Good day, ladies and gentlemen, and welcome to the eBay's Q1 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Tom Hudson, Vice President of Investor Relations, you may begin.

Good afternoon and thank you for joining us, and welcome to eBay's earnings release conference call for the first quarter of 2015. Joining me today on the call are John Donahoe, our President and Chief Executive Officer; and Bob Swan, Chief Financial Officer, Dan Schulman, our CEO elect of PayPal and Devin Wenig, our CEO elect of eBay. We're providing a slide presentation to accompany Bob's commentary during the call. All growth rates mentioned in John and Bob's prepared remarks represent year-over-year comparisons, unless they clarify otherwise. This would also include Dan and Devin’s statements as well. In addition all segments results are adjusted for the effects of foreign currency exchange. This conference call is also being broadcast on the Internet, and both the presentation and call are available through the Investor Relations section of eBay's website at investor.ebayinc.com. You can visit our Investor Relations website for the latest company news and updates. In addition, archive of the webcast will be accessible for 90 days through the same link. Before we begin, I'd like to remind you that during the course of this conference call, we'll discuss non-GAAP measures in talking about our company's performance. You can find a reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation accompanying the call. In addition, management will make forward-looking statements relating to the planned separation of eBay Inc.'s Marketplaces and PayPal businesses, and our future performance that are based on our current expectations, forecasts and assumptions involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the second quarter and full year 2015; a future growth in Payments, Marketplaces and eBay Enterprise businesses; the implementation, completion and timing of the planned separation. Our actual results may differ materially from those discussed in the call for a variety of reasons. You can find more information about the risks, uncertainties and other factors that could affect our operating results in our most recent annual report or on our Form 10-K or in future quarterly reports or Form 10-Q available at the investor.ebayinc.com. You should not rely on any forward-looking statements. All information in this presentation is as of April 22, 2015 and we do not intend and undertake no duty to update this information. With that, let me turn the call over to John.

Thanks, Tom. Good afternoon, everyone, and welcome to our Q1 earnings call. We had a strong first quarter and despite currency headwinds pressuring topline growth, eBay and PayPal rocked to a good start for the full year. I feel very good about the focus and performance of our teams at eBay and PayPal. Each business is executing well with greater focus on operating discipline as we prepare for separation. Joining our call today are eBay CEO Designee Devin Wenig and PayPal CEO Designee, Dan Schulman. Devin and Dan will provide more perspective on Q1 performance for eBay and PayPal respectively, as well as their views on the future opportunities and focus for each business. Bob will then provide full details on the quarter including eBay Enterprise. But let me provide some highlights. In the first quarter, eBay Inc. revenue was up 9% on an FX neutral basis with PayPal contributing 17% growth and eBay Marketplaces up 3%. Non-GAAP EPS was up 10%. For Q1 PayPal enabled $61 billion of volume, topping a 165 million active accounts and eBay drove 20 billion of gross merchandise volume, topping a 157 million active buyers. Before I turn it over to Dan and Devin, let me briefly recap where we are in the separation process. As you know, last September we announced our decision to separate eBay and PayPal into independent publicly traded companies. Separation will enable each business to operate with greater focus and strategic agility and better position to capitalize on the respective growth opportunities. We believe more than ever that separation is the best path for eBay and PayPal and the right approach to delivering sustainable value to shareholders. We are moving forward with clarity and speed. We passed the significant milestone in Q1 with the initial filing of PayPal Form-10…

Thank you, John and thanks everyone for being on the call today. PayPal is off to a solid start for the year and I like our current trajectory and progress. We grew our revenues 17% on a FX neutral basis and our Merchant Services TPV continue to decline in the first quarter, growing 33% year-over-year, more than double the pace of the e-commerce market, indicating we gain meaningful share. Our growth and the new capabilities we are building position us well as we look towards the future. There are four key metrics that I believe measure the growth and health of our business. They are, one, our topline growth. Two, the growth of our account base, which demonstrates our scale. Three, the engagement of that base as measured by revenue per active account and four, free cash flow. These metrics are my top priorities as they measure the progress of our strategic initiatives, which are to grow ubiquity, increase engagement of both merchants and consumers and produce a strong return for investors. We drove progress in all of these areas in the first quarter. First, the topline. The 17% revenue growth we delivered is a strong foundation to build on as we move into 2015. Second, we continue our steady growth in customer accounts, increasing total active accounts by 3.6 million to 165 million customers across the globe. We expect strong growth to continue in 2015 as we further penetrate the merchant population and build out our products and services to grow more and more relevant to consumers. Third, our customer engagement also steadily increased with transactions per account growing to 23 in Q1 from 21 in the first quarter a year ago. This -- we processed as well more than 1 billion transactions in the first quarter. This represents…

