Good afternoon. My name is Emma, and I will be your conference operator today. I would like to welcome everyone to the eBay First Quarter 2023 Earnings Conference Call. All lines have been muted to avoid background noise. After the speaker's remarks, there will be a question-and-answer session. John Egbert, Senior Director of Investor Relations, you may begin your conference.

Good afternoon. Thank you for joining us for eBay's first quarter 2023 earnings conference call. 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 our commentary during the call, which is available through the Investor Relations section of the eBay website at investors.ebayinc.com. Before we begin, I'll remind you that during this conference call, we will discuss certain non-GAAP measures related to our performance. You can find a reconciliation of these measures to the nearest comparable GAAP measures in our accompanying slide presentation. Additionally, all growth rates noted in our prepared remarks will reflect organic FX neutral year-over-year comparisons unless indicated otherwise. During 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. Our actual results may differ materially from our forecasts 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, Form 10-Q, and our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of April 26, 2023. We do not intend and undertake no duty to update this information. With that, I'll turn the call over to Jamie.

Thanks, John. Good afternoon, everyone, and thank you for joining us today. I am pleased with our strong performance during the first quarter. We delivered better than expected results across our key financial and operating metrics despite continued challenges in the macro environment. Our emphasis on non-new-in-season goods, advancements of our focused category strategy, site-wide innovation for sellers and buyers, and investments in trusted experiences have enhanced the durability of our marketplace and kept us on the path to achieving sustainable long-term growth. We generated over $18.4 billion of gross merchandise volume in Q1, representing a 3-point acceleration in organic year-over-year growth sequentially and over 4% organic growth versus the first quarter of 2019. Revenue eclipsed $2.5 billion and grew 2% organically, outpacing GMV by roughly 5 points, primarily due to contributions from advertising. Our operating margin was 29.6%, and we delivered non-GAAP earnings per share of $1.11, up 5% year-over-year. Our financial results provide clear evidence that our strategy is working and driving underlying growth in our business. Our progress is most evident in focused categories, which outgrew the rest of our marketplace by roughly 8 points during Q1 and grew low-single digits year-over-year overall. Our largest focused category, motors, parts and accessories, or P&A, accelerated a few points sequentially and was the largest contributor to GMV growth in Q1. Based on the data we are seeing, we believe P&A grew at market rates of growth for this category during the quarter, which is a testament to the results that are possible when we are laser-focused on driving customer satisfaction and awareness in even the largest categories. In February, we launched the eBay Guaranteed Fit program in the U.S., which enables millions of P&A shoppers to buy with confidence knowing their auto parts will fit or they'll receive their money back. We accompanied the launch with a full funnel marketing campaign across TV, streaming video, audio and social channels to drive awareness and consideration of this compelling trust unlock. We're pleased with the initial reception of the Guaranteed Fit program and are excited to extend it to the U.K. and German markets later this year. We also recently began a major revamp of how shoppers buy tires on eBay. We overhauled our tire installation experience on desktop and mobile web in Q4 and expanded the improved experience to mobile apps in Q1. Now buyers can more easily evaluate installation options as they browse and compare tires that fit their vehicle. Across five major markets, buyers can ship tires directly to one of over 10,000 local auto shops for installation rather than having to take delivery of these hard-to-transport items. While we are still in the early stages of connecting online sales to off-line installations in P&A, these initial launches are already driving a meaningful uplift in the attach rate of installation services to tire purchases. Within our focused categories, our eBay Refurbished program also continues to be a standout. In the current economic climate, our range of refurbished goods has proven to be more valuable than ever, and consumers are increasingly aware of the sustainability benefits of purchasing these products. Building off its record holiday quarter, growth in eBay Refurbished GMV accelerated notably during Q1, posting double-digit year-over-year growth. We added dozens of new categories to the program last quarter, including computing and video game peripherals. We also signed up more brands and OEMs in existing categories to sell refurbished inventory directly on eBay. Additionally, in recent months, we've taken steps to make the onboarding process for small business sellers in the eBay Refurbished program faster and more scalable by automating elements of the sign-up and eligibility check processes. This is important because small business sellers make up the majority of refurbished goods sales on eBay and bring some of our most unique and valuable inventory to the platform. Our work to improve the site-wide experience on eBay continued to build momentum in the first quarter. While eBay has operated a core AI platform for years, an upgrade to this platform last year has meaningfully accelerated our AI development philosophy across multiple areas of our organization. In search, we continue to improve retrieval and ranking using state-of-the-art deep learning models and better leveraging the vast amount of structured listing data on our marketplace, which delivers more relevant choices to our buyers. A series of search deployments we made during Q1 led to a measurable uplift in conversion that we estimate would amount to roughly $1 billion in incremental GMV on an annualized basis. This demonstrates the value that a relatively small number of AI-powered enhancements can generate for a marketplace of our scale. Another key area of foundational improvement is our proprietary computer vision technology. With 1.8 billion live listings and billions more images from historical sales, eBay is one of the few companies in the world training deep neural networks using tens of billions of images directly linked to commercially relevant data elements. Leveraging these assets, our product team recently reengineered our visual similarity models, which has dramatically improved the speed and efficacy of image search on eBay. This change has driven more relevant search results and a substantial increase in adoption, image query volume and purchase behavior. It also enables new features like the See Visually Similar results module, we are testing within select subcategories of furniture and home decor. These capabilities are powerful unlocks in helping eBay buyers discover more of the unique and hard-to-describe items on our marketplace. For example, if you have an antique vase that breaks, you can now just take a picture of the pattern and find an exact match for a potential replacement on eBay. Our advancements in computer vision also have profound implications for the selling experience on eBay. Over the coming quarters, you'll see us testing new experiences, harnessing our improved visual and contextual understanding of product images to assist our sellers in listing products. For instance, sellers will soon be able to pre-populate categories and item specifics from a single photo, enabling them to spend less of their time inputting inventory and more on growing and managing their businesses. eBay is also well positioned to benefit from recent leaps forward in generative AI capabilities. We are in the process of integrating the ChatGPT API into our core listing flow and will soon launch a beta