EBay Inc (EBAY) — Q3 2024 Earnings Call Transcript

Good afternoon. Thank you all for joining us for eBay's third 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. Before we begin, I'll remind you that on this conference call, we will discuss certain non-GAAP measures related to our performance. You can find a reconciliation of these measures to the nearest comparable GAAP measures in our accompanying slide presentation. Additionally, all growth rates noted in our prepared remarks will reflect organic FX-neutral year-over-year comparisons, and all earnings per share amounts reflect earnings per diluted share, unless indicated otherwise. During 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. 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, 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 30, 2024. We do not intend and undertake no duty to update this information. With that, I'll turn the call over to Jamie.

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. Q3 was another strong quarter for eBay as our gross merchandise volume grew by over 1% to $18.3 billion, marking our second straight quarter of positive GMV growth. Revenue increased by more than 3% to $2.58 billion. Non-GAAP operating income grew by 6%, and we grew non-GAAP earnings per share by 16% to $1.19. Now let's turn to the key drivers of our Q3 results. Our focused categories continue to deliver relevant experiences to customers and drive growth for our overall marketplace. Focus category GMV grew by nearly 5% in Q3, outpacing the remainder of our marketplace by approximately five points. This growth was driven by broad-based momentum across motors, parts and accessories, collectibles, refurbished, and our luxury fashion categories. Collectibles had a particularly strong quarter as trading GMV accelerated to double-digit growth in Q3, driven by strength in sports trading cards and collectible card games both on the eBay platform and through our subsidiary, TCGplayer. During Q3, we engaged with collectibles enthusiasts at key industry trade shows including the National Sports Collectors Convention, GenCon, and San Diego Comic-Con. We expanded our high ASP inventory through monthly marquee auctions and consignment from trusted partners like TSA and ComC. And we continue to scale and evolve the eBay live experience, fueling particular momentum in areas like trading card case breaks. On top of healthy organic momentum, our recent acquisition Goldin is opening up exciting opportunities in the collectibles world. Just last week, Ken Goldin and his team completed a record sale for Shohei Ohtani's 50th home run ball, which sold for nearly $4.4 million, making it the most valuable baseball ever sold. Auctions for truly one-of-a-kind items like this can generate a lot of awareness for our platform, where hobbyists can shop for everything ranging from low ASP ungraded trading cards to some of the world's most valuable collectible items. Fashion is also a critical entry point for us. Nearly one in five new sellers and buyers come to eBay through the fashion category. During Q3, we launched a new creative campaign called Things People Love, to raise awareness of eBay's value proposition in pre-loved fashion. We focused on driving relevance with key audiences like GenZ by highlighting eBay's breadth and depth of quality pre-loved inventory backed by trust. Our full funnel marketing strategy has been instrumental in driving continued momentum in focused categories and healthier trends in active buyers, which grew nearly 1% to $133 million in Q3. One of the key building blocks underpinning our return to positive GMV growth has been our geo-specific investment, where we leverage our innovation playbook from focused categories to better serve customer needs at the local level. While many of these product experience changes benefit all sellers and buyers, we are particularly focused on consumer-to-consumer or C2C sellers for several reasons. C2C sellers bring some of the most unique inventory to eBay and are typically less price sensitive than B2C sellers. C2C sellers accelerate e-commerce as roughly 60% of their GMV comes from used and refurbished items compared to 40% for our marketplace overall. Selling on eBay also creates a flywheel effect that stimulates incremental GMV as buyers who sell purchase roughly twice as much on eBay as non-sellers, with most of their incremental spend supporting small businesses. As a reminder, our first major geo-specific initiative launched in Germany in March of 2023, and more than 18 months later, we continue to see significantly higher customer satisfaction or CSAT and improved GMV trends for the overall German market. This past April, we rolled out significant enhancements in the UK for pre-owned apparel categories. These improvements included simplified tools for selling and new tools to drive demand through enhanced discovery like Explore and Shop the Look. Since then, we have observed material improvements to key C2C metrics like CSAT and active sellers, alongside a double-digit improvement in C2C GMV growth in pre-owned apparel versus our prior baseline. The success of our Germany initiative over the last 1.5 years, and similar results in the UK over the last six months, gave us the confidence to move forward with a significant expansion of our UK initiative earlier this month. We introduced a suite of new capabilities to upgrade the overall C2C experience in the UK, including a simplified native listing flow, managed shipping, which streamlines the domestic shipping experience and creates a new revenue stream for eBay, improved local pickup and discovery capabilities, and eBay Balance, which allows UK sellers to store their earnings or use them as spendable funds on eBay. We accompanied this future rollout with a full funnel marketing campaign in the UK, which highlights the ease of selling on eBay. We also eliminated final value fees and regulatory operating fees for UK C2C sellers across all categories, excluding motor vehicles. We made this change due to clear evidence that European consumers are more motivated to list their items online when it's free to sell, even when buyer fees are introduced. We believe reducing the friction to sell will unlock a significantly larger total addressable market, or TAM, in C2C. We will initially monetize our UK C2C volume in several ways, including advertising, cross-border fees, and our sell-to-buy flywheel. In Q4, we will begin to ramp our managed shipping initiative in the UK. We also plan to introduce a buyer-facing fee on UK's C2C transactions during Q1 of 2025. Next, I'll walk through some of the major enhancements to the UK experience. One of the most significant changes we launched in October was the horizontal rollout of a simplified native listing flow for UK C2C sellers. This experience dramatically reduces the number of steps and decision points for sellers, offers intelligent pricing recommendations, seamlessly integrates AI-generated descriptions and photo enhancements, and better highlights the benefits of advertising. Since launch, the simplified flow has notably decreased time to list, improved listing completion rates, increased conversion, sold items and GMV per listing attempt, and elevated adoption of promoted listings. With managed shipping, we are completely overhauling our shipping experience for C2C sellers in the UK in two phases. The first phase, completed in early October, extended the simplified shipping experience we first rolled out in pre-owned apparel to all categories. Within the new native listing flow, UK C2C sellers now see a consolidated list of shipping options based on the estimated package size and weight. Since implementing this change, we have observed a significant reduction in time spent on shipping in the listing flow. The second phase of managed shipping radically simplifies the experience and creates a new revenue stream for eBay. Similar to managed payments and eBay international shipping, managed shipping leverages our scale and expertise to create a better experience for customers while