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.

Good afternoon. Thank you for joining us and welcome to eBay’s earnings release conference call for the fourth quarter of 2020. Joining me today on the call are Jamie Iannone, our Chief Executive Officer and Andy Cring, our Interim Chief Financial Officer. We are 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 would like to remind you that during the course of this conference call, we will discuss some non-GAAP measures related to our performance. You can find 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 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 February 3, 2021, and we do not intend and undertake no duty to update this information. With that, let me turn it over to Jamie.

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…

Thanks, Jamie. I will begin my prepared remarks with our Q4 financial highlights, starting on Slide 4 of the earnings presentation. In Q4, we generated $2.9 billion of revenue, $0.86 of non-GAAP EPS and $715 million of free cash flow, while returning $529 million to shareholders through share repurchases and cash dividends. Moving to active buyers on Slide 5, we exited the year with 185 million buyers, representing 7% year-on-year growth, a 2 point acceleration versus the third quarter. Since the end of Q1, we’ve added 11 million buyers to the ecosystem and are seeing retention rates in line with historical cohorts. We continue to see growth in GMV per active buyer across the buyer base. Moving to Slide 6, in Q4, we enabled $26.6 billion of marketplace GMV, up 18% year-on-year. While volume decelerated 3 points versus the third quarter, we did see modest acceleration compared to September growth rates, driven by a decrease in consumer mobility and benefits from ongoing improvements in the product experience across horizontal work streams and the progress we’re making in key verticals. In the U.S., we generated $9.6 billion of GMV in Q4, up 25% year-on-year, decelerating 8 points from Q3. International GMV was up 15% year-on-year, a 1 point acceleration versus the third quarter, inclusive of growth in our off-platform Korean business at 5%, accelerating 1 point from Q3. For the full year, the marketplace platform generated $100 billion of GMV, up 17% year-on-year, an acceleration of 19 points versus the prior year. Turning to revenue on Slide 7, our Q4 net revenue was $2.9 billion, up 28% organically, accelerating 2 points. We delivered $2.6 billion of transaction revenue, up 31%, accelerating 3 points from Q3, driven by our payments migration and strength in advertising. In managed payments, strong execution continued as…

[Operator Instructions] Our first question comes from Eric Sheridan with UBS. Your line is open.

Thanks so much for taking the questions. Maybe two, if I can. Appreciate all the color on some of the vertical moves you are making, especially with respect to watches and sneakers. Can you talk a little bit just strategically about how much you already have in place to capitalize on looking – going vertical by vertical within the marketplace or how much your sort of investments you have to make to unlock the opportunity over the longer term? And then understand on what you face in the middle part of the year with respect to comping against the growth from a year ago. Can you just talk philosophically about how much you think your exit velocity is going to matter against running against that comp versus how much you might want to make investments to sustain momentum in either buyer growth or buyer behavior to sort of outrun the comp through some of the investments you might be able to make against the business or just letting sort of the market play out from a comp perspective? Thanks so much.

Yes. Thanks, Eric. Let me take the first one on verticals and then Andy can take the second. So, we invested in those verticals really based on the strategy that we laid out in July of focusing on non-new and season and opportunities where we had strength to win. And if you look at those categories being watches, sneakers, which we rolled out surely after watches and then Certified Refurbished, we saw really great growth rates. I mentioned the triple-digit growth rate that we saw in sneakers. You got to remember, this was a business that had been in decline. And so to see it as strong as this shows us the power of really focusing on those verticals and the end-to-end experience for our customers. And so while those categories represent a single-digit percentage of our GMV, the plan is to continue to roll out new category experiences from an end-to-end perspective over the course of the coming years, eventually meeting the majority of our GMV. I will add that we included another area for us in the UK, where we piloted a fashion brand outlet with 150 fashion brand sellers performed really well, double-digit growth ahead of the market and ahead of what we expected. And so that kind of gives us the confidence that the strategy is working and the confidence to continue to rollout more categories over the coming quarters and years.

Yes, Eric. And then on the second part of your question on comps and investments, clearly, there is a lot of noise now with what’s going on with the pandemic, but that hasn’t stopped or really changed the approach we have taken towards building towards longer term growth. It’s given us a little bit of a tailwind to lean in a bit on investment. But the beauty of this model is as I said in my prepared remarks, we are committed to the 30% margin and we believe that we have got a very strong plan to get there. And we feel like we have done or made great progress on the initiatives this year, exiting the year stronger, certainly stronger than we entered and stronger than we had anticipated when we entered the year as we look at the controllable aspects of growth if you peel apart what we can see from COVID-related items.

