority of enthusiasts remain active buyers. It's just a movement between mid-value and enthusiast buyers. And for us, enthusiast buyers is a very healthy spend. If you think about the average spend of that being $3,000 a year, that's up to like membership level spend. So over the next few years, we expect enthusiast buyers to continue to grow and spend more as we continue to execute on our strategy. As I talked about, their spend is up double-digits versus '19, so really healthy. So the other thing I'd say on the ad business is we don't expect it to be linear quarter-to-quarter. But we've been enhancing and adding new products. I talked about the quarter-over-quarter growth that we're seeing in our new products. So we're on track to $2 billion. As I said, there were some onetime step-up things that we saw in Q3. But overall, our ROAS is healthy. I mentioned the statistics on the call that we now have two million sellers who have purchased at least one ad product in their listing, which is healthy. So we feel right on track with the goals that we outlined back in Investor Day.

Operator:

Your next question is from the line of Richard Kramer with Arete Research. Your line is open. Richard Kramer, your line is open.

Jamie Iannone:

Yes, so on the first question, when we think about the non-new in season, it represents about 90% of what we sell on the platform. So that's both used and refurbished and think N minus 1 last year's fashion, white label goods, all of those types of things. So the majority of what we sell is actually in the non-new-in-season business that we have on the platform. The stat that I talked about earlier is that one-third of our business is -- about one-third of our GMV is used and refurbished, and that's actually accelerating faster given the ties that we see. In terms of the advertising money that our sellers are spending, the majority of what we collect is via our CPA-based program, which is Promoted Listing Standard, which is a direct attribution program. So as we're able to drive incremental sales for them, we monetize that. So we've added the new products, like the CPC-based products in Promoted Listings Advanced. But what we're doing from a CPA standpoint has a direct tie to GMV. I would say the same is true for our seller program, which is partnering with our sellers to drive external traffic to their listings on eBay, which as I said before, sellers are seeing a really good ROAS on our platform, especially relative to other places that they can market their products.

Jamie Iannone:

Thank you.

Operator:

Your final question comes from the line of Sean Dunlop with Morningstar. Your line is open.

Jamie Iannone:

Yes. So I'd say in general, we're not immune to the macro impact. And so Steve talked earlier in his remarks about we think there'll be likely meaningful headwinds into '23. But we do have a more resilient business model because of the shift in focus of moving towards non-new-in-season and refurbished. And so that 32% is growing faster than the rest of the site. And I would just say, in general, value is a key tent-pole for our buyers on the site, and we're continuing to push it. From some perspective, I think this is a double win for us because we've been pushing e-commerce, we love, et cetera, as part of our massive ESG efforts that we have on the platform and really being the pioneers of re-commerce and saving products from the landfill, et cetera. And now where consumers want to value, we're seeing a real willingness to purchase there. The last thing I'd say is that Gen Z is much more inclined to buy pre-owned and pre-loved goods, and so we're leaning into that trend. So it's great to see that from the value standpoint. It's also great in terms of the ESG impact that it has in the business. I'd like to say that ESG is so core to eBay that we should be in every ESG fund because of the importance of it and the role we play in re-commerce. But that's how I would kind of characterize where we are today, and I think what we'll see into the coming quarters.

Jamie Iannone:

Thanks, Sean.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay Second Quarter 2022 Earnings Call. [Operator Instructions] Thank you. It's now my pleasure to turn today's call over to Mr. Joe Billante, Vice President of Investor Relations. Sir, please go ahead.

Jamie Iannone:

Thanks, Joe. Good afternoon, everyone, and thank you for joining us. Earlier this year, during our Investor Day, we updated you on the progress of our Tech-Led Reimagination and outlined our vision for the future. I'm really excited about the pace at which our talented teams are delivering against that plan. Our focus category playbook is working. Enthusiast buyers are spending more, and advertising and payments continue to grow. This quarter, we launched several key innovations in line with our long-term objectives. These ongoing efforts have put eBay in a stronger position today than it was when we entered the pandemic. I'm pleased to say that during the second quarter, we delivered better than expected financial results across the board. We delivered over $18.5 billion in GMV and over $2.4 billion in revenue. We continue to invest in marketing and product while achieving close to 29% operating margin, and our non-GAAP EPS was $0.99. Our focus category payments and advertising initiatives helped offset the impact of the war in Ukraine, rising inflation and a more uncertain macro environment. Looking ahead, we remain on track to deliver on our full year commitments, and we'll continue to invest and manage towards sustainable long-term growth. Later in the call, Steve will go into more detail about our outlook. One of the most important pillars of our long-term plan is our focus category strategy. Investments in trust, product experience and marketing are increasing customer satisfaction, leading to faster volume growth. Last quarter, excluding trading cards, focus category GMV grew 9 points faster than the rest of the platform. Trading cards are lower than last year's [stimulus fuelled] (ph) results, but volume remains robust at more than double prepandemic levels. We are seeing significant outperformance in focus categories globally. Although the US is higher than international. The primary reasons for the difference are the timing of launches and category mix by market. The markets where it's implemented these changes, customer satisfaction remains at or near best-in-class levels. The vast majority of our enthusiast buyer shop in focus categories and their spending levels remain above $3,000 per year. We continue to see cross-category shopping activity consistent with data we shared during Investor Day in March. One of our largest focus categories is parts and accessories, which is one of the highest buyer NPS scores on the platform. We know from experience how crucial trust is, and fitment is one of the best enablers of trust. To ensure every buyer finds the perfect part to fit their vehicle, we are enhancing all of the AI that powers search, merchandising and advertising. In addition, we have rolled out more ways for P&A enthusiasts to discover the wide range of inventory on eBay. In our international markets, we have added over 100,000 fitment-based browse pages last quarter alone. We also expanded our supply of OEM and certified green parts. To drive demand to our huge supply of P&A inventory, we continue to invest in full-funnel marketing. Initial consideration is showing encouraging early signs, and we see further opportunity to attract more enthusiasts. Across other focus categories, we took several steps over the past quarter to expand coverage. To enhance our leadership position in trading cards, we expanded authentication services to a wider range of graded items. In addition, we rolled out a new feature where enthusiasts can now use the popular My Collections tool to track a broader set of inventory, including sports trading cards. In eBay Refurbished, we added more trusted sellers and expanded categories in the program. These included headphones, audio, gaming consoles and smart home devices. Refurbished products are growing faster than new products in the same category, in part due to increased customer satisfaction. And in sneakers, we added more products to our catalog, which now includes the top 40 brands across our 4 largest markets. This expansion reduces friction in selling and buying experiences. We also started authenticating handbags in Germany and handbag accessories such as wallets in the U.S. The next focus category where we are innovating and changing the customer experience is jewelry. Recently, we announced authentication for eligible new and preowned jewelry items over $500. We are partnering with GIA, the Gemological Institute of America, who bring 90 years of experience to our partnership. Like other focus categories, we will improve the product experience, increase customer satisfaction and change how we market to jewelry enthusiasts over time. I am pleased with the near-term progress in focus categories, and we remain on track to expand coverage and drive growth back towards market rates. Equally important is evolving our capabilities to attract the next generation of enthusiast buyers. In Q2, we took several steps toward that objective. In June, we marked an important milestone with the opening of the eBay Vault. This state-of-the-art facility enables a new format for sellers and buyers to trade and build their collections in real time. The Vault is initially accepting graded authenticated trading cards above $500 and will expand to more products over time. Sellers are taking advantage of an initial year of free storage and no selling fees for Vault sales. This innovation will help us transform many product categories. One reason that we're excited to launch the Vault is because it can enable real-time transactions for physical or digital goods. This intersection is nascent, the one that collectible enthusiasts are increasingly exploring. This is part of the rationale behind our second quarter acquisition of KnownOrigin. KnownOrigin is an NFT platform that enables artists and collectors to create, buy and resell NFTs via blockchain-supported transactions. Their team is highly talented and has extensive technical experience in this rapidly evolving space. They were one of the early pioneers of NFTs and are a perfect fit to make eBay the destination to collect and trade. In the second quarter, we also began to experiment with Live Commerce. Although Western market adoption of live shopping remains low, we are optimizing our user experience ahead of this emerging trend. Early pilots have seen users engage, on average, for 15 minutes at a time with approximately 1/4 of them interacting directly with the event. We will continue to optimize this capability in future quarters. The Vault, NFTs and Live Commerce were all long-term strategic opportunities that we mentioned at Investor Day, and I'm pleased that in a few short months, we are already making progress in these areas. Customers are also seeing rapid improvements in payments capabilities where we continue to build out new services for sellers and buyers. For example, we rolled out additional forms of payment popular with German buyers, especially Gen Z. Through our partnership with Klarna, consumers can now pay upon invoice or in installments. We also expanded our Buyer FX program, which allows eBay buyers to purchase in the currency of their choice. Recently, we expanded this global service from 8 currencies to over 30 currencies. To date, we have seen over 60% adoption on related transactions. These new services are reducing transactional friction for sellers and buyers while delivering incremental revenue to eBay. Advertising is also driving growth through innovation. Despite the macro environment, ad rates and adoption continue to grow due to the high return on ad spend that seller's experience on eBay. In Q2, our ads business accelerated faster than volume and delivered revenue that was nearly 1.5% of GMV. Promoted Listings drove first-party ad revenue to $232 million, up 6%. This was 20 points faster than GMV growth. Our largest product, Standard Promoted Listings, grew in the quarter due to conversion optimization and pricing changes. Our 3 newer advertising products that we launched last year grew almost 30% versus Q1. The largest contributor was Promoted Listings Advanced, which saw increased seller adoption and exposure. Our advertising business remains on track with the long-term goals we outlined at Investor Day, and we anticipate that Promoted Listings will return to double-digit growth in the coming quarters. ESG is a major focus for the eBay team. And during the quarter, we made steady progress on our commitments in this space. Recommerce continues to be a huge volume driver on eBay. As we've shared before, non-new and season inventory is driving the vast majority of volume on the platform. In particular, demand for refurbished and used goods is growing in many categories. And we are well positioned to hit our long-term recommerce goals. eBay has a tremendous impact on the economy beyond our own results. As mentioned in our most recent impact report, in the U.S. alone, eBay supports more than 1 million jobs. The vast majority of these jobs come from small and micro business entrepreneurs selling on the platform. Another meaningful economic impact comes from the generosity of our community. eBay for Charity allows sellers and buyers to make a positive difference in the world. During the quarter, eBay for Charity raised nearly $56 million, up 52% year-over-year. And Q2 marked the Final Power of One Charity Auction with Warren Buffett, raising over $19 million. Over almost two decades, these auctions have raised more than $53 million for GLIDE, a nationally recognized center for equity. I'm truly inspired by the continued generosity powered by our marketplace. Finally, the team and I are honored to have received multiple prestigious awards this quarter. We were recognized as one of LinkedIn's top companies in retail, and we received 3 Women's Choice Awards in the consumer Internet category, Best companies for Diversity, Best Companies for Women and Best Companies for Millennials. I am proud to be in a team that focuses so heavily on the impact we are making in the lives of our employees, our customers and our communities. In closing, Q2 was a strong quarter for eBay. We delivered better-than-expected short-term results while marking several important milestones towards our long-term vision. GMV, revenue and EPS for Q2 all exceeded consensus estimates. Focus categories outperformed the rest of the marketplace by nine points, excluding trading cars. We maintained high NPS scores from enthusiast buyers who spend more per buyer. Coverage extended to more refurbished products and new categories like Joy. The eBay Vault, a game-changing capability that will enable the future of collecting. We acquired KnownOrigin to accelerate our connections between physical and digital. Our payments team scaled our Buyer FX capabilities, further simplifying frost currency transactions and rolled out Klarna to German customers. Our advertising business accelerated faster than volume, putting Promoted Listings on a trajectory to a double-digit growth in the coming quarters. And eBay for Charity raised nearly $56 million, including a record-breaking Power of One Auction with Warren Buffett. Before I hand over to Steve, I want to thank our amazing team who has continued to work hard innovating and exceptional experience for our customers around the world. They are delivering high-quality products and technologies that are translating into higher NPS scores and driving long-term growth for the company. To our sellers, thank you for continuing to partner with us. Your feedback is extremely valuable and helps us create trusted, reliable and frictionless experiences. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

[Operator Instructions] Your first question is from the line of Ross Sandler with Barclays. Your line is open.

Stephen Priest:

Yes. I'll take that one. First of all, I wanted to say how pleased I am with both the results and the execution of eBay during the second quarter, as I stated in the prepared comments. As you would imagine, as we look to the rest of the year, we've been very thoughtful about the guide and obviously take into account of the current environment. As I think about it, there's 3 significant considerations that we've taken into account and expect to continue throughout the rest of 2022. The first being the impact of the war in Ukraine, which has a disproportionate impact on the European business because of the proximity to Ukraine and the pressure on energy prices. Secondly, the supply chain constraints, which are having an impact on our cross-border trade. And again, we expect those to prevail through the rest of the year. And then thirdly, just really thinking about the broader macro backdrop where we're seeing elevated inflation, rising interest rates, which are having associated impacts on consumer discretionary spend that are all putting pressure. As we consider that, we've put a broader range than we ordinarily would do in the second half of the year to take account of those three significant items. And ultimately, we land within our guidance range will be determined how that macro environment and those macro headwinds evolve over the second half, whether they hold steady, whether they intensify or indeed whether they subside. With regards to the specific areas versus GMV, we obviously have a very global and significant business across the globe. We don't have grocery. We don’t have no material FMCG, and so there's a broad-based of countries. So I wouldn't point to any specific area that would stand out for me. Perhaps, Jamie, if you've got anything that you'd like to add.

Operator:

Your next question is from the line of Nikhil Devnani with Bernstein. Your line is open.

Stephen Priest:

Nikhil, I'll pick up the first part, and then Jamie perhaps can pick up the second. With regard to the second quarter, as you would anticipate, we continue to lean in in terms of operational efficiencies in the short term while we do continue to invest for the long term to drive that long-term sustainable growth that we talked about at our investor event back in March. Candidly, it's really an effect of timing. We had expected some incremental ramp of expenditure as we went through with those investments in the second quarter. Some of that will ramp in the third quarter. And that's why you've seen us hold our full year margin guidance intact for the full year. Jamie, perhaps you'd like to cover the focus categories question.

Operator:

Your next question is from the line of Doug Anmuth with JPMorgan. Your line is open.

Jamie Iannone:

Yes. So it's early days, as you said, but we're excited by the initial feedback from the early customers. So it's having the intended impact, which is giving them a frictionless way to buy and sell on the platform to encourage sellers to use it because, obviously, there's a first-mover advantage. We think once the product is in the vault. It's unlikely to move to a different vault or there can be withdrawal. So we reduced fees through the end of the year on things like storage and selling fees in order to encourage adoption. And we're kind of right on track with where we thought. We're going to continue to innovate, add more categories and add more products over time, but a good early start to the program.

Colin Sebastian:

Good, of course, to see the progress here on the platform. Jim, I know you've been asked this before, but just reflecting on the past quarter, last few months, do you think the marketplace is benefiting all from consumers trading down a bit just given the pressures on the pocketbook right now sort of that countercyclical benefit? And then, Steve, you mentioned growing awareness on the platform. And I'm just curious how you're evaluating that. Is there data you're looking at in things like traffic to the site or other signals that might not yet be showing up in volume monetization that we might expect to see down the line a bit?

Operator:

Your next question is from the line of Stephen Ju with Credit Suisse. Your line is open.

