EBAY INC (EBAY)

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with Part I “Forward Looking Statements,” Part I, Item 1 “Business,” Part I, Item 1A “Risk Factors,” and the consolidated financial statements and the related notes included in this report. This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Annual Report on Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

OVERVIEW

Business

eBay Inc. is a global commerce leader that connects people and builds communities to create economic opportunity for all. Our technology empowers millions of buyers and sellers in more than 190 markets around the world, providing everyone the opportunity to grow and thrive. Our Marketplace platforms, including our online marketplace located at www.ebay.com and its localized counterparts, our off-platform marketplaces and our suite of mobile apps, together, create one of the world's largest and most vibrant marketplaces for discovering great value and unique selection.

Gross Merchandise Volume (“GMV”) grew during 2024 as we executed on our strategy, including across Focus Categories, country-specific investments, and horizontal initiatives. Improvement was driven by cross-category shopping, horizontal innovation, country-specific initiatives and growth in recommerce. The culmination of these effects, combined with consumers looking for value, offset pressure in discretionary spending across our three largest markets primarily resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence.

FX-Neutral Presentation

In addition to presenting net revenues in accordance with U.S. generally accepted accounting principles (“GAAP”), we also present foreign exchange neutral (“FX-Neutral”) net revenues to supplement our results of operations presented in accordance with GAAP and to enhance investors’ understanding of our global business performance by excluding the positive or negative year-over-year impact of foreign currency movements on reported net revenues. We define FX-Neutral net revenues as GAAP net revenues minus the exchange rate effect, which we calculate by applying prior period foreign currency exchange rates to current year transactional currency amounts, excluding hedging activity. We believe presenting FX-Neutral net revenues provides useful information to both management and investors by isolating the effects of foreign currency exchange rate fluctuations that may not be indicative of our core operating results. In addition, as we have historically reported certain FX-Neutral results to investors, we believe that continuing to include these FX-Neutral measures provides consistency in our financial reporting. FX-Neutral net revenues are non-GAAP financial measures that are not based on any comprehensive set of accounting rules or principles and may be calculated differently than other “FX-Neutral,” “constant currency,” or similarly titled measures used by other companies. FX-Neutral net revenues are not presented as an alternative to GAAP net revenues and should only be used to evaluate our results of operations in conjunction with GAAP net revenues.

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Fiscal Year Highlights

Net revenues increased 2% to $10.3 billion compared to $10.1 billion in 2023. FX-Neutral net revenues (as defined above) also increased 2% compared to 2023. Operating margin increased to 22.5% compared to 19.2% in 2023.

We generated cash flow from continuing operating activities of $2.4 billion in both 2024 and 2023.

We recognized $76 million of aggregate losses on equity investments and warrant in our consolidated statement of income compared to $1.8 billion of aggregate gains recognized during 2023.

We repurchased $3.1 billion of common stock and paid $533 million in cash dividends.

In the first and fourth quarter, our Board authorized an incremental $2.0 billion and $3.0 billion, respectively, under our stock repurchase program, with no expiration from the date of authorization.

In the third quarter, we repaid $750 million aggregate principal amount of our previously outstanding 3.450% senior notes on the date of maturity.

In the second quarter, we completed the previously announced sale of Adevinta ASA (“Adevinta”) shares in exchange for $2.4 billion in cash and shares of the new entity, Aurelia Netherlands TopCo B.V. (“Aurelia”) representing approximately 18.3% ownership. We recognized an unrealized loss of $234 million and a realized gain of $78 million. Concurrently, we granted Aurelia UK Feederco Limited, the buyer, a six-month option to purchase Aurelia shares.

In the fourth quarter, the option was exercised upon which we sold additional shares in Aurelia in exchange for $1.0 billion in cash and recognized an $11 million loss. The fair value of the investment was $867 million as of December 31, 2024, representing approximately 8.3% of the outstanding equity of Aurelia.