release of a plug-in that enables sellers to automatically generate text for their item descriptions based on known product attributes. Generative AI has a number of exciting use cases outside of descriptions, and we're exploring numerous potential applications across our marketplace that can enable truly magical customer experiences. I'm excited to share more about these initiatives with you over the coming quarters. For store sellers, we recently launched a centralized tool, making it more seamless to publish and promote their listings across social media. This new feature is integrated into the Seller Hub and makes it easier to bulk post across several popular social channels with content that is automatically optimized for each medium, including engaging carousels that allow shoppers to browse multiple listings in a single post. Thousands of store sellers have already linked their social accounts to date, and on average, they observed 40% higher click-through rates on content published using this new tool versus what was previously available. Last quarter, we talked to you about the February rollout of our new eBay International Shipping program, which makes it as easy for eBay sellers to ship from Silicon Valley to Sydney as it is to ship to St. Louis. The revamped program is not only making cross-border trade more seamless and cost-effective for sellers and buyers, but it also improves trust in eBay's coordination of the end-to-end shipping process. During Q1, we fully ramped this program to sellers in the U.S. and migrated 100% of listings from our previous global shipping program. While it's early days for the new program, we're already observing a positive impact on customer satisfaction. Over the long term, we believe eBay International Shipping will increase cross-border inventory available to buyers, improve sales velocity and price realization for sellers, and ultimately drive incremental GMV. Now transitioning to advertising. Our advertising business continues to deliver robust growth at scale despite challenges in the broader digital ad market. Strong demand for Promoted Listings drove first-party advertising revenue of $285 million, up 31% or more than 30 points faster than GMV growth for the third straight quarter. Total advertising revenue grew 23% to $317 million. During Q1, over 2 million sellers adopted single ad products, and we reached more than 750 million live Promoted Listings. Our standard CPA product was once again the largest contributor to advertising growth, benefiting from continued optimization and performance improvement. In Q1, we rolled out a new machine learning model for ranking CPA ads that improved sales philosophy for sellers and conversion for buyers. This ranking model also enables us to evaluate the expected performance of multiple ad products alongside each other rather than making ad-serving decisions in silos. This change will be beneficial as we continue to expand our multiproduct advertising portfolio. Our emerging Promoted Listings products also continued to scale and grew mid-single digits quarter-over-quarter during the seasonally slower Q1. This growth was led by Promoted Listings Advanced, our cost-per-click format, which benefited from an upgraded relevance model deployed in the quarter as well as the inclusion of CPC ads within more of our existing ad services. Now let's discuss the impact we're having on the communities we serve. I'm pleased that we continue to make meaningful progress on our key ESG initiatives. Just yesterday, we published our seventh Annual Diversity Equity and Inclusion report. This report provides insight into our four strategic objectives: increase representation, cultivate a sense of belonging, engage our communities and allies, and build inclusive technology. These objectives help us build a richly diverse, truly equitable, and fiercely inclusive place to buy, sell and work. We have seen a steady increase in the number of women and underrepresented minorities in all levels enrolled since 2020, with women representing 42% of our global workforce. I'm also proud to report eBay's gender pay equity is at 100% globally. The next area I would like to highlight is around reducing our impact on the planet. Two years ago, we set ambitious long-term science-based targets. In 2022, we reduced Scope 1 and 2 emissions by 7% versus 2021 and by 32% from our baseline in 2019. We also continue to make progress on our Scope 3 reduction goals. Lastly, 91% of our energy now comes from renewable sources, and we remain a carbon-neutral company. You can find more details about our sustainability programs in our annual impact report coming out next month. In addition, we continue to partner with other organizations across the industry to make an even bigger impact on sustainability. Throughout 2022, we partnered with some of our e-commerce peers to encourage the U.S. Postal Service to adopt more innovative and sustainable shipping practices for small businesses. Our efforts culminated in a letter published in February 2023 congratulating USPS for their commitment to exclusively purchasing electric delivery vehicles by 2026. This shift not only helps the environment but also our customers by enabling lower costs and other benefits offered by an all-electric delivery fleet. Turning to eBay for Charity. The eBay community continues to demonstrate its tremendous generosity, and I'm always impressed by the contributions from this program. In Q1, eBay for Charity raised over $38 million, up 3% year-over-year. During the quarter, the program continued to support important initiatives like a Black History Month sneaker campaign, highlighting Black sneaker designers and influencers. Additionally, during Q1, the eBay Foundation committed $11 million to non-profit organizations advancing inclusive entrepreneurship. The foundation also supported disaster relief efforts with employee contributions and matching gifts. All of these efforts combined demonstrate our purpose-driven community, and we are honored to be recognized for our progress. Newsweek recognized eBay for our efforts around diversity in the workplace as well as our customer service. Additionally, eBay was once again included in JUST Capital and CNBC's list of America's Most Just Companies, which measures corporate performance and efforts in areas such as climate change, DE&I, and employee wellness. Lastly, we were ranked among some of the top companies on S&P's Global Sustainability Yearbook, which distinguishes companies for their strengths in corporate sustainability. In closing, Q1 was another strong quarter for eBay. We exceeded our quarterly financial commitments while making significant progress against our long-term objectives. Our focused categories grew roughly 8 points faster than the rest of our marketplace, led by an acceleration in the P&A category, which reached market rates of growth in Q1. Our core AI platform has dramatically improved our tech velocity, leading to accelerated innovation in areas like search, computer vision, generative AI, and advertising. We continue to find more ways to leverage our scale for the benefit of sellers, most recently with our eBay International Shipping program. This initiative is reducing costs, alleviating friction, and improving trust for cross-border transactions. And ultimately, we believe it will lead to more of our sellers' unique inventory being made available globally. And we continue to make meaningful progress with our pay equity, representation efforts, charitable contributions made through our platform, and our impact on the environment. Lastly, I'd like to thank our talented eBay employees who have been relentlessly focused on raising the bar for innovation and service to our customers. I'm also grateful I was able to meet and personally connect with a number of our sellers during my travels last quarter. Hearing their feedback and seeing the impact eBay is having on their businesses is truly inspiring. Our sellers, along with our enthusiast buyers, truly make eBay a more vibrant marketplace and community. With that, I'll turn the call over to Steve to provide more details on our financial performance.

