Good day, and thank you for standing by. Welcome to the eBay Q4 2021 Earnings Call. [Operator Instructions]. I would now like to hand the conference over your presenter, Vice President, Investor Relations, Joe Billante. Sir, please go ahead.

Good afternoon. Thank you for joining us, and welcome to eBay's earnings release conference call for the fourth quarter of 2021. Joining me today on the call are Jamie Iannone, our Chief Executive Officer; and Steve Priest, our Chief Financial Officer. We're providing a slide presentation to accompany Steve'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 and Steve'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 in our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of February 23, 2022, 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. Today, I'll begin by sharing highlights since our last earnings call. Then I will focus on the near-term progress we are making towards our strategic vision. And finally, provide a short preview of our Investor Day in 2 weeks. At the end of my remarks, I will turn the call over to Steve, who will discuss our financial performance and outlook in greater detail. The fourth quarter marked another solid quarter for sellers and buyers on eBay. They benefited from investments in our strategy to drive sustainable growth in our marketplace. We are simplifying the seller and buyer experience, increasing customer satisfaction and improving our underlying growth trajectory. Let me highlight a few achievements from the quarter. We are seeing faster GMV growth in focus categories that now represent approximately 20% of global volume. We successfully completed our multiyear payments transition on time with more customer benefits and with greater financial impact than expected. Our advertising business grew faster than marketplace volume as more sellers adopted new ad products. We delivered revenue growth at the high end of our expectations and earnings growth above guidance. And finally, we continue to execute our ESG agenda. In addition to being carbon-neutral, we made progress on our long-term sustainability targets, and eBay for Charity finished a record-breaking year. I'm very pleased with our Q4 financial results. We delivered 5% revenue growth on the back of payments migration and Promoted Listings growth. We also delivered $1.05 of non-GAAP EPS, more than the high end of expectations. For the full year, revenue was up 15%, and non-GAAP EPS was up 21%. As proud as I am of our team for delivering these results, I am more excited about eBay's future based on the response…

Thank you, Jamie, and thank you all for joining us today. I'll begin with the financial highlights from the quarter and full year on Slide 4 of our investor presentation. Next, I'll walk through key operating and financial metrics in greater detail. Finally, I'll provide our forward outlook and closing thoughts before we begin Q&A. Please note, my comments will reflect year-over-year comparisons at constant currency, unless I note otherwise. Overall, we are pleased with our Q4 results as we met or exceeded expectations across all of our key financial metrics, capping off an exceptional 2021 for eBay. I've been inspired by our team's relentless focus and execution amid uncertain economic and operating conditions throughout the year. Importantly, our performance in 2021 demonstrated the progress we have made towards a return to durable, sustainable growth in the years ahead. Revenue grew 5% to $2.6 billion in Q4, over 15 points faster than volume growth. For 2021, revenue grew 15% to $10.4 billion, up 18 points faster than volume growth. Our non-GAAP operating margin was 31.6% for the quarter. For the full year, we generated approximately $3.5 billion of operating profit at 33.4% margin. Non-GAAP earnings per share grew 24% to $1.05 in Q4. For the full year, EPS grew 21% to $4.02. We generated $2.6 billion of free cash flow in 2021 and returned $7.5 billion to shareholders through repurchases and dividends. Let's take a deeper look into our key operating and financial metrics. As a reminder, we adjusted our definition of GMV in December following the completion of our payments migration. The change had a modest impact on our historical GMV and active buyer figures, but the impact of the change on year-over-year growth for each metric in Q4 was immaterial. Starting with active buyers. We ended 2021 with…

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

I have two. The first, U.S. and international GMV growth rates have been diverging recently, favoring the U.S. for a variety of reasons. And so as we get through to the second half of '22, in which overall GMV improves to flat to modest -- modestly positive and you begin lapping the -- of stimulus and mobility dynamics, supply chain cross-border and differences in the reopening time in various countries, should we assume that U.S. versus international growth dynamics converge, even maybe favoring international due to cross-border? And are there any specific countries you point out in one direction or the other relative the overall growth rate of the business when we get back to that kind of normal period of time again? And then secondly, I know you just divested a number of businesses, but valuations of companies that could be bolted on to the platform has changed considerably just in the past few months. And I'm curious if the environment change has made you more open to considering acquisitions within the marketplace category.

