Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the eBay Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. Thank you. It is now my pleasure to turn the call over to the Vice President of Investor Relations, Mr. John Egbert. Sir, please go ahead.

Good afternoon. Thank you all for joining us for eBay's Second 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 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 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 July 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 all for joining us today. We delivered another solid quarter in Q2, exceeding expectations across all key metrics while investing in a disciplined manner to support our long-term objectives. Before I jump into the details around our second quarter results, I'd like to discuss the evolution of our strategy. Three years ago, I articulated our ambition of becoming the best global marketplace to buy and sell through a tech-led re-imagination of eBay. This would help us realize the enormous untapped potential of this company and put it firmly on a path to sustainable long-term growth. Since then, we've renewed our focus on products where we are uniquely positioned to offer meaningful choices and value for our customers. We've accelerated innovation to adapt to the changing needs of buyers and developed world-class shopping experiences in our focus categories. And we've changed our marketing strategy to support these experiences, pivoting to a full funnel approach aimed at attracting and retaining enthusiast buyers. These accomplishments make it a logical time to embark on the next phase of our journey. The foundational work of our tech-led re-imagination will continue, including our prioritization of non-new products, expansion of focus categories in ads and payments initiatives. And now we're raising the bar for innovation and have set our sights on an even more ambitious vision which is reinventing the future of e-commerce for enthusiasts only at eBay. We will achieve this vision in the coming years by focusing on 3 key pillars: relevant experiences, scalable solutions and magical innovation. Let's start with our first pillar, relevant experiences. This means we are solving the specific and ever-changing needs of our customers across all shopping occasions. Through our focus category strategy, we've proven that when we build relevant experiences, we can dramatically improve customer satisfaction which translates into faster GMV growth. While we'll continue to understand customer needs and innovate at the category level, we will leverage the new tools, capabilities and technologies we have developed over the last few years to enhance more elements of the site-wide experience. This includes developing a more relevant, consistent experience for the next generation of online shoppers through a comprehensive overhaul of our user experience and design rolled out in phases over the course of 2023 and beyond. This evolution will result in simpler, more personalized browsing experiences that will inspire people to sell, shop and connect with their community on eBay. This initiative is a cross-collaborative effort between design, product, core AI, search, engineering and other key stakeholders to ensure our modernized shopping experience is powered by intelligent computing at scale. Enabled by artificial intelligence, we will fine-tune the breadth of inventory and other aspects of the shopping journey to cater to the varying needs of new buyers, infrequent shoppers and eBay enthusiasts. We believe these innovations will increase our ability to bend cohort curves, drive higher lifetime values and ultimately grow enthusiasts and average spend per buyer. We began rolling out these changes to consumers in recent months, starting with testing a more modern and intuitive view item page, which is the most visited page on eBay. The updated page offers a streamlined appearance, larger and higher resolution images and an optimized information hierarchy. Early tests indicate a measurable uplift in GMV versus our existing design. Over the next few quarters, you will see a continued evolution of the look, feel and experience of our marketplace, including updates to view item, our header, homepage, search results and other landing pages. Alongside this work, we're investing in new capabilities for search, where relevance is also critical. We're investing in technologies like deep learning and visual similarity to improve ranking and retrieval, reducing queries with low or no results to see if there's more of our amazing inventory for customers. Now let's turn to our second pillar, scalable solutions. Combined with improving relevance, our scale is a powerful asset. As we discussed at our Investor Day last year, eBay has 5 categories that each generate more than $10 billion annually in GMV, making up more than 80% of volume on our marketplace in aggregate. Our global footprint across 190 markets and density of supply and demand across major trade corridors are tremendous advantages in cross-border trade, and our proprietary data assets are powered by tens of billions of cumulative transactions and commercially relevant product information and images accumulated over our nearly 28-year history. Our scale enabled us to launch a proprietary managed payment solution capable of processing more than $70 billion in annualized volume in less than 2 years. It also allowed us to build our nearly $1.3 billion advertising business driven by Promoted Listings, which help our sellers drive greater velocity and price realization for their inventory. Ads and payments have dramatically enhanced our financial architecture. But now we are widening the scope of scalable solutions on eBay to develop a broader suite of value-added services. Our payments infrastructure makes it possible for us to launch new financial services like FX conversion, alternative payment options and seller financing partnerships informed by transactions on eBay. We're also investing in improved in-house risk modeling to alleviate transactional friction for sellers and buyers on eBay, which has led to measurable uplift in conversion and hundreds of millions of dollars of incremental GMV during the first half of 2023 alone. Our scale and cross-border capabilities allowed us to launch the eBay international shipping program earlier this year. This program simplifies paperwork, lowers cost for buyers, streamlines returns and enables sellers to tap into our global demand. While this program is still ramping up in the U.S., we are seeing positive proof points in the number of listings migrated, increased exportability of new listings as well as conversion, delivery times and operational costs in line with our expectations. The cross-category nature of eBay makes our investments in individual focus categories more scalable to other areas. This is because technology and capabilities that are developed for one category can be adapted quickly and seamlessly to others. For instance, eBay's Authenticity Guarantee program has enabled us to rapidly transform trust across new categories and countries, from watches to sneakers, handbags, jewelry and trading cards. Now it's faster and more cost-efficient to launch authentication for a new category like we did this quarter with streetwear. We believe only eBay is in a position to bring hyper relevant experiences like these to customers at scale across this breadth of categories. Lastly, our third pillar is magical innovations. The foundational work we've accomplished over the past 3 years has set us up for a new phase of innovation. Our teams are focused on thinking bigger and moving faster as we build game-changing features and functionality for customers to keep eBay at the forefront of e-commerce. Our improved tech velocity has allowed us to launch and rapidly iterate on exciting features like live commerce. Other examples include the ability to instantly buy and sell trading cards in the eBay vault and our improved computer vision capabilities that streamline buying and selling on eBay. Over the next few quarters and years, we expect advancements in artificial intelligence, including Generative AI to impact nearly every aspect of our organization, driving meaningful efficiency and productivity improvements. More importantly, they enable truly compelling customer-facing experiences that I'm confident our customers will love, such as the Magical Listing experience I'm excited to discuss with you shortly. You will continue to hear us talk about the progress of our evolved strategy and how we're delivering on the three pillars of relevant experiences, scalable solutions and magical innovation. This work is all in service of our plan to reinvent the future of e-commerce for enthusiasts only at eBay. As I've mentioned, these efforts are already underway, and we've begun delivering these innovative features and functionality to eBay customers. Now let me turn to the second quarter. We delivered better-than-expected results across the board in Q2 despite continued macro uncertainty. Gross merchandise volume was over $18.2 billion while revenue grew 5% to $2.54 billion and outpaced GMV growth by roughly 6 points, and we delivered non-GAAP earnings per share of $1.03, up 5%. Our improving growth trends continue to be led by our focused categories, which grew roughly 7 points faster than the remainder of our marketplace during Q2. This