In the fourth quarter, we met the processing volume milestone required to vest in the second tranche of our warrant to purchase shares of Adyen N.V. (“Adyen”). Upon vesting, we exercised the option to purchase shares of Adyen valued at $630 million in exchange for $108 million in cash. We subsequently sold our shares for $573 million and recognized a realized loss of $57 million.

In the fourth quarter, we sold our remaining stake in Gmarket Global LLC (“Gmarket”) valued at $323 million in exchange for $322 million in cash, net of transaction costs, and recognized a realized loss of $1 million and an unrealized loss of $12 million related to the change in fair value of the investment.

In January 2025, we repaid the $450 million aggregate principal amount of the previously outstanding commercial paper notes on the date of maturity.

In February 2025, our Board declared a cash dividend of $0.29 per share of common stock to be paid on March 28, 2025 to stockholders of record as of March 14, 2025.

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RESULTS OF OPERATIONS

We have one reportable segment, which reflects how the chief operating decision maker (“CODM”), President and Chief Executive Officer, reviews and assesses performance of the business. This reportable segment includes our online marketplace located at www.ebay.com and its localized counterparts, our off-platform marketplaces and our suite of mobile apps. The accounting policies of this segment are the same as those described in “Note 1 — The Company and Summary of Significant Accounting Policies” in our consolidated financial statements included elsewhere in this report.

Net Revenues

We generate revenues from the following activities:

Marketplace revenues primarily consist of commissions related to the connection service including final value fees, listing fees, feature fees, and foreign exchange fees. Marketplace revenues also include store subscription fees, shipping fees, and certain other fees. Marketplace revenues are reduced by customer incentive programs, including discounts, coupons, and rewards.

Advertising revenues primarily consist of fees charged to sellers to promote their listings on our Marketplace platforms, as well as third-party advertising fees.

The following table presents net revenues for the periods indicated (in millions, except percentages):

Seasonality

We expect volume on our Marketplace platforms to trend with general consumer buying patterns. Seasonal trends in net revenues have been influenced by macroeconomic conditions, foreign exchange rate fluctuations, as well as the introduction and scaling of new products and initiatives by us and our competitors. The following table presents our total net revenues and the sequential quarterly movements of these net revenues for the periods indicated (in millions, except percentages):

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Net Revenues by Geography

Revenues are attributed to the United States and international geographies primarily based upon the country in which the customer is located. The following table presents net revenues by geography for the periods indicated (in millions, except percentages):

(1)Net revenues included $54 million of hedging losses during 2024 compared to $56 million and $140 million of hedging gains during 2023 and 2022, respectively.

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $2 million during 2024 compared to a favorable impact of $52 million and an unfavorable impact of $320 million during 2023 and 2022, respectively. The effect of foreign currency exchange rate movements during 2024 compared to 2023 was primarily attributable to the weakening of the U.S. dollar against the euro and other major currencies.

Our Marketplace platforms operate globally, resulting in certain revenues that are denominated in foreign currencies, primarily the British pound and euro. Year-over-year appreciation or depreciation of the U.S. dollar may have a material impact to our financial results; we have experienced and may continue to experience elevated foreign currency volatility in the future. Through our hedging programs, we actively monitor foreign currency volatility and attempt to mitigate significant movements. As shown in the table above, we generate approximately half of our net revenues internationally. Therefore, we are subject to the risks related to conducting business in foreign countries as discussed under “Item 1A: Risk Factors” in Part I of this report.

Key Operating Metrics

GMV and take rate are significant factors that we believe affect our net revenues.

GMV consists of the total value of all paid transactions between users on our Marketplace platforms during the applicable period inclusive of shipping fees and taxes. We believe that GMV provides a useful measure of the overall volume of paid transactions that flow through our Marketplace platforms in a given period.

FX-Neutral GMV is defined as GMV minus the exchange rate effect, which we calculate by applying prior period foreign currency exchange rates to current year transactional currency amounts.

