Ladies and gentlemen, thank you for standing by and welcome to the eBay Q3 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Joe Billante, VP of Communications and Investor Relations. Please go ahead sir.

Thank you. Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the third 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'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. Additionally, all revenue and GMV growth rates mentioned in Jamie's 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 October 28, 2020 and we do not intend and undertake no duty to update this information. With that, let me turn it over to Jamie.

Thanks Joe and good afternoon, everyone and thank you for joining us. Today I'll walk you through some of the key highlights from the quarter and update you [technical difficulty] of the company. Then I will turn the call over to Andy to discuss our recent performance and near-term outlook. Before I do that, I'd like to take a moment and reflect on a major milestone eBay passed last month. 25 years ago during Labor Day Weekend, our Founder Pierre launched eBay as a technology experiment. The aspiration was to create an open, fair, and trusted marketplace that empowered people and created [ph] economic opportunities for all. Since our inception, eBay pioneered online shopping, has become an iconic brand that has shaped the modern e-commerce landscape. We are very proud of our accomplishments and today we connect over 183 million buyers to nearly 90 million sellers around the world in a broad and diverse set of categories. We are operating during historic times when our buyers and sellers need us most, while supporting our employees who are working hard to meet the needs of our customers and adjusting [ph] to their own reality. As we look ahead to the next 25 years, our business become the best global marketplace to buy and sell goods through our tech lead re-imagination [technical difficulty]. I will come back to this in a moment, but first let me talk about our most recent achievements. In the third quarter, we delivered strong results. Earlier this month, we updated how we report classified [ph], but to be clear on apples-to-apples basis, we performed better than expectations on both the top and bottom-lines. Gross merchandise volume and marketplace 21%. To put that in perspective, we added over 4 billion in volume in Q3 versus last year, more…

Can you pause for one second? We're getting some feedback on the line, we're working through, a technical issue, can you give us a moment. [technical difficulty]

Hi, in the midst of repeating myself, I'm going to go back a little bit just to make sure, because I understand the line got fuzzy which we apologize about the technical difficulties. So, we also turned our focus to the sneakers category, which attracts passionate enthusiast, particularly GenZ and Millennials. In the U.S., sneaker GMV has significantly improved from a year ago. These buyers and sellers bring tremendous value to our ecosystem. An average sneaker buyer purchases in 10 unique categories each year more than double the amount of other eBay buyers. Leveraging similar technology launched in watches, we expanded the authenticity guarantee to sneakers. We required all collectible sneakers both new and pre-owned above $100 to be verified by a team of independent third-party industry experts. The program kicked off with the authentication of our most popular brands and styles and will scale that all sneakers sales over $100 next year. A year ago we were losing share in this important category. But now we're seeing over 50% GMV growth year-to-date and that was before launching the authenticity guarantee. And just last week, we announced the launch of new elevated experience for certified refurbished product. We see tens of billions of dollars in untapped potential in the global refurbished market. Through our new certified refurbished program, buyers can save up to 50% unlike new branded inventory with all the assurances of buying new including a two-year warranty, eBay money back guarantee, and hassle free 30 day returns. We are launching this program in partnership with globally recognized brands, including De'Longhi, Dirt Devil, Hoover, Nikita, and Fila, that was all certified refurbished inventory exclusively on eBay, not only does this program help with buyers budgets leading into the holiday season, it also helps to eliminate unnecessary waste by keeping…

Thanks Jamie and thank you all for joining today. Before I walk you through the results for the quarter, I'm going to take a few minutes to provide some additional context on the financial reporting impact of moving our Classifieds business to discontinued operations. With that designation, our reported results reflect only the performance of our marketplace business. The Q3 results for Classifieds are reflected in GAAP EPS from discontinued operations. You can find the presentation of historical financial statements, recap to the current presentation in the Form 8-K we published on October 1st. When we last provided guidance in July, Classifieds was included in both our Q3 and full year 2020 guidance assumptions. On slide four, you will see a refreshed look at what our July guidance would have been if we had excluded Classifieds. This will help create an apples-to-apples comparison versus our Q3 results reported today. Let me quickly walk -- let me quickly walk you through the numbers. Adjusting for the Classifieds impact to our July guidance, the implied Q3 guide for marketplaces was between $2.38 billion and $2.45 billion of revenue growing 16% to 19% on an organic FX-neutral basis, and non-GAAP EPS between $0.68 and $0.74 per share, representing 31% to 42% growth. On slide five, we've made a similar adjustment for our full year guide. Adjusting for Classifieds, the implied full year 2020 guide for marketplaces revenue was between $9.59 billion and $9.78 billion, growing 14% to 16% on an organic FX-neutral basis. Operating margin in the range of 30% to 31%, non-GAAP EPS between $3.04 and $3.16 per share, and GAAP EPS between $2.51 and $2.66 per share. And finally, free cash flow adjust to the range of $2.2 billion to $2.35 billion. With that, I will move on to our current…