outperformance continues to be led by motors, parts and accessories or P&A where GMV grew mid-single digits year-over-year for the second straight quarter, which we believe is in line with market rates of growth for this segment of e-commerce. We also extended our focus category coverage through new launches and category expansions during the quarter. In early June, we launched Authenticity Guarantee for streetwear in the U.S. and are now authenticating new and pre-owned streetwear items from 20 trusted brands, including Kith, Off-White, Palace and Supreme. In July, we expanded eligible streetwear to mass appeal brands like Adidas, Jordan and Nike. And later this year, we'll expand coverage to luxury brands, including Gucci, Prada, and Louis Vuitton. This marks our entry into authenticated apparel, a category that has strong overlap with our passionate community of sneaker enthusiasts, adding another layer of trust when they shop. In April, we launched a Certified by Brand program, which we also expect to facilitate more e-commerce in the luxury space. There are already more than 20 brands participating in this program. offering new and certified preowned inventory across the watch, jewelry and handbag categories. Listings from this program will show a direct-from-brand or brand-authorized seller badge, bringing an enhanced level of trust to these listings similar to visual trust signals for Authenticity Guarantee. Brands benefit from eBay's scale demand, gain access to consumer and pricing insights while being able to maintain control of their brand equity and image online. eBay shoppers will benefit from these brands' unique inventory and enhanced trust as these products will include certifications and/or warranties from the brands themselves. Our expertise in fashion is further extended by our recently closed acquisition of Certilogo, a provider of AI-powered authentication for apparel. Certilogo empowers brands and designers to manage the life cycle of their garments, protect their customers from counterfeits and encourages e-commerce via QR codes that serve as digital product passports. While we are just beginning to explore the synergies between our companies, Certilogo already works with a number of leading global fashion brands, and we are incredibly excited to leverage this technology to accelerate the circular economy. Next, I'd like to discuss the groundbreaking work our team is doing with artificial intelligence. In particular, I'm excited to announce that this quarter, we're ramping up a new feature we've been calling Magical Listing, which will make it significantly easier for sellers to list their inventory. One of the biggest challenges to operating a listings-based marketplace is the burden on sellers to fill in descriptions and item aspects for their products. In May, we launched the first version of our Magical Listing experience, which dramatically reduces this friction for our sellers via AI-generated item descriptions. We integrated Azure's open AI API into our core listing flow. And now sellers can choose to have detailed product information instantly populated by Generative AI based on the product's title, category and any item aspects that have been input. During the quarter, we ramped this beta feature to more than 50% of iOS and Android users in the U.S. and expect to reach 100% in the coming weeks. Early signals have been extremely positive. Approximately 30% of users have tried the feature at least once, and we've observed acceptance rates of over 90% for AI-generated descriptions, including those with edits. Customer satisfaction is over 80% thus far, which is among the highest CSAT for any new feature launched in recent memory. Sellers have told us that this feature will unlock more of the unique inventory in their closets. And on average, we are seeing description lengths double when Gen AI is used. But we are just getting started. The next iteration of our Magical Listing will leverage our improved image recognition capabilities to provide flows with the option of a more seamless camera-based listing. Sellers can utilize their smartphone camera or existing photos to start a listing. And based on our visual understanding of the products, the eBay app can pre-populate the title, category, description and item specifics wherever possible. We have been testing this tool with our employees for several weeks, and we're incredibly excited to launch in public beta in the coming months. The advent of Generative AI has sparked an explosion of creativity at eBay among our product and engineering teams who have conceptualized new and innovative shopping experiences that can be rapidly deployed onto the site. Two compelling examples that launched in July are the Shop by Upgrade and engine code lookup features that went from concept to production in the eBay Motors app in just a few weeks. Shop by Upgrade uses Generative AI to help customers discover the most relevant fitment-enabled upgrade options for their vehicles, which are personalized based on a specific user's preferences. Engine code lookup offers specific P&A products available on eBay that can address the root cause of hard-to-decipher error codes, aiding them in identifying and fixing the source of the problem. I'm thrilled to see how quickly our teams are moving with this technology at their disposal and look forward to more of these experiences launching in pilots in the months ahead. Turning next to our advertising business, which continues to build impressive momentum. We reached a major milestone in Q2 as advertising revenue reached 2% penetration of GMV. Total ads grew 35% while first-party ad revenue grew roughly 50 points faster than GMV. Over 2.1 million sellers adopted a single ad product in Q2, while we reached more than 800 million live promoted listings. Promoted Listings Standard, our CPA product was again the largest contributor to growth in Q2, driven by attribution enhancements, continued optimization and ad rate improvements. At the end of March, we adjusted our attribution methodology for CPA ads, expanding the definition of what constitutes a qualified sale. This change, referred to as a halo attribution in the industry, enabled us to more efficiently optimize our ads as we capture a more complete picture of the downstream sales driven by promoted listings. While sellers maintain the full flexibility to adjust their bidding behavior after this change, halo attribution had a net positive impact on our ad business in Q2. During the quarter, we also introduced a new way to rank ads on search which leverages our in-house AI capabilities to optimize CPA placements for both conversion and ad rate. Additionally, we improved our precision in calculating trending and suggested ad rates and made it easier to adopt dynamic bidding, both contributed to a modest lift in Q2 ad rate. Our emerging Promoted Listings products also scaled nicely in Q2, growing more than 30% quarter-over-quarter. Promoted Listings Advanced, our CPC product was the largest contributor. Advanced recently exited beta into general release as we have simplified the process of creating and managing campaigns, increased the visibility of CPC ads on eBay and demonstrated healthy return on ad spend levels to sellers. During Q2, we introduced suggested campaigns for Advanced, which provide a one-click activation experience by offering customized keywords, bid and ad group structures for B2C sellers across 5 major markets. These campaigns were pushed out to sellers on a monthly cadence and can drive further adoption of CPC ads. Now let's discuss the impact we're having on the communities we serve. Last quarter, we published our annual impact report, which recognizes the progress we've made to our environmental and social goals. As a pioneer of e-commerce, we are committed to helping sellers earn extra cash selling pre-loved items and helping buyers find items of value while promoting a healthier planet and economy. I'm proud that we continue to make important strides to our own climate goals while leading sustainability throughout our company culture and philanthropic efforts. Additionally, we will soon publish our first ever U.K. social impact report, which takes a closer look at the programs we're delivering for hundreds of underserved entrepreneurs, social enterprises and charities in the U.K. This includes programs like eBay for Change, which supports social entrepreneurs and creates jobs in marginalized and vulnerable communities. Another program with considerable impact is eBay for Charity which raised more than $38 million during the quarter. And I'm excited to announce that Engage for Good, a nonprofit organization dedicated to supporting the practice of cause marketing recognized eBay for Charity as a 2023 charity checkout champion. In closing, I would like to thank our incredible employees for another strong quarter of execution and for continuing to bring our strategic vision to life. I have never been more confident that we are on the right path to unlocking our enormous untapped potential and reinventing the future of e-commerce for enthusiasts only at eBay. Our focus on relevant experiences, scalable solutions and magical innovations will greatly benefit our loyal community of sellers and buyers in the quarters and years ahead as well as better cater to the needs of the next generation of online shoppers. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

