eBay Inc.

Ladies and gentlemen, thank you for standing by and welcome to the eBay Q3 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask questions during the session, you will need to press star then 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Joe Belante, VP of Communications and Investor Relations. Please go ahead, sir.

Thank you. Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the third quarter of 2020. Joining me today on the call are Jamie Iannone, our chief executive officer, and Andy Crane, our interim chief financial officer. We're providing a slide presentation to accompany Andy's commentary during the call, which is available through the investor relations section of the eBay website at investors.ebainc.com. Before we begin, I'd like to remind you that during the course of this conference call, we will discuss some non-GAAP measures related to our performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call. Additionally, all revenue and GMV growth rates mentioned in Jamie's and Andy's remarks represent FX-neutral year-over-year comparisons, unless they indicate otherwise. In this conference call, management will make forward-looking statements, including, without limitation, statements regarding our future performance and expected financial results. These forward-looking statements involve known and unknown risks and uncertainties, and our actual results may differ materially from our forecast for a variety of reasons. You can find more information about risks, uncertainties, and other factors that could affect our operating results in our most recent periodic reports on Form 10-K and Form 10-Q and our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of October 28, 2020, and and we do not intend and undertake no duty to update this information. With that, let me turn it over to Jamie.

Thanks, Joe, and good afternoon, everyone, and thank you for joining us. Today I'll walk you through some of the key highlights from the quarter and update you on our new tech-led reimagination of the company. Then I will turn the call over to Andy to discuss our recent performance and near-term outlook. Before I do that, I'd like to take a moment and reflect on a major milestone eBay passed last month. Twenty-five years ago, during Labor Day weekend, our founder, Pierre, launched eBay as a technology experiment. His aspiration was to create an open, fair, and trusted marketplace that empowered people and created economic opportunity for all. Since our inception, eBay pioneered online shopping and has become an iconic brand that has shaped the modern e-commerce landscapes. We are very proud of our accomplishments, and today we connect over 183 million buyers to nearly 19 million sellers around the world. in a broad and diverse set of categories. We are operating during historic times when our buyers and sellers need us most, while supporting our employees who are working hard to meet the needs of our customers and adjusting to their own reality. As we look ahead to the next 25 years, our vision is to become the best global marketplace to buy and sell goods through a tech-led reimagination of eBay. I will come back to this in a moment, but first let me talk about our most recent achievements. In the third quarter, we delivered strong results, Earlier this month, we updated how we report classifieds. But to be clear, on apples-to-apples basis, we performed better than expectations on both the top and bottom lines. Gross merchandise volume in marketplace was 21%. To put that in perspective, we added over $4 billion in volume in 2003 versus last year, more than many businesses do annually. Active buyers increased to over 183 million globally. Organic revenue grew faster than volume, up 26%, driven by payments and advertising. The managed payments migration made significant progress in Q3 and is delivering buyers and sellers a simplified end-to-end experience. Starting with five of our largest markets, we focused first on transitioning business sellers to the new payments platform. As a result, we exited the quarter with over 340,000 sellers migrated. During the quarter, eBay managed payments for over 20% of on-platform volume. Additionally, we informed sellers that we are expanding managed payments to France, Italy, and Spain in early 2021, and we will begin to migrate consumer sellers in Q4 in the U.S. We remain on track and expect to complete the vast majority of our transition by the end of next year. Seller feedback has been encouraging, as the NPS from sellers in managed payments has averaged more than 10 points higher than the NPS of sellers who have yet to migrate. Buyers love the flexibility, choice, and ease of use. We are seeing new and reactivated buyers choosing alternate forms of payment like credit and debit cards, Google Pay, and Apple Pay across the majority of their purchases. We remain confident that we are on pace to deliver $2 billion in revenue and $500 million in operating income on an annual basis by 2022. Advertising growth continues to be driven by promoted listings, which continue to outpace volume, a trend we expect will continue for the foreseeable future. In the third quarter, promoted listings delivered $186 million of revenue, up 77%. We are providing sellers with more data-driven recommendations