This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
Operator
like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to John Edbert, Vice President of Investor Relations. John, you may begin your conference.
John Edbert
Vice President of Investor Relations
Good afternoon. Thank you all for joining us for eBay's fourth 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 the 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 FX neutral year-over-year comparisons and all earnings per share amounts reflect earnings per diluted share unless indicated otherwise. As we fully lap the TCG player acquisition at the end of October 2023, our organic and total FX neutral growth rates for Q4 have largely converged. 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 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, 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 February 27, 2024. We do not intend and undertake no duty to update this information. With that, I'll turn the call over to Jamie.
Jamie Iannone
Chief Executive Officer
Thanks, John. Good afternoon, everyone, and thank you all for joining us today. I'm incredibly proud of the progress we made in 2023 against our vision of reinventing the future of e-commerce for enthusiasts and our goal of returning eBay to long-term sustainable growth. Let's go over a few highlights from the full year. First, despite significant macro pressure on discretionary spending across our major markets, we saw organic year-over-year GMV growth improve during each quarter of 2023, resulting in GMV growth down roughly 1% for the full year. Focus category GMV grew by nearly 4%, outpacing the remainder of our business by roughly 7 points, and we exited 2023 at approaching 30% penetration. We stabilized our active and enthusiast buyer counts as acquisition, reactivation, and retention improved year-over-year. Our revenue grew 3% organically to over $10 billion, driven by continued momentum in first-party advertising, expansion of our financial services offerings, and the launch of eBay International Shipping. And we made significant investments in tech, talent, and marketing to support our strategic pillars, including making meaningful strides towards establishing eBay as a leader in generative AI for e-commerce. These results have demonstrated that we have the right strategy, which has put us on a path to building a stronger, more resilient company. In service of that goal, last month we announced significant organizational changes focused on removing layers and simplifying execution in order to better meet the needs of our customers. This involved the difficult but necessary decision to reduce our workforce by approximately 1,000 roles and begin to scale back our alternative workforce contract. This restructuring better aligns our expenses with the growth of our business, and I am confident it will enable us to accelerate innovation while delivering long-term value for shareholders. Now turning to the fourth quarter. We generated $18.6 billion of gross merchandise volume in Q4, nearly flat versus the prior year. Revenue grew 3% to $2.6 billion. Our non-GAAP operating margin was 26.7%. and we delivered $1.07 of non-GAAP earnings per share, rezoning in $4.24 of VPS for the full year. Our focus category strategy remained a significant driver of underlying growth during Q4. Focus category GMV outpaced the remainder of our marketplace by approximately six points, growing roughly 4% for the third straight quarter. Our momentum in Motors Parts and Accessories, or P&A, continued in the quarter, as volume growth held steady in the mid-single digits. Our eBay Guaranteed Fit programs have benefited buyer trust and retention across the US, UK, and Germany, driving incremental GMV within P&A last year. During Q4, we began rolling out multi-warehouse shipping optimization to some of our largest US P&A sellers that collectively manage millions of listings. B2C sellers can activate these tools via eBay APIs and this enables buyers to see more accurate estimated delivery dates when purchasing from sellers with multiple warehouses, which has driven a measurable uplift in conversion for early adopters. In 2024, we plan to onboard sellers in other categories to utilize this technology and tighten delivery estimates across eBay more broadly. Our established position in P&A has led to more than 100 million vehicles being saved in the My Garage section of eBay by active customers. In addition to providing better fitment experiences, we are finding more ways to leverage this valuable data to drive utility for our customers. For example, last quarter we introduced predictive maintenance that offers AI-driven auto part recommendations based on a vehicle's mileage. Features like this help eBay stay top of mind for customers looking for auto parts at a great value. The work we've done in the eBay Authenticity Guarantee Program has also been a key driver of our focus category momentum and raising the level of trust on the marketplace. In Q4, we launched our eighth authentication center in Tokyo, Japan. Our first center focused primarily on cross-border trade. Our Tokyo center is currently authenticating luxury handbags and will expand to other high-SP categories over time. Japan is one of the largest and fastest-growing markets for personal luxury goods in the world, enabling our global buyers to tap into a wealth of inventory from the world's most exclusive brands with complete confidence. Earlier this month, we also expanded the Authenticity Guarantee Program to cover loose gemstones. This further extends our product coverage within Fine Jewelry with authentication from our existing partner, the Gemological Institute of America, a trusted authority for over nine decades. In addition to expanding focus categories, last year we made a significant investment in Germany, our third largest country as measured by demand. We adapted a similar approach to our vertical playbook to address the unique needs of German consumers. These changes included language enhancements, improvements to search, SEO, and recommendations, shipping and return label improvements, and a complete overhaul of the local pickup experience. In January, we further improved local discovery in Germany by introducing a new map-based browsing experience, which services trending and recently listed items through an intuitive interface based on what's nearby and easy to pick up. Overall, our initiative in Germany has outperformed our initial expectations. We've observed C2C seller MPS and customer satisfaction both up 20 points or more versus our previous baselines. Our buyer NPS also increased by double digits as buyers who sell returned a positive growth following the initiative launch. In addition, enhancements made to our QR code technology has helped reduce unpaid items by more than 50% for local pickups. And importantly, C2C volume in Germany returned a positive growth resulting in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. These investments have made our business significantly more resilient to the challenging macro environment in Germany, where overall e-commerce growth has been negative in recent quarters. During 2023, we also laid the groundwork to accelerate our capabilities in artificial intelligence and further embed AI throughout the customer experience and our organizations. After the first commercial large language models became available from companies like OpenAI and others last year, we immediately found ways to leverage generative AI technology to improve the eBay experience across selling, buying, advertising, and marketing. Within a few months, we began fine-tuning open source LLMs using eBay's proprietary