Thank you, Jamie, and thank you all for joining us today. I'll begin with highlights from the first quarter on Slide 9 of our earnings presentation. Next, I'll walk through our key operating and financial metrics in greater detail. Finally, I'll provide our outlook for the second quarter and some additional thoughts on the second half of the year before we begin Q&A. As usual, my comments will reflect year-over-year comparisons on an organic FX neutral basis unless I note otherwise. Overall, I am pleased with our Q1 results as our key financial metrics exceeded expectations despite navigating a challenging macro environment for e-commerce. Gross merchandise volume was down 3% to $18.4 billion, improving 3 points sequentially, while FX was a 3-point headwind to reported year-over-year growth. Revenue was up 2% to approximately $2.5 billion, which outpaced volume by 5 points due primarily to continued momentum within our advertising business. Non-GAAP operating margin was 29.6%, down 2.8 points year-over-year due to volume deleverage and continued investment in product innovation and full funnel marketing to support our strategic initiatives. We delivered $1.11 of non-GAAP earnings per share, up 5% year-over-year. And we generated $709 million of free cash flow, up 30% year-over-year, while returning $384 million to shareholders through repurchases and dividends. Our Q1 results demonstrate the strength and durability of our scaled global marketplace during periods of economic uncertainty, as well as the meaningful impact our strategic initiatives are having on our long-term growth trajectory. Let's take a closer look at our financial performance during the first quarter. Gross merchandise volume of $18.4 billion was down 3% year-over-year on an organic FX neutral basis or down 2%, including the impact of recent M&A. Organic GMV growth accelerated by 3 points sequentially in Q1, driven by continued outperformance in focused categories, strong initiative delivery within horizontal areas like search, and healthy ROI on our marketing investments. The sequential improvement was also aided by the lapping of last year's macro downturn midway through the first quarter. FX represents the 3-point headwind on reported year-over-year GMV growth, which is roughly 0.5 points worse than the implied headwind in our Q1 outlook but an improvement of 3 points versus Q4. As noted last quarter, we estimate one-time factors contributed roughly $100 million to GMV in Q1, which we primarily attribute to CBT sellers keeping stores open during the Lunar New Year. Our focused categories continue to drive underlying growth in our business, a trend that is becoming more visible as macro-related pressures subside. Focused categories outgrew the remainder of our marketplace by roughly 8 points during Q1. In aggregate, focused categories delivered positive low-single digit growth in Q1 as our business accelerated overall. Motors, parts, accessories, or P&A, was once again the largest contributor to growth in our focus categories. P&A GMV accelerated by a few points sequentially in Q1, climbing to what we believe are market rates of growth for this category in our largest markets. P&A momentum has benefited from multiple quarters of product and fitment investments as well as full funnel marketing aimed at raising awareness and consideration among all shoppers. Growth in refurbished goods accelerated a healthy double-digit growth in Q1, meaningfully contributing to our focused category outperformance. In support of our luxury categories, we recently leaned into paid, owned, and earned media to grow awareness of our authenticity guarantee program with a particular focus on millennials and Gen Z. Although this campaign has just started, it has already improved perceptions of eBay as a trusted place to shop for high ASP items. Now looking at our business on a geographic basis. U.S. GMV was down 5% organically in Q1, accelerating by roughly 5 points versus the prior quarter, driven by strength in our focused categories and moderating lapping pressures. Diminishing headwinds to global supply chains and overall strength in cross-border trade did favor imports over domestic sales among U.S. buyers in Q1. International GMV declined 1% on an FX-neutral basis, accelerating by roughly 3 points sequentially, benefiting from robust cross-border trade, particularly within P&A as well as outperformance in our other focused categories. Although key macro indicators like GDP and e-commerce growth remained notably weaker outside of the U.S., business conditions appeared relatively stable quarter-over-quarter internationally. Moving to active buyers. 133 million active buyers shopped on eBay during the trailing 12 months ending in March. We had 131 million active buyers, excluding recent M&A and buyers from our Turkey business, where we ceased operations last July. Excluding these impacts, active buyers were down less than 1 million sequentially. We continue to see stabilization in our active buyer count driven by buyer reactivation initiatives and particular strength in P&A. In aggregate, new and reactivated buyers showed positive year-over-year growth for the third straight quarter, while new buyer growth was positive for the first time in eight quarters. Enthusiast buyers remained relatively stable sequentially at 16 million in Q1 as migration patterns between buyer groups continued to modestly improve. Enthusiast buyers make up roughly 70% of GMV on eBay and on average spend approximately $3,000 annually. Turning to revenue. Net revenue of $2.5 billion represented organic FX neutral growth of 2% year-over-year, accelerating by more than 3 points versus Q4. Total FX-neutral revenue growth, including M&A, was 3%, while currency was a 2-point headwind to reported growth. Our take rate was 13.6%, down roughly 20 basis points sequentially but up over 80 basis points year-over-year. Excluding the impact of currency, our take rate would have risen quarter-over-quarter as FX represented a headwind of roughly 35 basis points. In terms of the drivers of take rate, recent M&A and the rollout of the eBay International Shipping program and aggregate contributed roughly 10 basis points to our sequential take rate in Q1. Managed payments were modestly accretive to our sequential take rate, driven by new financial services. Our ads business continues to deliver impressive results and drive revenue in excess of volume growth. Total advertising revenue grew 23% during the quarter, while first-party ads grew 31%, outpacing