eBay Inc

NASDAQ:EBAY

Earnings Call Analysis

eBay Reports Strong Q3 with Positive Growth in Key Metrics

In Q3 2024, eBay achieved gross merchandise volume (GMV) of $18.3 billion, reflecting over 1% growth, marking its second consecutive positive quarter. Revenue rose by more than 3% to $2.58 billion. Non-GAAP earnings per share increased by 16% to $1.19. Focus categories, notably collectibles and luxury fashion, drove nearly 5% growth. eBay expects Q4 GMV between $18.9 billion and $19.3 billion, with FX-neutral growth of 0-2%. For Q4, the anticipated non-GAAP EPS is $1.17-$1.20, suggesting annual growth of 13-14% and a continued focus on operational efficiencies to enhance shareholder returns.

Strong Performance Amidst Challenges

In the third quarter of 2024, eBay reported solid financial results, with Gross Merchandise Volume (GMV) increasing by over 1% to $18.3 billion. This marked the second consecutive quarter of positive GMV growth despite a challenging macroeconomic environment. Revenue grew by more than 3%, reaching $2.58 billion, while non-GAAP operating income rose by 6% to $700 million. Diluted non-GAAP earnings per share also saw a notable increase of 16%, hitting $1.19. Notably, eBay returned $881 million to shareholders in dividends, showcasing its commitment to investor returns.

Focused Categories Driving Growth

A key driver behind eBay's success this quarter was the performance in their focused categories, which experienced an impressive 5% growth. This was significantly better than the rest of the marketplace, which remained nearly flat year-over-year. Categories like motors, parts and accessories, collectibles, refurbished goods, and luxury fashion contributed to this uptick. The collectibles sector, in particular, showcased robust activity, accelerating to double-digit growth, driven by strong interest in trading cards and valuable collectibles.

Geographic Insights and Consumer Behavior

Geographically, eBay's U.S. GMV increased by nearly 1%, with positive traffic trends supporting this growth. Internationally, GMV surged by almost 2% on an FX-neutral basis. However, regions like the U.K. and Germany faced more challenging conditions due to lowered consumer confidence. Nevertheless, cross-border trade remained a strong growth driver, especially from Greater China and Japan. The company noted how various socio-political events and elevated travel influenced consumer purchasing patterns, leading to a dynamic but cautious shopping atmosphere.

Strategic Initiatives and Buyer Engagement

eBay's strategy of investing in new buyer acquisition tactics led to nearly a 1% increase in active buyers, now totaling 133 million. Techniques such as full-funnel marketing campaigns and geo-specific initiatives were credited for this uptick. Performance metrics for the C2C segment, which comprises a significant portion of eBay's offerings, have proven beneficial, allowing consumers to sell previously owned items, thus creating a flywheel effect that stimulates further spending on the platform.

Looking Ahead: Fourth Quarter Guidance

For the fourth quarter, eBay anticipates it will generate GMV between $18.9 billion and $19.3 billion, translating to FX-neutral growth of up to 2%. This forecast includes expected contributions from acquisitions and geopolitical factors; specifically, eBay expects Golden to add over 30 basis points to GMV growth. Revenues are projected to be between $2.53 billion and $2.59 billion with overall revenue growth ranging from negative 1% to positive 1%. Furthermore, the forecasted non-GAAP operating margin will fall between 26.5% and 27%.

Operational Efficiency and Financial Health

eBay's non-GAAP operating margin expanded by over 80 basis points year-over-year to 27.2%. Despite various headwinds like increased costs related to marketing and currency fluctuations, operational efficiencies largely counteracted those pressures. Additionally, eBay reported free cash flow of $646 million for the quarter and detailed plans to allocate $3 billion toward share repurchases over the year, evidencing their proactive capital management approach.

Commitment to Long-Term Growth

Looking into 2025, eBay remains optimistic about its prospects, anticipating positive GMV and revenue growth. Management expects non-GAAP operating income to grow modestly ahead of GMV, alongside an expected high single-digit growth in annual EPS. Despite challenges like fluctuating foreign currencies and integration costs of new acquisitions, eBay's commitment to strategic reinvestment in their business segments remains strong.

Earnings Call Transcript 2024-Q3

[Operator]

Thank you for standing by, and welcome to the eBay Third Quarter 2024 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to John Egbert, Vice President of Investor Relations. You may begin.

[John Egbert, executive]

Good afternoon. Thank you all for joining us for eBay's Third Quarter 2024 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, and all earnings per share amounts reflect earnings per diluted share, 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 October 30, 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, executive]

Thanks, John. Good afternoon, everyone, and thank you all for joining us today. Q3 was another strong quarter for eBay as our gross merchandise volume grew by over 1% to $18.3 billion marking our second straight quarter of positive GMV growth. Revenue increased by more than 3% to $2.58 billion. Non-GAAP operating income grew by 6% and we grew non-GAAP earnings per share by 16% to $1.19.

Now let's turn to the key drivers of our Q3 results. Our focused categories continue to deliver relevant experiences to customers and drive growth for our overall marketplace. Focus category GMV grew by nearly 5% in Q3 and outpacing the remainder of our marketplace by approximately 5 points.

This growth was driven by broad-based momentum across motors, parts and accessories, collectibles, refurbished and our luxury fashion categories. Collectibles had a particularly strong quarter as trading GMV accelerated to double-digit growth in Q3, driven by strength in sports trading cards and collectible card gains both on the eBay platform and through our subsidiary, TCG player.

During Q3, we engaged with collectibles enthusiasts at key industry trade shows including the National Sports Collectors Convention, GenCon and San Diego Cometa. We expanded our high ASP inventory through monthly marquee auctions and consignment from trusted partners like TSA and ComC. And we continue to scale and evolve the eBay live experience, fueling particular momentum in areas like trading card case break. On top of healthy organic momentum, our recent acquisition of Golden is opening up exciting opportunities in the collectibles world.

Just last week, Ken Golden and team completed a record sales for Shohei Otani's 50th home run ball which sold for nearly $4.4 million, making it the most valuable baseball ever sold. Auctions for truly one-of-a-kind items like this can generate a lot of awareness for our platform where hobbyists can shop for everything ranging from low ASP ungraded trading cards to some of the world's most valuable collectible items.

