eBay Inc.

Good day, ladies and gentlemen, and welcome to the eBay Q4 2018 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Suleem Freja. Vice President of Investor Relations. Mr. Freya, you may begin.

Thank you, Operator. Good afternoon. Thank you for joining us, and welcome to eBay's Earnings Release Conference Call for the fourth quarter of 2018. Joining me today on the call are Devin Wenig, our President and Chief Executive Officer, and Scott Schenkel, our Chief Financial Officer. We're providing a slide presentation to accompany Scott's commentary during the call. All revenue and GMV growth rates mentioned in Devin and Scott's remarks are represent FX-neutral year-over-year comparisons unless they indicate otherwise. This conference call is also being broadcast on the Internet, and both the presentation and call are available through the Investor Relations section of the eBay website at investors.ebayinc.com. You can visit our Investor Relations website for the latest company news and updates. In addition, an archive of the webcast will be accessible for at least three months through the same link. 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. In addition, management will make forward-looking statements that are based on our current expectations, forecasts, and assumptions and involve risks and uncertainties. These statements include but are not limited to statements regarding the future performance of eBay, Inc. and its consolidated subsidiaries, including the expected financial results for the first quarter and full year 2019 and the future growth of our business. Our actual results may differ materially from those discussed in this call 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 annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's investor relations website at investors.ebayinc.com or the SEC's website at sec.gov. You should not rely on any forward-looking statements. All information in this presentation is as of January 29, 2019, and we do not intend and undertake no duty to update this information. With that, let me turn the call over to Devin.

Thanks, Salim, and good afternoon, everyone. We delivered record earnings this quarter, with top-line results in line with our expectations, although we did see slowing consumer spend in December. In Q4, total GMV was up 2% and revenue was up 6%. while our active buyer base grew 4% to $179 million. Underlying these results, GMV on our marketplace platform grew 3%, StubHub volume was down 1%, and our classified platform grew revenue at 11%. Scott will go into more detail on our financial results shortly. First, let me provide a bit more context on our business. We continue to experience consistent active buyer growth, which historically has driven GMV. However, more recently, we've seen GMV growth drop below active buyer growth, the result of several factors. As discussed last quarter, while some of the simplified buying experiences we launched have been positively received by new buyers, they were causing some conversion pressure with our existing buyer base. Given that dynamic, we stopped scaling these experiences to our existing customers. This in turn has created some downward pressure on GMV as we lap acceleration from last year. will continue to roll out these experiences with new buyers. Additionally, non-structured data SEO pages are delivering less traffic and lower conversion compared to a year ago. And while we increased our marketing spend in Q4, we experienced lower returns than expected. As we enter 2019, we've aligned our tactics to directly address these issues and to capitalize on the opportunities ahead of us as we transition to a different eBay in 2020 with a comprehensive catalog intermediated payments, and a robust and high contribution advertising business. eBay is a unique company with a unique value proposition, and we're focusing on a few critical areas to build on this. First, we'll pursue several new efforts in our product experience, leveraging the foundation we've built over the last few years. For existing customers, we'll focus on conversion and frequency, removing friction, leveraging our vast customer data, and providing additional ways to compare value and surface unique inventory. Sellers will gain access to more data and tools with enhanced protections. We're also working to grow our new buyer base through delivering new experiences and messaging to encourage first purchase. All customers will benefit from enhanced delivery and returns through broader coverage of guaranteed shipping and our new return experience. We believe this will lead to an improved experience for both buyers and sellers, which we're confident will result in higher conversion rates and increased momentum in GMV. Second, we're rapidly moving significantly more SEO pages to a catalog structured data foundation. The expansion of our catalog has historically been constrained by the rate of seller adoption, but new AI capabilities will allow us to opt in millions of listings in the torso and tail of our inventory that we believe will drive SEO and social traffic moving forwards. We'll also make some substantial changes to our marketing strategy and spend as part of our continuous effort to maximize efficiency across the business. We'll reduce low ROI marketing and refocus our effort on acquiring new buyers to drive growth. While this will likely put pressure on GMV for a period of time, it will enable more profitability and a stronger foundation over the long term. We will continue to increase awareness around our brand, focusing on the value and uniqueness that differentiates the eBay experience. In addition, in 2019, we'll continue to invest aggressively in our key growth initiatives, advertising and payments, which are already showing great promise and represent a huge opportunity for the company to ensure they're set up for success. In our marketplace advertising initiative, we've made good progress this quarter. We had 600,000 active sellers promote 200 million listings in Q4, both significantly higher than last quarter, and we began rolling out placements more broadly in search results. This helped drive nearly 80 million of revenue this quarter, up nearly 150% year-on-year. For the full year, promoted listings delivered nearly 200 million of revenue, well above the expectation we set in October. We'll continue to ramp our advertising effort in 2019 while ensuring we achieve the right balance between user experience and monetization, as we build towards a billion-dollar advertising revenue opportunity. Looking at payments, we've been live in the U.S. for four months, and our confidence and our customers' confidence is growing every week. Since we launched in late Q3, we've enabled over 140 million of GMV, with over 3,500 sellers active in the program. To date, we've saved sellers over $1 million in payment-related costs, and we expect that savings to increase significantly as the program scales. We're also readying our launch in a second market, which we'll announce next quarter. We continue to expect to begin a full rollout in 2020, building to a $2 billion revenue opportunity at scale. At StubHub, there continues to be significant opportunity to deliver growth. We remain focused on improving the customer experience to increase conversion, while investing to drive loyalty and repeat usage of the platform. will further penetrate key international markets by leveraging our global event catalog to enable cross-border sales and improve conversion. Finally, we're already pursuing aggressive cross-merchandising efforts and traffic-sharing initiatives between StubHub and eBay and plan to scale those in 2019. In our classified platform, our key initiatives will be motors vertical expansion across several markets, including the UK and Canada, and driving further horizontal vibrancy and engagement. in part through our successful eBay integration, which drove 200 million of GMV to eBay in 2018 and contributed nearly a point of revenue growth to classifieds in Q4. There continue to be numerous cross-platform opportunities across Marketplace, StubHub, and classifieds to improve the user experience for our customers. We indicated last quarter that 2019 would be a transitional period. with slower growth as we invest to deliver on large opportunities in 2020 and beyond. At that time, we established a committee of our board to review our capital allocation strategy and to make adjustments as necessary to evolve our approach moving forward. As a result, as you'll hear further from Scott, we've made some significant changes to our capital allocation strategy, including instituting a dividend for the first time in our history and increasing our plan share repurchases to $5 billion in 2019. The purpose of these changes is to return more capital to our shareholders in a balanced way, highlighting our confidence in the free cash flow resiliency of our business and the opportunity ahead of us, and to significantly reduce our share count ahead of 2020. We are confident in our business and in our plan. eBay has never had more buyers, business sellers, or inventory in its history. In 2019, we will connect our buyers with our sellers' unique inventory while improving our user experience. We feel strongly about our ability to deliver value now and in the future to our customers, employees, and shareholders. Finally, I appreciate that there will likely be questions regarding the letter Elliot issued last week commenting on our business. We've issued our public response, and we will not be discussing this further during today's call. We would appreciate it if you limited questions to our results. Now, let me turn it to Scott to provide more details on our quarterly financial results in our 2019 guidance.