[Operator Instructions] Your first question comes from the line of Scott Devitt of Stifel. Your line is open.

Hi, and thank you. In Q3, items sold decelerated a bit more than GMV. I was wondering what caused that, whether it's some changes in ASP driven by category mix or was there some other factor at play there? And then secondly, this was partly answered but, in 4Q, I think you fully comp the sales tax collection implementation. It was 600 basis point headwind in 4Q '19. You did just a 22% in Q3. And I think that also had a 3% headwind in it. It does seem like we're going to have limited mobility again this quarter certainly in the U.S. and there were some announcements today in certain countries in Europe. In 4Q, you guided to low-double-digit GMV growth, I'm just wondering is there anything that you're seeing in the business that is leading to that or is that just more as you discussed a bit on the call staying consistent with this conservative approach of guidance given the uncertain business conditions, it seems to have been the case on the 1Q and 2Q guide as well. Thank you.

I'll start with the question on guide and Scott, to your point, there is new information coming out on a daily basis, which makes this tough. I think the way that we've looked at it, clearly, there is multiple factors moving that can influence our volume outlook for the quarter. It's really hard to predict how any of them will play out and certainly to try to itemize which pieces we've included for which amount. We can't do at this point. What we have tried to do with our guide is compile what we've learned through the third quarter and what we've seen. And it implies a continued growth moderation in the fourth quarter following what we saw in the third, and what we're seeing the beginning of the fourth with regards to consumer behavior and mobility. What we provided, I wouldn't call it conservative, I think it's our best outlook based on the combination of these factors, and certainly any one of those could change and could impact our results. On the -- I think you called it right on the sold items, there's GMV and category mix and similar to what you see on buyers and what you see on GMV there's just a magnitude of things changing on a quarter-over-quarter basis given the breadth of categories that we have in the different price tranches. I think you called it, right.

Thank you.

Your next question comes from the line of Richard Kramer of Arete Research. Your line is open.

Thank you very much. Jamie, I've got two questions. The first is, I'd like to get some more detail on your tech-led re-imagination, especially given that you've seen declining R&D and relatively low capex. So, specifically, can you talk a little bit about how eBay might be developing infrastructure for social commerce, be it with more modern messaging, video or some material revamp of what's been a very consistent user experience and look and feel. And then maybe second question, since you mentioned, eBay is being a global marketplace when we last got the geographical detail, you had roughly 80% of your business in four countries and a very wide range of markets, covering the other fifth. So, what's your approach going to be to reaching scale and other countries? And how important is that global footprint to you and what sort of investment requirements do you see in 2021 and beyond to make eBay go beyond 80% coming just from those four markets? Thanks.

Yes, so on the first one on the tech-led re-imagination, it's why you see us making the investments that we're making is that, we believe that there is some big horizontal things that really move the business like payments and advertising. We're obviously putting a lot of technology focus. And then you saw this quarter, some specific vertical experiences of focus for us in both watches and sneakers and also in certified refurbish. And so we actually think this is the start of really leveraging our technology, we are horizontal plus vertical focus brings together just a much different experience on eBay. You think about the level of trust that we just put in place in those three categories. So, it's really game-changing versus where we were before. You asked specifically about marketing, there is a lot of things that we're dealing specifically in, paid social and using new channels that we haven't used before. That's a key part of it for us. If you think about the sneaker category, as an example, we're bringing on a lot of GenZ and Millennials. So, we're going out, reaching them where they are. Because when we enquire them in the sneaker category as we said, they end up buying in 10 unique categories across the site. The second thing I'd say on our footprint is, look, we've got some very strong growth in some of our smaller markets. There is a lot of advantage to the scale of our cross-border trade business where we're bringing products from very different countries to our smaller countries or exporting out of our smaller countries and obviously play a role in that. So, we continue to believe that those are important good growth opportunities, not only for the domestic business, but also for the cross-border trade that they bring.