Jamie Iannone:

Yes. So I'd say a couple of things. First, on the collectibles business, yes, we've leaned in a lot to trading cards because of the opportunity that we see in that market. But if you go back to Investor Day, where we size the collectibles business, it's over a $10 billion category. So there's lots of different elements in there and, frankly, lots of different elements geographically. So there's things stronger in our U.K. and German business where trading cards is more of a U.S. phenomenon from that perspective because collecting is interesting regionally, although there is a good amount of cross-border trade when it comes to collectibles. So we're going to continue to invest in collectibles and broadly as a category. On KnownOrigin, it's really -- a key part of that is the talent that we're bringing in. If you look at the team there, they're really the founding -- some of the founding pioneers and the early work around NFTs and digital. And so bringing that directly into eBay, I think, really helps us as we think about the intersection of physical and digital, some of the pieces that Jordan outlined at Investor Day because eBay has been always the place where people go to collect things. And so being able to figure out how to bring them on to the platform, I think, is a key advantage. I'd say it's really early days, but I think we found a great amazing team that we're integrating into the business.

Eric Sheridan:

Going back to the Analyst Day, you guys talked about the ability to continue to sort of innovate around the marketing platform for yourselves over the medium to long term. Any update on how you're thinking about advertising solutions continuing to innovate and change on the platform for sellers? And how we should be thinking about investments versus the cadence of rollout of some of those potential products in the quarters ahead?

Operator:

Your next question is from the line of Tom Champion with Piper Sandler. Your line is open.

Jamie Iannone:

Yes. So we're excited by what we're seeing in terms of spend per buyer. So we -- if you look at -- versus 2019, our spend per buyer for enthusiast buyers are actually up double digits. And that ties right into what we're doing from a focus category strategy. The second thing that we're really focused on is that multiplier effect that we talked about at Investor Day, the fact that watches buyer will come in and spend $8,000 in watches, but $9,000 in the rest of the site, a parts buyer will buy $500, but then buy $700 outside of that. And that helps us drive the strategy around what we -- what we're going after with enthusiast buyers and spend per buyer. It's also why we changed our marketing programs to be much more targeted at acquiring enthusiast buyers. Steve, do you want to cover the second one?

Jamie Iannone:

Yes. I'd just add that when I talk to our eBayers in Germany and U.K., they get their gas bills twice a year, in some cases, once a year. And definitely, there's the impact there of that. And I think that's part of why we see a bigger impact on our European business than we -- our international business than we do in the Americas.

Lauren Schenk:

Great. I just wanted to ask about the marketing has been in the quarter was sort of higher than, I think, we were all expecting. Just how do I marry that with maybe the weaker-than-expected customer net adds as well? And then how you're thinking about marketing somewhat broadly in the back half of the year? Is that somewhere that you would pull back if the macro does deteriorate further?

Operator:

Your next question comes from Justin Post with Bank of America. Your line is open.

Stephen Priest:

Justin, I'll pick those up. So I'm really pleased with the level of execution that we've seen both in terms of our ads business and payments business. And so as Jamie alluded to in his prepared comments, we're seeing a 20% delta between advertising and volume in the second quarter. And the payments team has done a tremendous job executing items like Buyer FX, additional forms of payments that continue to add potential for the revenue side to eBay. We are sort of lapping through as we're coming off the back of the payments migration that was completed in quarter 4 last year. So we are seeing some of the upside around that. But if I reflect on the second quarter, we had about an 8-point delta between GMV and revenue pretty much split evenly between advertising and payments, a little bit more pressure going forward as we see lap to that dynamic. With regards to your questions around hedging, the team did a very nice job of obviously hedging OI and EPS. Our GMV, obviously, is unhedged. And we are seeing pressure because of the strength of the dollar versus sterling and euro over recent months. And that's why you've seen an implied $500 million impact on our GMV guide at a spot rate as we've gone forward. But the teams diligently work hedging OI and EPS as we go forward. And we go quarter by quarter, year by year. I'm not sure that we get the balance side as we do that.

Unidentified Analyst:

This is Zack [ph] on for Deepak. Just curious on your ad business. You saw some reacceleration in the quarter. Just curious for an update on some of these newer product initiatives, Express and Advanced. Kind of can you just give us an update there in terms of adoption? Is this kind of a key driver of the reacceleration? Or is it just still kind of broader adoption of the standard Promoter listing product? And then second, on the kind of monetization of some of your investments. Just curious for how you're thinking about the Adevinta stake here. You've been kind of monetizing some of the other assets over the past couple of quarters. I know a good chunk of it is kind of locked up until end of next year, but just kind of any updated thoughts and philosophy on the Adevinta specifically?

Stephen Priest:

Absolutely. So we continue to be very balanced and thoughtful about capital allocation. We've got a long track record of creating and maximizing long-term shareholder value as we've gone through that. As you're probably aware, in the second quarter, we divested some of our holdings in Adyen and Kakao. Specifically, with regards to your question around Adevinta, we have 33% stake. Indeed, 25% of that is tied up until later in 2023. We continue to reflect on our investments, whether we believe we can generate incremental value in the short term by selling them or holding on for a little longer to continue to drive that shareholder value. So we reflect on all of our investments. We'll be very diligent about how we think about it to ultimately drive long-term shareholder returns.

John Blackledge:

Two questions. First, on eBay Live, could you kind of discuss the early learnings engagement and how we should think about this program ramping as we head towards the fourth quarter and the holiday season? And then secondly, a follow-up on advertising. You've mentioned Promoted Listings reaccelerating to 10%-plus growth. Any update there on timing for when it gets back to double digits?

Operator:

Your next question is from the line of Lee Horowitz with Deutsche Bank. Your line is open.

Stephen Priest:

Lee, I'll take the longer-term plan question. We obviously updated the market at our Investor Day back in March, and our long-term guidance remains unchanged. We are continuing to execute, whether it's through the focus category playbook, ads, payments, building, broader trust on the platform and driving CSAT. So I'm really pleased what we've been seeing quarter after quarter and the levels of execution that we're seeing with the team. Undoubtedly, we are navigating a particularly challenging macro environment, which we believe is transitory. And so the way that we think about this is a duration and the severity of the current macro environment will really point to the timing to the medium-term proportion in GMV, but we continue to be very aligned and confident about the long-term trajectory that we laid out on our Investor Day, specifically to do with parts and accessories, Jamie?

Operator:

Your final question comes from the line of Richard Kramer with Arete Research. Your line is open.

Jamie Iannone:

Yes. So on the first one, part of the reason why we look at '19 is just the massive acceleration that we saw over the COVID time period and kind of comparing the pre and post with the massive restriction and mobility and the stimulus that was there in the market. Obviously, we believe we're definitely coming out of the pandemic much stronger than we came into it. And our strategy is working. To your question on focus categories, our focus category strategy is really focused on non-new and season. So we've kind of really moved away from new and season. You can still obviously buy it on the site, and we have that product. But we're leaning into where eBay is strong. If I go back to the Investor Day, it's a $1.1 trillion TAM growing to $1.4 trillion. And we think given the tougher economic times right now, our strategy of where we're focusing from that category standpoint is exactly where we need to be, and it's frankly a strength for eBay. Do you want to take the third one, Steve?

Operator:

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by, and welcome to the eBay Q1 2022 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to your host, Joe Billante, VP of Investor Relations. Please go ahead.

Jamie Iannone:

Thanks, Joe. 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'm 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 role is fundamental to our purpose and motivates our workforce. In addition to direct and indirect support for refugees and citizens, we will continue 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. 18 million enthusiast buyers continue to shop regularly on eBay, purchasing items over 30 times per year. Sellers are seeing a simpler unified listing experience, and we made several improvements to eBay stores in the quarter. We announced a 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 GMV due to increased optimization and adoption of new products. And finally, we made significant progress on our e-commerce, DE&I and sustainability goals. Sellers and buyers are turning to eBay, and this led to financial results at the high end of our expectations. We delivered over $19.4 billion in GMV 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 $1.05, $0.02 ahead of consensus. Given the challenges our customers are facing around the world, we are pleased with our performance to start the year. 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 U.K. and Germany. As we look forward to the rest of 2022, we find ourselves in the most dynamic macro environment I have seen since returning to eBay as CEO. We expect more near-term headwinds to e-commerce growth rates this year, and our revised guidance reflects our best year 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 reimagination 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 GMV growth. In Q1, excluding trading cards, focused category GMV grew 9 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, GMV was more than double the size of pre-pandemic levels. As a leading trading cards platform, we continue to innovate our experience to increase trust between buyers and sellers. In Q1, we launched authenticity guarantee for ungraded cards above $750. Just this week, we expanded authentication to 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 GMV growth. We are incredibly excited for the launch of the Vault this quarter, which will transform our Collectibles business. Items in the vault will be able to securely transfer between sellers and buyers in a matter of seconds without the need to ship or the need to reauthenticate. We see an opportunity to hold up to $3 billion of inventory in our vault in the next few years, creating significant GMV and revenue growth potential. Looking beyond Collectibles, we continue to expand coverage of focused 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 U.K. 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 area in Q1 was eBay Refurbished. After success with certified products direct from manufacturers, we have significantly expanded the program across smart watches, tablets, laptops and guest steps. Now buyers can shop from sellers across a wide range of refurbished inventory backed by eBay's moneyback guarantee and warranties. These trusted products contribute to e-commerce, 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 $2,000 across 3 markets. This quarter, we added the ability for buyers to request expert verification for a fee for watches valued between $1,000 and $2,000. This additional service marks an important milestone in our journey to increase trust through authentication. This feature is portable to other categories and markets across the platform and demonstrates the scalability and effectiveness of our playbook. In our sneakers 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 GMV 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 0.5 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 are 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 is the eBay Auto Parts Show in New York, where several top influencers showcased that restored in custom vehicles. These do-it-yourself enthusiasts crafted reconcept cars using unique and hard-to-find parts on eBay. This event generated 3 billion media impressions in 1 week, supporting the momentum we are seeing in the P&A category. While sellers and buyers love what we are doing in focused categories, we are also making site-wide enhancements to help all sellers grow their business. In Q1, we made several significant changes to further modernize our store's experience. First, our new storefront page provides sellers the ability to tell their story, showcase their brand and increase trust in their business. Second, we optimized SEO for stores to drive more free traffic. Third, we increased the prominence of store inventory and made it easier for enthusiasts to find stores throughout the buyer journey. To support sellers and help them grow their buyer base, we also increased the ability for buyers to save sellers for future purchases. Now when buyers purchase items, they are prompted after checkout to save that seller. This has driven a 4x increase in the number of saved sellers to date, which leads to more purchase frequency. New buyers who save a seller in their first 90 days are more than twice as likely to repurchase an item. More sellers are sending coded coupons to drive repeat purchases. To date, over 7.5 million buyers have purchased an item from a seller funded coupon, equating to approximately $500 million in GMV. To help sellers improve targeting, they can now categorize their buyers in 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 Klarna in early March, bringing 2 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 studies in Q1, including the new digital wallet we announced at Investor Day. When sellers earn money, that balance is stored 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 1 in 5 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 enables incremental payments revenue to fund further innovation. I'm 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 is our advertising. In Q1, our ads business once again outpaced volume. Ad revenue growth was driven by Promoted Listings, which generated $222 million in revenue, up 2%. This was 19 points faster than GMV, and 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 3 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 auction sellers. A typical auction that leverages this feature is attracting several hundred more buyers per 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 limited data, 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. Firstly, on Recommerce. In 2021, our platform generated over $4 billion in positive economic impact from the sale of used and refurbished goods. This activity avoided 1.5 million metric tons of carbon emissions, equivalent to taking 300,000 cars off the road for a year. Recommerce on eBay is growing due to our focus on non-new and 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 DE&I. We are about to publish our sixth annual diversity, equity and inclusion report. This report provides insights into our 4 strategic objectives

Operator:

[Operator Instructions]. Our first question comes from the line of Colin Sebastian from Baird.

Jamie Iannone:

Yes. Thanks for the question, Colin. Absolutely. So when you look at our enthusiast buyers, we have 18 million of them. They drive 70% of our GMV. That group is a very productive group for us. It's -- they shop more than 30 days. They spend over $3,000. And even though some of them are moved in and out of mid-value, when you look at our mid-value buyers that we outlined at Investor Day, they're actually of the cumulative lifetime value of most other platforms. So they're also very valuable customers as well. So the key things we're doing is, a, driving our focused category strategy. When we look at those enthusiast buyers, 94% of them shop in focus categories. So that's a big opportunity. 25% of them are selling on eBay, and that obviously drives the flywheel of 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 2019, they're 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 or their initial category, and then all of the pieces that we know kind of drive retention. The last one I'll just pick up on is it's also tied into our seller strategy. So part of the things that we announced this year -- this quarter with sellers, things like new eBay storefronts, enhancements to the eBay coupons, improvements to SEO. It's all about how to -- it's just not eBay and the platform driving retention of those enthusiast 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 feel really good that the strategy is working and the plans are intact.

Stephen Priest:

Colin, good to speak. As you can imagine, we've been very deliberate in terms of how we've looked at the outlook for the remainder of 2022 based on this base of uncertain and challenged environment. I'd just like to -- you're correct in terms of your assumption as we go forward with regards to seasonality. So just as a reminder, as we talked about at our last earnings call, we do have a half 1 and half 2 underlying story for 2022 as we lap some of the significant tailwinds associated with COVID in 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 macroeconomic environment, but we still expect the sort of seasonal shape of the GMV as we go forward.

Eric Sheridan:

Two if I can, just following up on Colin and following up on the macro issue. Are you seeing different behaviors in the macro environment between your high-value buyers and low-value buyers? And would that inform any decisions of maybe accelerating some of the investments you want to make in terms of improving the skew of your buyer base as we go through 2022? That would be a sort of question number one. And then secondarily, you pointed out the gap between GMV and ads, which was quite wide. How should we think about that gap between ads outperformance relative to GMV beyond just what you reported in Q1 given against your innovation curve run ads longer term?

Operator:

For our next question, we have Tom Champion from Piper Sandler.

Jamie Iannone:

Yes. So a couple of things. One is really pleased to see that 9 points faster growth in terms of the focus categories. We are lapping some stimulus from last year in our numbers. So that's certainly a factor. And then over time, Tom, the math would say as we increase our coverage of focus categories, obviously, the delta will decrease just because of the math of more of the numerator being, the denominator as well. But as we look at this as a multiyear, the strategy that we laid out at Investor Day is right -- is consistent, getting them to grow at or above market growth rates. What I'd 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 nascent, and we're starting to see that traction in the focus categories. And we talked about some of the new launches that we're seeing internationally.

Deepak Mathivanan:

Great. Just sticking with the macro discussion. The 5 points lower revision on full year GMV guide, maybe can you elaborate a little bit on what signals you're seeing now to arrive at the 500 basis point reduction? I mean a lot of uncertainty is still kind of ahead of us. So does this revised guide reflect what you're seeing now? Or does this also factor in potential unfavorable trends in the second half? And then how should we think about your expectations for 2023 and 2024 based on the revised 2022 targets?

Operator:

For our next question, we have Stephen Ju from Credit Suisse.

Jamie Iannone:

Yes. Great question. So first, the way I think about the focused category is 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 in 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 is in addition to all the things we're doing around consideration, we're continuing to drive quarter-after-quarter new features, new capabilities 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 built a new capability, which is actually allowing buyers to pay for authentication if they want it for watches between $1,000 and $2,000. So it will be a continued evolution of focused categories as we launch new ones and continue to enhance them. I'd say a couple of things about the collectibles category. I'm really excited by this quarter. A, our Vault is on track that we talked about at Investor Day and a lot of potential there to save, reauthenticating, shipping the products. On Monday, we announced a partnership with PSA. PSA is the most popular grader for trading cards, and now you can have your cards authenticated by PSA, over $2,000. 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 ROAs that we continue to see. We have strong ROAS for our sellers. And so it's obviously easiest to get the largest sellers to start using the product and drive that penetration first. But we're, for example, launching a new unified listing experience, which has a great advertising inclusion. This quarter, we announced some optimization tools for our product listing advanced. And look, it took us 5 years to get the -- to 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.

