The Vice President of Investor Relations, John Egbert, welcomed everyone to the eBay Second Quarter 2023 Earnings Conference Call and introduced Jamie Iannone, the Chief Executive Officer, and Steve Priest, the Chief Financial Officer. He reminded the participants that the company would be discussing non-GAAP measures and that all growth rates would be organic FX-neutral year-over-year comparisons. He also warned that there are risks and uncertainties associated with the company's forward-looking statements and that all information is as of July 26, 2023.

Jamie Iannone discussed the evolution of eBay's strategy, which focuses on offering meaningful choices and value for customers, pivoting to a full funnel approach, and prioritizing non-new products. He then outlined the vision of reinventing the future of e-commerce for enthusiasts only at eBay, which will be achieved by focusing on three key pillars: relevant experiences, scalable solutions, and magical innovation.

eBay is rolling out updates to their user experience and design over the course of 2023 and beyond, with the goal of providing simpler, more personalized browsing experiences. These updates include a more modern and intuitive view item page, a streamlined appearance, larger and higher resolution images, and an optimized information hierarchy. Early tests indicate that these changes have led to a measurable uplift in GMV. Over the next few quarters, users will see further updates to the look, feel and experience of the marketplace.

eBay is investing in new capabilities for search, such as deep learning and visual similarity, to improve relevance and reduce queries with low or no results. eBay's global footprint and density of supply and demand across major trade corridors are advantages in cross-border trade. eBay's managed payment solution and Promoted Listings have enabled it to build a nearly $1.3 billion advertising business. eBay is also investing in improved in-house risk modeling to alleviate transactional friction for sellers and buyers, which has led to measurable uplift in conversion and hundreds of millions of dollars of incremental GMV.

eBay's international shipping program simplifies paperwork, lowers costs for buyers, streamlines returns, and enables sellers to access global demand. The company's Authenticity Guarantee program has enabled them to rapidly transform trust across new categories and countries. Additionally, their improved tech velocity has allowed them to launch and rapidly iterate on exciting features like live commerce, the ability to instantly buy and sell trading cards, and improved computer vision capabilities.

eBay delivered better-than-expected results in Q2 despite macro uncertainty, with GMV of over $18.2 billion, revenue growth of 5%, and non-GAAP earnings per share of $1.03. Their focus categories, such as motors, parts and accessories, grew mid-single digits year-over-year for the second straight quarter. They also extended their focus category coverage through new launches and category expansions, such as the Authenticity Guarantee for streetwear in the U.S. which is authenticating new and pre-owned items from 20 trusted brands.

eBay has expanded their eligible streetwear to mass appeal brands and will soon expand to luxury brands. They have launched a Certified by Brand program with over 20 brands offering new and certified preowned inventory. eBay has also acquired Certilogo, a provider of AI-powered authentication for apparel, to help brands and designers manage the life cycle of their garments, protect their customers from counterfeits, and encourage e-commerce. These initiatives will bring an enhanced level of trust to listings and benefit both eBay shoppers and brands.

This quarter, eBay is launching a new feature called Magical Listing to make it easier for sellers to list their inventory. It uses Azure's open AI API to automatically generate item descriptions and item aspects based on the product's title, category, and any item aspects that have been input. Early signals have been positive, with over 90% acceptance rate and 80% customer satisfaction. The next iteration of Magical Listing will use improved image recognition capabilities to provide a more seamless camera-based listing, allowing sellers to use their smartphone camera or existing photos to start a listing and pre-populate title, category, description, and item specifics.

eBay has been testing a Generative AI tool with employees and is soon launching it in public beta. This tool has enabled product and engineering teams to rapidly deploy new and innovative shopping experiences, such as Shop by Upgrade and engine code lookup. Advertising revenue has also been increasing, with total ads growing 35% and first-party ad revenue growing 50 points faster than GMV. Promoted Listings Standard, a CPA product, was the largest contributor to growth in Q2, due to attribution enhancements, optimization, and ad rate improvements.