Take rate is defined as net revenues divided by GMV and represents net revenue as a percentage of overall volume on our Marketplace platforms. We believe that take rate provides a useful measure of our ability to monetize volume through services on our Marketplace platforms in a given period. We use take rate to identify key revenue drivers.

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The following table presents net revenues and our key operating metrics of GMV and take rate for the periods indicated. The following table also presents a reconciliation of FX-Neutral net revenues and FX-Neutral GMV (each as defined above) to our reported net revenues and GMV for the periods indicated (in millions, except percentages):

(1)Net revenues included $54 million of hedging losses during 2024 compared to $56 million and $140 million of hedging gains during 2023 and 2022, respectively.

In 2024, the increase in net revenues was primarily due to higher GMV, the expansion of promoted listings products, the ramp of eBay International Shipping and additional financial services offered to buyers and sellers within our payments system, partially offset by a decline in our take rate driven by fluctuations in foreign currency exchange rates and changes to our fee structure in certain markets.

GMV grew during 2024 as we executed on our strategy, including across Focus Categories, country-specific investments, and horizontal initiatives. Traffic improvement was driven by cross-category shopping, horizontal innovation, country-specific initiatives and growth in recommerce. The culmination of these effects, combined with consumers looking for value, offset pressure in discretionary spending across our three largest markets primarily resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence.

Focus Categories GMV grew in aggregate, faster than the remainder of our marketplace. This volume growth was primarily driven by Parts & Accessories (“P&A”), Refurbished, Collectibles, and Luxury goods. Traffic and conversion improved in the U.S., which led to a narrower gap to U.S. ecommerce market growth. Collectibles was a key contributor to U.S. growth, including Trading Cards, where traffic and conversion have improved, driven by strategic investments and partnerships. In the United Kingdom and Germany, we continued to experience challenging macroeconomic conditions and lower consumer confidence, with offsetting growth in P&A and consumer-to-consumer volume. Cross-border trade was a key driver of International GMV growth, led by exports from Greater China and Japan into our major markets. Cross-border trade was also a significant contributor to growth in Focus Categories, particularly P&A.

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Cost of Net Revenues

Cost of net revenues represents costs associated with customer support, site operations and payment processing. Significant components of these costs primarily consist of employee compensation (including stock-based compensation), contractor costs, facilities costs, depreciation of equipment and amortization expense, bank transaction fees, credit card interchange and assessment fees, authentication costs, shipping costs and indirect tax expenses. The following table presents cost of net revenues for the periods indicated (in millions, except percentages):

(1)Cost of net revenues were net of immaterial hedging activity during 2024, 2023 and 2022, respectively.

(2)Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $7 million on cost of net revenues during 2024 compared to an unfavorable impact of $2 million and a favorable impact of $81 million during 2023 and 2022, respectively.

The increase in cost of net revenues during 2024 compared to 2023 was primarily due to a $53 million increase related to the expansion of promoted listings products, a $50 million increase related to indirect tax expenses, a $32 million increase related to the ramp of eBay International Shipping, and an $11 million disposition of data center equipment, partially offset by a $66 million decrease in depreciation expense due to the change in our estimate of the useful lives for our servers and networking equipment and a $38 million decrease in payment processing costs driven by rate improvements.

Operating Expenses

The following table presents operating expenses for the periods indicated (in millions, except percentages):

(1)Operating expenses were net of immaterial hedging activity during 2024, 2023 and 2022, respectively.

(2)Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $9 million on operating expenses during 2024 compared to a favorable impact of $16 million and $193 million during 2023 and 2022, respectively.

**    Not meaningful

Sales and Marketing

Sales and marketing expenses primarily consist of marketing program costs, employee compensation (including stock-based compensation), certain user coupons and rewards, contractor costs, facilities costs and depreciation on equipment. Marketing program costs represent traffic acquisition costs in various channels such as paid search, affiliates marketing and display advertising, as well as brand campaigns and buyer/seller communications.

