EBAY INC

Previous wording

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the condensed consolidated financial statements and the related notes included in this report. This section of this Form 10-Q generally discusses items relating to the three-month periods ended March 31, 2024 and 2023 and quarter-to-quarter comparisons between the two periods.

Current wording

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the condensed consolidated financial statements and the related notes included in this report. This section of this Form 10-Q generally discusses items relating to the three and six-month periods ended June 30, 2024 and 2023 and comparisons between the respective periods.

Previous wording

In 2023 and extending into the first quarter of 2024, we experienced reduced traffic in most markets resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence, which negatively impacted discretionary consumer spending. These trends are uncertain in duration and are expected to continue in 2024.

Current wording

In 2023 and through the second quarter of 2024, we experienced dynamic discretionary spending trends resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence. These trends are uncertain in duration and are expected to continue. In addition, our operating and financial results may continue to fluctuate as a result of changes in the legal and regulatory landscape and our response to those developments.

Previous wording

Net revenues increased 2% to $2,556 million during the three months ended March 31, 2024 compared to the same period in 2023. FX-Neutral net revenues (as defined above) increased 2% during the three months ended March 31, 2024 compared to the same period in 2023. Operating margin increased to 24.7% for the three months ended March 31, 2024 compared to 22.2% for the same period in 2023.

Current wording

Net revenues increased 1% to $2,572 million during the three months ended June 30, 2024 compared to the same period in 2023. FX-Neutral net revenues (as defined above) increased 2% during the three months ended June 30, 2024 compared to the same period in 2023. Operating margin increased to 21.3% for the three months ended June 30, 2024 compared to 20.4% for the same period in 2023.

Previous wording

We recorded $97 million of aggregate losses in gain (loss) on equity investments and warrant, net on our condensed consolidated statement of income during the three months ended March 31, 2024 compared to $198 million of aggregate gains recorded during the same period in 2023.

Current wording

We recorded $222 million of aggregate losses in loss on equity investments and warrant, net on our condensed consolidated statement of income during the three months ended June 30, 2024 compared to $214 million of aggregate losses recorded during the same period in 2023.

Previous wording

We generated cash flow from continuing operating activities of $615 million during the three months ended March 31, 2024 compared to $841 million in the same period in 2023.

Current wording

We generated cash flow from continuing operating activities of $367 million during the three months ended June 30, 2024 compared to $605 million in the same period in 2023.

Previous wording

During the three months ended March 31, 2024, we made cash payments of $453 million related to the purchase of common stock and $139 million in dividends.

Current wording

During the three months ended June 30, 2024, we made cash payments of $1.0 billion related to the purchase of common stock and $135 million in dividends.

Previous wording

In April 2024, our Board declared a quarterly cash dividend of $0.27 per share of common stock to be paid on June 14, 2024 to stockholders of record as of May 31, 2024.

Current wording

In July 2024, our Board of Directors (our “Board”) declared a quarterly cash dividend of $0.27 per share of common stock to be paid on September 13, 2024 to stockholders of record as of August 30, 2024.

Previous wording

(1)Net revenues included $10 million of hedging losses during the three months ended March 31, 2024 compared to $29 million of hedging gains during the same period in 2023.

Current wording

(1)Net revenues included $10 million and $20 million of hedging losses during the three and six months ended June 30, 2024, respectively, compared to $14 million and $43 million of hedging gains during the same periods in 2023.

Previous wording

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $14 million on net revenues during the three months ended March 31, 2024 compared to an unfavorable impact of $45 million during the same period in 2023. The effect of foreign currency exchange rate movements during the three months ended March 31, 2024 compared to the same period in 2023 was primarily attributable to the weakening of the U.S. dollar against the British pound and other major currencies.

Current wording

(2)Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $11 million and a favorable impact of $3 million on net revenues during the three and six months ended June 30, 2024, respectively, compared to unfavorable impacts of $9 million and $54 million during the same periods in 2023. The effect of foreign currency exchange rate movements during the three months ended June 30, 2024 compared to the same period in 2023 was primarily attributable to the strengthening of the U.S. dollar against the euro and other major currencies while the effect of foreign currency exchange rate movements during the six months ended June 30, 2024 compared to the same period in 2023 was primarily attributable to the weakening of the U.S. dollar against the euro and British pound.

Previous wording

(1)Net revenues included $10 million of hedging losses during the three months ended March 31, 2024 compared to $29 million of hedging gains during the same period in 2023.