volume by more than 30 points for the third straight quarter. This delta was driven by optimization and performance improvements within our standard Promoted Listings product, paired with healthy growth in emerging products like advanced and external Promoted Listings. Moving to profitability. Non-GAAP operating margin was 29.6% in Q1, down 2.8 points year-over-year. Gross margins were roughly flat year-over-year as modest volume deleverage and roughly 0.5 points of pressure from the rollout of eBay International Shipping were offset by monetization efficiencies. Sales and marketing rose by over 1 point as a percentage of revenue year-over-year in Q1, and we continue investing in full funnel marketing to support our focused categories. Product development rose by 1.3 points as we continue to hire product and engineering talent to accelerate innovation on the platform. Our G&A expense rose by roughly 1 point, driven by M&A, higher employee spend and volume deleverage. We generated $1.11 of non-GAAP earnings per share in Q1, up 5% year-over-year, benefiting from a 9% reduction in share count from our repurchases. We delivered GAAP earnings per share of $1.05, aided by a modest recovery in our equity investment portfolio. Turning to our balance sheet and capital allocation. Free cash flow grew 30% to $709 million in Q1 as beneficial working capital items offset lower cash earnings. Our balance sheet position remains robust as we ended the quarter with cash and non-equity investments of $5 billion and gross debt of $7.7 billion, following a $1.2 billion debt repayment in January. We repurchased roughly $250 million of shares at an average price of approximately $46 during Q1 and have roughly $2.6 billion remaining under our current buyback authorization. We paid a quarterly cash dividend of $134 million in March or $0.25 per share. Our investment portfolio is detailed on Slide 19 of our earnings presentation. Our equity investments and warrants were valued at over $3.5 billion at the end of the quarter. This represents an increase in value sequentially, driven primarily by the recovery in our Adevinta shares. Moving on to our outlook. For the second quarter, we forecast GMV between $17.8 billion and $18.2 billion, representing organic FX neutral growth between negative 5% and negative 2% year-over-year. This outlook anticipates an FX headwind to reported GMV growth of over 0.5 points. We expect to generate revenue between $2.47 billion to $2.54 billion, representing organic FX neutral growth between 1% and 4% year-over-year. We anticipate non-GAAP operating margin to fall between 26.1% and 26.8%. And we forecast non-GAAP earnings per share between $0.96 and $1.01, representing EPS growth between negative 3% and positive 2% year-over-year. On a quarter-over-quarter basis, our Q2 guidance range implies total FX neutral GMV growth of negative 4% to negative 2%. Given persistent macro challenges around the world, we believe it is prudent to prepare for continued uncertainty. First, we continue to plan our business around the assumption that GMV trends in the second half of 2023 roughly approximate the sequential growth we observed in 2022, excluding the impact of currency, starting from our Q2 spot GMV guidance range. For the full year, we expect to grow total non-GAAP expenses, inclusive of cost of revenue, by approximately mid-single digits year-over-year on a spot basis. The majority of this change versus our prior outlook or more than 2 points of the delta is driven by the impact of the weakening U.S. dollar on expenses in foreign currency, which also increases GMV and revenue. The remainder is driven by incremental investments in product and full funnel marketing as we're encouraged by the strong returns on the investments we've seen year-to-date. We continue to expect our take rate to expand organically in 2023, excluding the impact of FX, driven primarily by continued momentum within our advertising business. As we noted last quarter, our expense forecast contemplates one-time impacts from recent M&A and the rollout of eBay International Shipping. These one-time factors in aggregate are expected to represent a year-over-year headwind to operating margin of approximately 100 basis points as compared to our 2022 P&L. Notably, we expect the eBay International Shipping program to generate positive operating profit dollars in 2023 and approach our corporate operating margin percentage by Q4. The costs for this program have been in line with expectations to date. And since they are almost entirely variable, they can be passed through to customer-facing shipping fees with a predictable margin for eBay. Our expense growth forecast is net of more than $100 million of OpEx savings from our structured cost program as we look inward for cost efficiencies in our business. With minimal noise from FX, our other income and expense reported in Q1 should be a reasonable baseline for the remaining quarters of 2023. We continue to estimate our non-GAAP tax rate will remain at 16.5% throughout 2023. Lastly, if foreign currencies were to hold at today's rates, FX would represent a de minimis impact to GMV and a 2-point to 3-point headwind for non-GAAP EPS in 2023 as we lap hedging gains from the prior year. In closing, Q1 was another strong quarter for eBay. We exceeded expectations for GMV, revenue, and EPS amid a dynamic global operating environment for e-commerce. Our focused categories continue to drive underlying growth in our business, while horizontal innovation in areas like search and international shipping supports our marketplace overall. Our disciplined approach to full funnel marketing has fueled growth in new and reactivated buyers and improved awareness and consideration in focused categories. Advertising growth continues to be robust as first-party ads outpaced GMV by more than 30 points for the third straight quarter due to continued adoption and optimization gains. We generated $709 million of free cash flow, returned $384 million to shareholders through repurchasing dividends, and reduced our net share count sequentially. And importantly, we continue to develop programs that support our communities, and we are making steady progress towards reducing our impact on the planet. I would like to thank our employees for their continued focus on operational excellence, which has enabled us to navigate short-term macro challenges while continuing to drive our business towards sustainable, long-term growth. With that, Jamie and I will now take your questions.