Fashion is also a critical entry point for us. As nearly 1 in 5 new sellers and buyers come to eBay through fashion category. During Q3, we launched a new creative campaign called Things People Love to raise awareness of eBay's value proposition in pre-lube fashion. We focused on driving relevance with key audiences like Gen Z by highlighting eBay's breadth and depth of quality pre-loved inventory backed by truck.

Our full funnel marketing strategy has been instrumental in driving continued momentum in focused categories and healthier trends in active buyers, which grew nearly 1% to $133 million in Q3. One of the key building blocks underpinning our return to positive GMV growth has been our geo-specific investment, where we leverage our innovation playbook from focused categories to better serve customer needs at the local level.

While many of these product experience changes benefit all sellers and buyers, we are particularly focused on consumer-to-consumer or C2C sellers for several reasons. C2C sellers bring some of the most unique inventory to eBay and are typically less price sensitive than B2C sellers. C2C sellers accelerate e-commerce as roughly 60% of their GMV comes from used and refurbished items compared to 40% for our marketplace overall.

Selling on eBay also creates a flywheel effect that stimulates incremental GMV as buyers who sell purchased roughly twice as much on eBay as non-sellers, with most of their incremental spend supporting small businesses. As a reminder, our first major geo-specific initiative launched in Germany in March of 2023. And more than 18 months later, we continue to see significantly higher customer satisfaction or CSAT and improved GMV trends for the overall German market.

This past April, we rolled out significant enhancements in the U.K. for preowned apparel categories. These improvements included simplified tools for selling and new tools to drive demand through enhanced discovery like Explore and Shop the look. Since then, we have observed material improvements to key C2C metrics like CSAT and active sellers alongside a double-digit improvement in C2C GMV growth in pre-owned apparel versus our prior baseline.

The success of our Germany initiative over the last 1.5 years and similar results in the U.K. over the last 6 months gave us the confidence to move forward with a significant expansion of our U.K. initiative earlier this month. We introduced a suite of new capabilities to upgrade the overall C2C experience in the U.K., including a simplified native listing flow, managed shipping, which streamlines the domestic shipping experience and creates a new revenue stream for eBay, improved local pickup and discovery capabilities and eBay balance which allows U.K. sellers to store their earnings or use them as spendable funds on eBay.

We accompanied this future rollout with a full funnel marketing campaign in the U.K., which highlights the ease of selling on eBay. We also eliminated final value fees and regulatory operating keys for U.K. C2C sellers across all categories, excluding motor vehicles. We made this change due to clear evidence that European consumers are more motivated to lift their items online when it's free to sell even when buyer fees are introduced.

We believe reducing the friction to sell will unlock a significantly larger total addressable market, or TAM, in C2C. We will initially monetize our U.K. C2C volume in several ways, including advertising, cross-border fees and our sell-to-buy flywheel. In Q4, we will begin to ramp our managed shipping initiative in the U.K. We also plan to introduce a buyer-facing fee on U.K.'s C2C transactions during Q1 of 2025.

Next, I'll walk through some of the major enhancements to the U.K. experience. One of the most significant changes we launched in October was the horizontal rollout of a simplified native listing flow for U.K. C2C sellers. This experience dramatically reduces the number of steps and decision points for sellers, offers intelligent pricing recommendations, seamlessly integrates AI-generated descriptions and photo enhancements and better highlights the benefits of advertising.

Since launch, the simplified flow has notably decreased time to list, improved listing completion rates, increased conversion, sold items and GMV per listing attempt and elevated adoption of Promoted Listings. With managed shipping, we are completely overhauling our shipping experience for C2C sellers in the U.K. in 2 phases.

The first phase completed in early October, extended the simplified shipping experience we first rolled out in preowned apparel to all categories. Within the new native listing flow, U.K. C2C sellers now see a consolidated list of shipping options based on the estimated package size and weight. And since implementing this change, we have observed a significant reduction in time spent on shipping in a listing flow.

The second phase of managed shipping radically simplifies the experience and creates a new revenue stream for eBay. Similar to managed payments and eBay international shipping Managed shipping leverages our scale and expertise to create a better experience for customers while generating incremental revenue and operating income dollars. When listing eligible products sellers simply confirm the preselected package size and eBay handles the rest.

Fires received competitive shipping rates and sellers are fully protected against loss or damage. Managed shipping is currently live for C2C pre-owned apparel listing in the U.K. In Q4, we plan to expand managed shipping horizontally on an opt-out basis, before mandating the program for eligible items listed by U.K. C2C sellers during Q1 of 2025.

In addition to shipping, we launched a number of enhancements to the local pickup experience in the U.K. As these transactions make up a significant portion of our C2C TAM in this market, we increased local supply by defaulting new C2C listings to offer both pickup and shipping options. We created a new eBay Local landing page and [indiscernible] for optimal browsing of nearby inventory.

We also enhance trust, improve post-sale education for shoppers and streamline the in-person payment process. Since launch, we've seen a significant uptick in locally enabled listings in the U.K. and a double-digit improvement in local C2C volume growth. Lastly, in mid-October, we added the eBay balance feature in the U.K.

This gives millions of C2C sellers the flexibility to use their earnings to shop on eBay, promote their listings, purchase shipping labels or withdrawal available funds whenever they wish. With eBay balance, we believe we can further stimulate the cell to buy flywheel and also reduce the cost of payments when sellers spend their earnings on eBay.

Taking a step back by making these changes, we believe we are addressing 3 of the longest-standing pain points for U.K. sellers on eBay. These delist the amount of time and effort it takes to create a listing and the complexities involved with shipping. During the first few weeks since the broader U.K. C2C initiative launch, we've seen more than 20-point increases in new and reactivated listers and sellers and material increases in C2C sold items and GMV.

We are confident that these changes will not only be great for our community, but also our shareholders. Our strategic focus on C2C should open up a significantly larger TAM in e-commerce by unlocking consumers' closets, basements and garages. Our teams continue to leverage the power of artificial intelligence to deliver magical innovations for our customers.