generating incremental revenue and operating income dollars. When listing eligible products, sellers simply confirm the pre-selected package size, and eBay handles the rest. Buyers receive competitive shipping rates, and sellers are fully protected against loss or damage. Managed shipping is currently live for C2C pre-owned apparel listings in the UK. In Q4, we plan to expand managed shipping horizontally on an opt-out basis before mandating the program for eligible items listed by C2C sellers during Q1 of 2025. In addition to shipping, we launched a number of enhancements to the local pickup experience in the UK. As these transactions make up a significant portion of our C2C TAM in this market, we increased local supply by defaulting new C2C listings to offer both pickup and shipping options. We created a new eBay local landing page and map view for optimal browsing of nearby inventory. We also enhanced trust, improved post-sale education for shoppers, and streamlined the in-person payment process. Since launch, we've seen a significant uptick in locally enabled listings in the UK and a double-digit improvement in local C2C volume growth. Lastly, in mid-October, we added the eBay Balance feature in the UK. This gives millions of C2C sellers the flexibility to use their earnings to shop on eBay, promote their listings, purchase shipping labels or withdraw available funds whenever they wish. With eBay Balance, we believe we can further stimulate the sell-to-buy flywheel and also reduce the cost of payments when sellers spend their earnings on eBay. Taking a step back, by making these changes, we believe we are addressing three of the longest-standing pain points for UK sellers on eBay. These deal with the amount of time and effort it takes to create a listing and the complexities involved with shipping. During the first few weeks since the broader UK C2C initiative launch, we've seen more than 20-point increases in new and reactivated listers and sellers, and material increases in C2C sold items and GMV. We are confident that these changes will not only be great for our community, but also for our shareholders. Our strategic focus on C2C should open up a significantly larger TAM in e-commerce by unlocking consumers' closets, basements, and garages. Our teams continue to leverage the power of artificial intelligence to deliver magical innovations for our customers. In recent months, eBay's core AI team released the second generation of our proprietary LiLiuM series of large language models, developed in-house using our high-performance supercomputer. Notably, these models have outperformed public benchmarks in eBay-specific tasks like description generation, title creation, aspect extraction, and pricing predictions. Behind the scenes, these models have already been deployed to accelerate the transformation of selling and buying on eBay, including magical listing. The first phase of our magic listing experience generates high-quality listing descriptions with the push of a button. Approximately 10 million unique sellers have used this feature to date, creating over 100 million listings. GenAI enhanced listings have also generated several billion dollars of cumulative GMV on eBay. Additionally, more than one-quarter of US mobile app users have access to the next iteration of magic listing and beta. After taking or uploading a photo, this experience leverages computer vision and generative AI to pre-fill or suggest the title, category, description, and other item aspects for listing. This app for this beta remains extremely high at roughly 90% as we continue to optimize model performance and efficiency. We are also leveraging GenAI to enhance our tools for our B2C sellers. We recently introduced the magical bulk listing tool, which leverages our internal large language model to seamlessly create a large number of pre-populated listings at once. Sellers simply upload photos in bulk, and individual listings are created with category, title, and item specifics pre-filled where possible. The magical bulk listing tool was launched for all B2C US trading card sellers in Q3, and early feedback has been extremely positive. In Q4, we've also begun to roll out this tool to sellers in other categories. Turning next to advertising. During Q3, first-party advertising grew 14% and while total ad revenue grew 11% to $408 million and eclipsed 2.2% penetration of GMV. Nearly 3.2 million sellers adopted a single ad product during the quarter, and we ended Q3 with over $1 billion live promoted listings out of more than $2.1 billion total live listings. Within the ads portfolio, promoted listings were the largest contributor to year-over-year growth, led by cost per click ad unit. Promoted offsite ads were the fastest growing among our first-party ads. And during the quarter, we rolled out several performance optimizations and scaled our go-to-market efforts for these ads, raising awareness, adoption, and retention amongst our seller base. Promoted stores ads are the most nascent product in our portfolio. But during Q3, we began to gradually ramp these ads through contextually relevant placements at the top of searches and on the new order details page. Next, I'd like to discuss our work in payments and financial services, where we continue to expand choice and flexibility for buyers and offer new solutions for sellers to grow their businesses on eBay. In Germany, we are expanding our breadth of payment options through our partnership with Riverty, a German Fintech company offering solutions used by 28 million consumers. We are introducing a monthly invoice payment option through Riverty, enabling German buyers to pay for multiple purchases on eBay at a later date with no interest or fees if the payment is made on time. According to an eBay consumer survey, more than three-quarters of online shoppers in Germany prefer to use invoicing as a payment method for online shopping. So we are pleased to offer another locally relevant payment option for our customers in this region. For small business sellers, we continue to expand the eBay seller capital program through trusted partners. In July, we launched Business Cash Advance, a revenue-based financing solution provided by Liberis. In October, we expanded our partnership with Liberis to offer flexible cash advances to US sellers. This program offers financing for sums of up to $2 million, with the flexibility for sellers to tap into capital on demand and a lot more financing over time. I am pleased to share that through these programs with Liberis, we have already enabled thousands of small business sellers to access over $40 million of growth capital. And in aggregate, across all of our seller capital partnerships, we've connected eBay sellers with over $100 million of working capital year-to-date. Next, I'd like to share a few ways we're making an impact in our community. eBay for Charity raised more than $49 million in Q3, up 21% year-over-year. Additionally, the eBay Foundation awarded nearly $3 million to grants across the globe who are supporting entrepreneurship for historically excluded groups. I'm always amazed by the generosity of our buyers and sellers, and I'm proud we're able to support important causes around the world. In closing, Q3 was another strong quarter for eBay. We sustained positive GMV growth for the second straight quarter, amid a dynamic macro and operating environment, led by nearly 5% growth in our focus categories. The rest of our marketplace was nearly flat for the second consecutive quarter, supported by horizontal innovation and our C2C investments in key geographies. We continue to see strong growth in our first-party ad products across our portfolio and broaden our range of payments and financial service offerings for sellers and buyers. And importantly, we remain focused on operational discipline alongside our investments in long-term growth initiatives to ensure continued healthy growth in operating income and earnings per share. With that, I'll turn the call over to Steve to provide more details on our financial performance.