Thank you, Jamie, and thank you all for joining us today. I'll begin with highlights from the second quarter on Slide 10 of our earnings presentation. Next, I'll review our key financial and operating metrics in greater detail. Finally, I'll provide our outlook for the third quarter and offer some additional commentary on the remainder of the year before we begin Q&A. As usual, my comments will reflect the year-over-year comparisons on an organic FX-neutral basis unless I note otherwise. We delivered solid results in Q2 as our GMV, revenue and EPS exceeded expectations and came in at or above the high end of our guidance ranges despite ongoing macroeconomic uncertainty. Gross merchandise volume was down 1% to $18.2 billion, an improvement from down 3% in Q1. Revenue was up 5% to $2.54 billion, which outpaced volume by 6 points, driven by accelerating growth within our advertising business. Non-GAAP operating margin is 26.9%, down roughly 1.7 points year-over-year, primarily due to the impact of eBay international shipping ramp and recent M&A. We delivered $1.03 in non-GAAP earnings per share, up 5% year-over-year. And we generated $492 million of free cash flow while returning $383 million to shareholders through repurchases and dividends. Let's take a closer look at the key drivers of our financial performance during the second quarter. Gross merchandise volume was down 1% to $18.2 billion, an improvement from down 3% in Q1 due to continued momentum within focused categories and a notable acceleration in cross-border trading. Foreign exchange represented a 1 point headwind to reported GMV growth in Q2. GMV growth in our focus categories accelerated modestly and outpaced the remainder of our marketplace by roughly 7 points during the second quarter. We launched a new focus category in U.S. streetwear, extended trading cards to Canada and broadened our inventory coverage in sneakers, handbags and jewelery which drove a sequential increase in GMV coverage. P&A was once again the largest contributor to GMV growth among focused categories, growing in the mid-single digits year-over-year in line with estimated market growth in this segment of e-commerce. eBay Refurbished maintained healthy double-digit growth in Q2 and was the second largest contributor to focus category outperformance as consumers continue to turn to eBay for value in the current economic climate. Next, looking at our business on a geographic basis. U.S. GMV was down 4% organically in Q2, as domestic buyers continue to favor imports due to diminishing headwinds within global supply chains that benefited cross-border trade. International GMV grew 1% on an FX-neutral basis, accelerating by roughly 2 points sequentially. Although e-commerce growth remains weaker outside of the U.S. amidst heightened macro challenges, international GMV benefited from a sequential acceleration in volume from cross-border trading. Moving to active buyers. 132 million active buyers shop on eBay during the trailing 12 months ending in June, down 1 million quarter-over-quarter. Excluding M&A and buyers from our Turkey business, where we've ceased operations in July of last year, we had 131 million active buyers, roughly flat versus Q1. As we lap the Turkey closure this month, this factor will no longer be a headwind to reported active buyers next quarter. The continued stabilization of our buyer count was driven by the four straight quarters of positive year-over-year growth in new and reactivated buyers, which was again led by double-digit growth in buyers from P&A. In isolation, new buyers grew year-over-year for the second straight quarter, while growth by our churn has steadily improved throughout 2023. Enthusiast buyers was stable at 16 million in Q2, as net migration patterns improved slightly quarter-over-quarter. Spend per enthusiast grew modestly year-over-year, averaging roughly $3,000 annually. Turning to revenue. We generated net revenue of $2.54 billion in Q2, up 5%, an acceleration of roughly 3 points versus Q1. Total FX-neutral revenue growth, inclusive of M&A, was 6% while currency was a 1 point headwind to reported growth. Our take rate was 13.9% in Q2, more than 30 basis points sequentially and up nearly 90 basis points year-over-year. Advertising revenue was the largest driver of our take rate growth, both sequentially and year-over-year. eBay international shipping and recent M&A in aggregate contributed nearly 10 basis points to our Q2 take rate sequentially, while new payment services contributed roughly 2 basis points. Foreign exchange represented a sequential headwind of approximately 10 basis points to take rate in the second quarter. Our advertising business accelerated notably in Q2 as total ad revenue grew 35%, a 12-point acceleration versus Q1. First-party ads grew 49% or roughly 50 points faster than volume as the GMV delta widened by 17 points sequentially. However, roughly 4 points of this gap were related to a one-time accounting adjustment of deferred revenue on cost per click ad fees following the halo attribution change Jamie discussed earlier. The deferral release brought forward approximately $9 million of ad revenue to Q2, which we will lap in Q3. The outstanding results within our ads business were driven by continued optimization of promoted listings standards and the expansion of our emerging products like advanced and external promoted listings. As we lap one-time factors like our ad portfolio expansion, recent product optimization wins, halo attribution and the one-time accounting change, we do expect the GMV delta to narrow from current levels. However, we still