Thanks, Dan. It's great to have the chance today to share my thoughts about eBay's Q1 performance and our plans for the future. Let's start with the quarter. EBay had a good quarter one showing signs of stabilization. Let me share some key metrics. GMV and three month trailing active buyers each grew 5% consistent with the prior quarter. Overall traffic including mobile grew at steady rates as well. International GMV on an FX neutral basis grew 7%, a one point acceleration in Q4 and sold item growth was 9%, also a one point acceleration. In addition StubHub and eBay classifieds both performed well. After the challenges faced in 2014 and following two sequential quarters of declining growth, our quarter one results are encouraging. I'm pleased with how our team is executing and delivering. We are certainly not ready to declare a victory over last year's SCO and password reset challenges, but we're making progress. SCO generated traffic is still impacting growth while this channel is beginning to stabilize, effectively managing SCO traffic is a constantly evolving process. We're working to stay out front of it. Also following the password reset, we're making ongoing investments to ensure we have a stable, secure platform for our users. We're focused on increasing user engagement and confidence over time. Steady progress, but we are just getting started. We have more work to do to ensure we deliver consistent sustainable performance and accelerate growth. Let me step back now and provide broader context. I'll focus the rest of my remarks on our path forward and the tremendous opportunities we see ahead. EBay turns 20 this year, in our industry and in Silicon Valley that's an extraordinary milestone. EBay helped define the beginning of ecommerce and we intend to continue being a leader in its…

Thanks, Devin. During my discussion I'll reference our earning slide presentation that companies the webcast. Q1 was a great start to the year. We delivered $4.4 billion of total revenue and $0.77 of non-GAAP EPS. We generated $829 million in free cash flow and repurchased 1 billion of our stock. We're making excellent progress on our plans to separate PayPal from eBay and we currently anticipate a third quarter close. In Q1, we generated net revenues of $4.4 billion, up 4% with strength across the Board. Organic revenue growth was 9% in the quarter and currency negatively impacted growth by approximately five points. We delivered revenue at the high end of the guidance range despite the impact of the stronger dollar which negatively impacted Q1 revenue by approximately $30 million since the guidance we provided in January. Non-GAAP EPS was $0.77, up 10%. EPS growth was driven by a strong FX-neural revenue growth, good operating leverage across the company and a lower share count. Operating expenses were 41% of revenue in the quarter, down 120 basis points, driven primarily by the benefits from the steps both Dan and Devin took to streamline their respective businesses, partially offset by provision for transaction loan losses and increased regulatory cost for PayPal. We generated free cash flow of $829 million in the quarter and CapEx was 7% of revenue. From a balance sheet perspective, we ended the quarter with cash, cash equivalents and non-equity investments of $14.1 billion, including approximately $4.1 billion in the U.S. EBay ended the quarter with $11.7 billion and PayPal with $2.4 billion in cash. We are taking steps to continue to strengthen our balance sheet to provide both businesses with the financial flexibility to pursue their strategic and capital priorities. First, we continue to find an increasing portion…

Thank you. [Operator Instructions] Our first question comes from the line of Carlos Kirjner of Bernstein. Your line is now open. Your line is now open.

Hi. Thank you for taking my question. I have two questions. First, can you ask some caller to what specifically we need to do to rebuild your SCO and if it's category-by-category exercise, for example, dependent on the structured catalog, have you made significant progress in some categories that give you confidence that these will work? Second, on PayPal, you said PayPal has a lot of opportunity and is still relatively small user base and its addressable market. In an environment of similarly increasing competition, why is right term for the business to focus on growing free cash flow instead of reinvesting more aggressively in product and user growth? Or in other words why do you think that maintaining 25% margin versus investing in new products and customer acquisition to accelerate user topline growth is now the right answer? Thank you.

