Ladies and gentlemen, thank you for standing by and welcome to the eBay First Quarter 2020 Earnings Conference Call. At this time, all lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, John Billante, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the first quarter of 2020. Joining me today on the call are Scott Schenkel; Andy Cring; and our new CEO, Jamie Iannone. We're providing a slide presentation to accompany Andy'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. With the February completion of the sale of StubHub, all figures in this presentation are for the remaining company, inclusive of Marketplace and Classifieds only. StubHub results are presented as discontinued operations. Please refer to our recent 8-K filing with adjusted prior periods. Additionally, all revenue and GMV growth rates mentioned in Scott and Andy'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 April 29, 2020 and we do not intend and undertake no duty to update this information. Lastly, I'd like to share today's agenda. As you know, the Board recently announced the appointment of Jamie Iannone as our new CEO. Given that he officially started the role two days ago, Jamie will obviously not be fully participating in this quarter's earnings call, but he will make a few introductory remarks before we begin. Following that, Scott will provide a business update and Andy will provide a financial update. At the end, we will open Q&A where Scott and Andy will be available to answer your questions. With that, let me turn it over to Jamie.

Thank you, Joe and good afternoon everyone. I'm thrilled and honored to be with you today. I look forward to speaking directly with all of you over the coming months as I settle into my new role at eBay, but for today, I will keep my comments brief. As some of you know, eBay is where I spent the most time in my career and I'm really excited to re-join the company. eBay's remarkable success story with amazing assets, robust organic traffic, and long-standing customer relationships around the globe, I truly believe the company has tremendous opportunities to capitalize on this foundation, innovate for the future, and grow its ecosystem. These are some of the reasons why I was so compelled to return to eBay and play a leading role in shaping the company's path forward. I look forward to working with our global teams to enhance buyer experiences and provide more capabilities that will help small businesses sustain and grow. I will focus on continuing to evolve the company's strategy while delivering on eBay's commitment to maximize long-term shareholder value. Before I close, I'd like to acknowledge and thank Scott for his leadership over the last several months. Scott has led and implemented huge changes in the business all while guiding the company through one of the biggest crisis our society has ever faced. Thank you, Scott. Thank you, Andy and the entire leadership team for your assistance and guidance as we work towards a smooth transition. I'd like to turn the call over to Scott to begin the earnings update and I look forward to speaking with you again 90 days from now. Scott?

Thanks, Jamie. Good afternoon everyone. We had a strong start to the year ahead of our expectations. Our volume is accelerating, managed payments and ads are delivering growth and are on track for long-term success. We are executing our product road map, improving buyer and seller experience and conversion, and we are driving margin expansion. We closed the StubHub deal in February, quickly deployed proceeds to reward shareholders, made progress on the Classifieds portfolio, and strengthened our balance sheet. While executing on our Q1 priorities, COVID-19 dramatically changed the world. Individuals and families are sheltering in place, millions of people have lost their jobs, and communities are struggling. Our purpose has always been to empower people and create economic opportunity for all. We are fortunate to have a resilient business that can help in times like these. That purpose and resiliency have inspired us to deploy well over $100 million to support our employees, communities, customers around the world at a time when they need it most, positioning our stakeholders to exit this crisis stronger. The health and safety of our employees and their communities is our top priority and I want to thank our team for their remarkable dedication during this difficult time. In line with government guidelines, we shifted the vast majority of our team to work from home, many for the first time, including thousands of customer service team members around the world. We provided them with equipment, training, and resources to support their transition. We also financially protected our hourly and alternative workforces, ensuring they get paid while society is asking them to do their part. We have also empowered our leaders to provide employees flexibility to balance health, well being, family, and professional responsibilities. We are also investing millions of dollars into our communities. Through…