anticipate advertising revenue will outpace GMV for the foreseeable future. Moving to profitability. Non-GAAP operating margin was 26.9% in Q2, down 1.7 points year-over-year. Roughly 1.5 points of this delta is due to the combination of eBay international shipping and recent M&A, while FX also represented a modest year-over-year headwind. Gross margin was down roughly 80 basis points year-over-year, primarily due to a 1 point headwind from the progressive ramp of eBay international shipping which was partly offset by an increase in take rate driven by ads and other monetization efficiencies. Sales and marketing as a percentage of revenue was down nearly 80 basis points year-over-year in Q2 as our continued investment in full funnel marketing initiatives was offset by leverage on monetization efficiencies and lower spend on coupons and incentives. Product development rose by 1.1 points as we continue to invest in product and engineering talent to accelerate innovation across the platform. Our G&A expense rose by roughly 60 basis points, driven by M&A and higher employee spend. We generated non-GAAP earnings per share of $1.03 in Q2, up 5% year-over-year, benefiting from a 4% net reduction in share count from our repurchases. We delivered GAAP earnings per share of $0.32 with the delta primarily driven by unrealized losses on our equity investment portfolio. Turning to our balance sheet and capital allocation. We generated free cash flow of $492 million in Q2, up 6%. Our balance sheet position remains robust, and we ended the quarter with cash and non-equity investments of $5.3 billion and gross debt of $7.7 million. We repurchased roughly $250 million in shares at an average price of approximately $44 during Q2 and have roughly $2.3 billion remaining under our current buyback authorization. We paid a quarterly cash dividend of $133 million in June or $0.25 per share. Our investment portfolio is detailed on Slide 20 of our earnings presentation. Our major equity investments and warrants were valued at over $3.4 billion at the end of Q2. This represents a decrease of approximately $200 million sequentially, driven primarily by the recent share price decline in Adevinta. Moving on to our outlook. For the third quarter, we forecast GMV between $17.6 billion and $18 billion, representing organic FX-neutral growth between negative 4% and negative 1% year-over-year. We expect revenue between $2.46 billion and $2.52 billion, representing organic FX-neutral growth between 2% and 4% year-over-year. We anticipate non-GAAP operating margin to fall between 25.8% and 26.5%, and we forecast non-GAAP earnings per share between $0.96 and $1.01 representing EPS growth between negative 4% and positive 1% year-over-year. We are currently planning our business around the assumption of total FX-neutral GMV growth between negative 2% and negative 1% year-over-year for the full year of 2023. We expect revenue to outpace GMV by approximately 4.5 points for the full year on a spot basis. Although FX-neutral revenue growth should continue to outpace GMV by mid-single digits during the second half, at current FX rates, our year-over-year growth in spot revenue and GMV would converge in Q4 as we lap significant FX hedging gains in the prior year period. We are now planning for full year 2023 non-GAAP operating margins between 27% and 27.4%. Our margin assumptions contemplate a year-over-year headwind of roughly 1 point from the combination of recent M&A and the eBay international shipping program. However, we do expect the operating margin impact from EIS to abate by the fourth quarter. Our margin assumptions imply more than $100 million of OpEx savings from our structured cost program in 2023, which will be redeployed into strategic objectives. If foreign currencies follow the current rates, FX would represent a tailwind of roughly 0.5 point to GMV growth for the full year in 2023. However, FX would represent roughly 0.5 point headwind to operating margin for 2023 with approximately 2 points of impact during Q4 alone due to hedging gains in the prior year period. FX also represents more than a 2-point headwind to non-GAAP EPS for the full year. Lastly, for the full year, we expect to generate just under $2 billion in free cash flow. Due to California state disaster tax relief, the majority of our cash tax payments scheduled for 2023 have been deferred and will be paid in October. As such, we expect the bulk of our remaining 2023 free cash flow to be recognized in Q3. We estimate our non-GAAP tax rate will remain unchanged at 16.5% throughout the rest of 2023. Our capital expenditures for the full year are still estimated to be between 4% to 6% of revenue. In closing, Q2 was another strong quarter for eBay as we delivered against our quarterly financial commitments and made significant progress on our long-term strategic objectives. Focus categories expanded in coverage and positively influenced growth for the marketplace overall. Our advertising business is driving robust growth at scale as first-party ads meaningfully accelerated relative to GMV. We continue to invest in product and full funnel marketing initiatives in a disciplined manner laying the foundation for sustainable growth, and we generated $492 million of free cash flow, returned $383 million to shareholders through repurchases and dividends and have returned roughly 130% of free cash flow to shareholders over the last 18 months. I continue to be inspired by the accelerating pace of innovation at eBay as we reinvent the future of e-commerce for enthusiasts. With that, Jamie and I will now take your questions.