Okay, thanks.

Your next question comes from the line of Colin Sebastian of Baird. Your line is open.

Great, thanks. Good quarter. I guess given some of the concerns around carrier capacity during the holiday period, I'm wondering it's a long tail of sellers, if they are more impacted by that or are your contracts with the shippers largely protecting them from those bottlenecks. And then looking at active buyer growth, what's the potential to accelerate that growth over the near-term certainly, given the secular shift we're seeing? Or are you more focused in terms of the marketing efforts on driving engagement with the existing buyers in the recent cohort ads? Thank you.

Yes, so on carrier capacity, part of why we did the UPS deal this year was to open up more flexibility and more options for our sellers. So not only are they going to save a bunch on the rate that they're going to have on there, but the integration is going to make it really easy for sellers and provide all that tracking for buyers. So, now you have multiple options even as a small consumer seller between USPS UPS and FedEx, one of the things we have worked on is deals that actually protect them from peak shipping charges or surcharges over the holiday. So, we think the combination of that flexibility of choices, plus the negotiating on behalf of our community, we'll work out well for them on the shipping side. On the active buyer growth as we talked about, our real third priority is turning buyers into lifelong enthusiasts. So really focusing on how do we, when we bring in a new buyer expand them into multiple categories, because we know that drives their LTV, so I use the sneakers example earlier coming in via sneakers and they are buying in 10 categories. It's also a big vision for our push-to-consumer selling. This quarter, I actually see the fee GMV growth grew faster than our B2C growth. And that push is really because once we get to a buyer to sell, they become more than twice as valuable as a buyer, so that's really our focus is on accelerating those things and driving that long-term potential of the people that we're bringing to the site.

Okay. Thanks.

Your next question comes from the line of Tom Champion of Piper Sandler. Your line is open.

Hi, good afternoon. On GMV trends, it looks like the growth between the US and international is really starting to diverge with international decelerating more. I'm just curious, what do you think might account for that or whether it's all explained by mobility. And then on managed pay, it sounds like you added about 300,000 sellers into the program this quarter and add 5% of revenue. That seems like it's about $130 million in revenue. Is this approximately the right magnitude? Thank you.

Yes, I'll take the -- on the third quarter volume, U.S. international, look; there are differences we see globally. We indicated on our -- on the call in July that we were seeing continued strength through the month of July in the U.S. Post-July, we did see some increased moderation in August and September. And we think at least in part driven by the expiration of the US stimulus. So that, in part, I think is a little bit of strength you're seeing in the U.S. In addition to, if you look at mobility and the progress of COVID, internationally there was a little more mobility sooner, in particularly in Germany and the U.K. than we had in the U.S. So, I don't think there is a drastic business shift between any of those regions other than some of the dynamics associated with the reopening. I think another important, you have just generally on volume. We have there's a few things we do see that consumer behavior patterns are definitely impacted by mobility that is different depending on location and country and sometimes state. And I think the other, the other key thing is that the customer and consumer behavior patterns aren't the same, so as mobility and lockdown happened in April and May, we had more time and less scarcity, some of that behavior is not as drastic as you -- as we saw early on in the pandemic. And then on the second part of the question, was managed payments. Yeah, your logic is about right on that.

Great. Thanks a lot.

Your next question comes from the line of Stephen Ju of Credit Suisse. Your line is open.

All right. Thank you. So, Jamie for some of these categories that you're leaning into like watches and sneakers, it seems like there is a greater requirement to work with external parties through you to authenticate refurbished thing. So, to some degree you are putting the eBay brand at risk here with your buyers. So what are you, what incremental things are you doing to, that the seller, so that you minimize bad behavior? And second on the C2C activity ramp, it seems like consumers are not always going to be savvy, some of the more professional sellers about probably planning the correct prescriptions for what they're selling, and you also want to get merchandise and all kinds of different conditions which seems like a pretty complicated structured data problem for your engineers to solve. So, can you talk about what you're doing to make sure that stuff people are putting up for sale or correctly serve first in search results? Thanks.