Thanks, Scott. Before we dive into financial highlights and the earnings presentation, I will begin my prepared remarks with a few comments on the impacts we are seeing related to COVID-19. These are unprecedented times and we are working hard to support our employees who in turn are working at home around the world to support our communities, customers, and shareholders. We believe our culture shines in these moments and our robust business model and strong balance sheet and cash flow provide the backstop that enables us to withstand these disruptions and directly support all of our stakeholders. In Q1, before we felt the full global impact of COVID-19, our underlying business performance was better than our expectations. Through mid-March, volume was accelerating compared to Q4 and we were tracking above the high-end of our revenue and earnings guidance range. Late in March, our segments began to see a more pronounced impact of the global pandemic. Our marketplace volume further accelerated as our sellers stepped up to serve the increasing needs of buyers around the world. However, in Classifieds, advertising came under significant pressure. Overall, while the revenue impact of COVID-19 in Q1 was relatively muted at the Inc. level, we did experience roughly 2 points of margin pressure driven in part by implementing programs to support our customers. In April, we have seen a surge in buyer demand resulting in double-digit Marketplace volume growth while Classifieds revenue has further decelerated based on continued advertising pressure coupled with the actions we've taken to support our Motors dealers. More specifically, here is a little more color on how the progressive impact of COVID-19 has been felt by our customers, how we've responded, and how that shows up in our results. First, as stay-at-home mandates rolled out across geographies, advertisers began pulling…

[Operator Instructions] And your first question is from Stephen Ju with Credit Suisse. Please go ahead.

Okay, thanks guys. So I guess a question on payments and I guess a question on the buyers. We're only a few months away from the end of the agreement with PayPal. So just wanted to check in with you guys on how your comfort levels with your own payment rails has evolved as you test in more regions and I guess as a byproduct, your willingness to either speed up or slow down the transition and I guess on the buyer side, the fear here is that as the world goes back to some normalcy, the people who came back to engage and buy more from eBay will just simply go away. So what do you think you can do to hold on to this increased level of activity? Thanks.

So, Stephen, on payments, look, I think our comfort level remains very strong. The team is executing well. We have two markets up and running, three now announced as we just went through. We're pre-onboarding customers on to rails that have been working. We continue to get great feedback from sellers and continue to expand and so our focus is going fast and letting our sellers really get the benefit of a simpler experience that's less expensive and a better experience integrated into their selling account and the buyers having more options and so we feel good about it. On the buyers back to normal, Andy, you want to take that one?

Yeah, look, Stephen, I think the way we think about it is we've been working for a long time to improve the buyer experience across the site and we have an opportunity here with some pretty healthy buyer growth at the end of the first quarter and the beginning of the second quarter to further leverage that. We're going to continue to invest in these buyers to ensure that they are finding and realizing the value and selection that we offer and continuing to drive engagement with these customers is critical. It's super early in the process. New buyers typically will engage a little less frequency and buy a little less than retained buyers and we're seeing similar behaviors, but one of our key focus is in the coming weeks and months is going to be how do we work to drive increased engagement with the buyer growth that we've had recently.

Your next question is from Ross Sandler with Barclays. Please go ahead.

Hey guys, just a follow-up on the sustainability of the GMV. So I think you said up 20% every week in April and it seems like advertising rates around the Internet are coming down, do you view this as an opportunity where you could potentially lean in on SEM or on other forms of kind of customer acquisition to not only try to hang on to the new buyers that you've got but drive more new buyers even after the quarantine's end. Any color there? And then the second question is just an update on the portfolio review. Any update on ECG given what's going on in the world and what's going on in terms of the deceleration in that business. Any new plan around the sale process and then has your thinking around Korea -- that business and the strength that you're seeing in Korea change at all. Any thoughts on where that one stands as far as the strategic review process? Thank you.

Yeah, maybe a few points and then Andy jump in. So the sustainability of 20% I think what we're calling out in our guide is that we expect it to trend back down, although it's obviously very hard to tell. The benefit that we've seen is first is as I called out and then Andy emphasized, we've had a really good out of the gate kind of what we term confinement categories and broadly speaking, those categories would cover roughly 25% of the site and that started to accelerate and then what you saw is as that settled down and as that matured, you started to see buyers buying in all of the other categories. And so, what you see now is a broad-based expansion of the growth in other categories on eBay without really any being left behind per se and so from that perspective, it feels good. I think to the spirit of your question, we will continue to be spending. The nice part is these new buyers fit right into our strategy of going after the buyers we brought in the last 12 to 24 months. We're trying to activate them and so they'll go right into those cohorts and really we'll be working on things like getting them to sign up for the mobile app if they didn't come through the mobile app, getting them to fully register as a user, if they were only a guest, continuing to hammer them with emails and other value that's available on the site. So tons of opportunities there. I don't know, Andy, do you want to weigh in on the ad rate or anything else I left out on that?