In recent months, eBay's core AI team released the second generation of our proprietary Lilium series of large language models, developed in-house using our high-performance supercomputer. Notably, these models have outperformed public benchmarks in eBay specific tasks like description generation, title creation, aspect extraction and pricing predictions. Behind the scenes, these models have already been deployed to accelerate the transformation of selling and buying on eBay, including magical listing.

The first phase of our magic listing experience generates high-quality listing descriptions with the push of a button. Approximately 10 million unique sellers have used this feature to date, creating over 100 million listings. Gen AI enhanced listings have also generated several billion dollars of cumulative GMV on eBay. Additionally, more than 1/4 of U.S. mobile app users have access to the next iteration of magic listing and beta.

After taking or uploading a photo, this experience leverages computer vision and generative AI to prefill or suggest the title, category, description and other item aspects for listing. CSAT for this beta remains extremely high at roughly 90% as we continue to optimize model performance and efficiency. We are also leveraging Gen AI to enhance our tools for our B2C sellers, we recently introduced the Magical bulk listing tool, which leverages our internal LLM to seamlessly create a large number of pre-populated listings at one.

Sellers simply uploads photos in bulk and individual listings are created with category, title and item specifics prefilled where possible. The magical bulk listing tool was launched for all B2C U.S. trading card sellers in Q3 and early feedback has been extremely positive. In Q4, we've also begun to roll out this tool to sellers in other categories.

Turning next to advertising. During Q3, first-party advertising grew 14% and while total ad revenue grew 11% to $408 million and Eclipse 2.2% penetration of GMV. Nearly 3.2 million sellers adopted a single ad product during the quarter, and we ended Q3 with over $1 billion live promoted listings out of more than $2.1 billion total live listings.

Within the ads portfolio, Promoted Listings were the largest contributor to year-over-year growth led by cost per click ad unit. Promoted offsite ads were the fastest growing among our first-party ads. And during the quarter, we rolled out several performance optimizations and scaled our go-to-market efforts for these ads. Raising awareness, adoption and retention amongst our seller base.

Promoted stores ads are the most nascent product in our portfolio. But during Q3, we began to gradually ramp these ads through contextually relevant placements at the top of search and on the new order details page. Next, I'd like to discuss our work in payments and financial services, where we continue to expand choice and flexibility for buyers and offer new solutions for sellers to grow their businesses on eBay.

In Germany, we are expanding our breadth of payment options through our partnership with River T, a German Fintech company offering solutions used by 28 million consumers. We are introducing a monthly invoice payment option through River T, enabling German buyers to pay for multiple purchases on eBay at a later date with no interest or fees if the payment is made on time.

According to an eBay consumer survey, more than 3/4 of online shoppers in Germany prefer to use invoicing as a payment method for online shopping. So we are pleased to offer another locally relevant payment option for our customers in this region. For small business sellers, we continue to expand the eBay seller capital program through trusted partners.

In July, we launched Business Cash Advance a revenue-based financing solution provided by Liberis. In October, we expanded our partnership with Liberis to offer flexible cash advances to U.S. sellers. This program offers financing for sums of up to $2 million with the flexibility for sellers to tap into capital on demand and a lot more financing over time.

I am pleased to share that through these programs with Liberis, we have already enabled thousands of small business sellers access to over $40 million of growth capital. And in aggregate, across all of our seller capital partnership -- we've connected eBay sellers with over $100 million of working capital year-to-date. Next, I'd like to share a few ways we're making an impact in our community. EBay for Charity raised more than $49 million in Q3, up 21% year-over-year.

Additionally, the eBay Foundation awarded nearly $3 million to Grand Teas across the globe who are supporting entrepreneurship for historically excluded groups. I'm always amazed by the generosity of our buyers and sellers, and I'm proud we're able to support important causes around the world. In closing, Q3 was another strong quarter for eBay.

We sustained positive GMV growth for the second straight quarter amid a dynamic macro and operating environment, led by nearly 5% growth in our focus categories. The rest of our marketplace was nearly flat for the second consecutive quarter, supported by horizontal innovation and our C2C investments in key geographies. We continue to see strong growth in our first-party ad products across our portfolio and broaden our range of payments and financial service offerings for sellers and buyers.

And importantly, we remain focused on operational discipline alongside our investments in long-term growth initiatives to ensure continued healthy growth in operating income and earnings per share. With that, I'll turn the call over to Steve to provide more details on our financial performance. Steve, over to you.

[Stephen Priest, executive]

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 fourth quarter and initial thoughts on next year before we begin Q&A. My comments will reflect year-over-year comparison on an organic FX-neutral basis, unless I note otherwise. eBay delivered strong top and bottom line results in Q3 our focused categories, geo-specific investments from [indiscernible] initiatives drove a second consecutive quarter of positive GMV growth amid an uneven macroeconomic environment. Gross merchandise volume grew over 1% to $18.3 billion.

Revenue grew over 3% to $2.58 billion. Non-GAAP operating income grew 6% and to $700 million. We delivered $1.19 of non-GAAP earnings per share, up 16%, and we returned $881 million to shareholders to be reported on dividend. Let's take a closer look at our financial performance during the third quarter. Gross merchandise volume grew over 1% to $18.3 billion on an organic FX-neutral basis. Golden contributed nearly 30 basis points of total FX-neutral volume growth and foreign exchange was a tailwind of nearly 30 basis points of spot growth.

We continue to face a dynamic macro and consumer spending environment in the quarter. And as we noted on the last earnings call, political news, sporting events and elevated travel in July influenced consumer behavior. Strong execution within our strategic initiatives helped us navigate these headwinds. Focused category GMV grew nearly 5%, approximately 5 points faster than the remainder of our marketplace.

Our momentum in focused categories is broad-based with continued positive growth in P&A, collectibles, refurbished and our luxury categories. The remainder of our marketplace is nearly flat year-over-year for the second straight quarter, driven by craft category shopping, horizontal innovation, geo-specific initiatives and resilient growth in e-commerce.