Ross Sandler:

I just had two questions. First, can you remind us what cross-border GMV peaked at prepandemic compared to the 20% today? And you mentioned the new payment partnerships and this new wallet potentially getting that going in the future. So how material could that be? And I guess other than like some of the log jam clearing up in China outbound, what else can you do to crank up cross-border? And the second question is you normally have a downtick in 2Q operating margin seasonally. This one is a little bit more pronounced than normal. So just any color on those investment levels? Or is that just from some of the GMV weakness you were talking about previously?

Jamie Iannone:

Yes, Ross, I'm happy with our pace of innovation. So the Klarna 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 invoice and financing. And so that's one component. Steve talked about the digital wallet, which is in beta now, which obviously helps us with the flywheel, also helps sellers because they can store a balance for their selling costs like shipping, et cetera. And then to your question on cross-border trade, we are doing things to help. They're having somewhat of an impact, being able to forward deploy inventory through a partnership that we've done. But our cross-border trade elements, as Steve said, have been roughly steady.

Operator:

Our next question, we have Dan Salmon from BMO Capital Markets.

Jamie Iannone:

Yes. With the departure of Pete in that transition, I went out and tried to find the absolute best product person in the world that I can find. Eddie has a really unique ability. He combines product UX and technology like no other executive that I've met. And importantly, too, he has a decade of background with eBay, which is extremely valuable to come in and really hit the ground running. And he's already started. I think he's on day 8 today, and is doing a great job. So really excited to have him here. I would say no, nothing changes in terms of the product road map. He's got a great team of leaders underneath him. We have a strong organization, and the road map is very solid for the year. I mean if I just look at payments as an example, this quarter, they announced a deal with Klarna at Investor Day. They're about to launch it. They launched a new capability to do buyer FX, so the buyers could 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. I'm just thrilled that Eddie could be part of the leadership team and help us push forward on the tech-led reimagination.

Richard Kramer:

Jamie, you've -- sorry, there's a big echo here. Jamie, you mentioned quite a bit about the focused strategy and laying that out, but still seems to leave eBay vulnerable to vertical sites in specific categories, which have some social or community hosting to engage users. How far might you see stores evolving to allow them to have their own maybe brands or IDs and try to engage users in more ways than simply buying? And Steve, I guess, the other question, if you look at the guidance for 6 to 7 points of upside from payments and ads, is that simply lapping the payment saturation or completions? Or do you imply some sort of slowing of ads growth over the course of the year despite all these new formats you mentioned?

Stephen Priest:

Yes. Richard, I think you're talking about the 6 point delta between the FX-neutral GMV and FX-neutral revenue. I'd say there's 3 dynamics at play. Number one, you're right, we're sort of lapping through the completion of managed payments as we've transitioned from '21 to '22. So we see less of a tailwind associated with that. But on the flip side, the other 2 items is the continued momentum with regards to the investments we were 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 being driven associated with that, and then the continued success in the ads platform. As we mentioned in the first quarter, ads was growing at 19 points faster than GMV. So it's really the combination of those 3 factors that I've talked about that gets the implied guide going forward.

John Blackledge:

Great. Two questions. First, could you expand a bit on how the trading card segment performed in the first quarter? And how does the launch of the Vault trading card and overall collection business? And then second, which e-commerce verticals were the biggest headwinds in GMV, perhaps the toughest comps in 1Q and 2Q?

Joe Billante:

Operator, we've got time for one more.

Justin Post:

Just a couple of questions. There's been a lot of write-downs in the group. And obviously, the e-commerce group is under pressure. You have the advantage of really strong cash flow. How are you thinking about the asset opportunities, bringing things into eBay? And then second, just on the U.S. GMV. It was down quarter-over-quarter, which has happened in the past. Did you see a slowdown there related to Ukraine as well and -- or gas price is a factor?

Stephen Priest:

Yes, I'll just give a little bit of extra color. I think when we bifurcate what we've seen between international and the U.S. in terms of consumer sentiment, U.S. and U.K. consumer sentiment is at pretty much historic based on what we've seen. But as you can imagine, some of this is percolated over to the U.S. in terms of inflation going up, higher prices and also the inflation that's going forward. So the U.S. is not immune to this. It's more -- we saw in the first quarter some deeper penetration challenges in the European business. But I think it's a fair comment just in that there has been some slowdown. And as we go further forward during 2022, at a macro level, you can sort of see that implied in our guidance and go forward.

Operator:

Good day, and thank you for standing by. Welcome to the eBay Q4 2021 Earnings Call. [Operator Instructions]. I would now like to hand the conference over your presenter, Vice President, Investor Relations, Joe Billante. Sir, please go ahead.

Jamie Iannone:

Thanks, Joe. Good afternoon, everyone, and thank you for joining us. Today, I'll begin by sharing highlights since our last earnings call. Then I will focus on the near-term progress we are making towards our strategic vision. And finally, provide a short preview of our Investor Day in 2 weeks. At the end of my remarks, I will turn the call over to Steve, who will discuss our financial performance and outlook in greater detail. The fourth quarter marked another solid quarter for sellers and buyers on eBay. They benefited from investments in our strategy to drive sustainable growth in our marketplace. We are simplifying the seller and buyer experience, increasing customer satisfaction and improving our underlying growth trajectory. Let me highlight a few achievements from the quarter. We are seeing faster GMV growth in focus categories that now represent approximately 20% of global volume. We successfully completed our multiyear payments transition on time with more customer benefits and with greater financial impact than expected. Our advertising business grew faster than marketplace volume as more sellers adopted new ad products. We delivered revenue growth at the high end of our expectations and earnings growth above guidance. And finally, we continue to execute our ESG agenda. In addition to being carbon-neutral, we made progress on our long-term sustainability targets, and eBay for Charity finished a record-breaking year. I'm very pleased with our Q4 financial results. We delivered 5% revenue growth on the back of payments migration and Promoted Listings growth. We also delivered $1.05 of non-GAAP EPS, more than the high end of expectations. For the full year, revenue was up 15%, and non-GAAP EPS was up 21%. As proud as I am of our team for delivering these results, I am more excited about eBay's future based on the response from our customers to the strategy we are implementing. This is evident in focused categories. We are delivering best-in-class customer satisfaction, and it is leading to faster GMV growth. In Q4, focus categories grew 15 points faster than the rest of the marketplace. The next category we are focused on is motors, parts and accessories or P&A for short. This is one of our largest categories globally and is full of enthusiasts who are passionate about what they trade on eBay. Many are very active buyers who shop in multiple categories, with over 60% of the eBay spend coming on products outside P&A. Starting in December, we began investing in top-of-funnel marketing across TV, radio and social sales in partnership with key industry influencers. These ads highlight the valuable choices P&A enthusiasts have on eBay across hundreds of millions of listings. In addition, we implemented monetization changes to higher-priced items and saw an increase in listings during Q4. We are leveraging the scale of our supply in new ways. With input from our P&A sellers, we simplified our global category structure. This makes it easier for buyers to find unique parts from around the world, unlocking more cross-border trade. These initial changes led to modestly better performance in P&A GMV during Q4 relative to the overall business. It's early days, and we plan to make further investments this year to improve our trajectory in this category. In focus categories where we have been investing for several quarters, we have seen growth sustained at higher levels. Sneakers over $100 continued to grow double digits globally. Our success in the U.S. is being replicated in other major markets. Part of that success is authentication, which is scaled to 5 countries over the past year. And in Q4, we started authenticating cross-border transactions into the U.S. But we are not stopping there. Last quarter, we acquired Sneaker Con, a leading authenticator with operations in the U.S., U.K., Canada, Australia and Germany. By bringing additional capacity in-house, we increased the scale and flexibility of our operations. We also introduced 3D true view on select listings. This capability increases trust for buyers shopping for unique, high-value pre-owned items. Given our success in driving customer satisfaction to over 90% and sustained double-digit GMV growth, we have reintroduced monetization in the U.S. for sneakers over $100. The initial customer feedback has been encouraging as sellers continue to benefit from a lower take rate than many other platforms. Sellers are also listing more luxury watches on eBay. We saw a double-digit increase in supply quarter-over-quarter, and total GMV in this category continues to grow at strong double-digit rates in the U.S. In Germany and the U.K., authentication is also leading to higher customer satisfaction. In luxury handbags, we saw acceleration in Q4 to positive double-digit growth in the U.S. Based on the success of authenticity guarantee, we are growing the number of brands covered by the program. In addition, we have expanded selection by authenticating cross-border imports from Japan, a key source of unique inventory. And just a few weeks ago, we announced authenticity guarantee for all single ungraded trading cards sold for over $750 in the U.S. We plan to expand this offering to include graded autograph and pass cars sold for more than $250 later this year. As we exited 2021, our Certified Refurbished program had expanded to over 320 brands. This program now includes brands like Microsoft, Dyson, Samsung Galaxy and KitchenAid. And as a reminder, these products are certified by the manufacturer, are like new and are backed by a 2-year warranty and eBay's money back guarantee. Higher trust has increased customer satisfaction and accelerated GMV to positive double-digit rates. Certified Refurbished products from top brands make up a small percentage of the total refurb activity on eBay but are growing significantly faster. This has inspired us to expand further. And in November, we announced eBay Refurbished, a destination for like new products. This expanded experience adds more inventory from top-rated sellers. These trusted sellers are thoroughly vetted to meet rigorous performance standards so buyers can purchase with even greater confidence. In Q4, we saw promising early results from this expansion in mobile phones and plan to extend to tablets, smart watches and laptops this year. In addition to improvements in focus categories, we made a number of changes during Q4 that benefited sellers and buyers across all categories globally. We've started a pilot with our API sellers to add video to their listings. To date, we have seen hundreds of thousands of listings add video content. Buyers get a rich shopping experience on individual item pages and in seller stores. Looking ahead, we plan to enable more sellers to tell their story by adding videos through additional listing flows. Another new growth capability we are scaling for sellers is coded coupons. Since launch, sellers have realized over $350 million in GMV. Over 60,000 sellers have driven repeat purchases from almost 6 million buyers. Buyer trust is essential in a third-party marketplace and is an area of focus for our technology investment. In Q4, we leveraged artificial intelligence to significantly decrease the time to detect and remove counterfeits. In the categories where it has been deployed to date, most listings are renewed before a buyer has a chance to see it. These are a few recent examples of how we are using technology to increase trust while simplifying seller and buyer experiences. Moving on to payments. In Q4, we completed the transition to a modern payments platform by migrating all remaining sellers away from the legacy system. This has resulted in a simpler seller experience, lower fees for most sellers, more choice for buyers and better-than-expected financial results. Although this marks the culmination of a major multiyear effort, in reality, this is just the beginning. By managing seller and buyer money flows, we can remove transactional friction and provide more trusted services. We've been systematically eliminating unpaid items, which removed friction for approximately 10 million transactions in 2021. In addition, sellers are being paid faster for weekend sales in most major markets. We are also exploring new ways to allow sellers and buyers to benefit from our scale. In the U.S., we recently launched a partnership with Chase Freedom rewards that increases top-of-funnel impressions, driving buyer traffic to eBay. We are excited by the value payments has provided our seller and buyer community, and we see more growth opportunities ahead. Moving to advertising. In Q4, ad revenue growth once again outpaced volume due to Promoted Listings, driving approximately $227 million in revenue, up 4%. Adoption grew at double-digit rates in both the number of sellers and the number of listings promoted. Looking at the full year, our advertising business, including both first-party and third-party ad products, surpassed $1 billion, up 9%. To drive the next growth cycle in advertising, we expanded the rollout of new products to more sellers and markets during the quarter. PL Express, our auction listings product, was fully launched to all major markets. We also integrated this feature into more listing tools to drive further adoption. For PL Advanced, our cost per click offering, we opened access to AI-driven recommendations for keywords and bid pricing. While this product remains in a limited beta as we optimize the customer experience, we are increasing exposure and streamlining reporting for sellers. For external Promoted Listings, we continue to ramp more affiliate traffic through the eBay partner network. We also increased traffic from external paid search to Promoted Listings in European markets. Participating sellers are seeing increased traffic and conversion while maintaining control over ad pricing. We have carefully meted the rollout out of these new products while balancing impacts to our buyer experience. Despite the limited release, new ad products provide a material contribution to Promoted Listings revenue growth in Q4. We expect this to accelerate in the coming quarters as availability and adoption of these new product increases. Another area where we made significant progress last year was in e-commerce. Volume of pre-loved products grew faster than new products in 2021 driven by demand from younger consumers. For the full year, we delivered $2.7 billion of GMV in pre-loved electronics and apparel in the U.S., U.K. and Canada. In addition to providing customers great value on unique used goods, e-commerce activity also helped to meet our sustainability goals. These purchases reduced carbon emissions by approximately 540,000 metric tons in 2021. eBay is a carbon-neutral company, and I'm thrilled by the recognition we recently received as a sustainability leader in e-commerce. For the third year running, eBay has made the Dow Jones Sustainability World in North American indices, putting us in the top 10% of companies in our industry globally. eBay was also included in Just Capital and CNBC's Just 100 list. This list measures corporate performance and efforts in areas such as climate change, DE&I and employee wellness. When compared to nearly 1,000 companies, eBay ranked 88th overall and fourth in retail when it comes to minimizing our environmental impact. I'm really proud of the progress our team is making here. The eBay community continues to demonstrate its tremendous generosity. In Q4, eBay for Charity enabled sellers and buyers to raise almost $37 million, up 6%. And for the year, customers raised over $145 million, up 18%, the most raised since we started this program almost 20 years ago. Lastly, we were honored this year to receive Glassdoor's 2022 Employees' Choice Award. This award reflects anonymous feedback from current and former employees regarding topics such as crew opportunities, culture and values, and diversity inclusion, just to name a few. We are truly honored to be recognized by the people who make eBay the company it is. Now I would like to talk about our upcoming Investor Day on March 10. In July of 2020, I outlined a clear vision of a winning strategy for the company. Since that time, we increased our focus on sellers and buyers, accelerated the pace of innovation, simplified the portfolio and revamped the leadership team. We also drove successful multiyear initiatives in payments and advertising, both of which exceeded ambitious targets. This unprecedented level of change in eBay all happened in parallel with a global pandemic that massively disrupted short-term consumer behavior. Their early results have demonstrated that our strategy is working, and the business is stronger than it was before the pandemic. Our focus categories are returning to market rates of growth. High-value buyers are growing, and they are spending more. We are empowering sellers by simplifying their experience, saving them money and providing tools to accelerate their growth. Our technology investments are driving a simpler and more sustainable marketplace. And along the way, our investors have been rewarded with strong earnings growth and significant capital returns. Looking ahead, we're excited about the next few years as we build on the momentum we have established. I look forward to introducing you to our world-class leadership team and sharing more about our plans, along with a few new initiatives we will unveil at Investor Day. We have our eyes squarely focused on deepening our relationship with sellers and buyers and building the world's most sustainable marketplace for the eBay community. In closing, I would like to sincerely thank our extraordinary employees for an amazing year. They completed a huge payments transition, executed 2 large dispositions and improved the underlying growth of our business. While doing so, they delivered tremendous sustainability results and supported sellers and buyers during these challenging times. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Operator:

[Operator Instructions]. Your first question comes from the line of Scott Devitt from Stifel.