Your first question today comes from Nikhil Devnani with Bernstein. Your line is now open.

Great. Thank you both for taking my questions. So I had a couple around expenses and margins. On the 2023 expense outlook, it looks like that's increased from about 2% growth this year to now mid-single digits. Could you maybe provide some more specifics around what's changed in that outlook and where you now expect to spend a little bit more? And then I had a second question on margins that I'll ask after. Thanks.

Hi, Nikhil. Steve here. Great to speak to you, and thank you for the question. As you are more than aware, we're not fully guiding the full year at this point due to the uncertainty of the current macro environment. But let me give you a little bit of color with regards to the expense commentary that we shared on the call. Last quarter, when we talked to the markets, we talked about targeting total expense growth for 2023 of approximately 2% increase, with one-time factors, as we talked about, like M&A and the rollout of eBay International Shipping, contributing a significant amount of that year-over-year expense growth. The mid-single digit guide that we provided you with today assumes the current weaker U.S. dollar exchange rate that we've seen continues for the remainder of the year. This FX impact accounts for the majority of the delta versus the prior outlook. And obviously, we will have a corresponding positive impact on both GMV and revenue. In addition, the top-line performance of the first quarter, we are pleased with the levels of execution that we had during the quarter, is providing us with incremental investment capacity for 2023. And so you're seeing us continue to invest in the business because we're getting such a strong return on investment as we go forward. And this is really aiding towards our drive towards long-term sustainable growth.

Thanks. And maybe just a big picture one on margins as you look out further. Obviously, there's a lot of important reinvestment happening. Business mix, I think, has also changed between M&A, payments, shipping. But you have some tailwinds into the take rate as well. So when you kind of step back, what is the right long-term structure for this business? I mean, should we still think about it as being a low-30s EBIT margin profile or should we approach it differently now? Thank you.

As you can imagine, Nikhil, we haven't guided long-term margins. I think what I would say is I'm very encouraged by the earnings power of eBay, both from ultimately driving improved net earnings and ultimately strong free cash flow coming over the business. The things that we're thinking about as we go into 2023, margin will be a function of the underlying GMV momentum, which is ultimately impacted by the macro environment that we operate in. As we’ve talked about, the impact of recent M&A where we’re leaning in on the EIS program, that will drive long-term increases in operating income for eBay will drive about 100 basis points of margin dilution in 2023. And as we’ve said, we’re going to continue to lean into the short term and drive operational efficiencies through the structural cost program. And we’re well on track and slightly above the $100 million that we laid out for 2023. That enables us, as I said earlier, to reinvest in the business and drive long-term sustainable growth for eBay.

Thanks, Steve.

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.

Thanks so much for taking the questions and hope everyone on the team is well. I wanted to come back to the comments you made on the focused category marketing spend, and maybe just a multi-parter on that one theme. Can you give us some greater level of granularity of what avenues of deploying those marketing spends are delivering sort of higher versus lower ROIs? And how should we be thinking about how that spend might evolve in the years ahead and when measuring that spend and trying to look at it from the outside in, what do you think we should be monitoring the most to qualify the sort of return on that spend? Is it enthusiast buyer growth? Is it enthusiast buyer behavior? How should we be thinking about what the return on that spend will be over a multi-year time frame? Thanks so much.

Yeah. Look, the first thing I'd point to, Eric, is the 8-point outperformance of focused categories over the rest of the business. In these areas where we're investing in, we're seeing the right types of growth. When I look at a category like P&A, which is our largest full funnel marketing to date, you look at the results this quarter, where we're at market rates of growth, and we're really excited by what we're seeing there. I think enthusiast buyers as well in the quarter and active buyers were strong. For the third straight quarter, we had an aggregate new and reactivated buyers growing positively. And our new buyer growth was positive for the first time in eight quarters. And let me give you an example of how that ties into marketing. So in P&A, where we've had this large full funnel marketing campaign, new and reactivated buyers actually grew double-digits faster than the overall marketplace during the quarter. So this has been a shift for us that we’ve been talking about all along, which is moving from just lower funnel optimization to more full funnel, driving long-term consideration, which takes a little bit of time. But the results that we’re seeing off of that spend are great and are creating a really healthy business as evidenced by what we’re seeing in the focused category outperformance.