Great. Thanks, guys.

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

Hey, guys. Two quick ones for me. I guess first you’ve made some really strong strides in getting some new customers, getting them back to the platform. I guess what are you doing to kind of ensure that they aren’t just one and done. If it’s not they were buying something COVID related or buying a video game system for their kids this holiday. And as a follow-up nice to see the strength in sneakers and watches, I know you guys have a third-party authentication services, I believe. Kind of what’s the scalability of those solutions as you continue to grow those businesses? Thank you.

Yes. So starting on the buyer ones, we acquired 11 million buyers over the course of the year. And what we’re seeing is that the behavior, when we look at things like frequency and retention, is not different and is as strong as we’ve seen in past cohorts, which means they didn’t just come to us for eBay to buy a specific PPE and then we won’t see them again. We’re doing a good job of turning a percentage of them into enthusiasts. And what we’re really focused on is how do we turn them into cross-category shoppers. So as I mentioned in the remarks, a sneaker buyer who comes into eBay is going to be worth $2,500, or they end up buying $2,500 worth of GMV. But only 20% of that is in sneakers, and 80% of that will be in other categories across the site. And that’s a huge advantage for us because of the cross-category nature that we have of the platform. And it’s also a specific focus and something that we lean into a lot is driving it. And a lot of that growth is coming from C2C, and is bringing Gen Z and millennials to the platform, which is also critical and part of our strategy. In terms of the authentication, we’ve ramped up the amount of authenticating we’re doing to now every sneaker over $100 going through the authentication platforms. And we’re seeing great response and great operations there. So consumers are getting their sneakers really quickly, and the authentication process is working. And look, while it’s a very, very small percentage of things that we find where there are issues that guarantee for customers is a huge differentiator and is a big part of what’s leading to the triple-digit growth. So we’re leaning in a lot in terms of marketing and acquiring those customers in that category, and we’re excited for what we’re seeing.

Thank you, Jamie.

Our next question comes from Ross Sandler with Barclays. Your line is open.

Hi, guys. Just two questions. First is international, it looks like you had some nice acceleration there. You mentioned Korea, but I would guess that UK and Germany are also accelerating. And based on the guidance, it’s probably happening again in 1Q. So I guess, can you just walk through how much of that’s like these company-specific initiatives versus just the overall kind of macro situations like mobility and lockdowns in 4Q and 1Q? And then second question is you mentioned that SEO is growing faster than paid, I think, was the comment. And that was a problem area from like 6, 7 years ago. So just, I guess, what are you doing that’s new to unlock that SEO and how big could that channel be for you guys on a go-forward basis? Thank you.

Got it. Hey, Ross, I’ll take the first one. On Q4 dynamics and then the international versus U.S. split, it looks like there’s a bit of a difference between U.S. and international growth rates, with the U.S. down 8 and international accelerating on a quarter-over-quarter basis. That’s really less an impact of what we saw in the fourth quarter and more an impact of kind of the unwind of the second quarter spike and how third quarter rates played through. So keep in mind, in the U.S. in the third quarter, the growth rate – the deceleration from Q2 was a little less. So when we look at third quarter – or fourth quarter and how it plays through into the first, it’s really for us more what we saw – what we’ve seen since September with some acceleration really in all – basically all countries around the world. And that’s played through to the first quarter, and it’s implied in the acceleration you see in our Q1 guidance. So clearly, mobility plays a large role in sustaining a level of growth and driving a bit of acceleration. But again, the initiatives we’re working on and the progress we’ve made with regards to product and marketing and managed payments and search contribute as well to the acceleration on a quarter-over-quarter basis. But clearly, the majority of that’s going to be mobility driven, but underlying performance is better.

Yes. And I’d say on the SEO, look, there’s a number of things that we’ve been doing in terms of how we structure our listings and work with our content and designers that actually specifically drives it. There was some Google algorithmic change which we benefited from. And we’ve been doing some upper funnel, specifically in targeted verticals, which we think helps some of our lower-funnel activity. I think the important thing to remember is, in general, 80% of our traffic on the site is organic and people coming to us directly, and that’s really one of the strengths and assets of eBay. But certainly, the SEO is helping us with our initiatives to drive cross-category purchase and drive consideration.