to optimize their ad conversion, while we test and build more technology features to drive future growth and position eBay as the seller's platform of choice. Now turning to classifieds. We believe that the transfer of classifieds to Ad Aventa is on track to be completed in Q1 2021, subject to regulatory approvals. We've been excited to bring together two highly complementary businesses that can create tremendous value over time. The market agrees, as evidenced by the appreciation in Ad Aventa's share price, which increased the value of eBay from $9.2 billion to over $11 billion based on recent trading levels. As you may recall, Last quarter, I outlined a long-term vision for eBay. Through a tech-led reimagination, we can realize the enormous untapped potential of our marketplace and drive sustainable long-term growth. We have three strategic priorities to support this vision. First, to defend our core by building compelling next-gen experiences for our enthusiasts. Second, to become the partner of choice for sellers. And third, to cultivate lifelong trusted relationships with our buyers. We are in the first phase of a multi-year journey, but many tech-led improvements for buyers and sellers yet to come. But over the past quarter, we were able to take several steps towards realizing this vision. As I mentioned, our first priority is all about defending our core business. Our focus here is on non-new and seasoned products and simplifying consumer selling. We're taking a holistic view of customer needs, responding by launching features to address those needs, and rapidly replicating the approach, leveraging scalable technology across enthusiast categories. A great example of that is the series of changes we made to our luxury watch category. Recently, we launched Authenticity Guarantee on all watches above $2,000. This service increases confidence for both buyers and sellers. Buyers can count on meticulous verification by third-party experts, and sellers are protected from fraudulent returns. In addition, we announced an escrow service for high-dollar transactions, plus new app content for watch enthusiasts, and we also reduced fees for sellers. While this service is still in its early stages, we have already seen a modest increase in supply and higher average selling prices. We also turned our focus to the sneakers category, which attracts passionate enthusiasts, particularly Gen Z and millennials. In the USA, sneaker GMB has significantly improved from a year ago. These buyers and sellers bring tremendous value to our ecosystem. An average sneaker buyer purchases in 10 unique categories each year more than double the amount of other eBay buyers. Leveraging similar technology launched in watches, we expanded the authenticity guarantee to sneakers. We are requiring all collectible sneakers, both new and pre-owned, above $100 and to be verified by a team of independent third-party industry experts. The program kicked off with the authentication of our most popular brands and styles and will scale to all sneaker sales over $100 next year. A year ago, we were losing share in this important category, but now we are seeing over 50% GMV growth year-to-date, and that was before launching the Authenticity Guarantee. And just last week, We announced the launch of a new elevated experience for certified refurbished products. We see tens of billions of dollars in untapped potential in the global refurbished market. Through our new certified refurbished program, buyers can save up to 50% on like-new branded inventory with all the assurances of buying new, including a two-year warranty, eBay money-back guarantee, and hassle-free 30-day returns. We are launching this program in partnership with globally recognized brands, including DeLonghi, Dirt Devil, Hoover, Makita, and Philips, that will sell certified refurbished inventory exclusively on eBay. Not only does this program help with buyers' budgets leading into the holiday season, it also helps to eliminate unnecessary waste by keeping products in circulation for many years to come. We see a long runway to accelerate GMV growth given the $500 billion global total addressable market we are competing for, but it will take time. By leveraging scalable technology, we can uniquely address the needs of customers across a diverse mix of categories in electronics, fashion, collectibles, home and garden, parts and accessories, and more. Moving on to the second key part of our vision, becoming the platform of choice for sellers. Over the past three months, in addition to enhancements in managed payments and advertising, we continue to leverage the scale of eBay to benefit small businesses. We work closely with UPS to offer new shipping services for sellers on our platform. In addition to a direct integration with eBay labels, sellers now have access to discounted rates, saving them time and money. Sellers also have access to order details, customer information, label printing, and shipment tracking all in one place. And buyers benefit from lower shipping costs and integrated tracking. Additionally, we are supporting seller profitability during the upcoming holiday season by working with the carriers on our platform to eliminate peak season shipping surcharges on eBay. Recently, we rolled out an update.