Your next question comes from the line of Doug Anmuth with JPMorgan. Your line is now open.

Thanks for taking my question. This is Wes speaking for Doug. I have a question for Steve and one for Jamie. It seems that the gross margins were a bigger challenge sequentially this quarter regarding the EIS rollout than we anticipated. Did you implement the rollout faster than expected, and how should we view gross margins for the remainder of the year? Additionally, for Jamie, we've discussed eBay Live and your initiatives in the collectibles sector. I would like to hear more about how you plan to expand into categories beyond trading cards and comics in the future. Thank you.

Thank you for the question. This is Steve. I will address the first question. We have fully ramped up the EIS program for our existing sellers on the global buying hub this quarter, and we are still in the early stages of the global rollout. Regarding your specific question about gross margins, they are in line with our expectations, reflecting about a 50 basis point impact on gross margin for the quarter. The positive aspect of this program is that, moving forward, despite the impact on gross margins due to our accounting for EIS, it is generating solid bottom-line momentum for eBay and holds strategic importance. Additionally, it allows us to adjust our charges based on the costs we incur for International Shipping. In the long term, we anticipate this program to contribute positively to overall profit for the year. By the end of the year, particularly in the fourth quarter, we expect it to align closely with our core margin structure for the business.

Yeah. And then on live commerce, this is something we began experimenting with Q2 of last year, hosting a few pilots and experimenting with it throughout Q2. We did expand it into luxury in Q4 with some events for handbags and jewelry. We also created a central hub and discovery entry point for our live commerce events in Q4, which means now users can subscribe to a specific channel or receive updates and notifications of upcoming events. This year, we hosted about 15 eBay Live events with over $500,000 of in-event GMV across collectibles and luxuries. At the end of March, we started hosting our first short auctions, think like 30 seconds for handbags and collectibles. In general, these are getting 5,000 and 15,000 buyers. We're seeing great engagement from that standpoint, so we're going to continue to pilot and learn and experiment with this technology, but exciting initial results thus far.

Your next question comes from the line of Michael Morton with MoffettNathanson. Your line is now open.

Thank you. Thank you for the question. I was wondering if we could maybe dig a little bit deeper on the spend buckets you're clearly investing in the business and the returns you're seeing there. And also how it could be feeding into the improvement in the decline rate for active buyers? And any color you could give us on the buyer level, maybe inflecting, starting to grow going forward? And then just the second question is, there's this macro environment we're all living in. Any changes in behavior you're seeing around your luxury products, trade down, new buyers coming who might have purchased new? Anything around that would be great. Thank you.

Mike, Steve here. Thank you for the question, Michael. I'll kick off with the first one and then Jamie can pick up the second one, perhaps. Specifically, with regards to where the investments are going, as you would expect, it's in terms of identifying what customers want and building the products that delight them and turning them about then to our full funnel approach to marketing. The investments that we're taking forward is really developing tremendous products on eBay. In the last couple of years, we've really pivoted our marketing spend to full funnel. And you've seen the fruits of our labor. Think about Jamie's prepared comments around the fact that we're growing at market rates in parts and accessories. We're seeing high double-digit growth with regards to refurbished business for the second quarter on the balance as a result of the investments that we're making. There's obviously a good correlation between our enthusiast buyers and the focused categories that we're going forward with in terms of our frequency coming to eBay and the levels of spend going forward. But what we're delighted with in terms of, again, what we're seeing with the buyers is the reactivation of our NORBs or new or reactivated buyers as we call them at eBay, where they're coming back to our platform as a result of the investments that we're making. Jamie, perhaps you pick up on the luxury question.

Yeah. Just in general, our luxury and fashion focused categories and on aggregate accelerated in line with our business overall. We continue to expand brand coverage on the platform, etc. So think about kind of very similar to what I said last quarter, which is a little bit of ASP pressure really made up for by the volume that we’re seeing on the platform. In general, our shift to non-new-in-season and that focus has really helped us in this environment because people are looking for values. And the ones that they can get on our platform make us much more resilient from that standpoint.

Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Your line is now open.

Great. Thanks for taking the questions. So first on EIS, we understand the accounting implications on margins, but can you elaborate on what's driving the profitability improvement from this program over the next few quarters? How do you think about kind of the long-term investments that's required to support this initiative? And then wanted to go back to the focused categories. It was nice to see that nicely outperform the total growth. But can you provide some color maybe on certain categories kind of on a same-store sales basis so that we can see how some of the categories where you launched these initiatives earlier or currently trending maybe like sneakers, handbags, luxury watches, and so on? And then how should we sort of think about the sustainability of the strength in P&A for the next few quarters? Thank you so much.

No problem, Deepak. Regarding eBay International Shipping, it provides significant strategic and financial advantages. If we take a step back and consider our cross-border trade, it represents around 20% of sales on eBay. When we initiated the eBay International Shipping program, only about 50% of our 1.8 billion listings were available for global trade. We focused on how to increase inventory accessibility for global buyers on eBay, and the eBay International Shipping program supports this aim. The advantage of this program is that we've transitioned from being an agent to a principal, which gives us much greater control over the entire process. This change allows us to foster greater trust, especially with our sellers. With the scale of eBay, we can negotiate better contracts with shippers and also transmit any cost increases through to the shipping program and future sales. As noted, there's an accounting change due to the shift from an agent to principal relationship, which allows us to recognize both gross revenue and costs, rather than just net revenue. As mentioned in our prepared remarks, this is beneficial for eBay's earnings growth, and we anticipate that by the fourth quarter, it will align with the margin profile of our broader business. Jamie, over to you.