Yes. So Scott, this is Jamie. So on the U.S. versus international, as we talked about last quarter, there's a couple of dynamics that are impacting the differences in the growth rate. First, on the macro side, just different markets, GDP growth, inflation growth, retail growth are different and lower in Europe than what we're seeing in the U.S. We've talked about the supply chain challenges, which have a bigger impact on our international business than on our U.S. business. So in some cases in the U.S., we're favored by it in things like video graphics cards, which are in high demand. At the same time, we have a strong cross-border trade business, and some of our sellers are impacted by some of the supply chain dynamics and export challenges. And that hits our international segment more than our U.S. segment. The third component is really the focus categories are much more nascent in our international business than in the U.S. So think a category like watches, which has been live for several quarters in the U.S., we just rolled that out to U.K. and Germany this quarter, ditto with some of our other products and focus categories where they're still rolling it off to our international markets. And as we've seen, it takes a few quarters for us to achieve the growth rate levels that we saw in the U.S. But we believe that, that playbook will apply and that will help the convergence that you talked about. The last thing is really just the collectible difference between the 2 markets. Trading cards and that whole segment is stronger in the U.S. than it is in international. So it's a long way to say that there's a number of factors that are at play there. But yes, we believe, over time, as the categories roll out, that will drive the convergence as well as some of the macro effects like the supply chain and other pieces change over time. On your second question on M&A, yes, we continue to look at M&A as an opportunity to accelerate our tech-led reimagination. We've said we will be opportunistic to look at areas that are asset-light and consistent with our business to drive the strategy that we've laid out. The example I would point to is, most recently, Sneaker Con and that investment with authentication properties and services in 5 different countries enabling us to accelerate even faster what's happening on sneakers, where we've seen really great success. In fact, we think the playbook has worked well enough now that we're actually remonetizing sneakers this quarter for sneakers over $100. So it gives us scale, and it gives us flexibility, and that was the point of the acquisition.

And your next question comes from the line of Ross Sandler from Barclays.

Just following up from Scott's question. I think looking at the exit run rate for '22, some investors we talked to, I think, were hoping to see a little bit more than 2% to 3% GMV growth with all the focus category activity and initiatives that you're working on. So I guess why aren't we seeing higher growth once we kind of hit the easier comp period? Are we still cleaning up some of the lower-quality buyers? Anything that you would call out in terms of why that growth rate isn't quite up to the e-commerce averages at the end of '22? And then, Steve, you mentioned new opportunities in managed payments now that we're 100% covered. Just can you elaborate a little bit on what you guys are going to potentially roll out in payments, that would be great.

Ross, Steve here. Thank you for the questions. I think the thing I would say is that we've made a very significant progress in our growth at eBay over the last couple of years. As you recall, prior to the pandemic, as we left 2019, the overall 2019, the business was shrinking, minus 2. We actually exited 2019 at minus 4. And as we've gone through the pandemic, we've made the right investments, we've really driven the tech-led reimagination and really driven our focus category playbook, which is working very, very effectively. As you sort of cycle through the pandemic, as we've said, the second half of the year -- the first half, we obviously are lapping very significant mobility challenges associated with the pandemic last year. As we come through the first half and get into the second half, it is obviously the cleanest comps that we've got from the pandemic. But we've always said over the last couple of years, the tech-led reimagination is a multiyear process. I'm delighted with the progress that we've made. The momentum is working. We're going category by category. And as we said, we're exiting the year in the -- well, our expectations to exit the year at sort of 2% to 3% growth. The thing with the focus categories, I'd also like to add, is that those areas that we've lent into are growing at about 15 points higher than the rest of the platform. And so again, it's very, very clear that strategy is working, and it will continue to take some time. The second thing I would talk about is obviously on managed payments. Magnificent work by the team. Very proud of what was achieved in 2021. I would describe it as being the end of the beginning. We completed the transition, enabled us to drive a seamless experience for our customers, both from a commerce standpoint and a payments standpoint, gives us the opportunity to eliminate things like UPIs or unpaid items, which is continuing to take friction away from the platform and increase trust. But again, we have opportunities as we go forward. I'm really excited that we have the opportunity to have Julie Loeger, who is leading our payments platform and the initiatives going forward, who will be joining us at our investor event on the 10th of March, who will be sharing with us our longer-term strategy, and I'm looking forward to you dialing in and seeing us on the 10th of March.

Moving on, your next question comes from the line of Stephen Ju from Credit Suisse.