[Operator Instructions]. Your first question is from the line of Eric Sheridan with Goldman Sachs.

Maybe bridging the strategy to potential impact for the P&L. When you think about the 3 pillars you laid out that you're investing behind over the medium to long term, how should we think either collectively or individually of those pillars as drivers of either buyer growth, continued ramp in spend per buyer and/or potentially amplifying ROI on the platform over the medium to long term?

Yes. Look, we're excited about the evolution of our strategy here with reinventing the future of e-commerce for enthusiasts. When you look at the pillars, Eric, first on relevant experiences, we've had a lot of success with this to date, right? Our focus categories have been about creating relevant experiences in specific categories and we've seen a CSAT change, a GMV change, et cetera. And so we're expanding this now to kind of every site-wide experience that we have on the site, including a new design for Gen Z shoppers, including going to every e-mail, every notification. And frankly, new technology and tools enable us to do that. And so we feel really great about that and the impact on customer satisfaction and on GMV. On the scalable solutions, think about all the foundational work that we've done in payments and really being able to take that to the next level with things like financial services and building on that or eBay International Services. When you combine the scale of eBay in 100 countries with the GMV that we do, we're able to roll out programs like the EIS, eBay International Shipping, and open up that opportunity for our sellers and just drive a lot more cross-border trade and a lot easier experience for our sellers. And then think of magical innovations is really raising the bar on the experience that we're going to have on the site. I talked about some of the new AI products that we're launching. I mean, these are products that are out the gate having over 80% customer satisfaction, having sellers tell us this is going to unlock more inventory because you're making it so easy to list on the platform, products like live commerce. We've now done over 300 live commerce and sellers and buyers are getting really engaged in that. And so that opportunity for us is to drive that customer lifetime value for a buyer as well as attract those new buyers on the platform. What I'm excited by is really the intersection of a couple of these. When you think about the intersection of relevant experiences combined with scalable solutions, only eBay can provide that, and that's why we think we're going to be able to reinvent the future of e-commerce in a really uniquely eBay way.