Current wording

(1)Net revenues included $10 million and $20 million of hedging losses during the three and six months ended June 30, 2024, respectively, compared to $14 million and $43 million of hedging gains during the same periods in 2023.

Previous wording

Net revenues increased primarily due to the investment in focus categories and a higher take rate driven by the expansion of promoted listings, eBay International Shipping and payment services. The increase in net revenues was partially offset by a reduction in traffic in most markets resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence, which negatively impacted discretionary consumer spending during the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

The increase in net revenues is related to higher GMV driven by the investment in focus categories and the expansion of promoted listings products, eBay International Shipping and payment services. The increase in net revenues and GMV was impacted by dynamic discretionary spending trends resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence during the three and six months ended June 30, 2024 compared to the same periods in 2023.

Previous wording

(1)Cost of net revenues were net of immaterial hedging activity during the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Cost of net revenues were net of immaterial hedging activity during the three and six months ended June 30, 2024 and 2023, respectively.

Previous wording

(2)Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $3 million on cost of net revenues during the three months ended March 31, 2024 compared to a favorable impact of $12 million during the same period in 2023.

Current wording

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $1 million and an unfavorable impact of $2 million on cost of net revenues during the three and six months ended June 30, 2024, respectively, compared to favorable impacts of $3 million and $15 million during the same periods in 2023.

Previous wording

Cost of net revenues was flat during the three months ended March 31, 2024 compared to the same period in 2023 with a $26 million increase related to eBay International Shipping and an $11 million increase in cost of ads products, offset by a $26 million decrease due to the change in our estimate of the useful lives for our servers and networking equipment and an $11 million decrease in payment processing costs.

Current wording

The increase in cost of net revenues during the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to a $30 million increase related to eBay International Shipping, a $26 million increase in cost of promoted listings products, a $29 million increase related to indirect tax matters and an $11 million disposition of data center equipment, partially offset by a $43 million decrease in depreciation expense due to the change in our estimate of the useful lives for our servers and networking equipment and a $20 million decrease in payment processing costs driven by rate improvements.

Previous wording

(1)Operating expenses were net of immaterial hedging activity during the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Operating expenses were net of immaterial hedging activity during the three and six months ended June 30, 2024 and 2023, respectively.

Previous wording

(2)Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $4 million on operating expenses during the three months ended March 31, 2024 compared to a favorable impact of $30 million during the same period in 2023.

Current wording

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $6 million and $3 million on operating expenses during the three and six months ended June 30, 2024, respectively, compared to a favorable impact of $11 million and $41 million during the same periods in 2023.

Previous wording

The increase in sales and marketing expenses during the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a $38 million increase in advertising and marketing program costs (both online and offline), partially offset by a $14 million decrease in employee related costs.

Current wording

The increase in sales and marketing expenses during the three months ended June 30, 2024 compared to the same period in 2023 was primarily due to a $44 million increase in advertising and marketing program costs (both online and offline), partially offset by a $23 million decrease in employee-related costs.

Previous wording

Product development expenses primarily consist of employee compensation (including stock-based compensation), contractor costs, facilities costs and depreciation on equipment. Product development expenses are net of required capitalization of major platform and other product development efforts, including the development and maintenance of our technology platform. Our top technology priorities include the implementation of our strategic plan including payment intermediation capabilities, improved seller tools and buyer experiences.

Current wording

Product development expenses primarily consist of employee compensation (including stock-based compensation), contractor costs, facilities costs and depreciation on equipment. Product development expenses are net of required capitalization of major platform and other product development efforts, including the development and maintenance of our technology platform. Our top technology priorities include improving seller tools and buyer experiences across our platforms powered by intelligent computing at scale.

Previous wording

Capitalized internal use and platform development costs were $29 million during the three months ended March 31, 2024 compared to $31 million during the same period in 2023. These costs are primarily reflected as a cost of net revenues when amortized in future periods.

Current wording

Capitalized internal use and platform development costs were $28 million and $57 million during the three and six months ended June 30, 2024, respectively, compared to $28 million and $58 million during the same periods in 2023. These costs are primarily reflected as a cost of net revenues when amortized in future periods.

Previous wording

The decrease in general and administrative expenses during the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a $51 million decrease in restructuring costs. See “Note 15 — Restructuring” to the condensed consolidated financial statements included in this report for more information on the restructuring.