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 fourth quarter and initial thoughts on next year before we begin Q&A. My comments will reflect year-over-year comparisons on an organic FX-neutral basis unless I note otherwise. eBay delivered strong top and bottom line results in Q3, our focused categories, and geo-specific investments from horizontal initiatives drove a second consecutive quarter of positive GMV growth amid an uneven macroeconomic environment. Gross merchandise volume grew over 1% to $18.3 billion. Revenue grew over 3% to $2.58 billion. Non-GAAP operating income grew 6% to $700 million. We delivered $1.19 of non-GAAP earnings per share, up 16%, and we returned $881 million to shareholders to be reported on dividends. Let's take a closer look at our financial performance during the third quarter. Gross merchandise volume grew over 1% to $18.3 billion on an organic FX-neutral basis. Goldin contributed nearly 30 basis points of total FX-neutral volume growth, and foreign exchange was a tailwind of nearly 30 basis points of spot growth. We continue to face a dynamic macro and consumer spending environment in the quarter. And as we noted on the last earnings call, political news, sporting events, and elevated travel in July influenced consumer behavior. Strong execution within our strategic initiatives helped us navigate these headwinds. Focus category GMV grew nearly 5%, approximately five points faster than the remainder of our marketplace. Our momentum in focused categories is broad-based with continued positive growth in P&A, collectibles, refurbished, and our luxury categories. The remainder of our marketplace is nearly flat year-over-year for the second straight quarter, driven by craft category shopping, horizontal innovation, geo-specific initiatives, and resilient growth in e-commerce. Moving to our trends on a geographic basis. US GMV grew by nearly one point in the third quarter. Similar to Q2, we saw improved trends in organic traffic in the US and continued momentum in focused categories led by collectibles, refurbished, and luxury fashion. International GMV grew by nearly 2% on an FX-neutral basis in Q3, while FX was a 0.5 point tailwind to spot growth. In the UK and Germany, we continue to navigate more challenging macroeconomic conditions and lower consumer confidence while seeing strength in parts and accessories and improved trends in C2C volume. Cross-border trade continues to be an important driver of international GMV growth, led by exports in Greater China and Japan into our major markets. CBT was also a significant contributor to growth in focused categories, particularly P&A. Next, let's take a look at buyers. Trailing 12-month active buyers grew by nearly 1% to $133 million. Our strategic initiatives and full funnel marketing campaigns help drive continued growth in new and reactivated buyers and improved retention. Buyers were stable at roughly $16 million. The average buyer grew slightly year-over-year to just over $3,100. Moving to revenue. In Q3, we grew revenue by over 3% to $2.58 billion, foreign exchange was a 30 basis point headwind to spot revenue growth. Our take rate was 14.1% and nearly 20 basis points year-over-year; first-party advertising, shipping, and financial services all contributed to our take rate expansion, which was slightly offset by the CTC initiatives and an FX headwind of nearly 10 basis points. On a sequential basis, our take rate expanded by over 10 basis points. Total advertising revenue grew 11% to $408 million in the third quarter and represented over 2.2% penetration of GMV. First-party ads grew over 14% to $396 million, and we accelerated modestly from Q2 levels. Third-party display ads revenue declined nearly 43% year-over-year as we continue to deprecate these legacy ad units. Next, I'll discuss our profitability. Non-GAAP gross margin was flat year-over-year as a reduction in the cost of payments and lower depreciation expenses were roughly offset by traffic acquisition costs, tax-related matters, and foreign exchange headwinds. Non-GAAP operating margin expanded by over 80 basis points year-over-year to 27.2% in Q3, driven by operational efficiencies, partly offset by investments in full funnel marketing and a foreign exchange headwind of roughly 20 basis points. Our non-GAAP operating income grew 6% in the quarter, while non-GAAP earnings per share grew 16% to $1.19. On a GAAP basis, we reported earnings per share of $1.29 in Q3. The difference was primarily due to an increase in the value of our investment portfolio, partly offset by stock-based compensation. Turning to our balance sheet and capital allocation. Our free cash flow for the third quarter was $646 million, down year-over-year due to the timing of cash taxes. Last year, the majority of our cash tax payments were delayed until Q4 due to California's disaster tax relief program. At the end of Q3, we had cash and non-equity investments of $5.8 billion and gross debt of $7.4 billion. We repurchased $750 million of eBay shares during Q3 at an average price of approximately $57 and had roughly $1.2 billion remaining under our buyback authorization at the end of the period. In addition, we paid a quarterly cash dividend of $131 million in September or $0.27 per share. Shifting to our investment portfolio, our equity investments and warrants were valued