Yes, so on the first one -- thank you for the question. We work with really industry leading experts to do the authentication specific for that category and a very intense multipoint inspection to make sure, the product is truly authentic. And so it really kind of not only you have to trust it kind of seller piece in there, but every single product, every single sneakers over $100 by the start of next year, will actually go through a third party authenticator. And so really takes the risk away of a potential issue by the time it gets to the buyer, even sometimes there could be a mistake, it was missing a piece of documentation. So, the beauty is, we're catching all of those things. The same thing in the returns. On making sure, and the seller is getting back the product that they actually ship the buyer, because the authentication works in both directions. So, look, it's a really high level of trust, when you look at the community feedback that we've got, and both from sellers and buyers, they're incredibly enthusiastic. They know it will bring a lot of new buyers to the platform, and for sellers, that's what they want. Like we said on the call, the business was growing 50% in sneakers even before we launched this authentication guarantees. So, we're excited by it. On the C2C ramp, it's a huge focus for us, it's using artificial intelligence and technologies to make it easier for the casual lister to come on and list. So, a lot of our listers will use things like sell similar, whether sell a similar product or they sell based on a specific catalog description. And what you'll see from us over the coming quarters is continuing to make that process easier to bring more to C2C sellers on. It's our, number 1 priority is defending the core and a huge part of that is consumer-selling. I should say that they also bring a unique inventory to the platform. There is a lot of things that are not being sold by a business seller. My -- one of my friends was looking for a guitar, [Indiscernible] hero and that's always, no one selling that B2C anymore, you're only going to get that from a C2C seller. So, we'd like to think about the unique inventory that it brings to the platform is also really important to us.

Thank you.

Your next question comes from the line of Youssef Squali, Truist Securities. Your line is open.

Great. Thank you very much. A couple of questions here. So, just on the authenticity guarantee that you've done for sneakers and watches so far, can you maybe just speak to, and I think you also canceled some seller fees on sneakers of $100 or more. Can you maybe just speak to and maybe it's too early, but just any uplift you've seen in and sales for these two particular areas and whether there are any other big categories which kind of lend themselves to the same thing. And on managed payment, how was that, I think you guys talked about it tracking to your own expectations. But just considering the fact that it seems that you guys have a fair amount of control over that. Is there a chance of seeing you migrate maybe the majority of all sellers globally earlier than expected. And if not, what are the, gating factors there. Thank you.

Yes, so the change in selling fees on sneakers we had done a while ago, and what I would say is that, it's very early and that we just launched that a few weeks ago. But the encouraging signs or what the feedback that we're getting from the community really leaning in and being excited by what it can do to unlock the categories. Watches has been live a little bit longer. And while early, what we're seeing is an increase in supply on the platform and an increase in average selling price. And if you think about it. That's really what we want to see is that higher level of trust is making buyers really more comfortable which obviously works out for sellers as well. You know what I'm really proud of, for the team is that when we talk about a tech-led re-imagination. Well, it took us a couple of months to launch that technology for watches. We actually rolled it out a few weeks later for sneakers. And so we're building capabilities that allow us to compete better in specific vertical, but a lot of those capabilities can be leveraged across multiple categories and that excites us. On the managed payments migration. It's important to know that there is still features that we continue to build out to be able to migrate more of a seller. So, we're right on track. But as an example, if I'm a seller that ships cross border to a country that we haven't launched managed payments and we're not going to convert that seller over to the new managed payments platform until we are marked by country, because we don't want them split between the old platform and the new platform. So, there is still capabilities that we are continuing to build out to ramp, and we basically are on track with our plan to be complete by the end of 2021.

Thanks Jamie.

Your next question comes from the line of Edward Yruma of KeyBanc Capital Markets. Your line is open.

Hey, good afternoon and thanks for taking the question. I guess just to drill down on some of these new categories little bit more, I know you're using third-party authentication, but can you kind of help us understand the cost profile around that, whether they have the ability to scale, as the business grows. And then I guess, just stepping back, the three big announcement that refurbish watches and sneakers. I guess what are the three, do you think would be most significant or impactful in the medium term? Thank you.