So why don't -- Devin, why don't you take the first part, Dan, you take the second question.

So, let me take the SCO and structured data question. Maybe I'll go back in history just a second. We grew up as a marketplace and eBay looks at the world historically through listings rather than products. Listings have gave eBay a tremendous selection advantage, it’s why we have the most things for sale of any marketplace in the world, but listings are also transient, they come and go. They don’t have link equity and they are hard to attach content to. So if you go back over eBay’s history there is been a pattern of SEO disruptions across various search engines. We now believe that the state of our business and our technology is that we can maintain the advantage given to us by our marketplace business model, but include a structured data catalog which gives us persistence and link equity and makes our seller’s inventory more discoverable both on and off eBay. The way we are approaching that is, it is a deep transformation. It’s a multi-year process. We are approaching it by category, but horizontally, but also focusing on the vertical areas where we believe we can have the most impact early on. I would say we are off to a good start, but it’s an early start, and it will take -- it is a multi-year transformation. But we do know where we structured and cataloged our inventory. Those items are more discoverable on eBay and they are more persistent and generate more traffic through search engines and other digital channels. So we feel good about the approach, but it is not a short-term fix.

Thanks Devin. Dan?

Yeah, thanks for the question Carlos, appreciated. So you are right. It is a very exciting opportunity in front of us with a addressable market that is expanding dramatically for us. Cash is digitalizing, the world of money is digitizing. The way consumers manage and move their money is transforming technology platforms and fundamentally redefine that and merchants are moving towards digital commerce where they can use mobile to get ever closer to their customer, drive engagement, drive incremental sales. And I think that PayPal is very well positioned to take advantage of those opportunities. There are number of assets that we bring to that site from our brand to our scale, to our platform, to our service and I can talk about that in more detail later. So what we have said is that we will grow our segment margins this year by 1% to 2%. We feel very comfortable with that. We feel very comfortable that with the operating leverage that we have in this business, in the cost action that I took earlier this year, reducing headcount to really focus our costs, as well as increased economies of scale as we grow larger, are going to allow us to grow free cash flow in a disciplined fashion and yet have the investment dollars to invest in the opportunities that we see ahead. As opportunities can be increased investments in our platform to speed up our ability to deliver capabilities, enhance capabilities, which you will see us rolling out even this quarter, going forward new markets that we move into. And so we feel as we look at our model, that we have the operating level to maintain consistent margins and invest to take advantage of the opportunities that we see in front of us and I feel comfortable with that as investment dollars. I’d also points out one other thing that Bod mentioned. He said PayPal is going to be extremely well funded on its balance sheet as we go forward with perhaps some approximately $6 billion of funding of cash on our balance sheet, enabling us to look at not just organic growth but inorganic growth as well. And so when I look at all those things together, I feel very comfortable with the guidance that we've given and the investment opportunities we see.

Thank you.

Yeah.

Thank you. Our next question comes from Eric Sheridan of UBS. Your line is now open.

Thanks for taking the question. Just one. You made quick mention of it. But it too want to deal with the deeper in the rationale for the PayPal Paydiant transaction. When we think that delivers long-term in terms of merchant relationships? What some of the ancillary benefits might be lower term in terms of credit and how far that asset might expand the PayPal footprint today in terms of playing a role in somebody’s lives? Thanks so much.

Dan?

Yeah. Eric thanks for the question. We are very excited about the Paydiant acquisition. Paydiant is not necessarily a name that lot of people recognize from a brand perspective, but very leading merchant in the country sure do recognize it. But it is a mobile base platform that provides merchants who want to write their own applications to engage and connect with their customers, to use that underlying platform to power those applications, whether that be through rewards, through payment processing or through QR codes at the point of sale. When you combine the Paydiant platform with our platform at PayPal you have probably in my estimation the world’s leading mobile payments platform and as I mentioned as the online and the offline world continue to coverage together, driven by the confluence of mobile at the heart of that. The Paydiant acquisition enables us to move much more aggressively into that converged space, so into that offline space. It also provides on the consumer side the ability to utilize things like private label cards, rewards. So it’s kind of a host of capabilities that supplement what we had on the PayPal platform. So for both merchants and for consumers it was an acquisition that enabled us to more aggressively and more quickly address that expandable market.