at $3 billion at the end of the quarter with Adevinta and G-Market accounted for the majority of the value. We retained approximately 18% ownership of Adevinta, which is a privatized ad event entity, and that ownership is valued at roughly $1.9 billion based on the value as of the close of the transaction. The consortium led by Permira and Blackstone has the option through November 29th to purchase from eBay roughly 10% ownership of the private entity for just over $1 billion. Our adding warrants were valued at approximately $0.5 billion at the end of Q3. On October 15th, we met the processing volume milestone necessary to invest the second tranche of our Adevinta. We subsequently paid $105 million to exercise the chance for approximately 404,000 shares of Adevinta stock, which are valued at approximately $602 million based on the company's share price at the time. Turning to our outlook. We expect to generate GMV between $18.9 billion and $19.3 billion in the fourth quarter, representing FX-neutral growth between flat to 2% year-over-year. We expect Goldin to contribute over 30 basis points of GMV growth in the quarter. At current rates, foreign currency would represent a roughly two-point tailwind to GMV growth in Q4. We expect continued momentum in GMV to be driven by multiple strategic initiatives across focused categories, the UK and Germany, and horizontal areas. Our outlook also contemplates a challenging operating environment due to persistent economic headwinds and several one-off dynamics in Q4, specifically greater consumer attention on US elections, a shorter holiday shopping period this year from Hurricane Milton in early October. We forecast revenue between $2.53 billion and $2.59 billion in the fourth quarter, representing FX-neutral growth of negative 1% to positive 1%. At current rates, we estimate FX would represent a nearly 30 basis point tailwind to spot revenue growth. We anticipate our UK C2C initiative will modestly benefit total GMV growth in Q4. While certain existing levers like advertising, cross-border fees, and our sell-to-buy flywheel are expected to continue to contribute revenue to UK C2C volume, we do not expect material revenue contributions in Q4 from our two major remonetization efforts. Managed shipping, which is ramping starting in Q4 through Q1 of 2025 and biofeedback, which we plan to introduce in the second half of Q1. We launched our UK initiative in October to provide the best experience for our sellers and buyers in our second largest market ahead of the critical holiday season. We also believe it is the right decision to phase in this new monetization program to give our customers time to adjust to changes. For Q4, we forecast non-GAAP operating margin between 26.5% and 27%. In addition to pressure from our UK initiative, expenses related to M&A and integration costs are expected to have over 30 basis points of impact on our consolidated operating margin and foreign currency another 60 basis points of headwind year-over-year. For the full year, this implies 60 to 70 basis points of non-GAAP operating margin expansion. We expect to generate non-GAAP earnings per share between $1.17 and $1.22 in the fourth quarter, representing year-over-year growth between 9% and 14%. This implies full-year non-GAAP EPS growth between 13% and 14%. We forecast capital expenditure to be about 4.5% of revenue for the full year, and our non-GAAP tax rate to remain stable at 16.5%. We continue to expect free cash flow just below $2 billion for the full year. We are further raising our share repurchase target for 2024 to $3 billion, implying $750 million of repurchases during Q4. In addition, our Board declared a quarterly dividend of $0.27 per share for the fourth quarter to be paid in December. Now, I'd like to make a few initial comments on our financial priorities for 2025. We plan to balance the need to reinvest for long-term growth against the near-term top and bottom line performance. Assuming an unchanged macro environment, we are planning our business to run positive FX-neutral GMV and revenue growth. Non-GAAP operating income dollar growth modestly ahead of GMV and high single-digit growth in non-GAAP earnings per share year-over-year. As it pertains to margins, we plan to target the optimal combination of GMV growth and operating margin to maximize operating income dollar growth. There were some unique considerations for 2025, influencing our financial architecture. Similar to eBay International shipping program, our managed shipping initiative in the UK will recognize revenue on a gross basis. Our current assumption is that UK managed shipping will pressure our consolidated non-GAAP operating margin by approximately 40 basis points in 2025, while contributing positively to operating income dollars. In closing, Q3 was another strong quarter for eBay. Our GMV grew for a second consecutive quarter. Non-GAAP operating income grew 6%, and non-GAAP earnings per share grew 16%. These results clearly demonstrate that our strategy is working; we have the right balance between delivering robust standing, reinvesting to drive long-term sustainable growth, and delivering healthy capital returns to shareholders. We plan to follow these same principles and build on this year's momentum as we finalize our plans for 2025. With that, Jamie and I will now take your questions.