So Jamie, your seller base has always been SMBs and individuals. And it seems like the ad products that seem to be fairly popular with smaller advertisers are those that are doing a lot of that automating of spend for them. So some sellers may be pretty savvy, and they might want to do -- manage the campaigns on their own, but I would imagine more folks would probably rather have eBay do the spending for them. So can you talk about where you may be in terms of simplifying PLAs for your sellers to expand the adoption rate? And expanding on that do-it-for-me theme, can you talk about where you may be in terms of the adoption rate for your external Promoted Listings product?

Yes. So thanks for the question. So we agree with you. So we think the benefit of having multiple advertising products is to appeal to not only multiple types of sellers but multiple types of advertising occasions. So we built our first $1 billion business over the last 5 years on a single product, which is a CPA-based product. And we've introduced 3 new products: Express, which is a fixed price, easy-to-understand product; external, which is really just an opt-in product for our external promoter listings, so that one is pretty straightforward: and then Advanced, which is actually a quite sophisticated product for SMBs, ones that are more used to keyword bidding, campaigns, daily budget levels, CPC amounts, et cetera. And so what I would say is that we're happy because the CPA-based product, our product that's out there for 5 years, is actually a pretty easy product and a low-risk product, meaning, I only pay when I sell the product from that perspective. But we're also excited that the new products actually round out the portfolio of opportunities to drive advertisement. The Advanced ones like CPC are still in a nascent stage. So we're still in a limited beta with those products. And it's really -- it'll take time just like it did for multi-years with the CPA to build the optimization, to drive trial, to drive adoption, et cetera. But exactly what you said is why we have the portfolio of products. And yes, we continue to look at ways to leverage artificial intelligence and other things to make not only the products easier for sellers to adopt, but also make them more effective in terms of the ROAS or the return on ad spend that we're seeing. Thus far, we've been really pleased with the ROAS that sellers are getting and shows us that there's continued opportunity in our advertising portfolio.

Your next question comes from the line of John Blackledge from Cowen.

Two questions. First, on the focus categories based on the current GMV guide. Do you expect the focus categories to sustain that growth differential -- the 15% differential versus non-focus categories in fiscal '22? And then second question on margin/investments. The 1Q '22 op margin is a bit higher than the '22 op margin guide, and you cited some investments. Could you discuss the investment spend that's kind of being phased in throughout '22?

Yes. So I'll start with the first one, and then, Steve, you can take the margin question. So on the focus category, yes, over time, we will be adding additional focus categories. Our next one is parts and accessories. And that category is a very large category on eBay, one where we come in from a position of strength. Especially in the U.K. and Germany, we have a market-leading position. There are some differences. Trading cards had a very strong year in '21. And so thus far, the category is performing well. But overall, I would say, yes, we think that the focus categories will continue to maintain a significant margin to the rest of the business. And frankly, it's why we're excited and why we're investing, to your second question. If I just back up and take sneakers. Sneakers have been declining for 3 years, John, at double digits. We invested in the category. We've built critical specific marketing campaigns. We built an A+ experience that had over 90 customer satisfaction. And what you saw there is that the business really took off. We grew triple digits a year ago, still doing double digits in that business. And in fact, the category is still healthy now that we're actually remonetizing it. So we just reintroduced monetization over $100 for sneakers. And that's part of the investment that we're looking to do in '22 is to continue to roll out this winning formula that we have in the playbook to additional categories.

John, Steve here. So let me just give you a little bit of color on the overall margin position as we've guided the full year margin for 2022 of 30% to 31%. There's a number of items at play here. Number one, we've got volume deleverage that's happening in the overall business as we cycle through the lapping of the pandemic, which is much more significant in the first half, as you can imagine. Secondly, as we sort of lap the payments transition that we went through, that's also a dilutionary effect. On the flip side, we have been doing a lot of work on our operational efficiency and going deep on our cost structure to identify opportunities to take cost out of the business to enable us to go forward with reinvestment. And then finally, we have been, as Jamie said, really delighted with the trajectory that we've had with regard to our focus categories. Think about sneakers, think about watches, think about the 15% -- 15-point increase over the core platform. And that's been a result of investments that we have made to really change the tide and turn the tide on the focus category we've had. So we're going to be leaning in to product. We're going to be leaning into full funnel marketing as we go category by category in '22. So it continues to be an investment year as we go forward. Q2 will be the lowest point of the margin for the year when, firstly, we do continue to lap through that significant COVID lapping from last year, but also the phasing of the investments as they start to ramp in the second quarter and ramp through the rest of the year as we go forward. So hopefully, that gives you a little bit of a shape of the macro picture, but also the shape of margin trajectory as we go through 2022.

Your next question comes from the line of Eric Sheridan from Goldman Sachs.