commerce data on our own infrastructure. These models included a smaller number of parameters and thus operated faster and more cost efficiently than commercial LLMs when operating at scale. But we also found these fine-tuned LLMs could perform as well, or in some cases better, than commercial LLMs across certain dimensions and use cases, such as generating listing descriptions. To support an even more ambitious AI roadmap for 2024, by the end of Q1, we expect to have doubled our GPU capacity versus the end of last year. Importantly, this investment falls within our historical CapEx budget range of 4% to 5% of revenue. This added GPU capacity, combined with our existing infrastructure, allows us to develop LLMs from scratch, pre-trained using eBay's nearly three decades' worth of e-commerce data. While we'll continue to take a hybrid approach, leveraging both commercial and open-source LLMs, We expect more generative AI services to be powered by internal LLMs in 2024, helping make buying and selling on eBay simpler, faster, and more magical. In terms of customer-facing features, we continue to iterate on our magical listing experience that has already been used by millions of sellers, which we believe makes it one of the most widely used Gen AI features in e-commerce to date. Generative AI descriptions have rolled out to 100% of users in our top five markets, adoption trends remain healthy, customer satisfaction continues to be at high levels as we've expanded outside of English-speaking countries, and content acceptance rates remain above 90% through the full rollout. The next phase of our magical listing experience is currently being tested by up to 5% of C2C sellers on an opt-in basis. This experience is even more seamless as it leverages our image recognition technology and generative AI to pre-fill or suggest product titles, categories, and other item aspects using photos alone. We are excited to make this experience available to more sellers in Q1, as early feedback from beta users has been incredibly encouraging. I'm also pleased to see the potential benefits our AI tools can have on the billions of listing images across our marketplace, as high-quality product photos can have a significant impact on conversion on eBay. Last quarter, we completed the global rollout of our revamped background removal tool in our listing flows, which leverages AI to effortlessly remove background noise from their product images. This tool has enabled sellers to create cleaner, more professional product images, and it has received rave reviews from our customers. Building on top of this, we're now leveraging generative AI to make sellers' product images even more compelling using our new background swap tool. This feature allows sellers to show their products alongside a wide variety of AI-generated backgrounds. For example, you can display a pair of Air Jordan sneakers on a hardwood basketball court or showcase your pre-owned hiking boots atop a picturesque mountain summit. We are currently testing this feature in beta with 1% of sellers on iOS devices, and I'm excited to see more sellers leveraging these tools to enhance their product images and drive conversions. Now turning to our advertising business, which delivered another strong quarter. Total advertising revenue grew 20% to $393 million, while first-party ads outpaced volume by 30 points. For the full year, we generated over $1.4 billion of total advertising revenue, up roughly 25% for the year, more than double our ad revenue in 2019. Over 2.9 million sellers adopted a single ad product during Q4, and we currently have over 900 million live promoted listings. Our standard cost per acquisition product remained the largest contributor to year-over-year ads growth in Q4. But notably, promoted listings advanced, our cost per click unit was the largest contributor to sequential advertising growth. Our CPC revenue and overall advertiser count benefited from the launch of rule-based campaigns in Q4, which allows sellers to automatically promote new listings based on rules they set for inclusion, such as price range, category, brand, or condition. Additionally, during Q4, we launched a top picks carousel for search, which provides a curated set of promoted listings ads, comprised of hyper-relevant, top-selling items from our highest-ranked sellers. Thus far, buyers have been highly engaged with these ads, providing added velocity for our sellers. Next, I'd like to share a few milestones around our sustainability efforts last year, starting with Recommerce. Recommerce continues to provide significant value for sellers and buyers during these uncertain times. In 2023, our marketplace generated nearly $4.9 billion in positive economic impact through the sale of pre-loved and refurbished goods. This activity helped avoid approximately 1.6 million metric tons of carbon emissions that would typically be used in producing new goods and kept nearly 70,000 metric tons of waste from going into landfills. Additionally, eBay remains committed to enabling more green energy on the U.S. electricity grid. As part of these ambitions, we have entered into agreements for three off-site renewable energy projects over the past four years. Our portion of the latest project is now fully operational, and the green energy produced will be roughly equivalent to the annual energy usage at our data center in Salt Lake City. Combined with our other two projects, This green energy covers over 40% of our global electricity consumption. And I'm incredibly proud that we source over 90% of our energy consumption for eBay controlled offices and data centers from renewable sources overall. And we remain on track to reaching our 100% renewable target by 2025. Now let's turn to impact. I'm always amazed by the tremendous generosity of the eBay community. eBay for Charity enabled sellers and buyers to raise more than $43 million in Q4 and nearly $162 million for the full year. The eBay Foundation granted more than $19 million in 2023 to support historically excluded entrepreneurs and through our employee gift matching program. I'm honored to lead a purpose-driven company that supports communities around the world For the fifth year in a row, eBay was included in the Dow Jones Sustainability World and North American Indices. eBay was also included once again 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. I'd like to take this opportunity to thank our employees for their incredible work in bringing our strategy to life and their tireless support in our community worldwide amid ongoing challenges in the global economy. In closing, while we continue to navigate a dynamic operating environment, I'm incredibly optimistic about our roadmap for 2024. Our teams are better organized for speed, allowing us to be nimble and make critical decisions more quickly. The foundational AI capabilities we developed last year make us well-positioned to unlock the power of our data assets, fundamentally change the customer experience on eBay, and drive efficiency across the company in 2024. We will continue to invest in new and existing focus categories while also improving country-specific experiences like we did in Germany last year. We expect continued momentum in first-party advertising despite lapping outstanding growth in the prior year while we grow our financial service offerings for customers. And from a financial standpoint, we are in a strong position to expand margins, drive robust earnings growth, and deliver healthy capital returns to shareholders in 2024 while still investing in high ROI initiatives to keep us on the path towards sustainable GMV growth. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.