Yeah. Just on focused categories, I'd say a couple of things. One is, overall, focused categories outperformed the rest of the business by 8 percentage points, so we're definitely seeing the impact of the strategy. A couple of standouts is one, we've already talked about it, but motors, parts and accessories hitting market rates of growth for us was really happening kind of sooner than we thought. I talked about luxury already kind of being a stable growth vector for us. And then maybe the other one I'd highlight for you is just refurbished. Our Refurbished business grew double digits in the quarter. That's really coming off of a healthy Q4 where we had our largest week ever with Refurbished and Cyber. I think that's two-fold. One is the value proposition that we provide in that focused category is pretty compelling. And two is we're continuing to invest in bringing new brands, making the process easier for small businesses to come on with their refurbished products, and we're backing it up with a great trust guarantee. On parts and accessories, I'd just say that we actually feel really good about the growth rates that we're seeing there, probably happening even sooner than we thought. We just launched Guaranteed Fit a few months ago. And I've always said these things take a couple of quarters to really have the impact on the consumer in really kind of changing the trust equation, but we're seeing a lot of great movement from that perspective already. So I talked about the buyers on the platform in P&A, New and reactivated buyers in that category are growing double digits faster than the overall marketplace. So it makes me really excited for the future of what we're going to do in P&A. And just like in other categories, we're not done investing. We'll continue to roll out new innovations that are really relevant for that parts and accessory buyer on eBay.

Great. Thank you so much.

Your next question comes from the line of Trevor Young with Barclays. Your line is now open.

Great. Thanks. First, just dovetailing on one of the earlier questions on luxury. Just bigger picture, what are like the two or three things that might bring luxe buyers and sellers to eBay versus some of the smaller competitor platforms that are focused on that category? Just trying to understand like what helps eBay win. And then on a different category, home and garden, I think it's still 1 of the top five on the platform but hasn't really migrated into focused. Is that an opportunity over the next two to three years to maybe carve out some pockets within, therefore some more curated selection and unique inventory or is that just too broad of a category to really drive those enthusiast buyers?

First, the scale of eBay is a significant advantage. Luxury products on eBay are accessible in 190 different markets worldwide, attracting over 130 million buyers. With the authenticity guarantee for handbags, we enhance trust, making eBay an excellent destination for purchasing these items. We also offer competitive fees that are appealing for sellers. Recently, I spoke with a handbag seller who hosted a live commerce event last quarter and was thrilled with the results and buyer interest we generated. Additionally, eBay has a unique advantage in bringing in buyers from various categories, not just handbags. For example, the average buyer of a handbag priced over $500 is likely to spend $2,600 on handbags but will also spend $5,600 in other categories on our platform. Regarding home and garden, I refer back to my comments during Investor Day about our five categories exceeding $10 billion, with home and garden being one of them, along with fashion and parts & accessories (P&A). P&A has been our largest category to date, and we've achieved great results. We believe our strategies can be effectively applied across all categories over time, though we prefer not to disclose our future plans for competitive reasons. The strategies we’re utilizing in P&A are relevant to our largest categories as well.

That’s helpful. Thank you, Jamie.

Your next question comes from the line of Lauren Schenk with Morgan Stanley. Your line is now open.

Great. Thanks. And two, if I can. Just one on the expense side. Is there a way that you could help us think about what percentage of your expense base is not denominated in U.S. dollars? I just thought it would be a relatively small portion. And then secondly, it's encouraging to see that new and reactivated customer growth is up. But just given the slight decline in buyers, I mean, consistent with last quarter, does that imply churn? Is that as well? And if so, is that isolated in any specific categories? Thanks very much.

Hi, Lauren. I'll pick up the first point. We don't disclose the mix of our sort of currencies. I'd refer you to the overall shape of the business from a global perspective and think about the fact that roughly half of our overall business is generated out of international and half out of the U.S. But we don't specifically disclose the dynamics of that. We obviously talk about the impacts of currency on the overall business, which you can probably triangulate back into. Jamie, go to the question.

Yeah. Lauren, I would say our active buyer count is exactly where we expected it to be. I’ve been talking for several quarters about some near-term pressure that we thought we would see based on the macro environment, but that I thought we would see stabilization in the metric, and that’s exactly what we’re seeing here is that we’re acquiring buyers in the right way now. We’re building and turning them into enthusiast buyers, and our enthusiast buyers are buying 70% of the GMV on the platform. And so we’re excited that we saw kind of a more modest change in stabilization. And the P&A stats that I talked about with buyers is also really encouraging because it shows when we invest, we’re actually seeing what we want to see with new and reactivated buyers on the platform. So as things change from that standpoint, we’ll continue to update you, but we actually feel really great about what’s happening on the buying side.

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

Okay. Thank you so much. So I think you talked about the case for International Shipping to be a profit center by the end of the year. But on the other hand, there are a lot of companies out there that use shipping savings as a promotional tool. So do you think there are opportunities for you to underwrite some of these costs to do the same or maybe come up with tools to aid the seller to run shipping discounts as an incremental way to promote their listings on eBay? Thanks.