In Q2, eBay introduced halo attribution, a new way to rank ads on search, precision in calculating trending and suggested ad rates, dynamic bidding, and Promoted Listings Advanced. Additionally, eBay published their annual impact report which highlights their commitment to helping sellers earn extra cash and buyers find items of value while promoting a healthier planet and economy.

Jamie thanked eBay's employees for their hard work and success during the quarter, and announced that Engage for Good recognized eBay for Charity as a 2023 charity checkout champion. He also discussed eBay's sustainability efforts, social impact report, and programs like eBay for Change and eBay for Charity, which have raised over $38 million. Lastly, Jamie expressed his confidence in the company's path to unlocking its potential and catering to the needs of next-generation shoppers. He then turned the call over to Steve to provide financial details.

In Q2, eBay reported solid results with GMV down 1%, revenue up 5%, non-GAAP operating margin down 1.7 points, and non-GAAP EPS up 5%. This was due to the acceleration in cross-border trading, the launch of a new focus category in U.S. streetwear, and the extension of trading cards to Canada, which drove a sequential increase in GMV coverage. P&A grew in the mid-single digits year-over-year.

In Q2, eBay Refurbished maintained healthy double-digit growth and was the second largest contributor to focus category outperformance. US GMV was down 4% organically, while international GMV grew 1% on an FX-neutral basis. There were 132 million active buyers during the trailing 12 months ending in June, with growth in new and reactivated buyers led by double-digit growth in buyers from P&A. Enthusiast buyers were stable at 16 million, while net revenue was $2.54 billion, up 5%. Total FX-neutral revenue growth, inclusive of M&A, was 6%.

In Q2, eBay's take rate was 13.9%, up nearly 90 basis points year-over-year. Advertising revenue was the largest contributor to this growth, increasing 35% and accelerating 12 points versus Q1. eBay international shipping and recent M&A contributed 10 basis points and new payment services contributed 2 basis points. However, foreign exchange represented a 10 basis point headwind to the take rate. eBay's non-GAAP operating margin was 26.9%, down 1.7 points year-over-year due to eBay international shipping and recent M&A, as well as foreign exchange.

In Q2, Gross margin was down 80 basis points year-over-year, Sales and Marketing as a percentage of revenue was down 80 basis points, Product development rose 1.1 points, G&A expense rose 60 basis points, and non-GAAP earnings per share was up 5%. The company also generated free cash flow of $492 million and repurchased $250 million in shares at an average price of $44. Additionally, they paid a quarterly cash dividend of $133 million and their equity investments and warrants were valued at $3.4 billion. Going forward, their outlook is detailed on Slide 20 of their earnings presentation.

eBay is forecasting GMV between $17.6 billion and $18 billion, representing organic FX-neutral growth between negative 4% and negative 1% year-over-year. Revenue is expected to be between $2.46 billion and $2.52 billion, with organic FX-neutral growth between 2% and 4% year-over-year. Non-GAAP operating margin is anticipated to fall between 25.8% and 26.5%, and non-GAAP earnings per share is forecasted between $0.96 and $1.01 representing EPS growth between negative 4% and positive 1%. The full year of 2023 is expected to have total FX-neutral GMV growth between negative 2% and negative 1%, with revenue outpacing GMV by 4.5 points. Non-GAAP operating margins are planned to be between 27% and 27.4% with $100 million of OpEx savings from the structured cost program. FX is expected to be a tailwind of 0.5 point to GMV growth, but a 0.5 point headwind to operating margin for 2023 with 2 points of impact during Q4. FX is also a 2-point headwind to non-GAAP EPS for the full year.

eBay reported strong financial results in Q2, with $2 billion in free cash flow and $383 million returned to shareholders. They anticipate a non-GAAP tax rate of 16.5% for the rest of 2023 and capital expenditures of 4-6% of revenue. Jamie Iannone discussed the three pillars they are investing in for medium- to long-term growth, which are expected to drive buyer growth, increased spending per buyer, and higher ROI on the platform.

eBay is excited about its strategy to reinvent e-commerce for enthusiasts. It is focusing on creating relevant experiences site-wide, including a new design for Gen Z shoppers, and using new technology and tools to do so. It is also scaling up its payments and financial services, and introducing magical innovations that can raise the bar for experiences on the site such as AI products, live commerce, and more. The goal is to drive customer lifetime value and attract new buyers to the platform.