Maybe a multi-parter on buyers that sort of dovetails with some of the questions you've gotten so far. If we were to compartmentalize buyer growth going forward, how should we be thinking about the headwinds you're facing in sort of a post-pandemic environment, elements where you yourself are not choosing buyer growth and where there could be tailwinds to buyer growth from some of the new verticalized experiences you're trying to build out for the platform over the medium to long term? So sort of -- I don't know if there's a way to sort of characterize it that way, but if we were to think about those 3 buckets and elements of headwinds and tailwinds and how it feeds back in to thinking about buyer growth going forward.

Yes. So look, on high-value buyers, we've talked about the shift in strategy where back in 2019, we were focused on the total number of active buyers. And I've refocused the organization since last July on this idea of turning buyers into enthusiasts and really focusing on our high-value buyers. High-value buyers, if you look at it, are really made up of 2 groups, buyers who sell and then high-value buyers, buyers who buy over $800 and shop 6 times a year. When we look at high-value buyers in total this quarter, they're up 3% year on 2 year, whereas our low-value buyers are down 9% year on 2 year. So this is a very conscious strategy to not do low ASP couponing and some of the stuff that we were doing. To your question, both of -- these metrics for buyers are trailing 12-metric -- 12-month metric. So what we're seeing is a slight deceleration from the infrequent sellers, and that's something that we had planned to see and will likely see for coming quarters in some time period. But the second group, the enthusiast buyers, is growing. And in fact, their spend is growing more each quarter so that it grew again this quarter. We call those our enthusiast buyers. I've met a lot of these enthusiast buyers, right? They wake up. They grab a cup of coffee, and they open up the eBay app. They shop eBay across multiple categories. And when you look at their spend, it's a very healthy spend level, right, $2,000-plus. So what we're going to be focused on is things like driving the cross-category shopping nature of those buyers. And so take watches, for example, when we acquire a watch buyer, we'll get them to spend $9,000 in watches, but they'll go on to spend $7,000 in other categories. So we get this multiplier effect on eBay from being able to acquire somebody into a category and having them spend across the vast breadth that we offer. So you'll see different patterns over time. We'll continue to see some deceleration from these infrequent sellers. And quarter-to-quarter, we may see some changes in high-value buyers. But overall, when we look at the trajectory of what we're doing is we're making the business a whole lot healthier by focusing on this group, getting to go cross-category and, frankly, acquiring enthusiasts right into our focus categories. That's the strategy that we'll have, and we'll go into more detail on Investor Day on March 10 on that.

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

Maybe two for me as well. A follow-up, Jamie, on the comments around sustainable growth and focus categories. Is P&A the only incremental vertical category change embedded in the guidance for the first half? And beyond easier comps then, does the second half growth outlook include other category enhancements you haven't really talked about yet? And then maybe, Steve, secondly, there were some changes to seller pricing announced recently. I wonder if you could perhaps unpack the size of that impact from those changes in the take rate and how that flows through the year in terms of the guidance.

Yes. So as you've seen, Colin, I don't like to talk about where we're going next for competitive reasons and kind of giving away what is our next focus area. So the other one that we've announced is going after parts and accessories next as a large category dominant market leader position and a great opportunity for us. We talked about investment. You're starting to see full funnel marketing from what we're doing in parts and accessories from a leading position as well as a number of product changes like opening up our global category structure to make it easier to do cross-border trade business, putting all of our parts into the vehicles apps, et cetera. And so we'll go into a lot more depth on Investor Day at what we're seeing in the focus categories that we worked on and our path forward, but that's all that we've announced up until this point.

Colin, thanks for the question. I'll talk about take rate. So just as a reminder, our take rate is ballparked around 12%, but 8 to that final value feed, 3 on payments, 1 on ads. There is a little bit of -- there's a number of items that we're going through as we go through the trajectory of 2022. The first thing is that we're obviously starting to lap payments. And so some of that trajectory that we saw grow significantly as we went through 2021 will plateau off. We're obviously continuing to see some of the ads momentum that Jamie sort of alluded to earlier. And then there's obviously puts and takes in terms of category mix and category pricing as we go forward. In the prepared comments, we talked about an incremental 1 point of take rate as we go through 2022, and that's primarily going to be a result of the payments rollout for the full year effect as we go forward. The other thing I would say is that we continue to drive great value for our sellers. If you think about prior to payments rollout, we actually brought the combined take rate down as a result of going through managed payments. So we still create and offer extremely good value for our sellers as we go forward and eBay being the platform of choice for those great sellers as we go forward.