Yeah. Look, we've always considered shipping as variable, so we can pass through those expenses to the seller from that standpoint. What we give them is the benefits of scale. So when you look at eBay's scale advantages in being able to work with providers from that standpoint and being able to manage things efficiently. When you buy your label through eBay, as an example, you're getting a very good discount versus what you would pay if you just walked in and tried to do those shipments on your own. And so we're going to continue to bring our scale to benefits like this. This one is really about opening up that inventory. So we wanted to almost be invisible to the seller based in the geography that they're shipping internationally. So the example I talked about is, if I'm sitting in Manhattan, I can ship a product that's actually going to Spain, but it will feel like I'm shipping a product to Albany because we take care of everything in the background. So it's really about that 20% of GMV that we do in cross-border. As Steve said, less than half of our inventory is available to go across borders. And this is really about creating that unlock. And it's, frankly, one of the powerful weapons of eBay is because, even a casual seller on the platform, we open up such massive worldwide scale demand for you in 190 different countries. So think about the EIS kind of similar to ads or payments. It's us leveraging our scale for the benefit of our sellers.

Your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is now open.

Great. Thanks. One on the macro, maybe one on ads if I could. So I guess how, if at all, have you seen consumer patterns shift in the wake of the recent banking crisis? And if there's been any sort of different reaction either more or less pronounced in the U.S. versus international markets, that would be helpful. And then maybe on the advertising side of the business. Jim, you talked about growing the number of services in which you were able to place CPC ads as a driver of Promoted Listings Advanced in the quarter. When you think about the path forward from here, how far are you into the journey, would you say, in terms of rolling out CPC-enabled ads across the entire eBay platform? I guess said differently, how much more runway do you see for CPC-enabled ad load growth from here?

Hi, Lee. I'll pick up the macro question. Obviously, we've extensively talked about the impacts of macro on our first quarter earnings, the perspectives of the guide for the second. We haven't seen any discernible change in the underlying dynamic macro environment. From a geographical perspective, as you recall, as we came into the end of the first quarter last year and the awful events of the war in Ukraine, Europe started to get impacted sooner than the U.S., particularly because of energy prices and the levels of consumer discretionary spend pressure. Obviously, that's caused some differential in the lapping behaviors. We've gone through and start to go through 2023. But no underlying discernible change in the overall macro environment.

Yeah. And Lee, what I'd say on the PL Advanced or our CPC-based business is, in Q1, we updated our ranking model, training it on CPC-specific data. That helped us present higher quality impressions and more GMV for the same number of impressions on the site. We also expanded CPC to the second row of ad placements within search results, which was previously only available to CPA. So it's still early in our CPC development. We're excited about these innovations. We also built some new technologies this quarter that helped us do better real-time evaluation between CPA and CPC. But what I would say is that we're well on track to the numbers that we outlined at Investor Day. And we think a big component of that in terms of new products is the Product Listings Advanced product and happy with the continued innovation quarter-after-quarter to kind of drive toward those targets.

Operator, can we do one last question, please?

Certainly, your last question comes from the line of Ygal Arounian with Citigroup. Your line is now open.

Hey, guys. Thanks for squeezing me in. One more on the advertising side and then maybe I'll just ask about buybacks. So advertising is coming in really nicely ahead of GMV. It looks like it's accelerated nicely ahead of our expectations. And obviously, we've got the legacy products and some of the newer products coming on. But has your outlook on the opportunity changed? Is it being pulled forward to a certain extent, maybe the macro environment leading to more sellers spending more on advertising to try to drive sales? So any incremental color on kind of what's moving the needle there? And then just on buybacks, expectations or use for the rest of the year, how you guys are thinking about it? Just any other color there.

Yeah. Look, advertising once again outpaced volume by 33 percentage points, driven by what we're doing in optimizing product listings across both standard and our more advanced products. We continue to think we have a long runway ahead of us for advertising. And I'd point to a couple of things. One is we continue to see nice quarter-over-quarter growth in our new advertising products, that's External Express and Promoted Listings Advanced. The second thing I'd say is that we have a variable model where sellers can set their rates. And we're seeing really good ROAS for our sellers. So when we look at the return on ad spend that they're seeing, once they start using our ad products, their sales are basically seeing a double-digit increase. And more importantly, when you look at the ROAS that they can get on eBay, it's very attractive relative to industry standards. So as I said before, we feel like we're on track and executing towards the goals that we laid out. We feel like we're doing a nice job of balancing the buying experience and keeping that incredibly healthy and strong conversion while continuing to drive our ads business. And finally, we're just making the product easier to use. So quarter-after-quarter, we've built new products. Most recently, we've built a quick setup, a product for our CPC-based product to make that easier to use. And we continue to build up new reporting tools for our advertising sellers. So we're excited by where we are and the potential that's ahead. Steve, do you want to take the next part?

Yeah. Hi, Ygal. What I would say is that our first priority, as we always say, is to invest in the long-term growth of the business through our build, buy, partner framework and because we see that as the best opportunities to drive long-term returns for shareholders. The beauty of the eBay model is because of the strength of the financial model and the strong free cash flow that we produce gives us the ability to do both in terms of investing in the business and return capital. As you know, we returned $250 million to investors through buybacks in the first quarter in addition to the $0.25 dividend. We haven't guided our capital returns for the rest of the year, but we will continue to be balanced and thoughtful about the approach. We have committed to offset dilution and we'll continue to do that through the year. And then beyond that, we'll be opportunistic in both the timing and magnitude of any further capital returns.

Thank you.

This concludes today's conference call. Thank you for attending. You may now disconnect.