Moving to our trends on a geographic basis. U.S. GMV grew by nearly 1 point in the third quarter. Similar to Q2, we saw improved trends in organic traffic in the U.S. and continued momentum in focused categories led by collectibles, refurbished and luxury fashion. International GMV grew by nearly 2% on an FX-neutral basis in Q3, while FX was a 0.5 point tailwind spot growth.

In the U.K. and Germany, we continue to navigate more challenging macroeconomic conditions and lower consumer confidence while seeing strength in parts and accessories and improved trends in C2C volume. Cross-border trade continues to be an important driver of international GMV growth, led by exports in Greater China and Japan into our major markets.

CBT was also a significant contributor to growth and focused categories, particularly P&L. Next, let's take a look at buyers. Trailing 12 month active buyers grew by nearly 1% to $133 million. Our strategic initiatives and full funnel marketing campaigns help drive continued growth in new and reactivated buyers and improved retention.

[indiscernible] buyers were stable at roughly $16 million. endpoints as buyer grew slightly year-over-year to just over $3,100. Moving to revenue. In Q3, we grew revenue by over 3% to $2.58 billion, Foreign exchange was a 30 basis point headwind to spot revenue growth.

Our take rate was 14.1% and nearly 20 basis points year-over-year. First-party advertising, shipping and financial services all contributed to our take rate expansion, which was slightly offset by the C2C initiatives and an FX headwind of nearly 10 basis points. On a sequential basis, our take rate expanded by over 10 basis points.

Total advertising revenue grew 11% to $408 million in the third quarter and represented over 2.2% penetration of GMV. First-party ads grew over 14% to $396 million, and we accelerated modestly from Q2 level. Third-party display ads revenue declined nearly 43% year-over-year as we continue to deprecate these legacy ad units. Next, I'll discuss our profitability.

Non-GAAP gross margin was flat year-over-year as a reduction in cost of payments and lower depreciation expenses were roughly offset by traffic acquisition costs, tax-related matters and foreign exchange [indiscernible] non-GAAP operating margin expanded by over 80 basis points year-over-year to 27.2% in Q3 driven by operational efficiencies, partly offset by investments in full funnel marketing a foreign exchange headwind of roughly 20 basis points.

Our non-GAAP operating income grew 6% in the quarter, while non-GAAP earnings per share grew 16% to $1.19. On a GAAP basis, we reported earnings per share of $1.29 in Q3. The difference was primarily due to an increase in the value of our investment portfolio, partly offset by stock-based compensation. Turning to our balance sheet and capital allocation.

Our free cash flow for the third quarter was $646 million, down year-over-year due to the timing of cash taxes. Last year, the majority of our cash tax payments delays until Q4 due to California's disaster tax release program. At the end of Q3, we had cash and non-equity investments of $5.8 billion and gross debt of $7.4 billion.

We repurchased $750 million of e-based shares during Q3 at an average price of approximately $57 and had roughly $1.2 billion remaining under our buyback authorization at the end of the period. In addition, we paid a quarterly cash dividend of $131 million in September or $0.27 per share. Shifting to our investment portfolio. Our equity investments and warrants were valued at $3 billion at the end of the quarter with [indiscernible] Adyen and G market accounted for the majority of the value. We retained approximately 18% ownership of [indiscernible] which is a privatized advent entity, and that ownership is valued at roughly $1.9 billion based on the value as at the close of the transaction.

The consortium led by Primera and Blackstone as the option through November 29 to purchase from eBay roughly 10% ownership of the private entity for just over $1 billion. Our adding warrants were valued at approximately $0.5 billion at the end of Q3. On October 15, we met the processing volume milestone necessary to invest the second tranche of our Adyen. We subsequently paid $105 million to exercise the chance for approximately 404,000 shares of Adient stock, which are valued at approximately $602 million based on the company's share price at the time.

Turning to our outlook. We expect to generate GMV between $18.9 billion and $19.3 billion in the fourth quarter, representing FX-neutral growth between flat from 2% year-over-year. We expect Golden to contribute over 30 basis points of GMV growth in the quarter. At current rates, foreign currency would represent a roughly 2-point tailwind to GMV growth in Q4.

We expect continued momentum in GMV to be driven by multiple strategic initiatives across focused categories, the U.K. and Germany and horizontal areas. Our outlook also contemplates a challenging operating environment due to persistent economic headwinds and several one-off dynamics in Q4. Specifically, greater consumer attention on U.S. elections a shorter holiday shopping period this year from Hurricane Milton in early October.

The forecast revenue between $2.53 billion and $2.59 billion in the fourth quarter, representing FX-neutral growth of negative 1% to positive 1%. At current rates, we estimate FX would represent a nearly 30 basis point tailwind to spot revenue growth. We anticipate our U.K. C2C initiative will modestly benefit total GMV growth in Q4. While certain existing levers like advertising, cross-border fees, and our sell-to-buy flywheel to continue to contribute revenue on U.K.

C2C volume. We do not expect material revenue contribution in Q4 from our 2 major remonetization efforts. Managed shipping, which is ramping starting in Q4 through Q1 of 2025 and biofeed which we plan to introduce in the back half of Q1. We launched our U.K. initiative in October to provide the best experience for our sellers and buyers and our second largest market ahead of the critical holiday season. We also believe it is the right decision to phase in these new monetization program to give our customers time to adjust to these changes.

For Q4, we forecast non-GAAP operating margin between 26.5% and 27%. In addition to pressure from our U.K. initiative, expenses related to M&A and integration costs and over 30 basis points of impact to our consolidated operating margin and foreign currency is another 60 basis points of headwind year-over-year.

For the full year, this implies 60 to 70 basis points of non-GAAP operating margin expansion. We expect to generate non-GAAP earnings per share between $1.17 and $1.20 a in the fourth quarter, representing year-over-year growth between 9% and 14%. This implies full year non-GAAP EPS growth between 13% and 14%.

We forecast capital expenditure to be about 4.5% of revenue for the full year, and our non-GAAP tax rate to remain stable at 16.5%. And we continue to expect free cash flow of just under $2 billion for the full year. We are further raising our share repurchase target for 2024 to $3 billion implying $750 million of repurchase during Q4. In addition, our Board declared a quarterly dividend of $0.27 per share for the fourth quarter to be paid in December.