Well, I'll maybe double click a little bit on the GMV comment and the sustainability of it. Just you know clearly in the guide for the quarter and the year, we're not counting on those rates of growth continuing. We haven't seen anything through April to suggest that they don't. So to the extent that they would continue at or not trend down as quickly, we'd see some upside, but to Scott's point looking to engage and take advantage of the incremental buyers we have and leverage them through the process.

Yeah, and then hey Ross, to get back to the other parts of your 14 point question here, let me try on Classifieds, the Classifieds, look, I think, certainly we have got the pressure from ads. I don't anticipate once dealerships come back, that we'll have ongoing pressure from that. And so the dynamic as we look towards the second half of the year and certainly for the longer-term, we don't feel it impacts the valuation of the company and thus accordingly, we're not really looking at the portfolio, discussions that aren't going any differently than we were three to six months ago and so we are in active conversations with multiple parties as I called out and we'll give you an update by the Q2 earnings call. And then Korea, sorry, Korea -- look, Korea is a great platform and we elaborated a bit more at least in my script on a bit more of the dynamics around what we're seeing there and you know, good double-digit revenue growth in that business this quarter, a little bit of highlight of the contribution operating income dynamics that we get out of that business versus some of the others and I think as we've demonstrated along the way and the Board has demonstrated, we'll continue to be clinical about how we approach all of our portfolio around eBay. Right now we're focused on Classifieds and making sure we maximize value for shareholders in that transaction. Did I get them all there?

Yeah, I'll get back in the queue with a few more. Thanks guys.

And your next question is from Eric Sheridan with UBS. Please go ahead.

Thanks so much for taking the question. Maybe two if I can. With the buyer growth being the same that we saw in Q4, is there any way you could sort of tease out what might have been sort of a tale of two parts of the quarter in terms of active buyer growth because I think anecdotally most people would assume that as people were re-engaging with the platform and you saw a type of better post-COVID behavior on the platform by buyers and sellers that, that number probably would have been a little bit better. So I didn't know if we could drill down a little bit on that number and maybe some of the rate of change you saw on it as the quarter progressed and maybe even out into Q1. That would be number one. Number two, coming into this year, there was a lot of talk about the headwinds that were going to be created by the Internet sales tax initiatives. We're not talking about that now, so is that either remaining a headwind, but one that you're outrunning because of the demand environment changes that have persisted or is that sort of the headwind that still persists to the same degree you thought before, but you're either outrunning it or it doesn't matter to buyers to the same degree that it did before. Just curious what the dynamic around IST might be. Thank you.

Yeah. Hey, Eric. It's Andy, I'll take both of those. Like I think both -- Scott and I both said in our script, the beginning part of this quarter was performing as we expected on almost all fronts and buyers are no different. As we said, you know, most of last year, we've been shifting marketing expense away trying to drive an increased CLV with buyers and we expected to see some deceleration in the first quarter and we were seeing it and we've seen healthy buyer growth the last couple of weeks of March. So absent the lift in COVID, I think that you'd probably be looking at slightly lower buyer growth, but keep in mind that's a trailing 12-month measure and it's really hard to move that in a period of two weeks. So, as -- we'll I'm sure disclose much more as we get through the second quarter on the growth rates, but you can assume with 20% GMV growth that we've had some pretty healthy buyer growth as well. The second question on IST, look, I think part of the reason we're talking less about it is its just relative to everything else going on, it's a smaller issue. Fundamentally, nothing's changed other than it's performing basically exactly as we thought it would. When we entered the year, we had I think two states we lapped on January 1st. The thesis at the time in what we're seeing in early January was that we would lap out of the headwind as states reached the 12-month mark. We had a few weeks of data at the time and we said that that's what we saw. We now have four states that have lapped out and we're seeing consistent data across all those states. So we remain confident that we'll see lift half over half driven by IST as that headwind dissipates, but the reality is we had in the U.S., 6 points of headwind in the fourth quarter. We thought first quarter would be roughly 6 points, we think it was still roughly 6 points in the first quarter. So kind of to our expectations on that front.

Okay, great guys, thanks so much for the color and stay well, speak soon.

Your next question is from Heath Terry with Goldman Sachs. Please go ahead.