Eric, if you think about the financial architecture in terms of linked to the P&L, you're seeing us continue to invest. The underlying business, as we're moving forward is in a very healthy space. We're seeing great momentum not only with the focus categories, but also the monetization initiatives and the strength on the horizontal platform. And so we continue to invest to drive the momentum in the underlying business. We remain committed to the architecture that we put out back at our Investor Day last year with the sorts of mid-single-digit GMV growth and the P&L architecture that comes off the back of that. The timing of that, as we always said, will be a function of the macro environment that we continue to operate in. So hopefully, that covers the question for you from the link between strategy and architecture.

Your next question is from the line of Nikhil Divani with Bernstein.

My first one is on margins. I think the operating margin has kind of stepped down this year, and that's continuing to the back half as well. Can you just talk about the primary factors that are weighing on that and the degree to which they are temporary versus structural? I know you're not guiding to '24 yet, but when you think about next year, what are the levers that would allow you to improve from this kind of 26% margin level?

Let me give you a little bit of color on the year-over-year margin. Obviously, we have seen some modest deleverage associated with the current macro environment, which obviously reflected in our full year GMV commentary, and that's bringing a lot of pressure on margins. I would refer probably to 4 discrete items that have impacted 2023. Firstly, we've talked about eBay international shipping. This is both strategically important for us as we open up the aperture across 132 million buyers across 190 countries and gives us a great opportunity to drive more commerce through eBay and, at the same time, drive accretive operating profit dollars. As a reminder for you all, we are now the principal in that relationship versus an agent and, therefore, the accounting treatment has impacted our margins in '23. The second item will be around M&A. We have been more acquisitive of late to drive sustainable long-term growth in the business. And as I mentioned in our prepared remarks, we would expect EIS and M&A together to be a 1 point headwind to margins in '23. The third element, which is slightly nuanced is the FX fluctuations and lapping that we have seen or will see through the second half of the year. We did benefit from significant hedging gains in the fourth quarter of 2022, which we will ultimately lap. And in totality, that will equate to 0.5 point of FX-driven margin dilution for the full year and 2 points in quarter 4 alone. And then finally, obviously, the reinvestments in our business. We are seeing focused category momentum, 7 points of growth over the core platform, horizontal investments in search and buyer and seller experience are driving dividends. And obviously, the investments in our monetization initiatives like payments and ads is bearing fruit. And so as I think about margins for 2023, we have some unique items, as I've said, such as eBay International Shipping, the M&A and the FX fluctuations we've talked about. But we've also been investing in the business because we feel very confident about the trajectory of the business and how it's driving long-term sustainable growth. I think that as it pertains to 2024, I'm not going to get ahead of myself. We've given you a lot of color for the third quarter. We've added some color for the full year. We are -- remain committed, as I mentioned to Eric, to the medium-term goals that we've put out at our investor event. This will really -- the timing will be the function of the duration and severity of the macro headwinds we're currently facing. And obviously, we'll give additional color for '24 in the quarters ahead.

And you alluded to that Investor Day GMV framework, which kind of assumed the non-focus categories would be flat. I guess what's the strategy in your playbook to ensure that those non-focus verticals also remain stable going forward?

First of all, our strategy when we go back to it in terms of relevant experiences on the site, we're doing a lot of work outside of just the work that we're doing in focus categories. In fact, the majority of our investment is going there. So if you think about the magical listing experience, that's going to help unlock C2C inventory across every category on the site. The second thing I would say is that when you think about our model and what we laid out, we have a real multiplier effect on our buyers. So as we continue to roll out focus categories and as we're seeing success there, that actually helps lift all tides across the eBay marketplace. So take a sneakers buyer. The average sneaker buyer comes in and buys sneakers over $100, they're going to spend $400 in sneakers but then $2,000 on the rest of the platform outside of that. And that nature really allows us to help grow the overall marketplace, including our non-focus categories. The last thing I'd say is when you think about things like the scalable solutions that we're building, take eBay international shipping, that's going to help every category. That's going to help focus categories like handbags coming out of Japan, et cetera, but it's also going to help our non-focus categories. And when you think about cross-border trade on the platform, it's really 1 in 5 transactions or 20%. So it you a lot of opportunity, both in our focus category work and the non-focus category work, and we feel committed and confident in our ability to get those to fly in the medium term.

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

I would like to maybe start off with EIS being deployed in the U.S. currently. If we could talk about any contributions you're seeing at this point to U.S. GMV. And maybe some color on timing and kind of contribution expectations going forward would be great because it seems like it's a program that you're very excited about. And then a second question, we've talked about the full funnel marketing spend in the past, and you've mentioned millennials and Gen Z and the active buyer numbers have been improving. I was -- would love to dig down on those cohorts maybe a bit or if you could kind of bucket the strength you're seeing in active buyers. Are you having some effectiveness in converting the millennials and Gen Z who have maybe grown up in a different era of interacting with marketplaces?