Steve Priest
Chief Financial Officer
Thank you, Jamie, and thank you all for joining us today. I'll begin with the financial highlights section of our earnings presentation. Next, I'll discuss our key financial and operating metrics in greater detail. Finally, I'll provide our outlook for the first quarter and the full year and some closing thoughts before we begin Q&A. My comments will reflect year-over-year comparisons on an FX-neutral basis unless I note otherwise. I'm pleased that we met or exceeded expectations across our key financial metrics in Q4, despite observing a softer demand environment during the early part of the quarter. Gross merchandise volume was nearly flat at $18.6 billion. Revenue grew 3% to nearly $2.6 billion, outpacing volume by over three points. Non-GAAP operating margin was 26.7%. We delivered $1.07 of non-GAAP earnings per share, and we returned $379 million to shareholders through repurchases and dividends. Let's take a closer look at our financial performance during the fourth quarter. Growth merchandise volume of $18.6 billion was nearly flat year over year, while foreign exchange was a tailwind of roughly two points to reported GMV growth. As we discussed last quarter, we observed softer demand for discretionary goods during the beginning of Q4, as consumers dealt with elevated inflation and higher interest rates in our key markets. Shoppers were more discerning in their purchase behaviour as we approached the holidays, and the promotional environment adapted to meet their expectations. However, we started to see our business improve towards the end of November, particularly in the US, driven by consumers looking for value to stretch their limited holiday budgets. Additionally, we believe recent product improvements modestly benefited our participation in last-minute holiday shopping. These included improved accuracy of our estimated delivery dates and product changes we made in Q4 to better highlight listings with faster shipping times. Focused categories continue to drive underlying momentum in our business, growing roughly six points faster than the remainder of our marketplace during the quarter. P&A, refurbished, and luxury were the top three contributors to GMV growth in focus categories. P&A delivered another quarter of mid-single-digit GMV growth, as improved trust from programs like Guaranteed Fit and growing shipment coverage continued to benefit the overall customer experience. Next, I'll walk through our results on a geographic basis. US GMV was nearly flat in Q4, an improvement of one point sequentially. US consumer demand was notably more resilient, relative to our largest international markets, consistent with market benchmarks. The underlying growth is even stronger when we include US buyer spending on cross-border goods. International GMV was down nearly 1% on an FX-neutral basis, and up 4% as reported due to FX tailwinds. While we saw resilient demand in the UK and Germany over the holidays, e-commerce market growth in these countries remained challenged. The progress we made in Germany to improve the seller and buyer experiences, particularly when in C2C, help mitigate a tough environment where e-commerce growth has been persistently negative. In the UK, our GMV growth narrowed the gap to market as consumers continued to look for value during the holidays. We also benefited from the lapping of the Royal Mail strikes that impacted results in Q4 of 2022. Moving to buyers. Trailing 12-month active buyers were 132 million at the end of last year, continuing the trend of stabilization in 2023 after a period of post-COVID rationalization in recent years. Enthusiast buyers remained at approximately 16 million. Spend per enthusiast was stable quarter over quarter at around $3,000 annually, despite continued pressure on discretionary spending across our major geographies. Turning to revenue. We generated revenue of $2.6 billion during the fourth quarter, up 3%, outpacing volume by over three points. Foreign exchange was a headwind of over one point to reported year-over-year revenue growth. Our take rate in Q4 was approximately 13.8%, down roughly 10 basis points quarter-over-quarter. The sequential decline was primarily driven by seasonal category and product mix, partly offset by continued momentum in our advertising business. and a modest tailwind from FX. On a year-over-year basis, our take rate was roughly flat, despite nearly half a point of FX headwind. Total advertising revenue grew 20% to $393 million and reached 2.1% penetration of GMV. First-party ads grew 30% to $368 million, or 30 points faster than volume. As Jamie discussed earlier, we saw robust seller adoption of promoted listings advanced in Q4, driven by recent innovations like smart targeting and rules-based campaigns. Reasons of profitability. Non-GAAP operating margin was 26.7% during the quarter, improving 30 basis points sequentially and down roughly three points year over year. Foreign exchange was a headwind to margins of approximately 150 basis points in Q4 compared to a year ago. The remainder is largely attributable to continued investment in product development and the margin impact of recent M&A. As expected, eBay international shipping was no longer a drag on our operating margins in Q4, but this program weighed modestly on gross margins year over year, as its costs primarily fall within cost of revenue. Overall gross margin was down about 60 basis points year over year, as modest headwinds from EIS but partly offset by efficiencies in cost of payments. Within G&A expense, we recognize the gap restructuring charge of $99 million in Q4 relating to our recent organizational changes, as well as a gap accrual of $15 million related to pending legal matters. You will find more information on adjustments in the gap to non-gap reconciliations in the appendix of our earnings presentation, while additional details on the legal matters will be provided in our upcoming 10K. We generated non-GAAP earnings