Great thanks. Andy, we've talked a lot about buyers and buyer growth. I wonder if you give us a sense of kind of what you're seeing on the supply side of the equation. Obviously, it's really early in this whole environment that we're in right now, but in prior recessions, we've seen pretty big spikes in supply on the platform and that's impacted pricing. Any sense as to whether you're seeing growth in supply on the platform, the old narrative being people cleaning out their closets, cleaning out their attic as they have more time in their homes and are able to -- looking for sort of additional income. Are we seeing that -- have we entered that wave on the platform yet and if so, or if it's something that you do expect, how do you see it impacting GMV growth as you think about us getting deeper into the recession. And then just strategically, I realize it's sort of early to kind of ask this question as well as you sort of think about your time is -- how you're going to manage the company as CEO, but the company has leaned really hard on capital returns in the past. As you think about sort of how you want to manage eBay, how do you anticipate sort of investing for growth, investing in technology, investing in the things that are going to allow you to compete against everyone else that's in e-commerce versus continuing down the path of returning capital to shareholders?

Okay, Heath, thanks. I'll take the first one. I think Scott will handle the second one. I'll try to give a little more color and you hinted at it at the beginning of your statement that it's super early and it's unclear how any of these things will really mature over time, but a couple of things that we did see. Early on, C2C was not really partaking in the growth that we saw relative to second half of March and we think that's related a little bit to the fact that to your people were moving around maybe less likely to go to the post office or deliver things and we've seen that recover a bit as we've gotten into April. In terms of supply, the listings on the site are healthy despite the fact that we've had the relatively quick ramp and spike in volume so that we haven't seen a reduction in listings on the site. In fact, I think they've grown a bit through April to support the volume spike that we're seeing on the B2C side. So we feel like supply is healthy. We've been onboarding as Scott mentioned and I mentioned onboarding new sellers through this process as well. So feel good about supply.

Yeah, you know, the other thing I'd add to that Heath is what we saw in January and February in particular when China was more shut down, we saw a dynamic that we've kind of confirmed and what we saw was just the strength in the overall global ecosystem of seller and listing and inventory availability, which was even as China was restricted, we saw domestic sellers step-up with additional inventory in the different markets where we have the buy side. So obviously, we don't have a buy side of China to speak of, it's super small. So the corridor out of China as that got a bit restricted in January and February in particular, we saw the other seller step-up and really not miss a beat and so just the quality of the sellers in the global supply chain was quite profound and so we saw tons of benefit there as kind of supply shifted around. As other markets -- Western markets started to shelter-in-place, China came back online and quickly really with a lot of help from our seller team in China, helped get them back online and shipping using our speed pack capabilities, which give them the capability to get inventory into other markets very quickly and so that was terrific. So I think broadly speaking, we walked away from the last six, seven weeks or even last quarter feeling very good about the supply quality. And to your question on C2C, I think it's a bit early to really see any substantial strength from C2C, but I would expect that as we go forward and certainly what people have already started to see in our international markets in particular is additional messaging to C2C sellers to re-engage with the platform if they haven't been around recently. So that'll be -- you'll see that in most major markets. On the question for -- I think that's Jamie, just in the interest of time, we'll park that and we'll let Jamie come back to that when we get to July.

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

And your next question comes from the line of Justin Post with Bank of America. Please go ahead.

Great, thank you. I'll make it quick. You've got some pretty good success with your sponsored listings product. I think your target was $1 billion in total marketing. Any change in your thinking there. Do you think it could be higher than say 1% to 1.5% of GMV and any signs that make you think the opportunity could be bigger over time? Thank you.

Well, a couple of things that I think we saw in Q1 that we feel great about. First off, while we raised the level of what was required for sellers to participate in Promoted Listings, we saw better quality listings go into search results and other placements that had better conversion and I think you've heard me talk about a number of times that the trick here to get to $1 billion and then north of there is making sure that this is accretive to the user experience and not a distraction, not sending people elsewhere and I think we walk away from Q1 feeling great about that. We'll work on the $1 billion first and then we'll update you after that, but look, I think the team has done an excellent job and what you're going to see us continue to do is iterate on placements, pricing, all sorts of things to just make this accretive to the user experience and I don't think the team sees any limits to this and they're really focused on it that way. Thanks.

Thank you.

Operator, I think that's all the time we've got for questions today.

Thank you.

Thanks everyone.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.