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

Alright. Great. Thanks guys. Congrats on the quarter. I’m going to follow up again on cross-marketing, just to understand how new this initiative is, if it’s something you’ve been working on throughout 2020 and if you have any metrics on maybe the number of cross-category purchases. And then secondly, I know there is some more focus on the competitive landscape. Perhaps you guys could comment on how you are perceiving the landscape with some call them up and coming marketplaces that cross some of your key categories? Alright, thanks.

Yes. So look, on the cross-marketing, I think it’s been important for eBay. Since I was here the first time, it continues to be a really important thing when you look at driving the CLTV of our buyers. If I go back to the sneaker example, I talked about the 80% outside the category, and that represents them purchasing in 10 categories out of that core category. I would even broaden that question to say, we’re really studying a lot that first kind of 90-day experience for a customer and looking at all the things that drive the retention of them. And so getting them to download the mobile app, getting them to shop across category, getting them to watch or save items and really driving more of our marketing technology to align to driving the retention of the buyers. And that’s why we are excited to see that. A big reason why we also focused on C2C selling is because if we acquire that buyer to come in as a buyer and then we get them to just do any kind of casual selling, they become 2x to 2.5x more valuable to us as a buyer. So really that whole kind of introductory life cycle and being really algorithmic, and using our best data science and AI, really working on our marketing technology to be able to leverage that more is a key focus for us. And look, on the competitive landscape, we feel great about our positioning. We significantly improved the NPS of our experiences, especially in those focused verticals that we talked about. And we’re seeing really good feedback from buyers and sellers. And that’s always the leading indicator is that CSAT and NPS performance and what’s happening there. And so that, combined with the payment CSAT stuff we’re seeing where sellers that are moving to our payments 2.0, our managed payments platform, have a 10 point higher NPS, is making us feel really good about where our competitive positioning is. And last thing I’d say is just thinking about the scale, right? So we talked about $14 billion GMV that we grew year-on-year last year. That’s more than the last 7 years combined. That’s more than most vertical competitors would do in a year, we grew more than that amount. So being able to leverage those 185 million buyers, and have their purchasing cross-category is a huge and unique asset for eBay.

Great. Thanks, Jamie.

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

Okay. Thank you. So I think, Jamie, previous management teams have talked about looking at managing the amount of page real estate dedicated to promoted listings for system or legacy forms of advertising. So are you yet in a place where you’ve had to make those types of trade-off decisions in terms of one versus the other? And secondly, you recently announced the rollout of managed payments to both merchants and buyers in China. So I think part of the benefit of working with Adyen has been that you can accept different forms of online payment, which you probably couldn’t do before. And this theoretically should help you take down some of the friction against cross-border trades. So does this help you think about potentially expanding your customer acquisition funnel as well? Thanks.

Yes. So first, on the advertising business, feel great about hitting the $1 billion milestone. As we look at it, a lot of that growth is being driven by the growth of promoted listings. And as we analyze it, we’re seeing better seller penetration of people coming on the platform, better technology and tools in terms of our ability to do relevance, and we’re not seeing it degrade the buyer experience, which is what gives us comfort that when we look at it in total being 1% of our total GMV that we have the opportunity to continue to have advertising growth faster than our GMV on the platform, and really based on that strength of promoted listings. On your question on managed payments, absolutely, it’s a huge part of the win is really streamlining the payment process and providing more payment options. Cross-border trade for us has always been a great business, a really unique business to eBay and specifically in the Greater China corridor and helps us bring on new buyers to the platform and a different type of inventory. So between what we’re doing in terms of speed pack and some of the forward deployed inventory, plus now as we expand payments to Greater China, we think that will help a number of the quarters in terms of our cross-border trade business.

Thank you.

Our next question comes from Thomas Forte with D.A. Davidson. Your line is open.

Great. Thanks for taking my question. So you sort of touched on this in the prepared remarks, but I was hoping you could give a little more of an answer on it. So you’ve made a number of changes to your operating assets over the last 18 months, wanted to get additional details on your thoughts on your long-term capital allocation strategy, including M&A, buybacks and dividends? And on the M&A part, are you looking more for tuck-ins or would you be looking for something more of a growth-type asset, too? Thank you.