Good afternoon, everyone. I would like to ask about the e-commerce initiatives as it appears to be a significant area of focus. First, regarding the monetization efforts, how should we view the progress towards breakeven on the fees being deferred? Do you believe that in the long run, the new monetization model can generate more revenue than the previous one? Additionally, how do you see the opportunity to expand this into the US market? If it proves successful in the UK, do you think it's feasible to pursue it in Germany, and how might this expand across eBay as a whole?

Yeah. Look, we're launching this from a position of strength. Let me tell you how we're thinking about it. We've delivered positive GMV growth in the past two quarters, and we have strong conviction. We started 1.5 years ago in Germany and saw really strong results there. Our early results in pre-owned apparel in the U.K. give us the confidence to move forward. We made the decision to launch this on October 1 to really take advantage of the holiday period in our second largest market. We believe it's the right decision to phase this in for our sellers and buyers because the other thing you've got to remember here, Ygal, is just it's a change to the marketplace, and we want to give sellers and buyers time to adjust their processes. So that's why we're going to ramp up managed shipping through Q4 and Q1. And we decided to introduce the buyer fees in the back half of Q1. So the pressure that you're seeing on revenue in Q4 is primarily a timing dynamic given that ramp of managed shipping over Q4 and through Q1. And then introducing the buyer fee in the back half of Q1, so some of that remonetization lag will likely spill over to Q1. But we believe that these changes are clear; we believe based on where buyer fees are in the UK, we have the ability to remonetize these moving those fees around. Remember, it's not just those two, but also advertising. It's the cross-border fees that we charge, and as well as the seller buyer flywheel that we see. The strategic benefits of doing this are really clear. We're going to unlock a significant portion of TAM in our second-largest market and ultimately generate long-term growth for eBay and value for our shareholders. As Steve said, he gave some preliminary commentary on FY 2025. We expect to grow GMV and revenue year-on-year, grow operating income modestly faster than GMV, and increase our EPS by high single digits year-over-year. To your question on the US, we have no plans to launch free selling in the US. The US is a different market from the UK. UK buyers and sellers are more open to buyer fees; it's more standard in the market. There may be certain aspects of the product experience that streamline selling that we bring to other markets. As you know, we look at each market in categories and think about the specifics of what the optimal set of initiatives is to unlock more supply and demand for that specific market.

Thanks. And like a follow-up on the second-gen of ROI. You guys are releasing and some of what you're seeing, you talked about outperforming the public benchmarks. Any way to frame how that's impacting volume growth? Are you seeing it roll through yet? Is there any way to quantify that? Thanks.

Yeah, we are. It's been really great to see how sellers and buyers have responded to this. In that new model, we're outperforming public benchmarks on things like descriptions, titles, aspect; we've seen a better job at precision pricing, increasing by double digits through these new models that we have on the platform. What's great about the AI that we're launching is it's having a major impact at scale. Over 10 million sellers have taken advantage of it, and over 100 million listings have adopted it. Cumulatively, we've generated several billion dollars of cumulative GMV from GenAI enhanced listings since launch. We're still continuing to ramp up, improve the models, and expose more people to magical listings, so I feel really good about it. We saw some demand from our small business and our B2C sellers to have access to the tools that we've built. This quarter, we launched magical bulk listings. Essentially, if I’m a business seller with, for example, 25 watches or trading cards to list, I can just upload photos in bulk, and our large language model and product knowledge graph will fill in all description, title, and aspect information for those using that same technology that we built for single listings to do bulk listing. So, we're in early stages, but I'm really excited about the performance of what we're seeing in AI.