Current wording

The decrease in general and administrative expenses during the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to a $48 million decrease in one-time restructuring costs. See “Note 15 — Restructuring” to the condensed consolidated financial statements included in this report for more information on the restructuring.

Previous wording

The increase in provision for transaction losses during the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a $6 million increase related to a slight increase in buyer and seller fraud rates.

Current wording

The increase in provision for transaction losses during the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to a slight increase in buyer and seller fraud rates.

Previous wording

Gain (loss) on equity investments and warrant, net primarily consists of gains and losses related to our various types of equity investments, including our equity investments in Adevinta, Gmarket and KakaoBank, and gains and losses due to changes in fair value of the warrant received from Adyen. The following table presents gain (loss) on equity investments and warrant, net for the periods indicated (in millions, except percentages):

Current wording

Loss on equity investments and warrant, net primarily consists of gains and losses related to our various types of equity investments, including our equity investments in Adevinta ASA (“Adevinta”), Gmarket Global LLC (“Gmarket”) and KakaoBank Corp. (“KakaoBank”), and gains and losses due to changes in fair value of the warrant received from Adyen N.V. (“Adyen”) and the Aurelia Option (as defined in “Note 5 — Investments”). The following table presents loss on equity investments and warrant, net for the periods indicated (in millions, except percentages):

Previous wording

The change in gain (loss) on equity investments and warrant, net during the three months ended March 31, 2024 compared to the same period in 2023 was primarily driven by the change in the fair value of our equity investments in Adevinta and the warrant.

Current wording

The change in loss on equity investments and warrant, net during the three and six months ended June 30, 2024 compared to the same period in 2023 was primarily driven by the change in the fair value of our equity investments and the warrant as well as the realized gain from the sale of shares in Adevinta and the related fair value of the Aurelia Option. See “Note 5 — Investments” to the condensed consolidated financial statements included in this report for more information on the Adevinta Transactions and the Aurelia Option.

Previous wording

Interest expense primarily consists of interest charges on amounts borrowed, commitment fees on unborrowed amounts under our credit agreement and interest expense on our outstanding debt securities and commercial paper, if any. Interest income and other, net primarily consists of interest earned on cash, cash equivalents and investments, gains and losses on foreign exchange transactions and gains and losses on acquisitions or disposals. The following table presents interest expense and interest income and other, net for the periods indicated (in millions, except percentages):

Current wording

Interest expense primarily consists of interest charges on amounts borrowed, commitment fees on unborrowed amounts under our credit agreement and interest expense on our outstanding debt securities and commercial paper, if any. Interest income and other, net primarily consists of interest earned on cash, cash equivalents and investments, gains and losses on foreign exchange transactions and transaction costs on acquisitions. The following table presents interest expense and interest income and other, net for the periods indicated (in millions, except percentages):

Previous wording

Interest expense decreased primarily due to a lower average notional amount of outstanding debt during the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

Interest expense decreased during the six months ended June 30, 2024 primarily due to a lower average notional amount of outstanding debt compared to the same period in 2023.

Previous wording

Interest income increased primarily due to higher yields on interest bearing instruments. We expect this trend to continue to a lesser extent in 2024.

Current wording

Interest income increased during the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to higher yields on interest bearing instruments. We expect this trend to continue to a lesser extent in 2024.

Previous wording

The decrease in our effective tax rate for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a recent California court ruling related to apportionment of dividends.

Current wording

The decrease in our effective tax rate for the three and six months ended June 30, 2024 compared to the same periods in 2023 was primarily due to the lapping of the increase in reserves for uncertain tax positions in 2023. The three months ended June 30, 2024 also includes the reversal of the benefit related to the apportionment of dividends recorded in the first quarter of 2024 due to a favorable court ruling, which was legislatively superseded in the California budget.

Previous wording

Cash provided by continuing operating activities of $615 million in the three months ended March 31, 2024 compared to cash provided by continuing operating activities of $841 million in the three months ended March 31, 2023 was primarily attributable to working capital movements and changes in non-cash items during the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

Cash provided by continuing operating activities of $982 million in the six months ended June 30, 2024 compared to cash provided by continuing operating activities of $1.4 billion in the six months ended June 30, 2023 was primarily attributable to working capital movements and changes in non-cash items during the six months ended June 30, 2024 compared to the same period in 2023.

Previous wording

Cash provided by continuing investing activities of $250 million in the three months ended March 31, 2024 was primarily attributable to proceeds of $3.7 billion from the maturities and sales of investments, partially offset by cash paid for investments of $3.3 billion and property and equipment of $143 million.