per share of $1.07 in Q4, roughly flat year over year. On a GAAP basis, our earnings per share was $1.40 for the quarter, driven by unrealized gains in our equity investment portfolio. These gains were partly offset by stock-based compensation and the aforementioned GAAP restructuring charge. Turning to our balance sheet and capital allocation, our free cash flow was negative $3 million in Q4. Consistent with our guidance for the minimum free cash flow, California's disaster tax relief program for 2023 delayed the majority of our annual cash tax payments until October. We ended the year with cash and non-equity investments of $5.1 billion and gross debt of $7.7 billion. We repurchased $250 million of eBay shares at an average price of approximately $41 during Q4 and had $1.4 billion remaining under our buyback authorization at the end of the quarter. In addition, we paid a quarterly cash dividend of $129 million in December, or 25 cents per share. Since the beginning of 2022, we have returned nearly $5.6 billion to shareholders through repurchase and dividends, or roughly 134% of cumulative free cash flow over that period. Turning to our investment portfolio, our equity investments and warrants were valued at over $5 billion at the end of Q4. Our Edventure stake was valued at nearly $4.5 billion, at nearly half a billion dollars versus Q3. On November the 21st, a consortium led by Premier and Blackstone announced an offer to acquire Adventa. This offer is proceeding as expected, and we continue to expect it to close in Q2. The public offer period expired on February the 9th, with 95% of shareholders accepting the offer, which satisfied the requirement for at least 90% acceptance rate. We understand that the consortium is working expeditiously to achieve the remaining regulatory approvals and clearances. Our add-in warrants were valued at over $360 million at the end of Q4. Our warrant value is calculated based on several assumptions, including add-in share price and the probability of vesting. Moving to our outlook, we have started the year with relatively uneven demand across our major markets, with the UK GDP growth. and U.S. retail sales weaker than expected in January. The dynamic nature of the operating environment has been incorporated into our GMV outlook, as well as a one-point boost to GMV growth from the extra leap yearday. For the first quarter, we expect between $18.2 and $18.5 billion of GMV, representing an FX neutral decline of 2% to flat year over year, or a spot GMV decline of 1% to flat. We expect to generate revenue between $2.5 and $2.54 billion Q1, representing FX neutral growth between flat and 2% year over year. Our forecast implies revenue will outpace volume by over two points on an FX neutral basis, while FX represents close to a one-point headwind to spot revenue growth. We forecast Q1 non-gap operating margin between 29.6% and 30%, marking both a sequential and year-over-year improvement at the midpoint. We expect to generate non-GAAP earnings per share between $1.19 and $1.23 in the first quarter, representing EPS growth between 7% and 11% year-over-year. At current rates, FX would represent a two-point headwind to year-over-year EPS growth in Q1. Now let me share some thoughts on the full year. Assuming no fundamental change in the macroeconomic environment this year, we expect our FX neutral GMV growth rate to turn positive in Q3 or Q4 of this year. We expect revenue to outpace GMV growth by about two points on an FX neutral basis. We expect FX to represent close to a one point headwind to spot revenue growth. We anticipate our take rate expansion to be primarily driven by continued healthy growth in advertising revenue throughout 2024, although we do face elevated year-over-year comps starting in the second quarter due to our acceleration in 2023, along with continued secular headwinds within our third-party ads. We expect non-GAAP operating margin to expand by 60 to 100 basis points for the full year as we balance continued investments in tech, talent, and marketing with organizational efficiencies, productivity gains, and savings from our ongoing structural cost program. A non-GAAP operating margin outlook includes a net benefit of approximately 40 basis points year over year, which is primarily driven by a change in accounting estimates associated with the extension of the useful life of data center equipment. Following an assessment of our service and networking equipment in December, we determined it was appropriate to extend the accounting useful life from three years to four years. You can find more information on this policy change in our 10K filing. Offsetting this benefit is an operating margin headwind of roughly 50 basis points year-over-year due to foreign exchange as we lapped sizable FX hedging gains in 2023. This is on top of the approximately 30 basis points year-over-year operating margin headwind we experienced in 2023 as we lacked even more meaningful hedging gains in 2022. Our capital expenditures for 2024 are expected to be stable between 4% and 5% of revenue, while our non-GAAP tax rate should remain unchanged at 16.5%. We expect just under $2 billion of free cash flow in 2024, which contemplates headwinds of $99 million in restructuring charges and $234 million from repatriation tax payments. As a reminder, these repatriation tax payments will remain a temporary headwind to free cash flow through 2025, which is the final year of an eight-year repayment schedule. Details on these tax payments are in the appendix section of our earnings presentation. For Q1, we have raised our quarterly dividend by 2 cents to 27 cents per share to be paid out in March. And I'm pleased to announce that our board recently increased our share purchase authorization by $2 billion, bringing our total remaining authorization to approximately $3.4 billion. We are targeting at least $2 billion of share repurchases for the year, though the pacing may fluctuate from quarter to quarter. We