Now I'd like to make a few initial comments on our financial priorities for 2025. We plan to balance the need to reinvest for long-term growth against the near-term top and bottom line performance. Assuming an unchanged macro environment, we are planning our business to run positive FX-neutral GMV and revenue growth. Non-GAAP operating income dollar growth modestly ahead of GMV and high single-digit growth in non-GAAP earnings per share year-over-year.

As it pertains to margins, we plan to target the optimal combination of GMV growth and operating margin to maximize operating income dollar growth. There were some unique considerations for 2025, influencing our financial architecture. Similar to eBay International shipping program, a managed shipping initiative in the U.K., we recognize revenue on a gross basis.

Our current assumption is that U.K. managed shipping will pressure our consolidated non-GAAP operating margin by approximately 40 basis points in 2025, while contributing positively to operating income dollars. In closing, Q3 was another strong quarter for eBay. Our GMV grew for a second consecutive quarter. Non-GAAP operating income grew 6% and non-GAAP earnings per share grew 16%.

These results clearly demonstrate that our strategy is working, and we have the right balance between delivering robust standing, reinvesting to drive long-term sustainable growth and delivering healthy capital returns to shareholders. We plan to follow these same principles and build on this year's momentum as we finalize our plans for 2025. With that, Jamie and I will now take your questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Ygal Arounian from Citigroup.

[Ygal Arounian, analyst]

I wanted to ask on the e-commerce initiatives seems to be a greater focus here. Maybe first, just on the monetization efforts. How should we think about the catch-up to breakeven on the fees that you're giving up? And do you think that over time, the new monetization model can be more monetizable than the previous one? And how do we think about -- or how do you think about this opportunity and expanding it to the U.S.?

And if it works in the U.K. and is worth in Germany and how could this -- how this could expand to eBay more broadly?

[Jamie Iannone, executive]

Yes. Look, we're launching this from a position of strength. Let me tell you kind of how we're thinking about it. We've delivered positive GMV growth in the past 2 quarters. And we have strong conviction. We started 1.5 years ago in Germany and saw really strong results there. And our early results in preowned apparel in the U.K. give us the confidence to move forward.

We made the decision to launch this in October 1 to really take advantage of the holiday period in our second largest market. We believe it's the right decision to phase this in for our sellers and buyers. Because the other thing you've got to remember here, Ygal, is just it's a change to the marketplace, and we want to give sellers and buyers time to adjust their processes. So that's why we're going to ramp up managed shipping through Q4 and Q1.

And why we decided to introduce the buyer fees in the back half of Q1. So the pressure that you're seeing on revenue in Q4 is primarily a timing dynamic given that ramp of managed shipping over Q4 and through Q1. And then introducing the buyer fee in the back half of Q1. So some of that remonetization lag will likely spill over to Q1. But we believe that these changes are clear -- we believe based on where buyer fees are in the U.K., we have the ability to remonetize these moving those fees around.

And remember, it's not just those 2, but it's also advertising. It's the cross-border fees that we charge as well as the cellular Bio flywheel that we see. But the strategic benefits of doing this are really clear. We're going to unlock a significant portion of TAM in our second largest market and ultimately generate long-term growth for eBay and value for our shareholders.

And as Steve said, Steve gave some preliminary commentary on FY '25. And as we expect to grow GMV and revenue year-on-year, grew operating income modestly faster than GMV and increased our EPS by high single digits year-over-year. To your question on the U.S., we have no plans to launch free selling in the U.S. U.S. is a different market. from the U.K. U.K. buyers and sellers are more open to buyer fees. It's more standard in the market.

There may be certain aspects of the product experience that streamlined selling that we bring to other markets. And as you know, we look at each market in categories and think about the specifics of what the optimal set of initiatives to unlock more supply and demand for that specific market.

[Ygal Arounian, analyst]

And like a follow-up on the second gen of LOM. You guys are releasing and some of what you're seeing, you talked about outperforming the public benchmarks. Any way to frame how that's impacting volume growth? Are you seeing it roll through yet? Is there any way to quantify that?

[Jamie Iannone, executive]

Yes, we are. It's been really great to see how sellers and buyers have responded to this. In that new model, we're outperforming the public benchmarks on things like descriptions, titles, aspect we've seen a better job at precision pricing increasing by double digits through these new models that we have on the platform. And what's great about the AI that we're launching is it's having a major impact at scale.

So if I look at it just since we've launched these tools, over 10 million sellers have taken advantage of it, and over 100 million listings have adopted it. And cumulatively, that we've generated several billion dollars of cumulative GMV from Gen AI enhanced listing since launch. And we're still continuing to ramp up, improve the models, expose more and more people to Magic listings.

So I feel really good about it. The other thing is we saw some demand from our small business and our B2C sellers, to have access to the tools that we have built. So this quarter, we launched Magical Bulk listings. And essentially, what that does is if I'm a business seller, let's say, I've got 25 watches or trading cards that I want to list, I can just upload a couple of photos of each and will, in the background, use our large language model and the product knowledge graph to fill in all the description, title and aspect information for those using that same technology that we built for single listings to do bulk listing.

So still early stages, but really excited by the performance of what we're seeing in AI.

[Operator]

Your next question comes from the line of Justin Post from Bank of America.

[Justin Post, analyst]

A couple of questions on that. So first, on focus categories within the positive GMV, is there still room to grow faster there? And what are some of the initiatives that you're most excited about? And then on take rates, maybe I know you can give us a revenue growth, but some of the puts and takes for revenue take rates on GMV next year?

[Jamie Iannone, executive]

Yes. So I'll start with the first one and then Steve will talk about the take rate. So on focused categories, yes, look, another solid quarter. We delivered 5% growth parts and accessories continues to be a big growth driver of our focus categories. But we saw some momentum in other areas, specifically, I would talk about collectibles. We saw double-digit growth in collectibles this quarter.