Current wording

Cash provided by continuing investing activities of $902 million in the six months ended June 30, 2024 was primarily attributable to proceeds of $6.7 billion from the maturities and sales of investments and proceeds of $2.4 billion from the sale of our equity investment in Adevinta, partially offset by cash paid for investments of $7.9 billion and property and equipment of $232 million.

Previous wording

Cash used in continuing financing activities of $686 million in the three months ended March 31, 2024 was primarily attributable to cash paid to repurchase $453 million of common stock and $139 million paid in cash dividends.

Current wording

Cash used in continuing financing activities of $1.8 billion in the six months ended June 30, 2024 was primarily attributable to cash paid to repurchase $1.5 billion of common stock and $274 million paid in cash dividends.

Previous wording

The negative effect of exchange rate movements on cash, cash equivalents and restricted cash was due to the strengthening of the U.S. dollar against other currencies during the three months ended March 31, 2024 compared to the 2023 year-end rate.

Current wording

The negative effect of exchange rate movements on cash, cash equivalents and restricted cash was due to the strengthening of the U.S. dollar against other currencies during the six months ended June 30, 2024 compared to the 2023 year-end rate.

Previous wording

As of March 31, 2024 and December 31, 2023, we had assets classified as cash and cash equivalents as well as short-term and long-term non-equity investments, in an aggregate amount of $4.9 billion and $5.1 billion, respectively. These amounts do not include cash held on behalf of customers related to marketplace activity of $448 million and $481 million, respectively, which are recorded separately within customer accounts and funds receivable with a corresponding liability within customer accounts and funds payable in our condensed consolidated balance sheet. These amounts also do not include restricted cash held for purposes of safeguarding customer funds of $83 million and $27 million, respectively. We believe these assets together with cash expected to be generated from operations, borrowings available under our credit agreement and commercial paper program, and our access to capital markets, will be sufficient to satisfy our material cash requirements over the next 12 months and for the foreseeable future.

Current wording

As of June 30, 2024 and December 31, 2023, we had assets classified as cash and cash equivalents as well as short-term and long-term non-equity investments, in an aggregate amount of $6.3 billion and $5.1 billion, respectively. These amounts do not include cash held on behalf of customers related to marketplace activity of $478 million and $481 million, respectively, which are recorded separately within customer accounts and funds receivable with a corresponding liability within customer accounts and funds payable in our condensed consolidated balance sheet. These amounts also do not include restricted cash held for purposes of safeguarding customer funds of $114 million and $27 million, respectively. We believe these assets together with cash expected to be generated from operations, borrowings available under our credit agreement and commercial paper program, and our access to capital markets, will be sufficient to satisfy our material cash requirements over the next 12 months and for the foreseeable future.

Previous wording

In January 2023, we redeemed the $1.2 billion aggregate principal amount of the floating rate and 2.750% senior notes due 2023. Total cash consideration paid was $1.2 billion, as the redemption price was equal to 100% of the principal amount. In addition, we paid accrued and unpaid interest on the principal amount.

Current wording

In January 2023, we repaid the $1.2 billion aggregate principal amount of the floating rate and 2.750% senior notes due 2023. Total cash consideration paid was $1.2 billion, as the redemption price was equal to 100% of the principal amount. In addition, we paid accrued and unpaid interest on the principal amount.

Previous wording

As of March 31, 2024, we had fixed-rate senior notes outstanding for an aggregate principal amount of $7.8 billion, with $1,550 million payable within 12 months. The net proceeds from the issuances of these senior notes are used for general corporate purposes, including, among other things, capital expenditures, share repurchases, repayment of indebtedness and possible acquisitions.

Current wording

As of June 30, 2024, we had fixed-rate senior notes outstanding for an aggregate principal amount of $7.8 billion, with $1.6 billion payable within 12 months. The net proceeds from the issuances of these senior notes are used for general corporate purposes, including, among other things, capital expenditures, share repurchases, repayment of indebtedness and possible acquisitions.

Previous wording

In March 2020, we entered into a credit agreement that provides for an unsecured $2 billion five-year credit facility (the “Prior Credit Agreement”).

Current wording

In March 2020, we entered into a credit agreement that provides for an unsecured $2.0 billion five-year credit facility (the “Prior Credit Agreement”).