expect to end 2024 with cumulative repurchase and dividends representing approximately 130% of free cash flow since the beginning of 2022, above our original target of 125% for the period. Given our top line assumptions, margin outlook and healthy capital return expectations, we forecast non-GAAP earnings per share growth of 8 to 10% year over year in 2024. In closing, I'm incredibly proud of our team's execution during 2023. Despite a very challenging macro environment, we saw underlying momentum in our business as GMV trends improved gradually through the year and we delivered non-gap earnings per share of $4.24 of 3% for the full year. While we are planning our business around the assumption that the macro environment will continue to be challenging, we remain incredibly confident in our strategy and our plan for 2024. Assuming no further degradation in the environment, we expect our investments in focus categories, local market and C2C initiatives, generative AI, and other site-wide improvements to turn GMV growth positive in Q3 or Q4 of this year. Although we will continue to invest in our strategic pillars, we are committed to striking the right balance between expenses and revenue growth and continue to lean into cost efficiencies to drive 60 to 100 basis points of operating margin expansion in 2024. Our fortress balance sheet enables us to increase our buybacks and dividends this year, leading to total capital return to shareholders of approximately 130% of cumulative free cash flow from 2022 to 2024. And I'm extremely pleased this financial plan allows us to target non-GAAP EPS growth of between 8% to 10% year over year, demonstrating the earnings power of our business. With that, Jamie and I will now take your questions.
Operator
Operator
As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. We also ask that you limit yourself to one question. And for any additional questions, please re-cue. Your first question comes from the line of Nikhil Devnani from Bernstein. Please go ahead.
Nikhil Devnani
Analyst at Bernstein
Hey, thank you both for taking the question. I wanted to ask about GMV growth. Could you provide a bit more context on the potential for positive GMV growth in Q3 or Q4? Is that anchored on the timing of certain product initiatives that should accelerate your growth? Anything on your visibility into the back half would be helpful. And then I had a follow-up on margins as well. Your Q1 outlook is quite strong, close to 30%, but it looks like for the full year, you're anticipating 28 to 28 and a half. So just wondering if that delta is due to seasonality or some discretionary investments that you see coming down the line, anything there would be helpful. Thank you.
Jamie Iannone
Chief Executive Officer
Yeah, thanks, Nikhil. I'll cover the GMV one and then I'll ask Steve to talk about margins. So, you know, when we looked at the start of the year here, we talked about You know, January having some weather impact, you heard that from other folks as well, and improvements kind of since then. You saw, you know, January retail sales show the consumer is a bit stretched. But when we look at the overall plan that we have for the year, we feel really good about the strategy that we're executing on. When you look at focus categories, they continue to outperform the rest of the business. For FY23, it was a 4% year-over-year growth or about 7.6%. ahead of the business. We like what we saw in terms of the investments that we made in Germany and feel really good about the roadmap that we have in front of us to drive growth in the business in Q3 or Q4, as Steve outlined. You know, I think importantly, when we look at the kind of underlying health of the business, you know, right now we still have UK just under a technical recession. Germany commerce growth is still in negative territory. And so, you know, we have those impacts from the market. but the underlying business and what's happening in the core we feel really good about. And that's what makes us confident in being able to drive GMV growth as we outlined there. Steve, do you want to talk about margin?
Steve Priest
Chief Financial Officer
Yeah, indeed. Good afternoon, Akhil. You're correct. Seasonally, Q1 has been our strongest quarter for operating margin. Why? Because of the dynamics of that seasonality. A reminder, we have been driving that through a number of cost savings. that we've been driving based on recent actions and also the accounting policy change that we saw that we discussed in the prepared remarks. I am really pleased with the amount of diligence that we've gone through. The teams are leaning into cost efficiencies in the short term while we continue to invest for the long-term sustainable growth of eBay. And we're pleased to be in a position to, based on no change in the overall macroeconomic environment, to drive between 60 and 100 basis points of margin improvement which is continuing to fuel the earnings growth that we laid out earlier in the call.
Nikhil Devnani
Analyst at Bernstein
Okay.
Operator
Operator
Our next question comes from the line of Colin Sebastian from Baird. Please go ahead.
Colin Sebastian
Analyst at Baird
Thanks, and good afternoon. Good to see the start of performance at the end of Q4. A lot of changes in e-commerce over the past couple of years Obviously, customer acquisition costs are going up a lot and there's more competition in the market from global marketplace players. So I was hoping, Jimmy, you could talk about maybe the evolution of e-commerce as you see it and the impact of some of those changes on eBay and if that leads you to any modifications in sort of the focus category strategy. And maybe related to that with Gen AI across the platform and the magical innovations, Is there any way to quantify the impact of some of those tests, if not from a volume or a revenue perspective, maybe from listings velocity or engagement levels with sellers and buyers testing the tools? That might be helpful. Thank you.