Thanks so much.

Yeah, you bet.

Thank you. Our next question comes from Gil Luria of Wedbush Securities. Your line is now open.

Yeah. Thanks for taking my question. I wanted to ask about -- Dan, I wanted to ask you about the progress in terms of your technology and in the important mobile technology that are being deployed right now, so in the card present context Venmo, One Touch and deploying that or the Venmo inspired One Touch in deploying that more retailers and via fingerprint reader. When do those technologies become mature enough and integrate enough in your products that you will be able deploy them? And then off the line when you will feel comfortable enough with NFC penetration on phones and in terminals in order to deploy that? And then to Devin, maybe I missed it. But impact do you expect from the most Google algorithm changes to mobile. Isn’t that a big advantage for you in terms of prioritizing mobile-ready websites? Yours has been ahead of the pack for the long time?

So maybe I can start and turn it over to you Devin. So thanks for your question Gil, its insightful. So the first thing that I'm just going to take one step backwards and tell you as you probably have seen is we've kind of reorganized PayPal around merchants and consumers. And when we did that we put Bill Ready in charge of the merchant segment. Bill as you know was the CEO of Braintree and what we really did by putting that together is really combine the Braintree platform and the PayPal platforms much more closely together so that we are able to being able things like One Touch not just on full stack integrations and on mobile, but into the PayPal base. We think that the world is moving increasingly towards mobile payments that we have with the combination now of Paydiant, Braintree and the PayPal platforms, the leading mobile payments platform in the world. We did over a 1 billion mobile payments transactions last year. You heard that this quarter you we’re up 40% year-over-year. We are taking things like One Touch and we want to put it right into our merchant onboarding process that we have for PayPal. And so we are taking the things that we've learned through both Venmo and Braintree, putting them together with some of our other acquisitions to provide to our PayPal embedded base, not only the services that you see now, but services that we will introduce even as of this quarter that will take us to a whole different level as a result of that integration together. That’s question number one that you asked and I feel really about that and excited about it. Number two was on NFC and I do I feel like NFC is embedded enough…

And Gil to your question about a sea of algo changes, we find out along with everybody else. We've heard what everyone has heard which is that recent changes will favor mobile optimized sites. All I would say and it’s a recent change, so it’s too soon to know fully what will happen. But I would say that we've been a leader in mobile commerce for multiple years. We've been working on optimizing our sites, our apps and our mobile properties for years. And a huge percentage of our business now, close to 40%, is mobile. That's $8 billion this quarter. So you would hope that any change that favors mobile optimized properties would ultimately help us.

Great. Thank you.

Thank you. And our next question comes from line of Heath Terry of Goldman Sachs. Your line is now open.

Great. Thanks. Bob or Devin, can you give us a sense of what contra revenue was from our Marketplaces this quarter. And how a level of that now compares with the levels since you started using those promotions more aggressively following the breach in algorithm changes? And then one just quick one from Dan. Dan I know you touched on offline a bit here. But I'm wondering if you could just give us a sense of how important offline is for your vision of PayPal? Sort of where it ranks in the opportunities and how you see the strategy in front of PayPal differing from the one that the company has been pursuing offline for the last couple of years?

So -- hey, Heath how are you? First contra revenue, there is no dramatic change in terms of how we use contra by year-on-year. We have -- as you see we have a two point gap between GMV and revenue and underneath that no dramatic changes in our take right over time. So contra revenue continues to be a source of driving traffic and engagement from our users. But not dramatic change in terms of the magnitude year-on-year.

Maybe I will just add quickly, Health, philosophically we are very rigorous about how we deploy contra revenue and when we do. It is not part to grow any e-commerce if you use your balance sheet. It is hard to create value. And we are very tough on ourselves about when we deploy contra revenue, when we deploy deals, when we spend to acquire customers. It has to be because there is a customer lifetime value that makes sense that will get that second or that third sale that is not subsidized. So contra is a lever it will continue to be a lever. But we are not spending simply to drive growth. We are spending to drive value and acquire in a healthy manner new customers.