Jamie Iannone:

Yes. So Scott, this is Jamie. So on the U.S. versus international, as we talked about last quarter, there's a couple of dynamics that are impacting the differences in the growth rate. First, on the macro side, just different markets, GDP growth, inflation growth, retail growth are different and lower in Europe than what we're seeing in the U.S. We've talked about the supply chain challenges, which have a bigger impact on our international business than on our U.S. business. So in some cases in the U.S., we're favored by it in things like video graphics cards, which are in high demand. At the same time, we have a strong cross-border trade business, and some of our sellers are impacted by some of the supply chain dynamics and export challenges. And that hits our international segment more than our U.S. segment. The third component is really the focus categories are much more nascent in our international business than in the U.S. So think a category like watches, which has been live for several quarters in the U.S., we just rolled that out to U.K. and Germany this quarter, ditto with some of our other products and focus categories where they're still rolling it off to our international markets. And as we've seen, it takes a few quarters for us to achieve the growth rate levels that we saw in the U.S. But we believe that, that playbook will apply and that will help the convergence that you talked about. The last thing is really just the collectible difference between the 2 markets. Trading cards and that whole segment is stronger in the U.S. than it is in international. So it's a long way to say that there's a number of factors that are at play there. But yes, we believe, over time, as the categories roll out, that will drive the convergence as well as some of the macro effects like the supply chain and other pieces change over time. On your second question on M&A, yes, we continue to look at M&A as an opportunity to accelerate our tech-led reimagination. We've said we will be opportunistic to look at areas that are asset-light and consistent with our business to drive the strategy that we've laid out. The example I would point to is, most recently, Sneaker Con and that investment with authentication properties and services in 5 different countries enabling us to accelerate even faster what's happening on sneakers, where we've seen really great success. In fact, we think the playbook has worked well enough now that we're actually remonetizing sneakers this quarter for sneakers over $100. So it gives us scale, and it gives us flexibility, and that was the point of the acquisition.

Ross Sandler:

Just following up from Scott's question. I think looking at the exit run rate for '22, some investors we talked to, I think, were hoping to see a little bit more than 2% to 3% GMV growth with all the focus category activity and initiatives that you're working on. So I guess why aren't we seeing higher growth once we kind of hit the easier comp period? Are we still cleaning up some of the lower-quality buyers? Anything that you would call out in terms of why that growth rate isn't quite up to the e-commerce averages at the end of '22? And then, Steve, you mentioned new opportunities in managed payments now that we're 100% covered. Just can you elaborate a little bit on what you guys are going to potentially roll out in payments, that would be great.

Operator:

Moving on, your next question comes from the line of Stephen Ju from Credit Suisse.

Jamie Iannone:

Yes. So thanks for the question. So we agree with you. So we think the benefit of having multiple advertising products is to appeal to not only multiple types of sellers but multiple types of advertising occasions. So we built our first $1 billion business over the last 5 years on a single product, which is a CPA-based product. And we've introduced 3 new products

John Blackledge:

Two questions. First, on the focus categories based on the current GMV guide. Do you expect the focus categories to sustain that growth differential -- the 15% differential versus non-focus categories in fiscal '22? And then second question on margin/investments. The 1Q '22 op margin is a bit higher than the '22 op margin guide, and you cited some investments. Could you discuss the investment spend that's kind of being phased in throughout '22?

Stephen Priest:

John, Steve here. So let me just give you a little bit of color on the overall margin position as we've guided the full year margin for 2022 of 30% to 31%. There's a number of items at play here. Number one, we've got volume deleverage that's happening in the overall business as we cycle through the lapping of the pandemic, which is much more significant in the first half, as you can imagine. Secondly, as we sort of lap the payments transition that we went through, that's also a dilutionary effect. On the flip side, we have been doing a lot of work on our operational efficiency and going deep on our cost structure to identify opportunities to take cost out of the business to enable us to go forward with reinvestment. And then finally, we have been, as Jamie said, really delighted with the trajectory that we've had with regard to our focus categories. Think about sneakers, think about watches, think about the 15% -- 15-point increase over the core platform. And that's been a result of investments that we have made to really change the tide and turn the tide on the focus category we've had. So we're going to be leaning in to product. We're going to be leaning into full funnel marketing as we go category by category in '22. So it continues to be an investment year as we go forward. Q2 will be the lowest point of the margin for the year when, firstly, we do continue to lap through that significant COVID lapping from last year, but also the phasing of the investments as they start to ramp in the second quarter and ramp through the rest of the year as we go forward. So hopefully, that gives you a little bit of a shape of the macro picture, but also the shape of margin trajectory as we go through 2022.

Eric Sheridan:

Maybe a multi-parter on buyers that sort of dovetails with some of the questions you've gotten so far. If we were to compartmentalize buyer growth going forward, how should we be thinking about the headwinds you're facing in sort of a post-pandemic environment, elements where you yourself are not choosing buyer growth and where there could be tailwinds to buyer growth from some of the new verticalized experiences you're trying to build out for the platform over the medium to long term? So sort of -- I don't know if there's a way to sort of characterize it that way, but if we were to think about those 3 buckets and elements of headwinds and tailwinds and how it feeds back in to thinking about buyer growth going forward.

Operator:

Your next question comes from the line of Colin Sebastian from Baird.

Jamie Iannone:

Yes. So as you've seen, Colin, I don't like to talk about where we're going next for competitive reasons and kind of giving away what is our next focus area. So the other one that we've announced is going after parts and accessories next as a large category dominant market leader position and a great opportunity for us. We talked about investment. You're starting to see full funnel marketing from what we're doing in parts and accessories from a leading position as well as a number of product changes like opening up our global category structure to make it easier to do cross-border trade business, putting all of our parts into the vehicles apps, et cetera. And so we'll go into a lot more depth on Investor Day at what we're seeing in the focus categories that we worked on and our path forward, but that's all that we've announced up until this point.

Jamie Iannone:

Yes. A good example of that is in sneakers, right? So I talked about us remonetizing sneakers for sneakers over $100. We're still a great value for buyers and sellers versus other places that they can sell and buy sneakers. So we feel great about that. And that's the feedback that we've gotten from the community. We'll continue to make other smart changes like we did in parts and accessories, in watches and in certain categories constantly with this viewpoint of how do we provide the right value for our sellers on the platform to make sure we're bringing the best inventory on.

Edward Yruma:

Two quick ones for me. I guess, first, to the extent you could talk about it, with some of these changes in the pricing structures as a follow-up to the last question, do you see any adverse impact in terms of the number of sellers or the performance level when you reprice some of these categories tactically? And then as a follow-up to that, as you look across the rest of the portfolio, do you think that there are other opportunities for you to take price given the strong momentum the platform has?

Operator:

Your next question comes from the line of Tom Champion from Piper Sandler.

Jamie Iannone:

Yes, Tom. So on the videos, what I would say it's very, very early days. So we just rolled out the feature. Excited about it from 2 elements, though. One is excited for our eBay store sellers that they can now build a video to tell their story. One of the unique parts of eBay is it's not just a transactional model. So if you look at some of these models, your brand doesn't meet a whole lot. At eBay, we let the seller really build the brand and have access to 160 million buyers. And so that, I think, will be really powerful as more and more sellers adopt it. The same thing is true for our listings and bringing video across the platform. One is it just makes the engagement of the platform much more compelling. I think about an oboe I recently bought them a platform of 2 quarters ago from my daughter. It was great, lots of pictures and lots of description, but god, a video and being able to hear it would have been even more compelling. You could think about that in a lot of categories. So it's really early days. We're just adopting it for our API-based sellers and moving into our core listing flows. But we think over the coming quarters and years, it'll be an exciting new element for us on eBay.

Operator:

Your next question is from Brian Fitzgerald from Wells Fargo.

Jamie Iannone:

Yes. Great. So even really pioneered e-commerce, and I think the strategy we laid out last July of leaning into e-commerce, is leaning into right where the next generation is going. And I'm really happy because not only leading into where Gen Z is, but we're keeping products in circulation, keeping them out of the landfill. We did a survey recently, and 87% of respondents said they had sold preowned goods in the last 12 months. And it's really important to Gen Z because it plays a huge role in their experience. 81% of Gen Z said that buying preowned items has become more common for them in the last year. So we feel great from a business perspective, but also from an ESG perspective. If you think about what e-commerce does, we just made the Dow Jones Sustainability World in North America indices for the third year in a row. I talked about some of the other recognition that we had as an organization. We've saved hundreds of millions of dollars in terms of emissions, just in apparel and preloved electronics. So from an ESG standpoint, we think ESG is so core to what eBay does, that we should be in every ESG fund. So both from a business and an ESG standpoint, we think we're leaning into a great vector of growth.

Operator:

Good day, and thank you for standing-by and welcome to eBay Q3 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today. Joe Billante, VP Communications and Investor Relations. Please go ahead. Good afternoon. Thank you for joining us and welcome to eBay's Earnings Release Conference Call for the Third Quarter of 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 a 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 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, and 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 October 27, 2021, and we do not intend and undertake no duty to update this information. With that, let me turn it over to Jamie.

Steve Priest:

Thank you, Jamie. And thank you all for joining us today. I'll begin with our Q3 financial highlights on Slide 4 of our presentation. We delivered another strong quarter. Our results met or exceeded the expectations across all key metrics, while our year-over-year comparisons reflect the extraordinary growth we experienced last year as a result of the pandemic. These results were underpinned by continuous execution, divisions on payments, Promoted Listings, and focus categories. [Indiscernible] year-over-year on an FX-neutral basis. The transaction revenue grew by double-digits Primarily due to contributions from managed payments. Non-GAAP EPS was $0.90 per-share, and our operating margin is 31.7%. We generated $502 million dollars of a free cash flow and returned approximately $2.4 billion to shareholders through share repurchases and cash dividends during Q3. Given the underlying growth in our business and strong free cash flow generation, I'm pleased to announce we've raised our share buyback target for 2021 from $5 billion to $7 billion. Our pending portfolio transactions remain on track to close within previously communicated timelines. We anticipate the sale of other [Indiscernible] shares. So [Indiscernible] were closed during Q4, while the career deal should close out the next year or potentially by the end of 2021. Turning to active buyers on Slide five, we exit Q3 with a 154 million active buyers on a trailing 12-month basis, representing a 5% decrease year-over-year. This decline was primarily driven by low value buyers. [Indiscernible] makes more than half of our buyer base, but only 5% of GMV. As Jamie mentioned, this ongoing trend is a result of our strategy to prioritize attracting and retaining high body buyers. We have confidence in this [Indiscernible] approach, but we recognize the reduction low value buyers could pressure our rolling 12-month active buyer accounts in the coming quarters. Compared with Q3 of 2019, low-value buyers are down 7%, while high-value buyers were up 6%. Moving to GMV on Slide 6. In Q3, we delivered $19.5 billion of GMV, down 10% year-over-year on a spot basis, and down 12% on an FX-neutral basis in line with our expectations. The macro benefits to our business from mobility was significantly diminished in Q3 as restrictions sighted across the globe [Indiscernible] positive underlying growth in our business. Compared with Q3 of 2019, GMV [Indiscernible] neutral basis. [Indiscernible] performance by market varied based on a number of factors, including relative mobility and [Indiscernible] specific macroeconomic trends. Internationally, GMV was roughly flat versus Q3 of 2019 on an FX-neutral basis. A number of factors influenced the growth differential between the U.S. and our international markets during the quarter. My abilities back to pre-COVID levels in many of our largest international markets, diminishing the volume tailwinds we benefited from in third quarter. Changing consumer behavior, including uptake in leisure activities and travel, also might have impacted e-commerce guides internationally. Additionally, category mix varies in our international markets, which have lower exposure to certain fast-growing verticals like collectibles. A higher concentration of items from cross-border trade that are more difficult to source amid the ongoing supply chain disruptions. Finally, our focus category rollouts on more nations in our international markets. However, as our innovation playbook expands to more categories and countries, we are confident our international growth trajectory will increase. In the U.S., GMV grew 22% versus GMV of 2019. Growth in our domestic marketplace was driven by strong execution against our strategic pillars, big growth within e-commerce. Residential mobility improved in the U.S. and continues to trail Europe markets. While leisure activities and travel increased in line with normalcy, including the lingering impact of government stimulus and [Indiscernible] The precise [Indiscernible] About likely a net positive contributor to U.S. growth in the near-term. And aggregate numerous puts and ties between regions, but we remain encouraged by the modestly positive underlying growth in our business. Turning to revenue on Slide 7. Net revenue for Q3 was $2.5 billion of 10% year-over-year on an FX-neutral basis and 11% on a spot basis. We delivered $2.4 billion of transaction revenue, also up 11% on an FX-neutral basis. Growth was primarily driven by managed payments, which contributed roughly 20 points of incremental revenue growth during the third quarter. The payments ramp drives an 80 basis points sequentially increasing our take rate, which surpassed 12% increases to moderate as -- the managed payments rollout is nearly complete. Within the advertising business, Promoted Listings grew 9% year-over-year. Our pricing volume by 20% of the new Promoted Listings products have seen significant increases in performance, giving us confidence in the long-term potential to advertising revenue. Marketing services and other revenue declined 7% year-over-year to a $151 million driven by the impact of sold item declines on shipping programs and headwinds within third-party advertising. We continue to purposely reduce third-party advertising in favor of Promoted Listings, which delivered superior performance and offer a better experience for both sellers and buyers. Moving to expenses on Slide 8. In Q3, we delivered non-GAAP operating [Indiscernible], primarily driven by lower volume. Our cost of revenue has scaled in line with payments growth due to variable processing costs. This dynamic has pressured gross margins during our transition to managed payments. However, once the transition is complete, we expect gross margins to be more stable. Moreover, the incremental revenue from payments drive significant leverage in our fixed expenses, most notably sales and marketing and G&A. Sales and marketing fell by nearly 4 points as a percentage of revenue year-over-year in Q3. In addition to leverage from payments revenue, sales and marketing was lower due to reduction in coupons and rewards programs that were previously targeted towards low value buyers. Product development increased 21% year-over-year, as we continue to accelerate product innovation, and support our longer-term strategic initiatives within payments, advertising on focus categories. Transaction losses rise as a percentage of revenue by nearly 2 points versus last year due to higher consumer protection losses from the payments transition. And the lapping of onetime benefits in the prior year, which were partially offset by the benefits of fee netting. Turning to EPS on Slide 9. We delivered $0.90 of non-GAAP EPS in Q3 at 9% year-over-year, as ramping contributions from payments on the net benefit share repurchases, more than offset the lapping of COVID -driven volumes, a year-ago. GAAP EPS for the quarter was $0.43, the dealt was primarily driven by a fair value adjustment on other venture shares, partly offset by gains from other investments. Switching to free cash flow on Slide 10, we delivered another strong quarter of cash generation in Q3 with $502 million of free cash flow, a 4% decline year-over-year. The decline was driven by the timing of working capital and capex spend, partly offset by operational efficiencies and the timing of 2020 cash taxes. As a reminder, the managed payments transition has yield meaningful working capital benefits. Through three quarters of 2021, this benefit amounted to approximately $300 million. Moving to capital allocation on Slide 11. we ended the quarter with cash and non-equity investments of $5.1 billion. In gross -- quarter, we returned approximately $2.4 billion to our shareholders through stock repricing dividends. We repurchased approximately 31 million shares for $2.3 billion with an average share price of $72.52. We also paid a quarterly dividend of a $116 million in September. Given our fortress balance sheet and strong underlying free cash flow, we are updating our share buyback plan for 2021 from $5 billion to $7 billion, which implies approximately $3 billion of repurchases during the fourth quarter. Over all, our capital allocation objectives remain unchanged. We'll preserve financial flexibility to execute on strategy and drive long-term value creation. We aim to drive organic growth in our business, and will look for opportunities to supplement that growth, with disciplined acquisitions and investments. We will optimize our financial flexibility, access to debt, and cost of capital, and we'll continue to deliver meaningful returns to shareholders -- to share repurchases and dividends. We made 2 investments on Slide 12. As a reminder, we received 540 million shares in Adevinta from a classified sale, which closed during June of this year, represents an equity ownership stake of approximately 44%. As a regulatory condition of the classified sale, we committed to reduce our ownerships like in Adevinta just to 33% or less over 18 months following the close of the deal. In July, we agreed to sell approximately 135 million shares to Permira for roughly $2.4 billion. We believe that Permira share trial remains on track to close during Q4 from the 405 million shares that we would retain, were worth close to $7 billion at the end of September. Turning to Adyen, the ones we acquired in connection with our strategic partnership during the second quarter of 2018, were valued at $1.4 billion at the end of Q3, an increase of over $300 million quarter-over-quarter. You will find more information on the Adyen [Indiscernible] and [Indiscernible] [Indiscernible] Our staking to [Indiscernible] banks as appreciates the embody following the Company's IPR in August. At the end of Q3, our investment was worth approximately $800 million. Finally, in June, we announced plans to sell the 80% of our carrier business to A-Mark's for approximately $3 billion, higher than implied value of roughly $800 million at the time of the announcement. We believe the deal remains on track supplies by early 2022 with a possibility of closing before the year-end. We remain excited about [Indiscernible] employable investments. The potential optionality that provide a significant value that collectively represent the eBay shareholders. Turning to guidance on Slide 13. For the fourth quarter, we are projecting revenue between $2.57 and $2.62 billion, representing growth of 3% to 5% on an FX-neutral basis, and approximately 4% to 6% on a spot basis. Our pay rates have risen notably in recent quarters due to contributions and payments in advertising. Although we expect advertising to continue growing faster than volume, we expect the impact from payments on our tight rates and moderate as we're nearing completion of our managed payments transition. We are raising our 2021 full-year outlook for payments revenue for 1.8 [Indiscernible]. Revenue guidance implies GMV is down low teens on an FX-neutral basis versus last year. And at mid to high single-digits compared to Q4 of 2019 focus categories. Our outlook also assumes minimal benefits from macro factors like mobility stimulus and supply chain impacts. However, we know the macro environment remains dynamic and difficult to predict with varied impacts from country to country. We expect non-GAAP EPS of $0.97 to $1.01 per share in Q4, represents the 14% to 19% year-over-year. We're investing in positive technology to deliver better tax [Indiscernible] appearances and improve customer satisfaction. We anticipate our non-GAAP tax rate to between 18% and 19% due to recent outperformance of our U.S. business. We expect our GAAP EPS in the range of $0.72 to $0.76 per share in Q4. In closing, we delivered strong results in Q3, the maximum exceeded expectations across all key metrics. We continue to execute our strategic vision and grow our core marketplace while maintaining the balance and discipline that will enable us to generate tremendous value for our shareholders for years to come. Managed payments are on track to deliver $2 billion in revenue this year. And that transition is on track for completion by year-end. However, we believe our tightness journey is just beginning. This milestone unlocks new opportunities to reduce friction in the marketplace and provide additional financial services. Advertising revenue continues to outpace volume, sell as increasingly leverage our expanded product portfolio to amplify the exposure of [Indiscernible] We observed impressive momentum with our focus categories, which are meaningfully out pricing overall volume [Indiscernible] We're confident we can continue expanding this innovation playbook to more categories and countries in the quarters ahead. Our balance approach to capital allocation has enabled us to reinvest in our business, generate consistently strong free cash flow, and deliver attractive returns to shareholders through share repurchases and dividends. As proud as I am about numerous business accomplishments, what makes them even more impactful to me, is knowing we're achieving these milestones while building sustainable, inclusive, and secular economy platform for all. Once again, I'd like to take this opportunity to thank our teams across eBay for their incredible work as the last quarter and the support for our amazing sellers and buyers in the eBay community. One final note, we are in the midst of a multiyear journey to deliver tech led re-imagination of eBay. As the impact from macro factors stabilizes, we are reviewing our internal goals for 2022 and beyond. We anticipate showing our longer-term goals and aspirations in investor event early next year. With that, Jamie and I will now take your questions. Operator, over to you.