Jamie Iannone
Chief Executive Officer
Yeah, so first let me talk about kind of the e-commerce piece. Specifically with customer acquisition costs, this is where eBay has a unique advantage. So first, the vast, vast majority of our traffic is organic. People coming to the eBay app or typing in eBay.com, which is a key benefit. The second is our ability to monetize users that we acquire across multiple categories. is a huge win for us. So when you look at someone coming in into a single focus category, they end up shopping across categories on the site, usually more than they buy in other categories from that one initial acquisition. So our ability to kind of manage the CAC and the CLTV is, I think, much different than others, and that's just based on the scale of what we have. I think our focus on non-new and seasoned is very unique, and our drive towards refurb, luxury, authentication, And the trust we've put on the marketplace is a real differentiator for us. For example, we've seen the fourth straight quarter now of growth in our luxury business. Our refurbished business maintained double-digit growth, all in a somewhat challenging macro environment. So that's unique. As we look at the generative AI, it's still early days. I can give you some of the early perspectives. But when I'm having a hard day, I go read the message boards about how consumers feel about these features that they're launching because they just love it. They love the speed with which it allows them to get more inventory on the site. And what we hear is this is going to unlock more of their things in their closet and their garage because we're speeding up the listing process. So today, you know, it's already been used by millions of sellers, our first version of the magical listing process. And over 90% of customers actually take the content that we have and include it in their listing. It has a satisfaction score of 80, which is very high for a brand new release on the product and continues to get better each day. And then, you know, we've had our other products in employee beta and now out to a single percentage point of our customers. Things like the enhanced background that I talked about. And I've been around this business for 20 years. There is nothing that moves product like better pictures on the marketplace. It's why we now have larger pictures on our desktop view item. But the quality now of being able to take a picture that you take, you know, on your rug or even on your unmade bed and put it on a beautiful background and make the product look more appealing for sale, we're excited to be able to get features like that out. So we'll continue to update you on the progress, but I can tell you that the anecdotal feedback is really good, the quantitative numbers of what we're seeing is helpful, and the pace of innovation around AI is exciting.
Colin Sebastian
Analyst at Baird
Great. Thank you.
Operator
Operator
Your next question comes from the line of Ken Goralski from Wells Fargo. Please go ahead.
Ken Goralski
Analyst at Wells Fargo
Ken, your line is open. Sorry, my fault. I was on mute. Sorry about that. I was hoping maybe you could talk a little bit about, you talked about some of the weakness you've seen and continue to see in the macro side, especially in Europe. Could you talk about if there are certain customer segments or even categories that you're seeing better trends or improving trends relative to those that might be still under pressure?
Jamie Iannone
Chief Executive Officer
Yeah, what I would say is that if you look at both UK and Germany, two of our largest markets, they're both experiencing a GDP decline. So UK, which is our second largest market, entered a technical recession. If you look at the cost of living challenges that are happening over there, that's obviously been a challenge. And the German business has been in recession and is still experiencing negative e-commerce growth from that standpoint. But one of the unique values of eBay is that we offer great values on the marketplace. So I think the reason that our refurbished business, for example, is so strong, our luxury business is so strong, is that even in challenging times, people are looking for a value on the marketplace. And so, you know, I would say I'd call out specific areas like that. Refurbished growing double digits, I think, is a sign of the consumer looking for value. Also, the consumer was looking for a lot of value in December, and we really lean into that across the globe. And that's been a big differentiator for us. And our parts and accessories business continues to perform well. It grew mid-single digits for the fourth straight quarter in consumers looking for a value in what we offer there. So, you know, some puts and takes across categories, but those are the ones that I think I would highlight and what we see happening, especially over in Europe.
Colin Sebastian
Analyst at Baird
Thank you.
Operator
Operator
Your next question comes from the line of Justin Post from Bank of America. Please go ahead.
Justin Post
Analyst at Bank of America
Great, thank you. I guess I asked about buyers. You talked about your GMV getting back to growth. What will we see with buyers and what are you seeing within the metrics as far as churn or new activations that give you encouragement right now? Thank you.
Jamie Iannone
Chief Executive Officer
Yeah, our buyers are exactly where we expected them to be. When you think about our enthusiast buyers, which is what we really track and go after, we said that we would see a stabilization coming off of the COVID time period. And that's what we're exactly seeing. It was roughly flat quarter over quarter at $16 million. We've been driving healthy buyer acquisition and buyer retention, especially in our focus categories. Our enthusiast buyers are spending over $3,000, which is essentially like membership level spends when you think about it. So our acquisition is healthier year over year. Our reactivation is healthier year over year. and our churn is down year over year. So we're pleased with what we're seeing on the buyer side, and we're continuing to lead in with new advancements and capabilities for buyers. You know, what I called out on the call is things like, you know, we have over 100 million vehicles stored in my garage, and we're using now predictive maintenance to say it's time to change, you know, this element for your car. Here's the parts on eBay that fit it exactly. They're backed by guaranteed fit. So we continue to build new tools for buyers to activate them onto the site and drive retention, and that's been working very well.
Justin Post
Analyst at Bank of America
Great. Thank you.
Jamie Iannone
Chief Executive Officer
Thanks, Justin.
Operator
Operator
Your next question comes from the line of Doug Enmuth from JPMorgan. Please go ahead.