Previous wording

In January 2024, we terminated the Prior Credit Agreement and entered into a new credit agreement (the “Credit Agreement”) that provides for an unsecured $2.0 billion five-year revolving credit facility. We may also, subject to the agreement of the applicable lenders, increase the commitments under the revolving credit facility by up to $1.0 billion. Funds borrowed under the Credit Agreement may be used for working capital, capital expenditures, acquisitions and other general corporate purposes and will bear interest at either (i) a customary forward-looking term rate based on the secured overnight financing rate published by CME Group for the relevant interest period plus an adjustment of 0.1% or (ii) a customary base rate formula, plus a margin (based on our public debt ratings) ranging from 0% to 0.375%. The covenants of the Credit Agreement are discussed in “Note 8 — Debt” to the condensed consolidated financial statements included in this report. As of March 31, 2024, no borrowings were outstanding under our $2 billion Credit Agreement.

Current wording

In January 2024, we terminated the Prior Credit Agreement and entered into a new credit agreement (the “Credit Agreement”) that provides for an unsecured $2.0 billion five-year revolving credit facility. We may also, subject to the agreement of the applicable lenders, increase the commitments under the revolving credit facility by up to $1.0 billion. Funds borrowed under the Credit Agreement may be used for working capital, capital expenditures, acquisitions and other general corporate purposes and will bear interest at either (i) a customary forward-looking term rate based on the secured overnight financing rate published by CME Group for the relevant interest period plus an adjustment of 0.1% or (ii) a customary base rate formula, plus a margin (based on our public debt ratings) ranging from 0% to 0.375%. The covenants of the Credit Agreement are discussed in “Note 8 — Debt” to the condensed consolidated financial statements included in this report. As of June 30, 2024, no borrowings were outstanding under our $2.0 billion Credit Agreement.

Previous wording

We are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits of $464 million included in other liabilities on our condensed consolidated balance sheet as of March 31, 2024. The timing of the resolution and/or closure of audits is highly uncertain, and it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

Current wording

We are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits of $472 million included in other liabilities on our condensed consolidated balance sheet as of June 30, 2024. The timing of the resolution and/or closure of audits is highly uncertain, and it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

Previous wording

As of March 31, 2024, our assets classified as cash and cash equivalents as well as short-term and long-term non-equity investments included assets held in certain of our foreign operations totaling approximately $2.0 billion. As we repatriate these funds to the United States, we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs. We have accrued deferred taxes for the tax effect of repatriating the funds to the United States. For additional details related to our income taxes, please see “Income Tax Provision” in our Results of Operations above and “Note 13 — Income Taxes” to the condensed consolidated financial statements included in this report.

Current wording

As of June 30, 2024, our assets classified as cash and cash equivalents as well as short-term and long-term non-equity investments included assets held in certain of our foreign operations totaling approximately $1.9 billion. As we repatriate these funds to the United States, we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs. We have accrued deferred taxes for the tax effect of repatriating the funds to the United States. For additional details related to our income taxes, please see “Income Tax Provision” in our Results of Operations above and “Note 13 — Income Taxes” to the condensed consolidated financial statements included in this report.

Previous wording

During the three months ended March 31, 2024, we repurchased approximately $499 million of our common stock under our stock repurchase programs. As of March 31, 2024, a total of approximately $2.9 billion remained available for future repurchases of our common stock under our stock repurchase programs. See “Note 11 — Stockholders’ Equity” to the condensed consolidated financial statements included in this report for more information about our stock repurchase programs.

Current wording

During the six months ended June 30, 2024, we repurchased approximately $1.5 billion of our common stock under our stock repurchase program. As of June 30, 2024, a total of approximately $1.9 billion remained available for future repurchases of our common stock. See “Note 11 — Stockholders’ Equity” to the condensed consolidated financial statements included in this report for more information about our stock repurchase program.

Previous wording

The Company paid a total of $139 million and $134 million in cash dividends during the three months ended March 31, 2024 and 2023, respectively. In April 2024, our Board declared a cash dividend of $0.27 per share of common stock to be paid on June 14, 2024 to stockholders of record as of May 31, 2024.

Current wording

The Company paid a total of $135 million and $133 million in cash dividends during the three months ended June 30, 2024 and 2023, respectively, and $274 million and $267 million in cash dividends during the six months ended June 30, 2024 and 2023, respectively. In July 2024, our Board declared a cash dividend of $0.27 per share of common stock to be paid on September 13, 2024 to stockholders of record as of August 30, 2024.