Thank you guys.

Great. Thanks for providing the framework for 2025, very helpful. A couple of questions on that. So first, on focus categories within the positive GMV, is there still room to grow faster there? And what are some of the initiatives that you're most excited about? And then on take rates, maybe I know you can give us a revenue growth, but some of the puts and takes for revenue take rates on GMV next year? Thank you.

So, I'll start with the first one, and then Steve will talk about the take rate. On focused categories, yeah, another solid quarter. We delivered 5% growth; parts and accessories continue to be a big growth driver of our focus categories. We also saw some momentum in collectibles, with double-digit growth this quarter. You've probably been seeing a number of the initiatives that we've undertaken, like what we're doing with TCGplayer and our acquisition of Goldin, which provides some of the world's most desirable inventory that's out there on the marketplace. If you're on Goldin right now, you see that we're doing Luke Homes and Eric Church raising money for the Carolinas. When you look at trading cards in particular, we've had this healthy run rate, as I said, as double-digit growth. This is based on all the innovations we've done over time, like my collections, price guides, authentication, and the grading partnership we have with PSA. Now instead of sending an item in to be graded and describing it on the way in, and then getting it back and listing again on eBay, before shifting it to the buyer, that's all one seamless process now where I just ship it to PSA, and it gets sold. We've seen strength across the board in all of our focus categories. Refurbished continues to do well in this marketplace where consumers are challenged. Our luxury has also contributed positively to year-over-year growth for the eighth consecutive quarter. So the work we're doing with our new authentication center is there. We have lots of momentum in our focus categories. We continue to expand the work we've done there. I'm also just excited because the work we've done for focused categories across verticals has enabled us to apply these geo-specific areas to C2C to great effect. In Germany, for example, we increased our C2C seller CSAT by 20 percentage points, which led to a real change in the trajectory of our German business versus the prior baseline.

Hi, Justin. Good to speak this afternoon. Obviously, we've provided a fair bit of color on our 2025 architecture in the prepared remarks, and believe this is a really robust financial outlook for 2025 and the continuation of the progress that we've made this year. We're not going to provide any more specific guidance around take rate at this point, because we're finalizing our budgets. But I can talk to a few factors to consider for 2025. The first one is on shipping. Jamie just elaborated on our UK C2C initiative, which is our second-largest market by volume with a higher C2C penetration than Germany. While there's a near-term impact on the take rate as we eliminated final value fees for sellers, we will be monetizing that through managed shipping, which is ramping now and will continue into the first quarter, along with the buyer fees planned for the back half of Q1. The second item is really around advertising and financial services. We expect advertising to continue to grow faster than GMV, driven by the momentum in first-party promoted listings and off-site ads, and obviously, the improved seller experience that’s coming from that. To a lesser extent, we expect some incremental revenue associated with financial services as we get into 2025.

Great. Thank you.

Great. Thanks. Maybe just sticking with the 2025 framework, does the 2025 framework assume expansion of focus categories next year? Can you remind us of some of the larger categories on the platform that have yet to get focused category investment at this point? And then maybe just one on competition. You have scaled sports-related collectible competitors who have direct relationships with leagues and may have some supply advantages there. Walmart is partnering in the fashion and sneaker vertical. Can you comment at all on what you see as some of the most important strategic moves in those two categories specifically to fight against competition from some of the larger competitors moving in there?

As you know, Lee, we don't pre-announce any specific initiatives for competitive reasons. However, I will say we have five categories that are over $10 billion on eBay: fashion, home and garden, collectibles, electronics, and motors, parts and accessories. This shows you the breadth of what we have on there. We purposely took some of the playbook that we've had going against verticals and put it against others to great effect, and we really like the ROI that we've seen from that. The second thing I would say is that the horizontal investments we've been making to drive our core categories have been highly beneficial. This is because all the generative AI capabilities we've been able to apply help both our focus categories and our core categories. In the past two quarters, we've had nearly flat growth in our core categories. To your question about collectibles business and competition positioning, we feel great about the innovation we're driving quarter after quarter from that standpoint. I mentioned this quarter as a very scaled player in the market. We continue to see double-digit growth in trading cards. We've assembled a cohesive set of assets. When you think about TCGplayer in collectible card games, what we do on eBay, and Goldin, we sell everything from ungraded trading cards to the highest value products in the hobby. That’s valuable because collectors are often looking across that span to do so, and all the innovation we've been driving in that category with collections, price guides, authentication, and products launched with TSA, this new partnership we've formed with collectors, and more. We believe in an open marketplace where enthusiasts can buy and sell the things they love.

Thanks guys. Appreciate the questions. I guess, first, Jamie, given these platform initiatives, do you think any of these will convert into growth and enthusiast buyers? Or is it really about increasing spending or share of wallet among the existing buyer base? And then the follow-up would be, I guess, Steve, regarding the Q4 one-off factors. Could you maybe quantify the impact on growth you're embedding in guidance from those distractions, and if we should think about that as maybe potential upside if consumers end up spending at normal levels during the holidays? Thank you.