Yes, there is really nothing different about our thinking towards capital allocation. Our model gives us the flexibility to both invest back in our business organically and opportunistically to look at M&A as well as return capital to shareholders. Our business generates a high amount of free cash flow. We have a strong balance sheet. And I think we have a track record of both exercising discipline in our portfolio as well as maximizing value for shareholders. So we’ll continue to look opportunistically at M&A and do so for tech and talent or areas that we believe are going to accelerate the strategy that we laid out in July. Andy, do you want to add anything to that?

Yes. I mean, I think the only thing I’d add is, while we do – it’s a pretty active playing field with what’s coming with eCG and the like. I think if you look at historically what we’ve done with StubHub and some of the things in the past, you can expect it will be consistent in what we’ve done. Our tenants and targets are unchanged. And our number focus is do what we can to invest back in the business to grow organically, look at M&A, where it helps us to do that. We remain committed to shareholder return. And I just expect us to continue to do that.

Great. Thanks for taking my question.

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

Great. Good afternoon. We’ve done survey work here that reflects a rising interest in pre-owned goods among Gen Z and the millennial cohort. Just curious if you are seeing this trend reflected in your new buyer growth as well, whether you would kind of agree with that? And then maybe just a second question around advertising. There are clearly some larger Internet platforms saying iOS changes will make small business advertising more difficult and degrade ROI this year. And just curious if you think this represents an opportunity for eBay to step in and offer a solution among SMBs? Thank you.

Yes. So, first on the Gen Z and millennials, absolutely, it’s a huge area of why we are focused on pre-owned not only because of the attractiveness there, but also just the impact on the planet. If you look at the numbers that we talked about from saving 720,000 metric tons of carbon emission, we recently did a survey, it probably sounds like much of the survey that you’ve done. And what we saw is that 72% of our sellers that come and start selling on the platform are doing so because they need to earn a little bit of extra money and some percentage of those are actually because they lost their job, and so they’re looking for opportunities on just making money on the platform. The other thing that’s important to remember is that we believe that people have about $4,000 of items in their house that they can sell, less than 20% of that is online. And so there’s a huge kind of social element which we’re leaning into as part of that, but definitely a focus on the Gen Z millennials. And you’re seeing that in sneakers, you’re seeing that in what we did with our brand fashion outlet in the U.K., and you’ll see us continue to focus on attracting that customer to the platform.

Your next question comes from Youssef Squali with Truist Securities. Your line is open.

And before you do, I forgot that I didn’t answer your advertising question. So let me just cover that one real quickly. So look, we believe that ads is beneficial for us because we essentially have a closed platform. We’re able to drive the majority of that growth through promoted listings, where we actually can see the actual relevance, the implications, the click-throughs, all of the data that makes that impactful. So yes, that gives us, I think, a lot of bullishness in terms of the future opportunity for us in advertising, especially since we’re only penetrated at 1% of GMV. And we think there is opportunities to continue to expand the number of sellers that use the platform as well as build new capabilities to make that platform even more attractive with some new tools, etcetera, which you’ll see over the coming quarters and coming years.

Can you hear me?

Yes. Go ahead. Sorry about that.

Excellent. Hey, no, thanks a lot. Thank you for taking the question. I just have a two-part question. One, if I look at Slide 6, the GMV breakdown, it looks like U.S. GMV was up 25% year-on-year, which is pretty impressive. If I look at it on a sequential basis, it was actually slightly down in a seasonally strong quarter. I was wondering if you can expand on that. And then related to that, as I look at your guidance for Q1 kind of what’s baked into your guidance in terms of the mix between U.S. growth versus international? Thank you.

I think it was just about U.S. versus international for Q1 guidance.

Yes. I’ll take that one first. Just on the – it’s a little similar to the question earlier. Based on the trends we saw in the fourth quarter, kind of the movement in U.S. versus international was relatively similar. So as we look into Q1, what we’ve seen thus far in the quarter and therefore implied in the guide is similar movements by country, so no real difference U.S. and international in terms of quarter-over-quarter dynamics. And then the first question, was it U.S. GMV only the deceleration?

Yes, yes, yes. It’s basically shown on Slide 6, yes.

That one again – yes, sorry, Youssef. That one, I think, again, if you – is less an issue – or less a component of Q4 activity as much as it is a hangover in Q3 of the spike in Q2. So the U.S. – I mean we had clearly a very large volume spike in the second quarter. Volume in the U.S. hung in longer in the third quarter, partially as a result of stimulus, partially as a result of some of the supply chain disruption. And then as that slowed down through the end of the third quarter, some of that’s what you’re seeing play through in the quarter-over-quarter dynamics. But as I said, from September on, the activity by country has been relatively similar.