The increase in sales and marketing expenses during 2024 compared to 2023 was primarily due to a $163 million increase in marketing program costs and user coupons, partially offset by a $74 million decrease in employee-related costs.

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Product Development

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 Marketplace platforms powered by intelligent computing at scale.

The decrease in product development expenses during 2024 compared to 2023 was primarily due to a decrease in employee-related costs driven by operational efficiencies. While employee costs are decreasing, we continue to invest in strategic areas such as browsing experience, search optimization and providing relevant recommendations to enhance the experience for our customers around the world.

Capitalized internal use and platform development costs were $108 million and $115 million in 2024 and 2023, respectively. These costs are primarily reflected as a cost of net revenues when amortized in future periods.

General and Administrative

General and administrative expenses primarily consist of employee compensation (including stock-based compensation), contractor costs, facilities costs, depreciation of equipment, legal expenses, restructuring, insurance premiums and professional fees. Our legal expenses, including those related to various ongoing legal proceedings, may fluctuate substantially from period to period.

The decrease in general and administrative expenses during 2024 compared to 2023 was primarily due to a $56 million legal accrual release during 2024 compared to a $65 million legal expense recognized during 2023 and an $8 million restructuring accrual release during 2024 compared to a $141 million restructuring expense recognized during 2023. See “Note 12 — Commitments and Contingencies” and “Note 18 — Restructuring” to the consolidated financial statements included in this report for additional details regarding our legal matters and the restructuring, respectively.

Provision for Transaction Losses

Provision for transaction losses consists primarily of losses resulting from our buyer protection programs, chargebacks for unauthorized credit card use, and merchant related chargebacks due to non-delivery of goods or services. We expect our provision for transaction losses to fluctuate depending on many factors, including changes to our protection programs and macroeconomic conditions.

The decrease in provision for transaction losses during 2024 compared to 2023 was primarily due to favorable fluctuations in buyer and seller fraud rates.

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Gain (loss) on equity investments and warrant, net

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, Adyen, Aurelia and Gmarket, 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):

**    Not meaningful

The change in gain (loss) on equity investments and warrant, net during 2024 compared to 2023 was driven by the realized and unrealized changes in fair value of our equity investments and the warrant. Refer to “Note 6 — Investments” for further details about our equity investments.

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Interest Expense, Interest Income and Other, Net

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, as applicable. Interest income and other, net primarily consists of interest earned on cash, cash equivalents, investments and customer accounts, gains and losses on foreign exchange transactions and transaction costs of acquisitions. The following table presents interest expense and interest income and other, net for the periods indicated (in millions, except percentages):

**    Not meaningful

Interest expense decreased during 2024 compared to 2023 primarily due to a lower average notional amount of outstanding debt.

Interest income increased during 2024 compared to 2023 primarily due to a higher average notional amount and higher yields on fixed-income investments.

Income Tax Provision (Benefit)

The following table presents provision for income taxes and effective tax rate for the periods indicated (in millions, except percentages):

The decrease in our effective tax rate during 2024 compared to 2023 was primarily due to benefits from the sale of Gmarket, research and development tax credits generated, excess tax benefits on stock-based compensation and the 2023 non-recurring remeasurement of deferred tax assets related to a tax rate reduction and an increase in reserves for uncertain tax positions, partially offset by a benefit from the release of a valuation allowance.

We are regularly under examination by tax authorities both domestically and internationally. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations, although there are inherent uncertainties in these examinations. Due to the ongoing tax examinations, it is generally impractical to determine the amount and timing of these adjustments. However, we expect several tax examinations to close within the next 12 months. See “Note 15 — Income Taxes” to the consolidated financial statements included in this report for more information on estimated settlements within the next 12 months.