Yeah. Great question, Colin. So first off, absolutely, we see that converting into buyers and enthusiast buyers. You'll note that this quarter, we were up 1% in our active buyer count to $133 million, and while that's not a core KPI, it is an output of the strategy and the strategic initiatives we've been driving. A healthy buyer funnel is important to our growth in enthusiast buyers. When you look specifically at the C2C initiative that we did in Germany and that we're talking about in the UK, it's great for the buying perspective for a couple of reasons. First, when we convert a buyer into a seller, they become at least twice as valuable as a buyer as they were previously on the platform. That's really great for buying. The second thing is C2C has really increased inventory on the platform. In general, we're about 40% used to refurbish, but in our C2C sellers, it's 60%. That unique inventory drives demand. It drives demand among enthusiast buyers who find that part or that card or that thing they couldn’t otherwise find on eBay. The other great thing is that a little over three-quarters of our volume is B2C, but the vast majority of our sellers is C2C. As a result, that flywheel of C2C buying more from once they become buyers leads to an increase in purchases, with the majority of that new purchasing going to small businesses and B2C sellers, so B2C sellers win as well from that increased buying activity on the platform. That’s why we like the synergy of what we're seeing overall. If you look at the trends in our German business, they are much healthier than before we made these changes, and we're excited both for the benefits to sellers but importantly, the demand that it drives for buyers. You'll also see a marketing campaign across all of our markets, a new campaign called Things People Love. We had a link in the slide deck to show you some of the creative, but I'm really excited by the storytelling, because there's both a buying message there but also a selling message about unlocking what’s in your closet, your garage, and your basement. That's really healthy for us to drive that new initiative.

Hi, Colin. Just with regards to our assumptions in the fourth quarter that informed our guidance on GMV. First thing to say is I'm really pleased with the position we're in and achieving another positive growth in GMV for the third quarter, our second consecutive quarter while we continue to navigate a very dynamic macro environment. This reflects the investments we've continued to make in focused categories in the UK and Germany and horizontal areas, which are driving health on the overall platform. Our UK C2C proposition launched on the 1st of October ahead of the holidays, and we believe this is going to provide a modest boost to fourth quarter GMV, and we're pleased with the early results so far. Assuming no discernible change in the macro environment, there are a number of one-off events that we've contemplated as we think about the fourth quarter. The first is obviously the upcoming US elections. The second is the shorter holiday season with fewer days between Thanksgiving and Christmas. In October, we saw the impacts of Hurricane Milton, which affected demand, particularly in P&A, shipping, and deliveries. I firmly believe our guidance balances strong execution we've seen year-to-date with the ongoing macro environment and some of those one-offs, but really pleased with the momentum we’re witnessing in the business.

Okay, thanks guys.

Hi, everyone. Thanks for the question. Really encouraging to see the initial guide for positive GMV growth in 2025. I guess, what are the one or two primary things that give you conviction that you've returned back to that sustainable growth area?

Yeah, I think a couple of things. One is the momentum we're seeing across the board in focused categories being at 5% growth here and kind of growing at market rates consistently over the last couple of quarters. Combined with the horizontal work we've been doing, we've now had two quarters of nearly flat. All of these are building blocks of the momentum we’re seeing in the underlying business. I'm happy to see exactly what we expected, which was stabilization and 1% growth in active buyers. The investments we're making in these geographies also represent significant opportunities for expansion of the TAM. When you look at our opportunity in the UK and C2C, we think there’s a big opportunity to go after a massive total addressable market in terms of what people have sitting in their garages, houses, etc. What we observed in the past with the UK pre-loved fashion initiative and what we saw in Germany is that we’re able to bring on new or reactivated sellers onto the platform and then drive that ultimate buyer flywheel. It’s a combination of the momentum we’re seeing, those elements, and the new initiatives that we have in place that give us confidence to put out the commentary for 2025.

Yes. It was very helpful for our cross-border trade business, and you see it in some of our cross-border trade numbers. We had an incremental $400 million in listings on the platform that were available to be shipped internationally. When you look at our shipping changes, the first thing we're doing is simplifying shipping on the platform, and that’s pretty significant across our markets. But with managed shipping, it radically simplifies the experience and creates a new revenue stream for eBay. Historically, when I had to list a blazer, for example, I had to go through all the choices and decide what I was shipping, then deal with it as a seller if any issues arose. Buyers on C2C items had tracking about 40% of the time. With managed shipping, eBay manages all that for you, greatly simplifying the experience on the platform, and nearly all buyers receive tracking information for eligible items. This creates a new revenue stream for us, just like with payments and advertising; this is a new opportunity for eBay. So it’s a win from an experience standpoint, great for generating operating income for the business, but most importantly, it’s another tool that unlocks more TAM in C2C. When we've tested this, it's now live in pre-loved fashion in the UK managed shipping. Historically, it would have taken 90 seconds to complete the shipping section, now sellers do it in under 30 seconds, making a powerful difference in removing friction from the sales experience.