Edward Yruma:

Hey. Good afternoon, guys. And thanks for taking the question. Really wanted to quick down a little bit on some of the categories that you're re-imagining and some of the success you're noting there. Just help us understand maybe the new customers you're growing into the platform. I know you've identified from dollar amounts, but just to clarify, are those new customers or is that customers that are participating in those categories? And then as a follow-up, what are the marketing plans to encourage new customer growth in these categories that you've re-imagined? Thank you.

Edward Yruma:

Great. Thanks so much.

Colin Sebastian:

On the core marketplace improvements. You obviously focused a lot on category specific changes and that's working well. How much effort is there in platform wide enhancements? And if there are any sort of specific initiatives there, what will be the timing for those? And then, Steve, maybe with respect to the Q4 outlook, just looking at the sequential ramp versus typical seasonality, it's certainly a little light of historical patterns. Even eBay could be a net beneficiary from supply chain issues, I know, like factoring that into the outlook, but maybe some additional color there would be helpful. Thanks.

Steve Priest:

Yeah thank you Jamie. Hi, Colin. Continue to lie out. We will not only move the focus categories but also the momentum alliance. So, payments and ounces have gone forward. On a year over 2 bases, if you think about on a standby year-over-year we're obviously lapping a pandemic. On a year over 2 bases, we're seeing mid-to-high single-digit growth compared to Q4, 2019. I think as a [Indiscernible] First of all, a holiday perspective around Q4 is embedded in the guide. From a headwind perspective, in the prepared comments we had, we talked about supply chain pressure for cross-border trade that we see on one side, but in terms of a tailwind, obviously, eBay is well known for unique and scarce items, which we do expect some support to the holiday periods. So, a few puts and takes, but overall, I'm pleased with the label be continued modestly positive to underlying growth on the platform as a result of the initiatives that we're driving forward.

Operator:

Thank you. We have our next question coming from the line of Q - Deepak Mathivanan with Wolfe Research. Your line is open.

Jamie Iannone:

Yes. On the new Promoted Listings offerings, let me just explain the 3 in details. The first one which is Express, is really to give us a Promoted Listings product against auctions. Since we launched this product 5 years ago, it's really only applied to fixed price. And so, this opens up your wallet smaller format at the site of format that has not been open to advertising before. Promoted Listings Express is a C2C -based product. Gives sellers the opportunity to drive more velocity, goes after a different type of marketing budget for that perspective and given us the opportunity to work with a secondary and supplementary advertising format. And the third is off eBay advertising, and that's using the vast marketing reach that eBay does today, partnering with our sellers to drive advertising as part of that off eBay outreach to bring existing buyers and new buyers back to the platform. I will say for you is that it's early days on these 3 products. If you look back, we started our ad business 5 years ago and we've grown to a billion dollars now over 5 years. So, we're at the point now where we're testing, we're learning. We've got invited sellers into the program. And just like it took us time to build up the CPA based program, I think it will take us time here to build up the advertising program. In terms of penetration, we still have a lot of opportunity left, both in terms of the sellers and Listings. I believe the last that we shared was that only 400 million of the Listings have advertising associated with them. So, there's a lot of opportunity for additional penetration. I'll let Steve take the second question about how we're thinking about the future.

Deepak Mathivanan:

Got it. Okay. Thank you very much.

Ross Sandler:

Hey, guys. 2 questions. One on just U.S. versus international. So, it seems like a big reason why your U.S. GMV is way above 3Q '19, I think you said it was about 23 or something like that, compared to international is a little bit on the IST comp, but also from these focus category initiatives. So, what's holding back the same type of uptick for international? Is it structural or is it just a timing thing, and we should see a ramp up after you roll those out after starting in the U.S. And then the second question is on how will eBay Motors these days are not a big category historically, and just can you talk about a little bit about the opportunity there in terms of making that one focus category emerging departs with the motors?

Operator:

Thank you. We have our next question coming from the line of Doug Anmuth with JPMorgan. Your line is open.

Jamie Iannone:

Yeah. First on the friction, the whole idea of bringing commerce and payments together gives us great opportunities to remove friction. So, on the selling side, people now only have to set up for single account and get selling. All of their claims are managed in one place. Tons of benefits from there. One of the ones that I'm really excited by is that since I worked at eBay, the last time starting in 2001, unpaid items have been on this platform forever. And so now, we've eliminated it and fixed-price virtually. We're doing so in best offer. And so, sellers won't have to face that issue, and it takes friction out of the platform. On the buy-side, it allows us to open up new opportunities for different forms of payments. Clearly, we've already integrated Apple Pay and Google Pay, but we launched the partnership with After pay in our Australia business for buy now, pay later. After pay is a very strong brand in that market. And that's bringing us new customers. It's already at 10% of our business there. And we're continuing to look at new opportunities for forms of payment for our buyers. Secondarily is on the seller financing -- payments through the business. So, like I said in the call, the way I look at it, the migration is complete, but we're just getting started in terms of the opportunity of what we can do with commerce and payments together in a single flow -- in a single experience.

Doug Anmuth:

Great. Thank you both.

Operator:

We have our next question coming from the line of Brian Fitzgerald with Wells Fargo. Your line is open.

Jamie Iannone:

Yes. On the first question, on auction by density, no, we're not seeing an impact from that. Frankly, that format has actually been really strong because of the strength we're seeing collectibles where it tends to be a more used format. And I'm excited that we are starting to launch Express because that will give our auction sellers the ability to drive some more visibility for them and then to have a tool that they haven't been able to use before. In terms of the shipping services, this has been a constant march for us. Last year, we expanded in the U.S. to have USPS, UPS and FedEx in there and did the same thing with Royal Mail and Australia Post to greatly exceed the amount of tracking. On the specific shipping test that's going on, now, it's kind of too early to tell. What I would say in general is how to think about this, Brian, is I'm trying to get the whole Company focused on how do we make things as simple and as easy to do on the platform. So, what we're doing with our new seller flows, with computer vision and trading cards is how do we take all of the work out of the listing process. We're trying to do the same type of thing with our sellers and the stores product and making it really easy to get that setup on the platform. Shipping is one of those areas where there's an opportunity to take a lot of the friction out. The new partnerships that we've created, the integrated tracking, the smoother returns process is all part of this evolution of just make the whole platform so much easier to use. And so, we'll keep you posted on how these tests roll out, but I'm happy with the progress so far.

Operator:

We have our next question coming from the line of Tom Champion with Piper Sandler. Your line is open.

Jamie Iannone:

Yeah. On the first one, look, I've been talking since last July about the game changing level of trust on the platform. And we've been doing that kind of category by category. So, the authentication that we've been doing in the luxury categories really takes trust off the table. These 2-year warranties that we put in place for certified refurbished does the same thing. And eBay actually has a good size business and industrial business in capital equipment, and [Indiscernible] allows us to put a whole different level of trust in there. They're a long-time seller in partner on eBay and the capabilities that they will bring to that category will help bring a new level of trust and just help buyers and sellers in that category move forward. So that's what I would say I'm going to do. On the C2C, it's really just a lapping of the COVID dynamics that we saw from last year, in terms of time period and just some of the macro dynamics. What I'd tell you is I'm really happy with the progress and continue to be a huge focus for us is on our C2C selling experience, bringing them onto the platform making it as extremely easy, making that payment sign-up process really, really simple. And so that's going to continue to be something that we're going to focus on quarter-after-quarter because as I mentioned in the past, we -- when we talk about high-value buyers, that includes buyers themselves. By nature, it helps drive them up their buyer cohort curves as well as bringing that unique inventory. So, we're going to continue to push forward there. And then Steve, do you want to take the last one?

Tom Champion :

Thank you.

Stephen Ju:

Okay. Thank you so much. So, Jamie, I think in your prepared remarks, you talked about what sounded like a 3D modeling technology. You're using in the sneaker’s category. So how easy or difficult is this to do and presumably, and hopefully, this is driving higher conversion rates were this is rolled out as you're presenting more information to the buyers, Apache might be rolled out to. And I guess as a follow-up to the earlier C2C question, as you get more and more buyers to become sellers over time, are you seeing pretty consistent behavior with the newest batch of converted users versus the earlier cohorts. Thanks.

Joe Billante:

Operator, I think we've got time for one more.

Dan Solomon:

Good afternoon, guys. Thanks for slipping me in. First Jamie, can you just expand a little bit on the affiliate program that you cited is one of the 3 new initiatives for Promoted Listings the opportunity to take it off platform, what are you hoping -- what probably hoping to sell for your sellers with that? And if you could add some color on how significant you think that opportunity could be relative to the 1 billion run rate that you're approaching for the onsite Promoted Listings business. And then just second [Indiscernible], will you go to exit [Indiscernible] you expect the metric to remain under pressure? And the strategy certainly seem sound, but is your goal here to ultimately exit all of those low value buyers? I'm just hoping you can add some context to the scope of the strategy. Thank you.

Steve Priest:

Hi Dough (ph.), you know, it's not -- it's not about -- I think it's about focus. And I think we're constantly thinking about acquisition of buyers and growth on the platform. And really, it is about really changing our strategy and our focus. And I just want to reiterate about the value of various buyers bring. So, if I think about our top 20 high-value buyers, or 20% of our buyers, and deliver 75% of our GMV. Nice buyers are making 6 different purchases 6 different times a year and over $800 and net buyers itself. But the low value buyers, it's about 50% of our -- on that strategy as we continue to evolve the platform, focus on the enthusiasts, focus on cost category selling. But it's very, very important that we continue to have a pipeline as we evolve the business in growth going forward.

Dan Solomon:

Great. Great. That was very helpful. Thanks.

Joe Billante:

Good afternoon. Thank you for joining us, and welcome to eBay's Earnings Release Conference Call for the second quarter of 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 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. 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 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 and Form-10-Q, 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.

Steve Priest:

Thank you, Jamie. And thank you all for joining today. I would like to start by saying how excited and honored I am to be at eBay. I would also like to thank Andy for his leadership and guidance during my transition into the role. He has done an excellent job creating value for the Company and leading our finance team over the last couple of years. I'll start on Page 4 of our presentation. We have outlined the impact of moving our Korean business to discontinued operations and our guidance for Q2 Earnings. That's an aggregated level, this would have reduced guidance by approximately 2 points of GMV growth, $400 million of revenue, and $0.02 of EPS. The Q2 results purely reflect the performance of our continuing marketplace business. On July 13th, we published a Form 8-K that includes the [Indiscernible] historical financial statements back to the start of 2019. These figures provide an apples-to-apples comparison versus our actual results. Excluding Korea, the implied Q2 guidance was between $2.58 billion and $2.63 billion of revenue growing 8 to 10% on an organic FX-neutral basis. Non-GAAP EPS was between $0.89 and $0.94 per share, representing a decrease of 5 to 10% year-over-year. Turning to our highlights from the quarter on Slide 5, despite lapping an exceptional quarter last year, we delivered strong operational results. Revenue grew double-digits, driven by payments and ads. Non-GAAP EPS was $0.99 per share. and our operating margin was 33%. We generated $910 million of free cash flow while returning $1.6 billion to shareholders through share repurchases and cash dividends. We generated significant value from our Portfolio as we work to transform eBay. We announced the agreement to sell about 80% of our Korean business to Emart for approximately $3 billion. We completed the classified transaction for a total value of $13.3 billion, including 2.5 billion in cash, and a 44% stake in Adevinta. We then reached an agreement to sell a quarter of that stake to Permira for over $2.4 billion in cash. Finally, we increased our estimated 2021 share buyback to $5 billion from an initial 2 billion. Moving to the active part on Slide 6, we exited the quarter with 159 million buyers representing a 2% decrease year-over-year on a trailing 12-month basis. At the beginning of the pandemic in Q2 last year, we added more than 7 million buyers, our largest quarterly increase over. The [Indiscernible] buyers have matured in line with historical trends. We are also seeing a reduction in the bias of life-priced items due to Chinese in our marketing mix. As Jamie mentioned, our strategy to attract new-time buyers has changed over the past several quarters. We've intentionally focused our marketing and product innovation on high-value buyers. These include buyers who sell or [Indiscernible], at least six days a year and spend over $800. This high-value segment represents approximately 20% of our buyer base, and they purchase around 75% of our GMV. High-value buyers grew in Q2, as did the spend per buyer. Low-value bars on eBay like approximately half of our buyer base but the only purchase, about 5% of our GMV. As we drive the strategy, we expect to see a further drop in active buyers on a rolling 12-month basis. But an increase in GMV per buyer over the coming quarters. Moving to Slide 7, in Q2 we delivered $22.1 billion of GMV, down 11% year-over-year. On a spot basis, this represents a decrease of 7% year-over-year. Compared with Q2 of 2019, GMV grew 19% on an FX-neutral basis, and 23% on a spot basis. There were several factors that contributed to the Q2 GMV dynamic. First, we lapped the peak of the early impacts of the pandemic, including the first wave of my ability restrictions, stimulus payments, and supply chain disruptions. Second, there was a meaningful ongoing macro benefit from global mobility, although it was significantly less at the end of the quarter than at the beginning of Q2. Our underlying business continued to show positive growth from site-wide product experience improvements and category performance. In the U.S. we generated approximately $10 billion of GMV in Q2, down 5% year-over-year. International GMV decreased 16% year-over-year to $12.1 billion. Our U.S. volume [Indiscernible] paced International primarily due to strength in trading cards, as well as benefits from government stimulus earlier in the quarter. Turning to Revenue on Slide 8, our net revenue for the quarter was $2.7 billion, up 11% on an FX-neutral basis and up 14% on a spot basis. We delivered $2.5 billion of transaction revenue up 11% year-over-year, mainly driven by payments. We continue to make great progress on seller migration. As Jamie mentioned, 71% of our global OEM platform volume was processed through managed payments during the quarter, which contributed approximately 18 points of incremental revenue growth year-over-year. The success of the payments ramp also drives the quarterly acceleration of 80 basis points to our transaction take rate, which is 11.3% for the quarter. We expect its rate to continue to grow throughout 2021 as we complete the payments rollout. We delivered $172 million of marketing services and other revenue up 11% year-over-year, driven by strength in shipping programs. While we continue to purposely reduce third-party advertising, the drug on total [Indiscernible] growth rate was less due to easier comps from a year ago. Turning to Slide 9, our major cost drivers. In Q2, we delivered a non-GAAP operating margin of approximately 33%. this represents a 6-point year-over-year decrease, driven primarily by lower volume. The cost of revenue has increased in line with payments growth due to processing costs. While these variable costs will increase as payments revenue grows, the incremental revenue provides leverage for our fixed expenses. Most notably sales and marketing, and G&A. Product development costs increased year-over-year as we continue to invest in product innovation, supporting our strategic initiatives. Transaction losses were flat versus the prior year. As the benefits of netting seller fees against our net proceeds were offset by higher customer protection losses. Turning to EPS on slide 10, we delivered $0.99 of non-GAAP EPS in the second quarter, flat versus the prior year. Negative impacts from lapping COVID - driven volumes were offset by strategic initiatives, particularly payments, as well as a lower share count related to sharing repurchase. GAAP EPS for the quarter was $0.43, a decrease of 56% year-over-year. We elected the fair value accounting method for our investments in [Indiscernible]. The change in stock price between the close of the sale on June 24th, and the quarter-end on June 30th, drive a majority of the GAAP EPS to decrease. In addition, while we recognized further guidance on the Adyen launch in Q2, we're lapping significant guidance in the [Indiscernible] year. Moving to slide 11, we saw another strong quarter of cash generation with $910 million of free cash flow. The 7% year-over-year growth was driven by strong operational results, payments, and improvements in working capital. This is partly offset by higher cash taxes. Turning to slide 12, we ended the quarter with cash [Indiscernible] investments of $7.6 billion and debt of $9.1 billion. As I mentioned in my earlier remarks, we completed the [Indiscernible] of our classified business to Adevinta during the quarter, generating cash proceeds of $2.5 billion. We expect to pay cash taxes associated with the sale of approximately $400 million in the third quarter. As a result of our strong underlying free cash flow performance, and the prices from this transaction, we updated our capital allocation plans for 2021 by increasing the estimated share buyback to $5 billion. In Q2, we returned $1.6 billion to our shareholders through stock repurchases and dividends. We repurchased approximately 24 million shares at an average price of $62.60 per share, amounting to 1.5 billion, and paid a dividend of $121 million. We exited the quarter with $4.2 billion of share repurchase authorization remaining. Our Board has approved an additional share repurchase authorization of $3 billion with no expiry, raising the total to approximately $7.3 billion. Finally, we issued $2.5 billion of senior unsecured notes during the quarter, part of which will be used to repay our 2022 debt maturities. Moving to investments on Slide 13 on June 24th, we closed the classified sale and recorded investments on our balance sheet of $10.8 billion to reflect the 540 million shares we received as consideration. The value of this stake stood at $10.4 billion at quarter-end. By some other venture stock price. Between the announcements of the deal last July and the close of the transaction this June, the value of our equity stake appreciated 61%. As a regulatory condition of the classified sale, we agreed to reduce our ownership stake in another vantage of 33% or less over the 18 months following the close of the deal. We recently announced an agreement with Permira to sell approximately 135 million shares for more than $2.4 billion. This will reduce our ownership stake to 33%. We expect this transaction to close in the fourth quarter. Turning to Adyen, the ones we acquired in the second quarter of 2018, are valued at $1.1 billion at the end of the second quarter. an increase of over $500 million year-over-year. You'll find more information on the [Indiscernible] in our [Indiscernible]. We also want to highlight [Indiscernible] at the end of the second quarter, our investment was worth approximately $300 million. On August the 6th, they completed their IPO, which increased the value of our stake to over 900 million. Finally, on June 24th, we announced plans to sell about 80% of our Korean business to Emart. We will retain an interest of less than 20% to the implied value of our interest was approximately $800 million at the time of the announcement. We remain excited about all these investments. The optionality they provide, and the significant value they generate for each of our shareholders. Turning to guidance on Slide 14, for Q3, we are projecting revenue between $2.42 billion and $2.47 billion, growing 6% to 8% on an organic FX-neutral basis, and approximately 7% to 9% on a spot basis. We anticipate payments and advertising, we'll continue to drive revenue to grow faster than volume, leading to type rate expansion. This revenue guidance implies GMV is down low-to-mid teens on an FX-neutral basis versus last year and up high single-digits compared to 2019. On a spot basis, today's rates would indicate a 2-point benefit versus FX-neutral growth rates in Q3. This is 2 points lower than the 4-point benefit we saw in Q2 GMV. We are [Indiscernible] that macro benefits, including stimulus and my ability, will be significantly less in Q3 than Q2. We also expect our efforts to improve the business will continue to enable modestly positive underlying growth. We expect non-GAAP EPS of $0.86 to $0.90 per share, representing 4% to 9% growth. Year-over-year, we plan to continue investing in products and technology to deliver better [Indiscernible] experiences while improving marketing efficiencies. We are expecting GAAP EPS in the range of 64 to $0.68 per share in Q3. Looking at the full year, the macro environment remains dynamic and difficult to predict. And we are not providing full-year guidance at this time. However, there are variables within our control that we're sharing in this context. Given the accelerated pace of the transition of the payments, we are raising our full-year forecast for payments revenue from $1.7 billion to $1.8 billion. Payments' margin contribution continues to ramp towards our long-term target of 25%. The total operating margin for the business was expected to land at approximately 33%, which would be close to 150 basis points, better than 2019. As I mentioned before, we expect to repurchase shares totaling $5 billion in 2021 at this time, which implies an additional $3.2 billion in the second half. In conclusion, during the quarter we delivered strong short-term results ahead of expectations while transforming the Company for the longer term. We are excited about the path forward on the growth potential of eBay. Innovation is leading to volume growth and our focus categories, despite tougher comps from a year ago. Our payments and advertising initiatives are driving better customer experience, resulting in incremental revenue and earnings growth. Our balanced approach to cost management allows us to reinvest in our customers while delivering high margins with low capital intensity. We continue to deliver strong free cash flow and return value to our shareholders through stock repurchases and dividends. Our portfolio simplification has created over $20 billion of shareholder value, allowing us to intensely focus on growing the core. As a purpose-driven Company, we're enabling economic opportunity for all, while supporting our people, our communities, and our planet. I would like to once more take this opportunity to thank our teams across eBay for their tremendous work at the last quarter and for their support for our buyers and sellers in the eBay community. We will now take your questions. Operator.

Tom Champion:

Hi, good afternoon, and thanks for taking the question, Jamie, I'm wondering if you could elaborate a little bit on your buyer strategy. It sounds like we should expect that maybe that metric is under pressure the next couple of quarters. But what sort of underlies that the strategy around focus, around that, that's 20% of the buyer base. And I guess relatedly with the portfolio improvements in streamlining the business, does this enhance your ability to execute more rapidly going forward? And maybe just the last one for Steve would love to hear a little bit more about your thought process and what -- what drove you to the business, given it's a little bit different from your prior background. Thanks very much.

Steve Priest:

Thank you, Jamie. And thank you, Tom, for your question. It's good to meet you this afternoon. I suppose, I [Indiscernible] in two areas, I've [Indiscernible] from two Companies, which were leaders in an industry around customer-centricity and innovation. And coming over to eBay a Company that's got a real sense of purpose. An amazing team and our hearts around customer-centricity and innovation were some of the core facets that I looked at when I came out to eBay. Since I've been here, it's really clear about the sheer size and scale of the enterprise and what opportunities are ahead of us in terms of its growth. We really do have incredible durability of the financial model with a fortress balance sheet, best-in-class margins, incredible free cash flow. And even after a few weeks, I feel that the value of the enterprise is really misunderstood because of the potential that's ahead of us and the strategy that Jamie's laid out. So, I'm really excited to be here. I think there are huge opportunities for the enterprise and I'm looking for to my journey over here and eBay

Operator:

Your next question is from Stephen Ju with Credit Suisse.

Jamie Iannone:

Thanks for the question. On the first one we're excited that as we get through managed payments, we announced that next quarter we'll be at 90%, that it opens up even more opportunities for us from a, how do we service our buyers and sellers? So, some examples of things that we've already launched, for example, is we launched a partnership with After pay as an additional form of payment in Australia, allowing people in that market to pay with installments. It's very strong in Australia, and that's certainly helped us in Australia business. In our U.K. business, we've launched a partnership that allows us to do seller financing and help sellers out there. And we'll continue to expand in different ways throughout the globe on more opportunities around managed payments. The other big one that I talked about earlier is that now that commerce and payments are one, and we can manage all of that on eBay, there's a lot of friction we can take out of the platform, so unpaid items are a great example where for 25 years since I was here the first time, sellers have had to face items where buyers wouldn't pay. We've now eliminated that in the 99% of options on our way to do that in best price -- I'm sorry, the best offer in auctions. We've eliminated fixed price on our way to do it, is the best offer in auctions. And two weeks ago, we had eBay open with thousands of sellers online and we announced this. And it was massive rejoicing from them because this has been a key pain point. So, the other thing I'm excited about is just eliminating those pain points. On your question on the fulfillment service, what we saw in the U.S. and especially in our cross-border trade, coming out of Greater China, for example, is the ability to forward-deployed inventory is a benefit because of the predictability that it gives to buyers from that standpoint. We're using it to help scale small businesses, to drive the ability to have for deployment. And basically, pass those savings onto the customer. So, we're just getting started with that program, but we've learned a lot about cross-border trade and, and we're excited that fulfillment services are going to help scale some of our small businesses and in their cross-border inventory.

Operator:

Your next question is from Michael [Indiscernible] with Bank of America.

Jamie Iannone:

Yes. So, on the first one on Promoted Listings, no, that business is doing well, we frew it 8% in the quarter, despite the volume being down 11. And we actually are starting to scale up a couple of pilots that we launched in Q2. Specifically, ads for auctions, what we're calling Promoted Listings Express, which is a CBC business. And then -- and off eBay advertising business. So, we continue to see lots of potential in that business, and these 3 areas are just getting started. On the sold items, that's really a reflection of the purposeful decisions that we've made, to one is moving away from low-value items that weren't driving the type of return and low-value buyers specifically, as well as a shift to higher ASP in general because of the strategy to focus categories strategy working. So, we talked about the strength that we're seeing in trading cards and collectibles. Already having done $2 billion this year, the same as all of last year. Really driving our C2C business, and C2C tends to have a higher ASP. Our higher average selling price than our B2C business. And so that's also driving kind of that dynamic. so, it's actually in line with what -- with where we wanted to be, we think it's healthy for the ecosystem, and we think it's going to continue to be driven that way because C2C, as we look at it, we hope to continue to outpace B2C and lean in on these categories of value, like our luxury goods collectibles, et cetera.

Operator:

Your next question is from Colin Sebastian with Baird

Jamie Iannone:

Yeah. So, on your first question on the buyer strategy. Yes, we're purposely moving away from low-value buyers who are kind of low CLTV, low GMV per buyer. If you remember back in 2019, we talked about that strategy and because some of these are trailing 12-month metrics, some of those numbers are actually still in our numbers even from 2019. But the reason I'm focused on is if you look at that 50% of buyers, they only contribute 5% of GMV. And the top 20% contribute 75%. And so, by focusing the organization not on just how many buyers do we have on the platform, but how many of our buyers are we turning into these high-value buyers? We think that's much healthier for the growth of the platform in the long term, much healthier for sellers, et cetera. Jive's better with the marketing strategies that we're going after while we're really focused on the first 90 days of a customer and getting them up to their lifecycle. So, this is going to be a purposeful strategy you are going to see us on for years, walking away from the work that we did back in 2019, what when you ask about the managed payments, what I'm really happy about is the execution from the team. If you look at when we started, for example, enabling greater China, we got to 90% penetration within 10 weeks. And so, we took the learnings from what started two years ago with the U.S. and Germany, and we've learned a lot as we've rolled out all of the other countries. And that pace speaks to the -- the pace of execution of the team and what they're doing and another, a lot of questions of what we'd be able to even reach the targets we had for next year originally. And I'm just excited that we're ahead of schedule and we're starting to do things like the After pay and the seller financing because there's just a lot of potential for this business as we fully manage the payments by -- all through eBay.

Operator:

Your next question is from Edward Yruma with KeyBanc Capital Markets.

Jamie Iannone:

Yes. So first on your question on authentication. Look, we're really excited at how we've been able to scale this program. We've now authenticated 1 million items on the platform. We've expanded that authentication too, for sneakers to U.K., Australia, and Canada. This quarter we announced that we're authenticating handbags over $500 in the U.S. And we're using a mixture of third-party and in-house resources to do so. But what we're seeing is that this authentication has a great ROI. What it's able to do in terms of driving GMV, driving new buyers into the site. I will just give you -- I'll reiterate the stat we talked about last quarter in sneakers, which is acquiring a Gen Z, they buy $500 in sneakers, but they buy $2,000 in other categories on the site. We're seeing the same thing in watches, where a luxury watch buyer is buying $8,000 in categories outside of watches, and that's over 50 items. And that's one of the benefits of eBay, is that cross-category shopping nature, and that's really hard for other competitors to replicate. On eBay stores, we talked about being the seller platform of choice and a big part of that is our strategy of really growing eBay stores. This quarter we announced a new program where it's much simpler to set up your eBay store. And I'm really excited by one of the features the team now -- announced, which was the ability for a seller to send coupons to repeat buyers. So, this is something that sellers have been asking for. We built it in as part of the store's platform. And in just a few short months since launch, that product already has 1 million buyers taking advantage of those coupons from sellers. So, another thing that -- as we had our big eBay open event 2 weeks ago, our sellers were really excited. And frankly, we're just getting started on that program. so, we're even continuing to make sellers aware of these new capabilities. So, you'll continue to see quarter-after-quarter and year-after-year innovation on eBay Stores because it's an important part of our strategy.

Operator:

Your next question is from Ross Sandler with Barclays.