Doug Enmuth
Analyst at JPMorgan
Thanks for taking the questions. Jamie, I just want to follow up on generative AI. Your comments were pretty interesting on how your large language models from scratch are working better. I was hoping you could talk a little bit more about that, some of the advantages that you're seeing. And then as you're doubling GPUs through 24, maybe Steve, can you talk a little bit about the impact there just on the product development bucket and how we should think about that in context of the deleverage that we saw last year on that line? Thanks.
Jamie Iannone
Chief Executive Officer
Yeah, Doug, one of the things I'm excited by is that, you know, we've had this model of building in a hybrid environment and having extremely large private cloud, which has allowed us to manage our cost infrastructure, even as we've grown to, you know, now close to 2 billion listings on the marketplace. But more importantly, the benefit of being able to take our 30 years of really rich data of e-commerce and combine that in a hybrid sense, in some case with open source LLMs, in some cases LLMs that we built, Another case with commercial LLMs makes us able to do those in a really efficient matter without really massively impacting our cost structure in any meaningful way. Also having good latency in terms of getting it back and also being able to fine tune the quality of the data of what's coming back from an inference has been important for us. So we've used across the board all different models. We started in some cases with some commercial models and then move those to open source or internal models. as we've refined them and gotten better. And that's been working out really well for us. Like I said earlier to the question about magical listing, when we look at the scale and volume of the millions of listings that we get each day and what consumers are hitting us with, making sure that we have an incredible amount of quality in terms of what's happening with the AI and ease of use. And thus far, really positive feedback from it. The models are working well. And what's great is that the team iterates every single week to make them better. Steve, maybe you just want to cover how we're managing the call.
Steve Priest
Chief Financial Officer
Yeah, of course, Jamie. Hey, Doug, good to speak to you. As Jamie said, we're really excited about the opportunity to drive further efficiencies and improve productivity across eBay through the AI technology. We're doubling our GPU capacity in the first quarter, which is going to give us a lot of expanded capabilities, specifically with regard to costs. The costs associated with Gen AI, including our GPU racks, are contemplated in our full-year capex guidance range, which we laid out. And it's pretty much in line with historical averages. All the OPEX costs are contemplated on our guide. I think it's fair to say our size and scale at eBay is a distinct advantage when it comes to this sort of additional infrastructure investment.
Jamie Iannone
Chief Executive Officer
Doug, the last thing I'd say is that that refers a lot to how we're using it with our consumers. I would say internally across the organization, we're also pushing very aggressively to drive productivity in the organization. So whether that be all of our engineers now using co-pilot tools as they do development. In our customer support centers, we've been using AI to really change the level of engagement we have with customers and the productivity. I call it the success of our employees there, where we summarize contacts from customers to make it easier, summarize initial responses. All the things that we can do when you think about our scale of over a million self-service queries a week in a customer service perspective, AI is incredibly helpful there. So those are just two examples of how we're using it across the board to drive productivity in the organization.
Doug Enmuth
Analyst at JPMorgan
Thank you both. Very helpful.
Operator
Operator
Your next question comes from the line of Lee Horowitz from Deutsche Bank. Please go ahead.
Lee Horowitz
Analyst at Deutsche Bank
Great. Thanks for the question. So your US business is stabilized at this point and is presumably set to return to growth sooner than the total. This is obviously happening in the face of U.S. e-commerce competition that has grown increasingly intense with the introduction of low-priced Chinese competitors. Can you maybe spend some time talking about how your strategy of leaning into enthusiast and enthusiast categories perhaps shields you from this incremental competition and any update holistically on maybe some of the vertical players and some of your key focus categories and how competition has evolved over the last year?
Jamie Iannone
Chief Executive Officer
Yeah, you know, specifically on the low price, if you're referring to like the T-Moves machine, we really haven't seen a significant impact from them on our business. You know, we really have a differentiated strategy with what we're doing with our focus categories and going after non-new in season for the business. And years ago, we really moved away from the low ASP, low quality items on our marketplace. And that hasn't been a focus for us for many years now. So I think, you know, that's the first key differentiation I'd call out. The second is that obviously some of the competition is spending a lot of money from a marketing standpoint in the marketplace, but one of the great benefits of eBay is just the vast amount of organic traffic we have. The vast, vast part of our traffic either comes directly to the app or types in eBay.com, so we're less reliant on paid from that perspective. The last thing I'd say comes back to kind of the CAC CLTV question, which is we can have one of the most healthiest CACs out there in the marketplace because of our ability to drive CLTV, really driving by the moves we've made to not be focused on active buyers, but really on acquiring enthusiast buyers or quickly moving new buyers up to become enthusiast buyers. And because of the cross category shopping nature of the business allows us to drive that CLTV higher for us. And then finally, the opportunity to turn them into sellers or to have buyers who sell on the marketplace also helps with that overall equation. And those are really key differentiators for us in business and why we feel really well positioned on a go-forward basis in the e-commerce landscape.
Operator
Operator
Your next question comes from the line of Tham Champion from Piper Sandler. Please go ahead.