You've probably been seeing a number of the things that we were doing, but the combination of the work that we're doing with TCGplayer, our Golden, which is Golden provides some of the world's most desirable inventory that's out there on the marketplace. If you're on Golden right now, you see that we're doing Luke Homes and Eric Church are doing -- raising money for the Carolinas, and that's all being driven by our family at Golden.

And then when you look at trading cards in particular, we've had this healthy run rate off of it, I said, as double-digit growth. really based on all of the innovations that we've done over time, like my collections, price guides, authentication, but also the grading partnership that we put in place with PSA, where now instead of sending an item in to be graded and describe it on the way into grading and then getting it back and then listing it again on eBay and then having to shift it to the buyer.

That's all one seamless process now where I just ship it to PSA and it gets sold. So we're really seeing strength across the board in all of our focus categories. Refurbished continues to do well in this marketplace where people are -- consumers are challenged. And our luxury has also been contributing positively to year-over-year growth for the eighth straight quarter.

So the work that we're doing with our new authentication center is there. So we have lots of momentum in our focus categories. We continue to expand the work we've done there. And I'm also just excited because the work that we've done for focused categories by verticals we've been able to apply these geo-specific areas to C2C to great effect.

I mean if you look at Germany, for example, we increased our C2C seller CSAT by 20 percentage points. And that's led to a real change in trajectory of our German business versus the prior baseline. So we will continue to push forward with our strategy, and we like what we're seeing.

[Stephen Priest, executive]

Good to speak this afternoon. Obviously, we provided a fair bit of color on our 2025 architecture in the prepared remarks and believe this is a really robust financial outlook for 2025 and the continuation of the progress that we've continued to make this year. We're not going to provide any more specific precise guidance around take rate at this point because we're finalizing our budgets. But I can talk to a few factors that you can consider for 2025. The first 1 is on shipping.

Obviously, Jamie just elaborated on our U.K. C2C initiative. U.K. is our second largest market by volume and has a higher C2C penetration in Germany. And while there's this near-term impact on take rate as we eliminated final value fees for sellers we will be monetizing that through the managed shipping, which is ramping now and will continue into the first quarter and the buyer fees, which is planned for the back half of Q1.

The second item is really around advertising and financial services. We do expect advertising to continue to grow faster than GMV driven by the momentum in first-party promoted listings and off-site ads and obviously, the improved seller experience that's coming from that. And to a lesser extent, we do expect some incremental revenue associated to financial services as we get into 2025.

[Operator]

Your next question comes from the line of Lee Horowitz from Deutsche Bank.

[Lee Horowitz, analyst]

Great. Maybe just sticking with the '25 framework, does the '25 frac assume expansion of focus categories next year? And can you remind us some of the larger categories on the platform that have yet to get focused category investment at this point? And then maybe just one on competition. You have a scaled sports-related collectible competitors who have direct relationships with leagues and maybe some supply advantages there, Walmart partnering in the fashion and sneaker vertical.

Can you comment at all, would you sort of see some of the most important strategic most in those 2 categories specifically to fight up competition from some of the larger competitors moving in there.

[Jamie Iannone, executive]

Yes. As you know, Lee, we don't preannounce kind of anything that we're doing on focus categories for competitive reasons. I will say we have 5 categories that are over $10 billion on eBay, fashion, home and garden, collectibles, electronics and motors, parts and accessories. And so it shows you kind of the breadth of what we have on there.

We did purposely take some of the playbook that we've had going against verticals and put it against geos to great effect, and we really like the ROI that we've seen against that. The second thing I would say is that the horizontal investments that we've been making to drive our core categories have been really beneficial.

And that's because of all of the generative AI capabilities we've been able to apply, those help both our focus categories but also in our core categories. And it's the second quarter in a row where we've had nearly flat growth in our core categories.

To your question on collectibles business and competitive positioning, we feel great about the innovation that we're driving quarter after quarter from that standpoint. I mentioned this quarter as a very scaled player in the market. We continue to see double-digit growth in trading cards. We put together a really nice collection of assets -- when you think about from TCGplayer in collectible card games to what we do on eBay to now Golden we sell everything from ungraded trading cards to the highest value products in hobby.

And that's valuable because collectors are generally looking kind of across that span to do so. and all the innovation that we've been driving in that category with collections, price guides, authentication products that we've launched with this new partnership that we've put in place with collectors. I mean, just think about it, all the things that we've been innovating are the exact things that collectors have asked us to do for years, right?

They've asked us to say, make it easy for us to send a card in for grading and sell it on eBay. And now that's really seamless, and the CSAT on that is very, very high. When you look at the innovation that we're driving in eBay Live, we've done more and more case breaks every single quarter and added new capabilities there.

We recently added last quarter, the ability to do by spot which is essentially to purchase your favorite team and track that through a case breaks, and we continue to grow it. And the last thing I'd say is that, look, we've had and we still have incredible relationships with top collectible sellers and we've always been a champion of the hobby shop.

It's why we did the TCGplayer deal. And we believe in open marketplace where enthusiasts can buy and sell the things that they love.

[Operator]

Your next question comes from the line of Colin Sebastian from Baird.

[Colin Sebastian, analyst]

Appreciate the questions. I guess, first, Jamie, given these platform initiatives, I mean, do you think any of these will convert into growth and enthusiast buyers? Or is it really about increasing spending or share of wallet among the existing buyer base? And then the follow-up would be, I guess, Steve, regarding the Q4 one-off factors, could you maybe quantify the impact on growth you're embedding in guidance from those distractions.

And if we should think about that as maybe potential upside if consumers end up spending at normal levels during the holidays?

[Jamie Iannone, executive]

Yes. Great question, Colin. So first off, absolutely, we see that converting into buyers and enthusiast buyers. You'll note that this quarter, we were up 1% in our active buyer count to $133 million and while that's not a core KPI of it is an output of the strategy and the strategic initiatives that we've been driving and a healthy buyer funnel is important to our growth in enthusiast fires.

When you look specifically at the C2C initiative that we did in Germany and that we're talking about in the U.K., it's great for the buying perspective for a couple of reasons. First is when we convert a buyer into seller, they become at least twice as valuable as a buyer as previously on the platform. And that's really great for buying. The second thing is C2C has really -- I call it the inventory goal on the platform.