Steve Priest:

hey, we got Steve here. [Indiscernible] So I'll start off with -- the second quarter. And as it relates to everything else on an Apples -- Apple basis, we've obviously exceeded our expectations across all of the major metrics. We laid out our Q3 - third-quarter guidance, and obviously, that reflects the best view based on what we're seeing in our most recent trends in the first part of the quarter. And our latest outlook on my ability. And this is actually an unchanged view versus what we communicated when me [Indiscernible] in the second quarter and what we indicated was that we expected the second half GMV growth will be similar to Q2 as the Asia comps will be offset by lower macro benefits in 2021 as some mobility got back to normal and we are seeing some of that, in particular, a couple of our key markets in the lights of Germany and the U.K. That underpins that. And again, we still to -- when we look through that lens, we expect that to lead to a mid, low-to-mid teen volume declines year-over-year, which actually at the heart of it indicates modestly positive growth from the underlying business on the basis of us continuing to improve the customer experience and execute on the vision that Jamie has a light out. Specifically, with regards to your second question about the 33% operating margin for 2021, obviously, we're ramping payments up. We talked extensively about the fact that that's actually a lower margin part of the businesses sort of 25%, we've guided our expectations that 2021 will end with that 33%. With our recast financials ties a 150 basis stronger than 2019. So, we're right on track with the margin accretion from all of the initiatives that we're driving forward. We're not guiding 2022 at this point, but I'm very pleased with the trajectory that we're sitting on.

Richard Kramer:

Thanks very much. Jamie, first of all, you spoke about being the platform of choice for sellers, but you've also hit a record transaction take rate of 11.3%, you're suggesting that a rise year-on-year. What's your message to sellers with the notion that they are seeing in terms of their costs on eBay continued to go up as there's been a lot of issues and glitches with working on final value fees and tax and so forth. And then a couple of quick questions for Steve. Can you give us a bit more detail on the decline in gross margins you mentioned payments on authentication? And also, adjusting for the fair value of both warrants, and equity, and the investments, it looks like free cash flow would have been about a 1/3 lower. So, can you talk about what you're seeing in the underlying free cash flow of the business when we remove all these very noisy investment income and changes in fair value of warrants? Thanks.

Steve Priest:

Hi Richard, good to meet you remotely. I'll turn off the first question with regards to margins. So, I think about the 3 key areas that the underlying business, there are payments, and then there are the lights of authentication. And so, as a reminder, we laid out the strategy around payments a couple of years ago. With regards to $2 billion of incremental revenue, $500 million of incremental [Indiscernible] margin, and as Jamie alluded to, that is going very well, the momentum's going well, we've increased the full cost for 2021 to 1.8, [Indiscernible] on the revenue side. And as I said earlier, we are continuing to be on the path for the incremental 150 basis points over two years on our margin story. So, it's not necessarily driving any dilution in the margin story. It's great from a Net Income standpoint as we go forward. The second point on authentication, Jamie mentioned the return on investment that is providing, it rather de minimus when you look at the overall cost structure in terms of, in fact, less than the half of points of margin is where you go from authentication, but the amounts of stickiness that are providing for our customers when they are going to cost cross-category buying more than pays for itself, and it's an investment that we're really glad we're making as we think about the whole ecosystem and And then the ability for that to move [Indiscernible] -- across categories. With regard to our free cash flow at an underlying level which generated a free cash flow of $910 million in the quarter. The warrants are not achieved yet, and the free cash flow's investments. What I would say is that we continue to invest in the product as part of our core platform. In terms of the payment’s rollout, which is going extremely well, and other product investments with regards to moving this side forward in the categories that Jamie alluded to earlier. So, we're doing very well in terms of the organization and how we're moving forward, and very happy to follow offline if there are any further questions.

Deepak Mathivanan:

Hey guys, thanks for taking the question. To start off, just to follow up on Ross's question. Low-to-mid teens GMV decline in 3Q. Any way you can sort of giving us color on mobility assumptions behind that, should we expect some incremental deceleration in 4Q, or is 3Q sort of the reflection of all potential reversals due to mobility may [Indiscernible] that it's hard to forecast COVID dynamics. But I want to understand your guidance assumptions. And then the second one, you monetized some of your Adevinta stakes, how should we think about the approach with the rest? Is there any specific guidance or timeline that you have in mind? Thank you.

Jamie Iannone:

Okay. Operator, I think we'll take one more, please.

Dan Solomon:

Hey, good afternoon, everyone. Jamie can come back and review the rollout of Promoted Listings Express and CPC pricing, whatever your key goals there, is it a greater advertiser base, deeper spend per advertiser, and bring more of your sellers in more deeply to the program, any more color on that would be great. And maybe an appropriate last comment for the call, you've mentioned eBay open a seller forum a couple of times here, and some of the pieces [Indiscernible] see back that you got. What would you say were the 2 to 3 most important that you heard from the sellers [Indiscernible]?

Dan Solomon:

Thanks, Jamie.

Operator:

Good day, and thank you for standing by. Welcome to the eBay First Quarter 2021 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today Joe Billante, VP of Investor Relations and Communications. Please go ahead.

Jamie Iannone:

Thanks, Joe, and good afternoon everyone, and thank you for joining us. Today, we'll begin the call with key highlights from the first quarter. Then, I will share some reflections from my first 12 months as CEO and provide an update on the status of our tech-led re-imagination. At the end of my remarks, I will turn the call over to Andy, who will discuss our financial performance and outlook in greater detail. The first quarter of 2021 was an excellent start to the year for sellers and buyers on eBay. Gross merchandise volume grew 24%, ahead of expectations. Revenue grew 38% outpacing volume, primarily due to payments and advertising. This is the fastest our revenues have grown since 2005, and we lean [ph] further into technology and vertical marketing investments, but still delivered $1.09 in non-GAAP earnings per share above our expectation. Importantly, our customer metrics grew on both sides of our marketplace. Active sellers grew 8% to 20 million globally, more small businesses are joining the platform and more consumers are engaging and selling. C2C GMV growth outpaced B2C for the fourth quarter in a row. This is positive for the long term as consumer sellers bring unique inventory at compelling prices and spend more than twice as much as buyers, who don't sell. Active buyers grew 7% to 187 million globally. We are retaining buyers acquired over the last year at similar rates as pre-pandemic level, and we're seeing higher customer satisfaction in several categories as well as increased spend per buyer. We have continued to make progress on our multiyear initiatives payments and advertising, which contribute to a seamless customer experience, increase our platform monetization and deliver compelling financial results. Managed payments ended Q1 with over four million sellers migrated. This includes millions of consumer sellers and hundreds of thousands of businesses globally. During the quarter, eBay managed payments representing over 52% of on-platform volume, up from 38% last quarter. In the US, we exited the quarter over 80% complete. By applying what we learned in previous markets, rollouts in France, Italy, and Spain progressed at an even faster pace, and we're on track to launch Greater China this quarter and all remaining markets by the middle of the year. We continue to see higher seller satisfaction due to a simpler end-to-end experience that reduces cost and complexity. For many years before managed payments, sellers had to manage delays between purchase and payment across two platforms that tied up their inventory. As sellers migrate to managed payments, that pain point has resolved saving time and money. And in Q1, we reduced unpaid items by approximately 80% on fixed-price transaction. We remain on track to complete the vast majority of the payments transition by the end of this year, which will deliver our stated financial goals at the least an incremental $2 billion in revenue and $500 million in annualized operating income in 2022. In Q1, advertising growth outpaced volume driven by Promoted Listings which delivered close to $224 million of revenue, up 58%. More than 1.3 million sellers promoted close to 400 million listings during the quarter. Growth was driven by increased seller adoption and AI improvements that increased conversion. Inspired by the success of Promoted Listings over the past few years, we are investing aggressively in innovation. We reached $1 billion of advertising revenue in 2020, primarily through Promoted Listings which leverages a risk free CPA model for fixed price inventory. To capture our next billion, we are running multiple experiments, including an ad product for auctions and cost per click capabilities. We are also exploring a new capability that expands seller exposure by increasing off-eBay traffic to promoted listings. Q1 clearly demonstrates that the ongoing execution of our long-term vision is driving better results. Small business and consumer sellers are thriving, and buyers are finding unique items at great prices. We have seen strong growth in volume, revenue, and earnings over the past year due to a combination of mobility driven tailwinds and the execution of our multiyear monetization initiatives. And we are driving value through portfolio optimization and returning capital to shareholders. Despite these notable achievements, there's still a tremendous amount of potential to be realized. Now, I'd like to take a step back to a year ago when I rejoined this remarkable company as CEO. I knew eBay as a pioneer in e-commerce with a globally recognized brand, robust organic traffic, and long-standing customer relationships. And I've always been inspired by the purpose and special culture it creates. Last July, we set out a vision for a tech-led reimagination of eBay. First, we believe that we can drive growth in our core by significantly increasing customer satisfaction. Second, we saw the need to better serve our small businesses and consumer sellers to become their platform of choice. And third, we identified the opportunity to evolve our relationship with buyers to drive better, long-term retention. I am confident we can deliver on these three pillars positioning us to more effectively compete and win in a huge and growing addressable market. Our results to date are very encouraging. Our underlying growth is accelerating, sellers and buyers are growing, and we are making progress in our pursuit to be the best global marketplace to buy and sell. Simply put, our strategy is working. Let me share some examples with you. In the US we are growing our core. In Q1, sneakers valued above $100 grew at a triple-digit rate once again. Since launching authentication, we verified hundreds of thousands of sneakers, and we're seeing buyer satisfaction above 80 as a result. In addition, we are expanding our engagement with Gen Z and Millennials through a wide range of social channels. Based on the tremendous success we've seen in the US, we are rapidly expanding identical capabilities to other major markets. We have set up local authentication centers and are launching in the UK, Australia, and Canada this quarter. These centers will also unlock cross-border trade opportunities in sneakers and in other categories. In luxury watches, we saw growth accelerate from 16% in Q4 to 38% in Q1 in the US. For authenticated items, we are seeing customer satisfaction that was close to 90% and is changing customer behavior. Sellers are listing more items and seeing a higher price realization. Buyers are visiting eBay more often and spending more. One of the key advantages of our platform is cross-category shopping. Our luxury watch buyers like our sneakers enthusiasts spend thousands of dollars on other categories across the platform. In addition, based on the value we are delivering in luxury watches, we recently raised fees in this category to create more investment capacity. For our certified refurbished experience, eBay sellers continue to see strong velocity and we've expanded in the US to over 150 brands. We've also rolled certified refurbished out to the UK, Canada, and Germany with more than 100 top brands signed up already. Buyers love the low prices on like-new products as well as free shipping, extended warranties, and extended returns. Now I want to highlight the next core category where we see significant potential, trading cards, a key part of our collectibles business. eBay is a market leader in this category with the widest selection across all price levels. We've seen explosive growth to start the year. In the US, GMV was over $1 billion in Q1, which represents more than half of 2020's record setting volume. Active buyers of trading cards doubled and existing buyers purchased more items at higher prices than last year. To dramatically simplify selling, we've recently launched image-based scanning for our top selling trading cards. In addition, we introduced a new low cost track and shipping service and aggressively market it to buyers on social and enthusiast forums. We plan to launch more innovation for trading cards throughout this year. Another area of focus for us is customization. Beginning next month in the UK and Germany, we will offer a new capability to all sellers to offer personalized goods in categories, such as home, fashion and jewelry. This will allow buyers to find and enter specific customization requests to the seller. In the past, this process was manual, which limited GMV. But we believe this new experience can significantly improve customer satisfaction, bring more supply onto the platform, and capture more growth. We plan to expand this capability to all major markets in the coming months. As I mentioned upfront, our playbook to grow the core is working. We have a series of innovations rolling out to more markets throughout the year. While we've only touched a small percentage of global volume so far, all of our largest eBay categories collectibles, home and garden, fashion, electronics, and parts and accessories have addressable opportunities that can benefit from this playbook. In addition to category-specific changes, we are rolling out site-wide improvements for all sellers. For consumer, sellers and small businesses we are focused on significantly reducing complexity, helping maximize value and driving sustainable growth. We believe these changes will increase seller satisfaction and grow the number of active sellers on the platform. Here are some examples of what we are doing. Image-based listing can remove up to 75% of the time it takes to list an item. We have activated this feature in trading cards, and we plan to expand to multiple categories and geographies throughout the year. Last quarter we talked about how we have migrated almost all of our store subscribers to our new platform that increases traffic to their items by approximately 20%. This quarter we empowered sellers with new CRM features, allowing them to directly issue coupons to acquire buyers. In addition, they can set coupon budgets, include QR codes on packing slips, and drive repeat business to their eBay stores. Recently we opened up Terapeak product research free for all Seller Hub users in several markets, including price insights and listing quality reports. In addition, we launched sourcing insights that help sellers analyze trending categories, top products and signals what inventory is most likely to sell. To acquire more buyers, we are also adding new ad formats to our display and social marketing, including video and we improved the inventory feeds that power them. Once we acquire these buyers, we are making changes to increase engagement and trust in their first 90 days and beyond. As an example, we are leveraging a mobile-first approach and revamping key communications buyers received. We are seeing increased engagement from Gen Z and millennial customers through social shopping, such as eBay Sneaker Showdown. For our experienced buyers, we continue to optimize the end-to-end shopping experience. In Q1, we increased conversion by improving our search engine's understanding of longer complex queries, and we added functionality to help buyers identify free local pickup items in their community. We are excited that all three of our strategic pillars are producing volume, seller and buyer growth, but we have a long runway ahead of us. We will continue to drive our investment decisions both organic and inorganic in pursuit of achieving this vision. While I'm pleased with our business results, I am more proud of the way our employees and our platform are fulfilling our purpose of providing economic opportunity for all. As part of our commitment to empowering small businesses everywhere, we announced an investment of $25 million into the Clear Vision Impact Fund to help support small and medium-sized minority-owned businesses that support historically underserved communities. We continue to support the UK's National Health Care Service efforts and I'm happy to report that we're now up to 2 billion PPE items distributed utilizing eBay's technology. Additionally, we remain active in philanthropy during Q1. We raised over $35 million through eBay for charity. The company also contributed to Asian Americans Advanced Justice and supported employee giving during Black History Month and the Lunar New Year and we quadrupled employee matching gift limits through the eBay Foundation. Finally, another area that inspires me is eBay's impact on the planet. Many companies make admirable investments into adjacent programs, but at eBay sustainability is the core of our business. Since eBay was founded over 25 years ago, re-commerce or the resale of pre-owned goods has been an integral part of our platform and purpose. Our community connects and trades pre-owned items that hold meaning and usefulness and keeps these items out of landfills. A recent survey confirmed that re-commerce resonates with our customers. In the US, 87% of respondents say they have sold pre-owned goods in the last 12 months. And they aren't just selling 81% of Gen V customers surveyed said that buying pre-owned items has become more common in the last year. In summary, we are making great progress on the tech library imagination of eBay. We delivered historically strong Q1 results, putting us in a stronger position today than we thought we'd be coming into the year. Looking forward, we are excited because our long-term strategy is working. By increasing customer satisfaction, we are accelerating our core business while attracting and retaining sellers and buyers. There is more work to do, but I couldn't be prouder of the eBay team. They are focused and driven and they work hard every day to innovate, keeping our customers at the forefront. With that, I'll turn the call over to Andy to provide more details on our financial performance. Andy?

Operator:

[Operator Instructions] Our first question comes from Ross Sandler with Barclays. Your line is open.