Got it. Andy, that’s helpful. Thanks, Andy. Thanks, Jamie.

Our next question comes from Bob Drbul with Guggenheim Securities. Your line is open.

Hey, guys. Just a couple of quick questions really. On the 7% increase in buyers, what would you put in the largest factors to the new buyers during this period versus what we’ve seen over the last I don’t know 9 to 12 months? And I guess the second question is just, are you seeing any change in Buy It Now versus the auction type buying with the consumer? Thanks.

Yes. Sure, Bob. So look, the increase in buyer is, in part, doing a lot of the strategic work that we’re doing and the focus verticals, you saw us do more marketing in the quarter, really talking about some of the new capabilities that we have out there. And we leaned in from a reinvestment standpoint to not only acquire those buyers, but to really to work on driving the retention of those buyers into our key platforms. So obviously, in a number of countries, it’s also pandemic-related relative to mobility, but we’ve also been leaning in to kind of take advantage of that and drive their cohort curves. And we’ve been impressed that we’ve been seeing from that perspective. In terms of the makeup of different format, Buy It Now remains the vast majority of what’s on the platform. We do see strength in auctions in areas like collectibles, which is a category that’s growing strong for us. But not only does Buy It Now remains strong, but we’ve innovated over the years in things like best offer and in seller-initiated offers. And seller-initiated offers, as an example, is almost the inverse the best offer. Best offer is the buyer making an offer. Sellers can actually make specific individual offers to sellers who have interacted with one of their products, and we’re doing $1.2 billion already in that. It’s one of the unique elements of the eBay platform as auctions, best offers, seller-initiated offers are all ways for buyers and sellers to get to a negotiated price on the platform. But overall, Buy It Now still remains the vast majority of the business.

Great. Thank you very much.

Hey, operator, we got time for one more.

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

Thanks for taking my question. I have two. Just the first one, Jim, I appreciate all the color around sort of the way you are studying the first 90 days of experience of the consumers and sort of the 80% of the traffic that comes organically. I’d be curious to hear about, in the U.S., talk to us about what you’ve seen as being the one or two key categories that have been the biggest enablers of the new people who have come to the platform. And how have you seen that change from last spring to now. Which categories are sort of driving the new people to the category? Then secondly, just as we think about the advertising business, just talk to us about qualitatively what types of investments you still see yourself needing to make internally to sort of ensure that the advertising business is set up to continue to scale and deliver value for the merchants? Thanks.

Yes. So look, the buying behavior that we saw over the course of the year, it started in PPE equipment, then went to kind of stuff that people needed to work-from-home or stay-at-home, things like fitness equipment and laptops and that type of thing. But after that, it was really broad-based and continues to be broad-based in terms of where we’re acquiring buyers. So, from everything from people spending time with their hobbies and parts and accessories or fixing up their cars to Certified Refurbished on what we are doing there, we are definitely seeing strength in buyer acquisition and the focused verticals that we have been talking about. So like apparel that we worked on in the quarter with the brand fashion outlet and in the areas that we announced in the U.S. and we will be expanding globally. So more important for us is not where we acquire them, but getting really smart and using a lot of AI about what’s the best second category, how we’re using all of our tools and capabilities across marketing and the apps and the websites to get them to interact in different parts of the business. And that’s where I think about it just getting a little bit better every single day in how we’re able to do that is going to be what continues to help drive those numbers. From an ads perspective, we’re focused on the tools and capabilities to make it easier for sellers to use the product to give them templating and reporting of how it’s doing and be able to have that closed-loop ROI on the spend that they have on the platform to make it more applicable to C2C sellers and make it really easy there, because obviously if you think about a sophisticated B2C seller, it’s easier to interact with and much easier understands in advertising product. So, that’s a big component of what we’re doing. And then also just building new algorithms and relevance and machine learning into are we displaying the best thing to the buyers. So we continue to expand the program while not degrading the buying experience and, ideally, enhancing the buyer experience through what we’re doing on our advertising products. So what you’ll see is just continued quarter-after-quarter innovation in that product to help us keep the – grow the – and reach the potential of the product and have it continue to outpace GMV for the near and medium term.

Great. Thanks, Jamie.

Yes.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. I’ll now turn the call back over to the company for closing remarks.

Alright. I think we’re all set. We can close the call. Thanks, everyone.

This concludes today’s conference call. You may now disconnect.