In general, they're bringing on things that aren't sold by a B2C seller or buy a small business, think about all the stuff that you have around the house, that's not available from a B2C seller. And so when I look at the overall platform, we're about 40% used to refurbish but in our C2C sellers, it's 60%.

And so that unique inventory drives demand. It drives demand amid enthusiast buyers who find that part or that card or that thing they couldn't otherwise find on eBay. And the other great thing is that a little over 3/4 of our volume is B2C, but the vast majority of our sellers is C2C.

And so what you see happening there is that, that flywheel of those C2C buying more from -- once they become buyers, actually, the majority of that new purchasing goes to small businesses and B2C sellers. So B2C sellers win as well from that increased buying activity on the platform. And that's why we really like the synergy of what we're seeing overall.

It's why when we look at the trends in our German business, they're much healthier than before we made these changes. And we're excited both for what it does for sellers, but importantly, the demand that it drives for buyers. You'll also see across all of our markets, a new marketing campaign that's called Things People Love.

And I think we had a link in the slide deck to show you some of the creative, but I'm really excited by the storytelling because there's both a buying message in there but also a selling message about unlocking what's in your closet, your garage, your basement, and that's really healthy for us to kind of drive that new initiative, and it's extremely well done, and it tested well. I'm excited for those campaigns.

[Stephen Priest, executive]

Colin, just with regards to our assumptions in the fourth quarter that informed our guide on GMV. First thing I would say, I'm really pleased with the position we're in and achieving another positive growth in the third quarter around GMV, our second consecutive quarter, while we continue to navigate a very dynamic macro environment. It's really a reflection of the investments that we've continued to make in focused categories in U.K. and Germany and the horizontal areas, which are continuing to drive health on the overall platform.

And as Jamie talked about, our U.K. C2C proposition launched on the first of October, ahead of the holidays and we believe that's going to provide a modest boost to the fourth quarter GMV, and we're pleased with the early results so far. Assuming no discernible change in the macro environment, there are a number of one-timers that we've contemplated as we think about the fourth quarter.

The first is obviously the upcoming U.S. elections. The second is the shorter holiday season with fewer days between Thanksgiving and Christmas. And in October, we saw the impacts of Hurricane Milton, which impacted demand, particularly in P&A, in shipping and deliveries. So I firmly believe that our guy balances the strong execution that we've seen year-to-date with the ongoing macro environment that we're expecting and a few of those one-offs, but really pleased with the momentum that we're seeing in the business.

[Operator]

Your next question comes from the line of Nathan Feather from Morgan Stanley.

[Nathaniel Feather, analyst]

Really encouraging to see the initial guide for positive GMV growth in '25. I guess, what are the 1 or 2 primary things that give you conviction that you've returned back to that sustainable growth area?

[Jamie Iannone, executive]

Yes. I think a couple of things. One is the momentum that we're seeing across the board in focused categories being at 5% growth here and kind of growing at market rates pretty consistently over the last couple of quarters. Combined with the horizontal work that we've been doing, we've now had 2 quarters of nearly flat. And these are all kind of building blocks, if you will, of the momentum that we're seeing in the underlying business.

I talked a little bit about where we are from a buyer's perspective, but we're happy to see exactly what we thought which was a stabilization and a 1% growth in active buyers. And the other thing is that the investments that we're making in these geos are significant opportunities for expansion in the TAM.

When you look at our opportunity in U.K. and C2C, we think there's a big opportunity to go after really a massive TAM in terms of what people have sitting in their garages, houses, et cetera, is pretty significant. And what we've seen in the past, what we saw with the U.K. pre-lube fashion and what we saw in Germany is that we're able to bring on new or reactivated sellers onto the platform and then drive that ultimate buyer flywheel. So it's the combination of the momentum that we're seeing, those elements and the new initiatives that we have in place that give us confidence to put out the commentary there about '25.

[Nathaniel Feather, analyst]

Great. That's helpful. And then how should we think about the economics of U.K. managed shipping relative to eBay International shipping? And can you remind us to what extent EIS drove uplift in cross-border transactions.

[Jamie Iannone, executive]

Yes. It was very helpful for our cross-border trade business, and you see it in some of our cross-border trade numbers -- we had an incremental $400 million listings on the platform that were available to be shipped internationally.

When you look at our shipping changes, the first thing we're doing is just simplifying shipping on the platform, and that's pretty significant across our markets. But with minute shipping, it radically simplifies the experience and creates a new revenue stream for eBay. So historically, when I had to -- let's say, you were shipping a blazer to someone. You'd have to go from all the choices and figure out what you're going to list. And then if there were issues, you had to deal with it as a seller, the buyers on C2C items only really had tracking about 40% of the time.

And so through managed shipping, eBay kind of manage all of that for you and really simplifies the experience on the platform. Nearly all buyers will then have tracking information for eligible items. And frankly, this creates a new revenue stream for us, just like with payments and advertising, this is a new opportunity for eBay it's a win from an experience standpoint, it's great on kind of generating operating income for the business. But most importantly, it's another tool that unlocks kind of more TAM in C2C. When we've tested this, this is now live in pre-loss fashion in U.K. managed shipping.

Historically, it would have taken 90 seconds to get through that shipping section, and we're seeing sellers get through it in under 30 seconds. And so that's really powerful when you think about just taking friction out of the experience for selling. Steve, maybe you can talk a little bit more to the financial implications on managed shipping.

[Stephen Priest, executive]

Yes. I think as we talked about extensively last year, there's obviously an accounting change associated with EIS and the same applies to managed shipping because we're leaning in we're taking friction off the platform. We're helping our buyers and sellers, and we become the principal. So we recognize the gross revenues and the cost of shipping. You can imagine as a result of the scale of domestic shipping is accretive to operating income and that's really the focus that we have in terms of operating income dollars. But because it's domestic in nature and has naturally lower operating margins because of the competitive dynamics, it's more dilutive than the IS.

[Operator]

Our next question comes from the line of Nikhil Devnani from Bernstein.