Stephen Priest provides an explanation for the decrease in margins in 2023, citing four factors: the current macroeconomic environment, GMV commentary, modest deleveraging, and pressure on margins. He also mentions that the timing of the architecture will depend on the macro environment and that there are levers to improve margins in the future.

eBay International Shipping, M&A, and FX fluctuations will be a headwind to margins in 2023. eBay is investing in the business to drive long-term sustainable growth and is confident about the trajectory of the business. They have given color for the third quarter and full year of 2023, but have not given any information for 2024.

Jamie Iannone explains the strategy to ensure the non-focus verticals remain stable going forward. He states that the majority of investments are going outside of the focus categories, and that the multiplier effect of focus categories helps to lift all tides across the eBay marketplace. Additionally, scalable solutions such as eBay international shipping will help both focus and non-focus categories.

eBay has recently rolled out an international shipping program that makes cross-border shipping and selling easier. eBay handles custom forms, duties, and immediate returns, and sellers are protected from item not received claims. The program has seen a positive reception from sellers, and eBay is excited because 20% of the business is cross-border, but only half of the big 3 inventory is available for international shipping.

eBay is seeing positive results from its full funnel marketing approach, with double-digit growth in new and reactivated buyers in categories like P&A. eBay is also seeing success from its Authenticity Guarantee for streetwear and sponsorship of Love Island in the U.K. Lastly, eBay is seeing a normalization of consumer preference for goods versus services.

Jamie Iannone discusses how eBay is combating the impact of inflation and rising costs on discretionary demand by focusing on the refurbished category, increasing used items, and enabling cross-border trade with initiatives such as eBay International Shipping and buyer and seller FX. They are also working with sellers to do forward deploying of inventory to ease supply chain pressure.

Jamie Iannone reported that their first-party ads business had grown 49% year-on-year, which was largely due to the success of their products and innovation. Promoted Listing Standard is the 'workhorse' of their portfolio, and their new products had grown 30% quarter-over-quarter. They have 2.1 million sellers using their product and 800 million listings, and have launched a feature called 'suggested campaign' to make it easier for sellers to use Promoted Listings Advanced.

Steve Priest and Jamie Iannone discussed the company's approach to M&A, with the goal of structurally improving the core marketplace. They have focused on entities that can help fuel and support the growth of their biggest focus categories, such as parts and accessories, trading cards, and fashion. Certilogo, their most recent acquisition, is a perfect example of an acquisition that is helping to support the long-term sustainable growth of the platform, as well as driving the trend of sustainability and preloved garments.

Stephen Priest responds to Thomas Champion's questions about international and domestic GMV growth. He explains that the GMV is based on the geography of the seller, and that the international GMV growth is due to the lapping of the economic fallout from the war in Ukraine and the easing of supply chains, as well as eBay's international shipping. He is also enthused by the overall level of momentum and Jamie will comment on the other question before Stephen talks about capital.

Jamie Iannone and Stephen Priest discussed the success of the strategy they have laid out and how it is reflected in the mid-single digit growth in the P&A category. They also discussed their investments in categories such as refurb, ads and payments, and their commitment to returning 125% of free cash flow to shareholders between 2022 and 2024. Finally, they answered a question about P&A from Wes on for Doug.

Jamie Iannone of eBay reported that the platform has seen good supply from their sellers and the experience has been made easier for buyers with the new fitment changes, My Garage feature, and two new AI features. eBay has seen mid-single-digit growth which is at market rate and double-digit growth for new and reactivated buyers in P&A. There is particular strength in CBT. eBay is continuing to invest in new features and capabilities.

This summary was generated with AI and may contain some inaccuracies.