Yes. Okay. So first, let me talk about eBay international shipping. So the whole program makes cross-border shipping and selling much easier. So eBay handles the custom forms, we handle the duties. We handle the immediate returns. And sellers are protected from things like item not received claims on the platform. So we're in the process of basically rolling this out. Most sellers are adopting it. And while it's early days for the new program, we're seeing a really positive reception from sellers in terms of shippable listings, the conversion that we're seeing, et cetera. Why we're excited by it is because 20% of the business on eBay is cross-border, but less than half of our big 3 inventory is available to be shipped internationally. So opening up that inventory, we think, is a unique advantage for eBay and a unique value proposition for our sellers on the marketplace. When you think about the full funnel marketing that we're doing and that shift, we're really seeing it pay off in terms of our buyer strategy. So this quarter, we saw, once again, new or reactivated buyers was positive for the fourth straight quarter. Our new buyer growth was positive for the second quarter. And take a category like P&A where we've been doing full funnel marketing, really targeting on enthusiasts, there, we're seeing that new and reactivated buyer growth being double digits faster than the rest of the platform. So we feel really good that the investments that we're making are driving the right buyer outcomes. They're exactly where we expect them to be and where I've been talking that they would be. And when you look at it, categories like what we're doing in sneakers. This quarter, we just launched Authenticity Guarantee for streetwear, which is a great kind of Gen Z younger consumer category. We're in the middle of sponsoring fashion island -- sorry, Love Island in the U.K., which is kind of currently on air right now, sponsored by our eBay U.K. business, also bringing in a different type of cohort. So we feel really good that the strategy is working. We're bringing in the enthusiast buyers that we want and that we're seeing a great payoff out of the full funnel marketing approach.

Your next question is from the line of Ken Gawrelski with Wells Fargo.

A couple of more kind of macro and competitive questions, please. First, could you just speak to where we are in the evolution of the consumer preference for goods versus services? Have you seen a normalization of that trend? And has there been any benefit yet in results? And then the second one, could you just speak about the competitive environment, especially in the kind of the lower end of the market, maybe where we've seen in the market where there have been some aggressive moves by China drop shippers. Anything you could touch on there, any impact you may be seeing and what actions you might be taking to combat those efforts?

Yes. So look, on the first one, clearly, inflation and rising are impacting discretionary demand. I think what makes our platform more resilient is that consumers can come here and find amazing values. So if you think about the refurbished category, which has been a focus category of ours, that grew double digits year-over-year and was the second largest contributor towards our focus category outperformance. In general, on the platform, we're seeing used growing faster than new. And that's what's great about eBay on the buy side. On the sell side, it is also a place to make extra income. And so we're really leaning into what we're doing on a C2C standpoint, including the new Magical Listing rollout because tougher economic times are an opportunity for us to bring more sellers onto the marketplace. When you think about the kind of a lower ASP market or the cross-border trade, as you mentioned, we noted that this quarter, we're actually seeing some strength in the cross-border trade of our business. That has to do with supply chain easing up and there being an opportunity for those sellers to export items in. And so we're actually seeing good health in what we're doing from a cross-border trade business. We've been doing a lot to enable that and make it easier. I talked about eBay international shipping, but we've also been rolling out new capabilities and payments over the past couple of quarters. with buyer and seller FX to make the payments process of that easier. And we've been working on with some of our sellers to do forward deploying of our inventory which has just helped kind of ease some of that supply chain pressure. So overall, we feel really good about the values that people are getting from this and the initiatives that we're investing in to make it easier for our sellers to export items throughout the globe.

Your next question is from the line of Deepak Mathivanan with Wolf Research.

Two quick ones from us. First, can you add additional color on the factors driving strong trends in the first-party ads business? Are sellers also seeing additional performance gains or is this primarily driven by expansion in ad load in some of the areas of the website? And then second, on M&A, Steve, you alluded to kind of being acquisitive, how should we think about the appetite over the next few quarters? Are there any specific areas where you think there are additional opportunities?

Yes. So our first-party ads is really a success based on the execution of the team and what we're seeing in terms of return on ad spend. So this quarter, we grew 49% year-on-year. Some of that is due to some one-time factors. Steve talked about the accounting change that we've had. We also talked about the halo attribution that we rolled out for sellers. But in general, it's really based on the success of the products and the innovation that we're seeing. So if you look at our Promoted Listing Standard, it continues to be the workhorse of our advertising portfolio where we're driving more optimization and more relevance. And secondarily, when you look at our new products, they once again grew 30% quarter-over-quarter. They're the -- key one being Promoted Listings in Advanced. And the team continues to innovate to make it easier for sellers. So this quarter, we launched a feature called suggested campaign which makes it easier for sellers to add Promoted Listings Advanced to the work that they're already doing in advertising. And as we talked about, we now have 2.1 million sellers using the product and 800 million listings. So we feel great about the growth that we're seeing there. As Steve commented, some of that gap will narrow because of some of these onetime factors, but we see revenue continuing to pace out GMV because of the success of what we're doing in ads. Steve, maybe you want to take the second one?