Tham Champion
Analyst at Piper Sandler
Hi, good afternoon. Jamie, I'm wondering if you could talk a little bit more about the C2C initiative in Germany and maybe what's the one or two key features that allowed you to crack the code there in that geography. I know it's been challenged for a while. And then where do you take this next? I mean, presumably, does it port to the UK? How do you think about it expanding another geography? Thank you.
Jamie Iannone
Chief Executive Officer
Yeah, when you think about our focus category strategy of really kind of leaning in on this specific area, driving the CSAT to a whole double-digit level, we essentially apply that to a certain segment of our business in Germany to our C2C segment. And that's exactly what we're seeing, Tom, is greater than 20-point improvement in NPS in that business, which is really great for us. It's an important business. And what we really focused on was designing around the needs of the buyer. So that's search and SEO improvements specifically around language needs in that market. The second was really a focus on local and things like map-based browsing in that market. Given the geography of it, We have more of that type of business in Germany than we do, for example, in our U.S. business and leaning into it. And the third is doing pricing adjustments for our C2C business there, really leaning in to being able to drive buyers who sell and bring more C2C inventory on the marketplace. And that's been working well for us. We've seen double digit increases in buyers who sell on the platform and a really kind of healthy business there in terms of first gen listings, that type of thing. So, you know, with everything that we do, we look at, you know, what's successful, what do we take to other markets, and we'll continue to do that and look at that on a go-forward basis. But overall, we feel really good about the metrics that we're seeing in Germany and the health of the business and the strong numbers we're putting up despite, you know, negative e-commerce growth in that marketplace.
Ken Goralski
Analyst at Wells Fargo
Thank you.
Operator
Operator
Your next question. question comes from the line of Michael Morton from Moffitt Nathanson. Please go ahead.
Michael Morton
Analyst at Moffitt Nathanson
All right. Thank you for the question, too, if I could. Just following up on the opportunities around AI, there's a view in the market that it allows you to run more sophisticated campaigns when you have large SKU offerings, like big e-commerce platforms, So wondering if you're seeing a benefit of that now, if it's something that's always been a part of your business. And then we haven't seen the filing yet, but for the prior quarters, a lot of strength appears coming from China based sellers. So just wondering about moving parts there and the sustainability of that in 2024. Thank you.
Jamie Iannone
Chief Executive Officer
Yeah, look, the expansiveness of our marketplace is what allows us to really go after launching compelling gen AI features. So, Specifically in parts and accessories, for example, we use AI to expand the fitment capabilities of finding what vehicles a part will fit, but now we're using it for things like predictive maintenance and things like that. The vast majority of categories are really relevant for these horizontal innovations, things like magical listings, things like backgrounds, enhancers, etc., So search uses AI, advertising uses AI. So across the board, we're using it in very compelling places. We use it in our marketing to do much more personalized marketing, things like subject lines that can be really tailored based on what's happening on the business. When I think about our CBT business, it remains very strong on the marketplace. So, you know, we've built more and more features to make CBT easier for both buyers and sellers. I'd call out the work that we did in payments on buyer and seller FX, really making that seamless. We've talked over the last two quarters about eBay international shipping with the concept of really opening up the 190 different geographies that we have around the world to our sellers from that perspective. And so it will continue to be a focus. We'll continue to make it easier and easier for buyers and sellers to interact across borders and drive that strategy forward.
Operator
Operator
Your next question comes from the line of Alexandra Steger from Goldman Sachs. Please go ahead.
Alexandra Steger
Analyst at Goldman Sachs
Great. Thank you for squeezing me in. I do want to follow up on some of your macro comments. So how should we think about GMB or revenue per buyer in that context? To what extent do you see customers trading down in certain markets, or is it more of a function of buyers making less purchases over a given period of time? And if that's the case, what are kind of like the key initiatives you're working on to drive purchase frequency on the platform? Thank you.
Jamie Iannone
Chief Executive Officer
Yeah. So when you look at it overall, when you talk about something like the UK or Germany where the consumer is more stretched in cost of living challenges, et cetera, we tend to lean into the deals and values on the marketplace. So refurbished, used. And so it's not really impacting as much their overall business with us, more so in terms of the categories and where they're buying. So I'd probably say refurbished is a good example. Refurbished growth is up double digits. We've talked in the past that macro has pressured the spend and moved some of the enthusiast buyers to mid-value buyers. That's a little bit why we see the enthusiast number flat quarter on quarter, but we're pleased with that stability in this environment because it means the eBay value proposition is really resonating for those customers. In terms of driving frequency, it's one way where we're looking at things like All the programs that we have, whether that's Save Seller or Stores or the marketing that we put out to our customers, we're now able to use generative AI to make that experience so much richer. The combination of our internal LLMs and the data that we have about what's been happening over the 30 plus years combined with the ability to really build compelling marketing to those customers is coming to a whole new level. And Alexandra, I think we're just at the early stages of what's possible there. And what's exciting at eBay is the canvas that we have to work with. When you think about the number of consumers that have transacted with a given seller on the platform and have saved that seller, when you think about 100 million vehicles being in my garage, when you think about the sizing data that we have for people for apparel, it gives us the unique ability to drive a lot of frequency on the platform.
John Edbert
Vice President of Investor Relations
Operator, can we do one last question, please?
Operator
Operator
We have no further questions in our queue at this time. And with that, That does conclude today's conference call. Thank you for your participation and you may now disconnect.
Disclaimer