Yes. So, when we look at the authentication costs, we look at it, in some ways it's like a marketing costs. When we think about how do we bring new buyers into the platform. So, if you look at what we, what we would have collected and final value fees for example on that product versus our cost of acquisition of bringing in a new buyer for, it's going to end up buying in 10 unique categories across the site. We're balancing that all out, and we think it's -- we think it's important, we think there is a lot of potential and we think it's a, it's a big difference for eBay to have that level of trust in the category. We haven't talked much about certified refurbish on the call yet. But I'm really excited by that. I mean sneakers clearly has a lot of potential as those watches, but there is tens of billions of dollars in certified refurbish. It's a real sweet spot for eBay. And this brings a whole new level of trust of feeling like you're buying unlike new product because you have the, not only all those guarantees, but you have a two-year warranty, you have a 30 day hassle free return along with the eBay money back guarantee. So, we just think it's an important category. We're also seeing brands lean in like we talked about on the call and big brands and we're just getting started. So we think there is a lot of runway and a huge market opportunity for us to go after that.

Thank you.

Your next question comes from the line of Robert Drbul of Guggenheim Securities. Your line is open.

Hey, good evening. I just got a couple of questions, mainly on M&A, in terms of like you have some -- the cash on the balance sheet, you talked a little bit about that, but I was just wondering, as you sort of look at, especially the sneaker category, would you consider acquisitions around that category to really accelerate your positioning and improve it? Maybe if you could just elaborate a little bit on that type of charge that would be helpful. Thanks.

Yes, we're not going to -- we're not going to speculate on kind of specific categories and M&A, what I'd say is we're looking opportunistically at M&A, like we always have at opportunities where we think we could accelerate the vision that we laid out on the prior earnings calls and always doing things at an asset light way and like we tend to do here at eBay, in a way that we think enhances shareholder value. So we're going to continue to be opportunistic about it.

Great. And if I could just follow up on a different topic, but in terms of the ability to sort of grow the buyers and sellers, can you just talk a little more about like the fourth quarter marketing plans and advertising in terms of the focus on continuing to bring new buyers and sellers in -- and the level of the rate at which you're thinking about that.

Yes, we're using some new tools and technology over the holiday, really going after some new channels like paid social like I talked about before. In addition to the other kind of brand and performance work that we normally do in the holidays. But really we're also you're also going to see more targeted marketing from us and you're seeing it already, where we're focusing on specific campaigns, like we had a viral campaign on tick-tock for sneakers that went incredibly viral and you'll see other specific, early vertical marketing that we're doing to attract the right types of buyers in these categories that were leaning in on. So lots of things that we've experimented with that we're learning from that, that we're rolling out in the quarter.

Great, thank you very much.

Your next question comes from the line of Brian Nowak of Morgan Stanley. Your line is open.

Great, thanks for taking my questions. I've two -- just the first one, I think in the second quarter you added a -- I think it's about $8 million net buyers sequentially. I know a lot of focus is on turning them into broader shoppers and sellers. Can you talk to us about what you saw in the retention of those buyers that you added in the second quarter? Are you seeing that expansion into new categories of them already? And then, Jamie, just now that you had a few more months in the seat, maybe just talk to us about how you are categorizing low hanging -- low hanging fruit areas of improvement that could really change the business trajectory in 2021 as opposed to sort of your longer term areas of focus.

Sure. So, let me start with the latter, and then we'll come back on the buyer one. So if you look at the types of things that we rolled out this quarter, it's indicative of where our focus areas are. So, when you think about defend the core, it's really around how do we go after the non-new season and help grow that business? We see a big kind of $500 billion TAM there. And like I talked about last quarter, this is -- these are not big bang releases you I think what our payments business as a two-year build for release. Here, I think what we're working on is a lot of releases throughout the year of different capabilities and hopefully continue like I talked about before of launching something and then being able to roll it out to other categories other countries, et cetera. On a pretty frequent basis. And that's how we're thinking about it is a multi-year journey with a lot of wins along the way. Andy, you want to take the buyer one?

Yes, Brian, look what we saw in the second quarter, clearly a significant disruption in a lot of areas and scarcity in certain areas in the supply chain and distribution that drove a lot of people shopping online and we did see some incremental activity from that, from the cohort acquired at the end of the first and in the beginning of the second. What we've seen in the third is it's reverting to a more normalized buyer acquisition trend and more normalized repurchase frequency for those cohorts. So, not performing above all cohorts and certainly not performing any worse than buyers in the past, what we have seen consistent across both quarters is just the volume of GMV and the amount of GMV per buyer, both for existing buyers and new buyers at higher levels than we've seen in the past.

Got it. Okay. Thank you, both.

Ladies and gentlemen, there are no -- there is no more time for questions. This concludes today's conference. Thank you for attending. You may now disconnect.