Got it.

Thank you. Our next question comes from the line of Douglas Anmuth…

Operator we have the second half of the….

Yeah, sorry, Heath, we weren’t going, we got jumped there.

No problem.

So in terms of your question, I think first of all, if I say we are operating in an incredibly healthy, growing dynamic market in itself. Online is still exploding. It’s -- what is it 10% to 12% of overall commerce right now, growing at double-digit percentages. We've got165 million consumers but they are huge swaths of the market where we are not even present right now. And you can be sure that we are looking at that, because I think there is tremendous opportunity for us to take advantage of this online growth that's going on all over the world right now. At the same time interestingly you see retailers and merchants starting to think about how can they use mobile to dramatically change the way that they interact with their customers. And I call that really sort of digital commerce, how can retailers more personalize the experience per customer when they walk into their store, and mobile can enable that. But it’s difficult to do that. The merchant can certainly write the right application to talk with their customers, to engage with their customers. But underneath that they need a platform to power that. Whether it be to power their loyalty and rewards programs, to power any payment type that comes and we've talked about recently this vision of us becoming much more of a partner or retailers and becoming sort of what we call the operating system for digital commerce, to be able to enable them to move into this digital commerce world. The advent of Paydiant, Braintree and PayPal call coming together is a real head start for us moving into that. And it’s not so much that we want to move into the offline world, it’s that the offline and online worlds are moving that way naturally and they are moving that way through mobile. And that plays right into a strength that we have right now. And I think that's one element and then on the consumer side, consumers are going to look to manage and move their money in different ways than they ever have before. Our transactions per active account are going up. The amount that people are spending with us are going up. We have a nice engaged base. But I believe that we can do so much more on that as we become a part of how consumers manage and move their money. We can move from being much more transactional and much more relational with them and that is our aspiration and vision on that. So I think a lot of opportunities in numerous places here.

Thanks.

Operator, I think we have time for one last question.

Okay. Our next question comes from the line of Douglas Anmuth of JP Morgan. Your line is now open. Again, Douglas Anmuth, your line is now open.

Doug if you are there, you are on mute. So…

If your line is on mute, please unmute.

All right, we will go to the next. We will just go the next. Operator lets go to the question and list it last question.

All right. Our next question comes from the line of Sanjay Sakhrani of KBW. Your line is now open.

Thank you. I guess I have questions for Dan on PayPal. First, just as far as PayPal credit is concerned, has going forward is the expectation that you guys are going to use the capital markets or use your balance sheet to fund those loans? And I guess secondly on the regulatory side, two questions, one is, all the stuff that's happening in Europe, how does that really affect the PayPal business model? And secondly, could you just give us an update on the CFPB CID [ph]? Thanks.

That last question was three questions. Okay. So, on PayPal credit, Sanjay, we're a technology-enabled lender and we do that because it makes sense for the partnership that we're enabling with merchants, it provides them additional value, they get to close more sales as a result of that. If we extend PayPal working capital to them, it obviously enables them to expand their business. When we do that, we see our customer satisfaction scores jump dramatically as a result of that. We see more volume come through those merchants, we see much lower churn with that and so for merchants who avail themselves of that, it's a tremendous benefit and for consumers they get to complete a transaction that they might not have otherwise completed. For us, it takes a cost and converts it into a revenue and so it's a win all the way around for that entire ecosystem. So, we think providing credit makes sense in terms of what we are trying to do from a platform perspective. But just because we do that, as Bob articulated in his remarks, doesn't mean that we need to fund that through our own balance sheet. And so we think that providing the service is the right thing, but having the flexibility to opt whether we want to do that through our balance sheet or not, there are multiple ways that we can look at that. What we just did is one example of funding that loan portfolio with other people's money and that having the return of $700 million of cash to us on our domestic balance sheet, which obviously opens us up to being able to do other things with that. So, that's question number one. Question number two, on the EU stuff, look, there are regulatory changes that…

Thank you. Appreciate it.

Yes.

Great. Thanks very much, everyone. And we'll see you next quarter.

Thank you.