[Nikhil Devnani, analyst]

When you refer to healthier trends in Germany, is that predominantly a top line comment? Or have you been able to improve the profitability of the German business as well now that you've got more activity taking place on your marketplace over there?

[Jamie Iannone, executive]

Yes, both. When you look at Germany and you look at kind of the trends before we were launching this to where we are now, we're seeing really nice improvement in the business. And you can while we don't break that market out specifically, if you look in the 10-Q, you can see kind of improving revenue trends from that perspective. and exactly what we intended to see is what we're seeing, right, which is that healthier C2C business with a 20% greater CSAT, is driving more new and reactivated sellers on the platform who end up buying more, and that's leading to the healthy trend.

When Steve talked about this originally, when we launched it, we quantified this as 10 basis points of impact. And we've been able to remonetize that business through things like ads, cross-border trades, and we're seeing exactly the flywheel that I talked about from seller to buyer. So we're really pleased with what we saw and what we continue to see with our C2C business in Germany.

We're really happy with the early results from U.K. pre-loved fashion, and that gave us the conviction that this was a real winning model to take to our second largest market, where there's some unique dynamics around how the sellers and buyers feel about buyer fees, which makes this a really good opportunity for us to go after incremental TAM.

[Nikhil Devnani, analyst]

Great. And maybe just a follow-up. You've been talking about improved satisfaction scores, which is a helpful indicator. Now that you've got several quarters behind you on very marketplace improvements. Can you maybe frame how much GMV conversion rates have improved since you started on this journey?

[Jamie Iannone, executive]

Yes. Look, you've heard me talk forever about GMV follow CSAT. And I've always said CSATs really the leading indicator there. And if you look case by case, we've seen CSAT increased 20 percentage points in what we did in our early focus categories and look at the trends that we have now on focused categories growing at 5%. I would say the same exact thing happened in Germany, where we had a 20-point increase in CSAT and much, much healthier trends. So what we're doing is not only having an impact on conversion and the health and growth of the business. but it's allowing us to bring on kind of new buyers and new sellers through these efforts, which is helping.

The active buyer growth that we're seeing is truly an output of the strategic initiatives that we've been driving and the new and reactivated sellers is not only good for the buying activity, but it's just bringing on more compelling inventory on the platform, which is really good for the long-term health of the business.

[Operator]

Our next question comes from the line of Tom Champion from Piper Sandler.

[Thomas Champion, analyst]

Jamie, perhaps for you. Always a lot of helpful commentary on the business in Europe, but I think China is actually now you're #3 market by revenue. I'm wondering if you could just give us an update the business and your customer base there? And maybe for Steve, just quickly, any impact from the sunsetting of the MX payment arrangement?

[Jamie Iannone, executive]

Yes. So look, our cross-border trade business out of China continues to be strong. It overindexes to focus categories, our business there. And so it's performing well. Specifically, I would call out parts and accessories has been a really good vector for our cross-border trade business. And we've continued to make that easier for buyers and sellers. So with our shipping solutions that we've had, we've helped them forward deploy from that perspective.

And we've also just made payments a whole lot easier from that perspective. When you think about our relationship with Amex, we deprecated Amex in August of last year. And as expected, there was no material impact to our business. As the vast majority of our customers on eBay, they use more than one payment option. So most customers that were using Amex were able to migrate to one of our other options like PayPal or Venmo or non-Amex, debit or credit cards.

And we're continuing to focus on launching new ways to pay Takeda to buyers and sellers. We launched River T this quarter. In Germany, 28 million customers, they are used that invoicing solution. They do like 80 million transactions a month, and it was 1 of those high demand areas for us to bring on to the platform and so we did. So really pleased between that and the seller cash advance work that we talked about in payments this quarter, really good innovation that we're seeing from that team.

[Stephen Priest, executive]

Operator, can we do one last question, please?

[Operator]

Certainly, your final question comes from the line of Michael Morton from MoffettNathanson.

[Michael Morton, analyst]

I think probably for Jamie. Following up on Tom's question a bit. Just on the strength that you've seen in parts and accessories, can you break down the key drivers to that for us? Is it the acquisition [indiscernible] flowing through the user experience now, I guess, like 2 years later and improving conversion rate around that? And then the second part is what you talked about China sourced inventory seems to skew towards parts and accessories.

And it looks like it's most -- is that like -- first question is, is that a big contributor just having more inventory and that helps conversion? And the second one is when you look at it, it appears that a lot of it has been freight forward from what we see all of it is straightforward. Do you feel comfortable that, that inventory is insulated from any political changes beta to even happen next week?

[Jamie Iannone, executive]

Yes. So look, I think it's hard to say that there's one thing because we've been working on parts and accessories for a couple of years, and we continue to innovate quarter after quarter. What I would tell you is all the work that we've done to increase customer satisfaction there started with the early work that we did in Fitment just in product finders and MyGarage enhancing that whole experience. We now have over 100 million cars in MyGarage, followed by really raising the trust level of what we did with guaranteed fit I was on with a reporter earlier today, and he talked about buying a new front end for his Toyota Sienna and it fit perfectly and it's going to give him 10 more years.

That's an example of just making those 2 products easier for customers to purchase. The point you called out the breadth of inventory plays a huge role in that. We have over $600 million unique listings in the marketplace and really unique inventory across a number of different segments of buyer enthusiasts. And all of the acquisitions the My Fitment has certainly added to the Fitment experience, the work that we've been doing to enhance not just the purchase, but the eventual service.

So we launched tire installation a couple of quarters ago, and we launched that first in Germany, and that's been performing well. We just launched parts installations and now you can both buy the part on eBay and have it installed and P&A has really been the largest contributor to growth despite this year despite lapping really strong growth that we have in '23.

To your question on the political environment, the majority of our inventory is forward deployed from that perspective. And that's been something that we've been working with our sellers to do to really reduce shipping times and make the overall experience better. So excited by the innovation that we're seeing in P&A, the strength of it and just the continued innovation of making the experience better and better.

[Operator]

This concludes eBay's Third Quarter 2024 Earnings Conference Call. Thank you for your participation. You may now disconnect.