When you refer to healthier trends in Germany, is that predominantly a top line comment? Or have you been able to improve the profitability of the German business as well now that you've got more activity taking place on your marketplace over there?

Yes, both. When you look at Germany, you can see the trends before we launched to where we are now; we're seeing really nice improvement in the business. While we don't break that market out specifically, if you look in the 10-Q, you can see kind of improving revenue trends from that perspective. What we intended to see is what we're seeing, right? A healthier C2C business with a 20% greater CSAT is driving more new and reactivated sellers on the platform who end up buying more, and that's leading to the healthy trend. When Steve spoke about this originally, he quantified it as a 10 basis point impact. We've been able to re-monetize that business through things like ads, cross-border trades, and we’re seeing exactly the flywheel I talked about from seller to buyer. We're pleased with what we see and continue to see with our C2C business in Germany. We're really encouraged by the early results from the UK pre-loved fashion initiative, which gave us the conviction that this was a winning model to take to our second largest market, where unique dynamics regarding how sellers and buyers feel about buyer fees make this a really good opportunity for us to go after incremental total addressable market.

Great. Thanks, Jamie. And maybe just a follow-up. You've been talking about improved satisfaction scores, which is a helpful indicator. Now that you've got several quarters behind you on various marketplace improvements, can you frame how much GMV conversion rates have improved since you started this journey? Thank you.

Look, you've heard me talk about how GMV follows CSAT. I've always said CSAT is the leading indicator here. If you look case by case, we've seen CSAT increase by 20 percentage points in what we did in our early focus categories. The same thing has happened in Germany, where we had a 20-point increase in CSAT with much healthier trends. Not only is this having an impact on conversion and the health and growth of the business, but it allows us to bring on new buyers and new sellers through these efforts. The new and reactivated sellers are not only good for buying activity but also bring more compelling inventory to the platform, which is very good for the long-term health of the business.

Thank you. Good afternoon, guys. Jamie, perhaps for you. There's always a lot of helpful commentary on the business in Europe, but I think China is now your number three market by revenue. I'm wondering if you could just give us an update on the business and your customer base there? And maybe for Steve, just quickly, any impact from the sunsetting of the MX payment arrangement? Thank you.

Yes. Our cross-border trade business out of China continues to be strong. It over-indexes to focus categories in our business there, so it’s been performing well. Specifically, I would call out parts and accessories as a really good vector for our cross-border trade business. We’ve continued to make that easier for buyers and sellers with our shipping solutions and allowed them to forward deploy from that perspective. We've also made payments much simpler, which has helped as well. When you think about our relationship with AMEX, we deprecated AMEX in August of last year, and as expected, there was no material impact on our business. The majority of our customers on eBay use more than one payment option. Most customers who used AMEX were able to migrate to one of the other options like PayPal or Venmo or non-AMEX debit or credit cards. We also focus on launching new ways to pay for buyers and sellers. We launched Riverty this quarter, a solution used by 28 million customers that allows them to invoice, and it has been a high demand area for us to bring on the platform. We're really pleased with what we're seeing in payments this quarter.

Yes. We’ve seen some impacts as we transition the MX payment arrangement, but as Jamie mentioned, the vast majority of our customers were able to adapt to new payment options without significant disruption. Overall, our payments landscape has become more diverse with the options we provide, and we continue to focus on enhancing this area to better serve our customers.

Thank you for the question. I think this one is probably for Jamie. Following up on Tom's inquiry, can you break down the key drivers behind the strength you've seen in parts and accessories? Is it related to the acquisition influencing the user experience now, two years later, and improving conversion rates? Additionally, regarding the China-sourced inventory, does its tendency to skew toward parts and accessories significantly contribute just by having more inventory, and does that aid in conversion? Also, it seems that a lot of it has been freight forward. Do you feel assured that this inventory is insulated from any potential political changes that could arise even next week? Thank you.

Yes. It’s hard to say that there’s one factor here because we’ve been working on parts and accessories for a couple of years now and continue to innovate quarter after quarter. What I can tell you is all the efforts we’ve made to enhance customer satisfaction started with the early work we did in fitment, including product finders and MyGarage that enhanced the entire experience. We now have over 100 million cars in MyGarage, followed by increasing trust levels with what we did with guaranteed fit. I had a conversation with a reporter earlier today who shared that he purchased a new front end for his Toyota Sienna, and it fit perfectly, extending the life of the vehicle by another ten years. That’s an example of improving the purchase process for customers. The breadth of inventory also plays a huge role. We have over $600 million in unique listings in the marketplace across a number of different buyer segments. All of the acquisitions have certainly added to the fitment experience, and we have launched new services such as tire installation and part installations. Customers can now buy parts on eBay and have them installed, and P&A has been the largest contributor to growth despite this year, even amidst lapping strong performance in 2023. Regarding the political environment, the majority of our inventory is forward-deployed, and we've been working with our sellers to ensure faster shipping times, improving the overall experience. So, I’m excited about the innovation we’re bringing to P&A, its impressive performance, and how we continue to enhance the experience.