Jamie Iannone:

Yes. I'll start with the trading card ones and then I'll let Andy talk about the other two. So, yes, we've always had a great history in the Collectibles business and a great history in trading cards. Obviously, Q1 was really strong doing it over $1 billion in the quarter, which was more than half of last year's record setting. And I'd say in general, what we see is that when we take category-by-category, and we changed the NPS, and we changed the customer experience, that changes the buyers and sellers and the GMV follows. And in that case, it's similar to what we saw in sneakers and in watches where that change led to a dramatically different performance. We see customization, which we just launched this quarter as another one of those opportunities. We do millions of items on the site today, but we do it in a way that's really full of a lot of friction between the buyer and the seller, and this makes it really seamless and I think gives us the opportunity to open up more GMV. But as I said upfront, we haven't even touched the -- some of the major categories that we have like home and garden, fashion, electronics, and parts and accessories. These are big core categories that all have addressable opportunities that we think can benefit from this playbook.

Operator:

Our next question comes from Colin Sebastian with Baird. Your line is open.

Jamie Iannone:

Yeah. So, first on the monetization side. So look obviously both payments and advertising are leading to the significant growth in revenue ahead of payments. Since you asked more about advertising, I'll talk about -- we feel great about the business in part, because our sellers are seeing a great return on the ad spend. And we think there's a lot of opportunity left from that perspective to help them be able to move their products with velocity. So what we're announcing this quarter is that, we're basically rolling out three new experiments or pilots in our advertising business. The first being placement for our auctions. So the growth that we've seen to date has really just been on the fixed price business. So that will be a new capability. We're also testing a CPC-based capability for our sellers, which is a new potential growth vector. And we're looking at off eBay opportunities for our sellers to even further increase their exposure. So we continue to look at the monetization and are we adding value to sellers? A great example for that is in watches this quarter, we saw an opportunity to increase our fees there, because of the value that we're creating for our sellers in that category. Overall, when I look at advertising, it's still only 1% of GMV. And if you look at benchmarks, there's significant opportunity above that. And we -- as long as we continue to add value to sellers we think that will be a continued opportunity. On the second side on the investments, we laid out in July, the strategic plan and started with the category idea on verticals specifically of reinventing the experience, changing the NPS and driving GMV. And if you look at the results of the past few quarters, this is the fourth quarter in a row where we have triple-digit growth in sneakers. This is a business that had been declining double-digits. Our watches went from 16% last quarter to 38%. More importantly though we're seeing customer satisfaction metrics in the 80s and 90s. And so we think this concept of really applying it to other parts of the business. So what you're going to see over the next coming quarters and years is us continuing to expand that focus and invest in and roll out additional categories. Like I said upfront, the majority of our big categories like parts and accessories, electronics, fashion all have similar opportunities to follow that playbook. So we're going to continue to do it in a balanced way as I talked about in July, managing what we spend with what we see as the growth opportunity. And we've already done that in a lot of areas especially in marketing over the past couple of quarters.

Operator:

Our next question comes from Edward Yruma with KeyBanc. Your line is open.

Jamie Iannone:

Yes. So on take rate, obviously, with payments we actually think we are -- for the vast majority of sellers they're going to experience lower fees even though it will mean at least $0.5 billion of operating income to our business. And we continue to look for ways that we can drive kind of the new experience. The off eBay advertising is a great example of that. And to your comment on watches, it's really kind of a category-by-category basis of us looking at what value are we creating and what opportunities are there for our sellers. On how large this can be? Why we're focused on the non-new in season is because we believe it's a $500 million total addressable market. And if you look at our categories on the site, we have high single-digit, low double-digit penetration. And so we think there's lots of opportunity. And coming back to the core of what we said about re-commerce, I think more and more especially in younger generations are interested in the re-commerce of pre-loved items. And so it's why we're leaning in so much towards that. Also we're seeing this strategy is working with C2C. So our C2C again, outgrew our B2C growth 34% versus 21%. But that only -- not only brings the unique inventory, but it turns those buyers into twice as valuable buyers when they try casual selling. And then lastly, the tests we've been doing on the brand outlet side in the UK has been performing well. We're growing double-digits ahead of market rates. And as I mentioned before, what's great is that while we went out and sourced all of the initial programs to kind of build that up and now the brands are actually calling us and asking us to be part of that program. So you've seen this playbook from us over the past few quarters where we're trying things in different markets, finding success and then rolling them out more broadly. So we've had a lot of success with sneakers in the US and we're now rolling that out to UK, Canada and Australia this quarter. And you could see us continue to follow that playbook.

Operator:

Our next question comes from Tom Champion with Piper Sandler. Your line is open.

Jamie Iannone:

Yeah. So look what I'd say is that on the categories that we've tackled thus far we're still in single-digit percentage territory. And what we've said is that we believe that over half over the -- coming years over half of the GMV is addressable in this type of opportunity and especially in some of these major categories. And frankly there's probably opportunities across all categories over time to be able to ever change it. We really wanted to see if the thesis that we laid out worked and it's been working pretty consistently and that's the feedback we're getting from buyers and sellers and we're obviously seeing it in the business. There's a lot of opportunity for us on the seller side. So on the store side, we're migrating all of our stores to the NextGen platform. That's mostly complete, which is a much better platform for them. This quarter we're rolling out CRM capabilities, which has been a long-standing ask of theirs, so that they can remarket to buyers through packing slips, through e-mail et cetera. So that's been pretty significant. And then even things like the customization that we're launching is a long-standing seller request to drive their business. We didn't talk much about this but one of the pain points that's existed in the eBay community for our sellers has been unpaid items for -- since the company really started payments was divorced from -- or separated from purchase, and so sellers sometimes would have a transaction close without getting paid. The ability -- now that we've launched manage payments and we're migrating a bunch of new technologies, we actually reduced that by 80% for our sellers. So that's a pain point that we're really happy to be able to eliminate for them. And then on the C2C side, it’s really about making it easier, why you see us launching things like image base listing? It is because we want to take all of the friction of the experience and make it a really short couple of minute process to get your items up on to the platforms. So, we’re doing a lot more education, things around the seller business, really focused on continuing to drive that C2C business. So I think each quarter, we'll be rolling out features that really address this key thesis of taking all the friction of the experience and making this the best marketplace in the world.

Operator:

Our next question comes from Mark Mahaney with Evercore ISI. Your line is open.

Jamie Iannone:

Yeah. So first on buyers look in Q1, we added 7% to our active buyer count to $187 million globally. Over the past year we've added 13 million buyers to the marketplace. And what we're seeing is that those buyers are behaving with strong performance like pre-pandemic. So they're not just coming to eBay for during the pandemic time period and leaving. We're converting a good amount to our strategy of long-standing enthusiasts. We're really focused on the first 90 days for buyers and making sure that they have a great experience on the site. And what you're seeing is that the NPS is up, especially in focused categories like watches and sneakers, certified refurbished where you now have a two-year warranty and have the free returns. So we're really pleased with that. The cross-category nature and the size of these categories is one of the best assets of eBay. We talked last quarter about our sneaker buyer where we acquire a new Gen Z buyer; they end up buying $500 in sneakers but another $2,000 outside sneakers. We're seeing the same type of thing in watches where we're acquiring a buyer of new high-end watches and they're spending thousands of dollars outside of other categories. So we continue to lean in because it's a huge accelerator for us to get buyers purchasing cross-category and a lot of the marketing technology that we've built and we worked on, the AI with recommendations et cetera is really centered on this idea of capturing buyers and having them transact in multiple categories.

Operator:

Our next question comes from Justin Post with Bank of America. Your line is open.

Jamie Iannone:

Yes. So I mean one that we're clearly looking at is with last year being such an anomaly with the pandemic is a year over two-year and the growth that we're seeing there, which we're excited by. Clearly we'll be lapping some of the buyer, extensive buyer growth that we had in last Q2 but we're looking at the performance of those active buyers on a go-forward basis and we're pretty pleased with that performance. And then the last thing I'd say is that, look, a lot of the stuff that we're doing on the core strategy is really about the long-term growth. So we're going to see things in the short-term variances versus prior year. But I think for me the core thing is the playbook that we put in place is working. This thesis of really changing the growth trajectory of the category by investing in the playbook is what the team is focused on. And we're going to stay on that for the near to medium future. If I look at coming into this in 2019, we were I think declining 2% from a GMV perspective. And if you look at our revenue growth projected next quarter, we're looking at double-digit revenue growth. So we feel good about where we're positioned coming out of the pandemic.

Operator:

Our next question comes from Stephen Ju with Credit Suisse. Your line is open.

Jamie Iannone:

Yes. So first on the payment side, I would say, yes, not only buyers now have more choices of how to pay including Google Pay, Apple Pay, credit card, debit, PayPal, et cetera. But you no longer have to set up two different accounts. You no longer have to manage a claims process or returns process in two different areas. It's one eBay money back guarantee. So to us it dramatically simplifies the whole experience for a buyer and makes it easier. They keep that payment on file and it's just a dramatically easier experience. And then it's helping the seller too because I mentioned the unpaid item example earlier on the call but also the ability for them to manage all their business in one place makes it much more streamlined to just run a business on eBay. On the Promoted Listings, we see opportunities really across every category and every price point of GMV. The beauty of the CPA model that we've had of the cost per acquisition model has been just the simplicity of it of just adding the percentage and it makes it really easy. But the PC model that we're launching also gives the opportunity to really kind of push volume in a different way with a different set of capabilities. But even on single and unique items, people want to promote those items and get more exposure for them. They have for the longest period of time. It's why we're launching the ad feature for auction and testing that is to really go after it. And it's still not -- we still have a lot of opportunity across our listings to increase the penetration. Like I said before, we're only at 1% of GMV.

Operator:

Our next question comes from Deepak Mathivanan with Wolfe Research. Your line is open.

Jamie Iannone:

Yes. I'll take the first one and I'll let Andy take the second. So on the category piece, we talked about last year was, people started by panic buying everything that was related to kind of health needs across the board on eBay. And then we saw that expand into kind of stay-at-home categories, fitness and laptops, those types of things in our electronics business. And then, really went kind of across the board over the course of the year. So as you think about this year it's really just a change against the backdrop of what we were buying last year. I'll let Andy take the second part of that.

Deepak Mathivanan:

Got it.

Operator:

Our final question comes from Brian Nowak with Morgan Stanley. Your line is open.

Jamie Iannone:

Yes. So the first thing I'd say is that, on the category piece, in some cases the categories have overlapped in terms of features or capabilities we need to build in order to make that a winning NPS for us. So we build authentication once. It took us a couple of months to build it out, but then we're able to roll it out to the next category in a couple of weeks and expand that geographically. And so, I think that's actually true for a lot of areas, where there's components or features that we're building specifically to drive the NPS of a category that will be applicable to a broad set of categories across the experience. And in terms of pace, we're going to continue to do what we've done before, which is, roll them out in a specific geography, make sure that we're seeing the intended impact and then roll it out across the board. We don't really want to talk about which category is next and what we're focused on for competitive reasons. But I would just say that, we're really pleased with the playbook. We're really pleased that we're able to drive significant growth and a significant change in trajectory and most importantly, a significant change in the customer experience. And so, you're just going to see us continue feature after feature, category after category. The second thing I'd say is that the verticals is not the only investment that we're making. A lot of our investment is going to site-wide investments that impact all categories. Clearly, that's true for payments and advertising, but the same is true across our seller tools, across our API business, across the CRM and couponing capabilities that we just rolled out, investments that we have in search and in SEO, which apply to the whole business. So the way I think about them is kind of, a good amount of investment in vertical to really change the NPS of those categories, but a significant amount of site-wide investments as well, which lifts all categories. So that's the strategy. That's how we think about it and we're really pleased with the performance.

Operator:

Ladies and gentlemen, thank you for standing by and welcome to the eBay Q4 2020 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Joe Billante, VP of Communications and Investor Relations. Thank you. Please go ahead.

Jamie Iannone:

Thanks, Joe. Good afternoon, everyone, and thank you for joining us. I’ll begin today’s call with some key highlights from last quarter of last year, and walk you through an update on the progress of eBay’s tech-led re-imagination. I will then turn the call over to Andy to discuss the details of our recent performance and near-term outlook. Overall, 2020 was a great year for sellers and buyers on eBay. We are pleased that we closed out the year with strong results. For Q4, gross merchandise volume in marketplaces grew 18%, well ahead of our expectations. The holiday season contributed to the strong performance as we saw record volume with high velocity in hard-to-find and sold-out items. Refurbished gifts also emerged as a top trend, and we saw many products from top brands in our certified refurbished experience sell out completely. Our buyers were very active during the holiday season. In the U.S., 1 in 10 online shoppers bought something on eBay. In Germany, that number was 1 in 7. And in the UK, it was 1 in 4. In addition to this holiday surge, we experienced unprecedented traffic levels for most of 2020, and yet our platform had the highest availability in the last 6 years. To put this in context, more than 100 days in 2020 exceeded peak 2019 traffic levels. eBay has been able to seamlessly handle these peaks, while keeping our marketplace open for all during a global pandemic. For the full quarter, revenue grew 10 points faster than volume, up 28% driven primarily by payments and advertising. And we delivered $0.86 in non-GAAP earnings per share, which was above our expectations and included reinvestments for the long-term. Our customer metrics grew on both sides of our marketplace in the quarter. Active buyers grew 7% to $185 million globally, and our active seller base increased by 5% as more small business and consumer sellers listed and sold on the platform. These results capped off a tremendous year for eBay. In 2020, we added an incremental $14 billion of GMV, that’s more growth in the past 7 years combined. Organic revenue grew 21% and non-GAAP earnings per share grew 49%, and we returned nearly $5.6 billion to shareholders through dividends and buybacks. In July, I laid out a long-term vision for the company, and we have rearchitected our roadmap to achieve our tech-led reimagination over the next few years. We also made progress on our multiyear initiatives, payments and advertising, which drove tremendous financial results while providing customers with a significantly improved experience. We continue to make significant advancements with our managed payments transition, ending the year with over 1 million sellers migrated. During the quarter, eBay managed payments for over 38% of on-platform volume. In the U.S., we exited the year with over 50% of the migration complete. In addition to the 5 markets where we already launched, transitions have been announced or underway in France, Italy, Spain and Greater China. We have also started to transition consumer sellers in the U.S., UK, Canada and Germany. Seller satisfaction has improved compared to Q3 and NPS scores from sellers in managed payments remain more than 10 points higher than the NPS of sellers who have yet to migrate. Over the course of 2021, we plan to roll out payments to remaining markets, launch cross-border trade and release product capabilities for all use cases. This roadmap opens up managed payments to all sellers globally and places us firmly on our path toward 100% migration. As the vast majority of the transition will be complete by the end of this year, we are well positioned to deliver at least an incremental $2 billion in revenue and $500 million in operating income annually in 2022. In Q4, advertising growth outpaced volume once again as sellers lean further into promoted listings to grow their business. For the quarter, promoted listings delivered over $215 million of revenue, up 57% despite having lapped a major product launch that drove strong acceleration a year ago. For the full year, promoted listings grew 86%. This product continues to grow, in part because sellers who have adopted promoted listings are seeing, on average, a double-digit sales increase. Our total advertising revenue reached a new milestone in 2020, passing $1 billion for the year. We see tremendous growth potential remaining as this represents approximately 1% of GMV, well below industry benchmarks. We expect advertising revenue to outpace volume for the foreseeable future. Now I’d like to share an update on the transfer of Classifieds to Adevinta. We remain excited to bring together 2 highly complementary businesses that can create tremendous value over time. We believe the deal is on track to close as we have received the vast majority of regulatory approvals. We expect closure by the end of the first quarter, subject to the remaining regulatory approvals which we are working to obtain. We also recently announced that we are exploring options for our Korean business. Our 2 local platforms, Gmarket and IAC, have built leading e-commerce positions by tailoring to customer needs with innovative experiences. With a paid loyalty program of over 2.5 million members, and a growing first-party inventory program, these businesses primarily focus on new and seasoned products from B2C sellers with limited cross-border trade. As we mentioned in our press release, we will not be communicating any further information about the strategic review process until there is material information to disclose. I will now provide an update on the progress we have made towards our long-term vision for eBay. The three strategic priorities to support this vision remain the same