Yes. So we've been very thoughtful and considerate as we've looked to M&A, it's really to structurally improve the core marketplace. And so if you think about where we've , my shipment is really helping fuel and support the growth in parts and accessories, our biggest focus category. We recently launched in the TCG Player, which is supporting our trading card business. And Certilogo, which is the most recent acquisition really supporting our fashion category. So we've been very, very thoughtful about the entities that we lean into and partner with or we ultimately buy to really support the long-term sustainable growth of the platform, and we'll continue to be thoughtful. And as a group, we look at each potential acquisition on its merits and make the best decisions to drive long-term sustainable growth and shareholder value.

Yes. And I'd just add, if you look at Certilogo as an example, it's a perfect acquisition for eBay. They have great relationships with brands. They're driving this ability to have these unique QR codes to make sure that products are authentic, and it's leading into a trend that we're seeing, frankly, two trends. One is the younger Gen Z consumer caring more about sustainability and preloved and what happens with garments. And frankly, governments and regulators, especially in Europe, making sure that products don't go into the landfill, but they get a second and third and fourth life, which drives consistently right into the strategy that we've been talking about as the pioneers of e-commerce and driving the circular economy and driving the benefits for the overall planet.

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

We were positively surprised by international GMV growth this quarter while domestic was maybe a little bit lower. Just curious, any context or one-timers to consider here? And Jamie, I'm curious with the marketplace essentially flat year-over-year for the first half, would it be reasonable to expect GMV to return to positive growth in '24. Maybe for Steve. It's a more reserved year for buybacks. Any reason why you wouldn't monetize the Adevinta stake to bridge the gap between the current period and maybe a return to GMV growth? Any comments on those would be really helpful.

Tom, I'll pick up the first one and the third. I'll let Jamie comment on the second. So the first one with regards to international versus U.S. GMV dynamics, there's a couple of items that are worth reflecting on. As a reminder for you all, the GMV is reflected on the geography where the seller is domiciled, i.e., where the sale takes place. So first, it's associated with lapping dynamics. If you recall, Europe, in particular, got hit harder as we sort of went through the awful events of the war in Ukraine and the economic fallout associated with that. And they got hurt earlier, and we started to lap through that versus the U.S. in the first half of 2022. Secondly, we saw the supply chain challenges that we're also lapping and the easing of those supply chains, particularly for our cross-border business that Jamie talked about earlier is helping drive international GMV momentum as we have an increase in cross-border trade, obviously fueled by some of the benefit from eBay international shipping. The one thing I would say on the overall GMV basis, I continue to be very enthused by the overall level of momentum because we're leaning not only to focus category in the U.S. but also internationally, and those investments are bearing fruit across all of our geographies. Jamie, do you want to just touch on the other question before I talk about capital...

Yes. Look, I think the momentum we're seeing is a reflection of the strategy that we have laid out and seeing it working. So if you think about focus categories, which was our largest one that we've -- we took on P&A, which was our largest one that we've taken on to date, having that grow mid-single digits, the category over $10 billion and be at market rates of growth speaks to the fact that we know how to roll out this playbook and make it successful. And frankly, we're continuing to invest back into categories that we've already launched because of the return that we're seeing. We feel good about things like what we're seeing in refurb with the double-digit growth, et cetera, the success that we're seeing in ads and payments. So we're really happy with the momentum that we have there. As Steve talked about, we'll kind of deal through the macro pieces. But we're continuing to invest behind the strategy because we feel like it's working and the investments are really paying off for the customer and for shareholders.

Tom, specifically pertaining to your question on capital returns, we remain committed to the return of 125% of free cash flow as we talked about to shareholders through stock buybacks and dividends between '22 and '24. As I look over the last 18 months, we've returned $4.4 billion to shareholders, which is 130% of free cash flow. Specifically around certain assets that we hold, I'm not going to share any specific details on any of our specific investment stakes, but it will continue to be our priority as it's always been to drive a disciplined approach and to maximize shareholder value through the investment portfolio.

Operator, can we do one final question, please?

Your final question comes from the line of Doug Anmuth with JPMorgan.

It's Wes on for Doug. Just a quick question on P&A. Outperformance has been solid, but just kind of curious what you're seeing on the supply side there or if you feel like you're constrained on any front on P&A.

Yes. No, Wes, we're seeing good supply from our sellers in that category. I mean if you look overall in the business, supply is in great shape. We did.9 billion listings on the platform. We have over 500 million in P&A. The key for us has really been helping sellers make sense of -- I mean helping buyers make sense of all that inventory. And as we roll out the new fitment changes, as we've rolled out guaranteed fitment, we're finding that the experience is just so much easier for all of our segments of key buyers, whether they're now using the My Garage feature on the site. We just launched these 2 new AI features which enable us to make the buying experience so much better. Once we know your car, we can tell you, here's the key upgrades to do. We can help you with things like your engine codes. And look, this is the second quarter of mid-single-digit growth, which we believe is at market rates of growth. And so we're feeling great about that. As I said, our buyers in P&A are growing double digits faster than the rest of the markets when you look at our new and reactivated buyers. So we're pleased with what we're seeing. We're continuing to invest and roll out new features and new capabilities. We're seeing particular strength in CBT right now. But overall, really pleased with what we're seeing in our motors P&A, and frankly, across our focus category portfolio.

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