Yes. A good example of that is in sneakers, right? So I talked about us remonetizing sneakers for sneakers over $100. We're still a great value for buyers and sellers versus other places that they can sell and buy sneakers. So we feel great about that. And that's the feedback that we've gotten from the community. We'll continue to make other smart changes like we did in parts and accessories, in watches and in certain categories constantly with this viewpoint of how do we provide the right value for our sellers on the platform to make sure we're bringing the best inventory on.

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

Two quick ones for me. I guess, first, to the extent you could talk about it, with some of these changes in the pricing structures as a follow-up to the last question, do you see any adverse impact in terms of the number of sellers or the performance level when you reprice some of these categories tactically? And then as a follow-up to that, as you look across the rest of the portfolio, do you think that there are other opportunities for you to take price given the strong momentum the platform has?

Yes. So in general, we obviously studied the elasticity quite a bit. And what I was saying about sneakers is true, which is we're maintaining a double-digit growth in that category. And relative to other places that they can sell their sneakers, we're still very economical and the best value for doing so. So we always look at the elasticity, what's our opportunity to bring more demand. In certain cases, we do, for example, C2C promotions to bring sellers onto the platform in our various markets. But we're kind of rebalanced obviously being a great value for our sellers and our, ultimately, monetization. I'd probably point you back, Ed, to what Steve said about advertising, which is the main vector for us in terms of driving monetization across the board and increasing the take rate. Other than that, we're really just looking at category by category and making sure that we're competitive.

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

Jamie, I'm wondering if you could talk a little bit about the impact on buyer activity from video content and video added to listings. And then, Steve, maybe just a quick one for you. Not to beat a dead horse on managed payments and the take rate, but notice the transaction take rate remained flat quarter-over-quarter. 3Q to 4Q, all else equal, I would think that would go up a little bit. Is that kind of evidence of offering a discount or lower core transaction take rate in some categories or a function of mix? Just curious if you could discuss that result a little bit.

Yes, Tom. So on the videos, what I would say it's very, very early days. So we just rolled out the feature. Excited about it from 2 elements, though. One is excited for our eBay store sellers that they can now build a video to tell their story. One of the unique parts of eBay is it's not just a transactional model. So if you look at some of these models, your brand doesn't meet a whole lot. At eBay, we let the seller really build the brand and have access to 160 million buyers. And so that, I think, will be really powerful as more and more sellers adopt it. The same thing is true for our listings and bringing video across the platform. One is it just makes the engagement of the platform much more compelling. I think about an oboe I recently bought them a platform of 2 quarters ago from my daughter. It was great, lots of pictures and lots of description, but god, a video and being able to hear it would have been even more compelling. You could think about that in a lot of categories. So it's really early days. We're just adopting it for our API-based sellers and moving into our core listing flows. But we think over the coming quarters and years, it'll be an exciting new element for us on eBay.

Tom, with regards to the payments take rate, great question. What I'd say is we were essentially complete as we entered the fourth quarter of last year with regards to the payments migration, as we talked about. Fantastic work by the team. And so on the basis of that and the fact that, as you put it, you got a bit of seasonality in there and category mix. So nothing to see there. It's just a function of those two items.

Your next question is from Brian Fitzgerald from Wells Fargo.

A little bit about growth in preowned, particularly among young buyers and the sustainability push across the company. Just wondering if you could talk a little bit more about the sustainability vision, how that aligns with your younger buyer cohorts, anything you could tell us about kind of brand awareness and association with that sustainability focus among younger users, growth in those younger cohorts.

Yes. Great. So even really pioneered e-commerce, and I think the strategy we laid out last July of leaning into e-commerce, is leaning into right where the next generation is going. And I'm really happy because not only leading into where Gen Z is, but we're keeping products in circulation, keeping them out of the landfill. We did a survey recently, and 87% of respondents said they had sold preowned goods in the last 12 months. And it's really important to Gen Z because it plays a huge role in their experience. 81% of Gen Z said that buying preowned items has become more common for them in the last year. So we feel great from a business perspective, but also from an ESG perspective. If you think about what e-commerce does, we just made the Dow Jones Sustainability World in North America indices for the third year in a row. I talked about some of the other recognition that we had as an organization. We've saved hundreds of millions of dollars in terms of emissions, just in apparel and preloved electronics. So from an ESG standpoint, we think ESG is so core to what eBay does, that we should be in every ESG fund. So both from a business and an ESG standpoint, we think we're leaning into a great vector of growth.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.