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Liquidity and Capital Resources

Cash Flows

Continuing Operating Activities

Our operating cash flows arise primarily from cash received from our customers on our Marketplace platforms offset by cash payments for sales and marketing, employee compensation and payment processing expenses.

Cash provided by continuing operating activities of $2.4 billion in 2024 compared to $2.4 billion in 2023 was primarily attributable to a $377 million increase in operating income offset by working capital movements.

Continuing Investing Activities

Cash provided by continuing investing activities of $2.2 billion in 2024 was primarily attributable to proceeds of $12.3 billion from the maturities and sales of investments, and proceeds of $2.4 billion, $1.0 billion, $573 million and $322 million from the sale of our equity investments in Adevinta, Aurelia, Adyen and Gmarket, respectively, partially offset by cash paid for investments of $13.9 billion and property and equipment of $458 million.

Cash provided by continuing investing activities of $240 million in 2023 was primarily attributable to proceeds of $14.5 billion from the maturities and sales of investments, partially offset by cash paid for investments of $13.9 billion and property and equipment of $456 million.

The largely offsetting effects of purchases of investments and maturities and sale of investments results from the management of our investments. As our immediate cash needs change, purchase and sale activity will fluctuate.

Continuing Financing Activities

Cash used in continuing financing activities of $3.8 billion in 2024 was primarily driven by common stock repurchases of $3.1 billion, debt repayments of $750 million related to the repayment of our 3.450% senior notes due 2024, and $533 million of cash dividends paid, partially offset by borrowing under our commercial paper program of $441 million and net funds receivable and payable activity of $305 million.

Cash used in continuing financing activities of $2.5 billion in 2023 was primarily driven by common stock repurchases of $1.4 billion, debt repayments of $1.2 billion related to the repayment of our floating rate and 2.750% senior notes due 2023, and $528 million of cash dividends paid, partially offset by net funds receivable and payable activity of $717 million driven by changes in payment processors.

The negative and positive effects of exchange rate movements on cash, cash equivalents and restricted cash during 2024 and 2023, respectively, was due to the strengthening and weakening, respectively, of the U.S. dollar against other currencies.

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Liquidity and Capital Resource Requirements

As of December 31, 2024 and 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 $7.2 billion and $5.1 billion, respectively. These amounts do not include cash held on behalf of customers related to marketplace activity of $763 million and $481 million, respectively, which are recognized separately within “Customer accounts and funds receivable” with a corresponding liability within “Customer accounts and funds payable” in our consolidated balance sheet. These amounts also do not include restricted cash related to safeguarding customer funds, our global sabbatical program, and other compensation arrangements held in escrow totaling $90 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.

Geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and global economic uncertainty have caused material disruptions in both the United States and international financial markets and economies and are uncertain in duration. The impact of these events has increased, and may continue to increase, our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity. The future impact of these events cannot be predicted with certainty and we cannot assure that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward.

We have certain fixed contractual obligations and commitments that include future estimated payments for general operating purposes. Changes in our business needs, contractual cancellation provisions, fluctuating interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of these payments. The following sections summarizes our fixed contractual obligations and commitments.

Senior Notes

In 2024, we repaid the $750 million aggregate principal amount of our previously outstanding 3.450% senior notes on the date of maturity.

In 2023, we repaid the $1.2 billion aggregate principal amount of our floating rate and 2.750% senior notes on the date of maturity.

As of December 31, 2024, we had fixed-rate senior notes outstanding with an aggregate principal amount of $7.0 billion, with $1.2 billion payable within 12 months. Future interest payments associated with the senior notes totaled an aggregate of $2.1 billion, with an aggregate of $223 million payable within 12 months. The net proceeds from the issuances of these senior notes were used for general corporate purposes, including, among other things, capital expenditures, share repurchases, repayment of indebtedness and acquisitions.

Commercial Paper

We have a commercial paper program pursuant to which we may issue commercial paper notes in an aggregate principal amount at maturity of up to $1.5 billion outstanding at any time with maturities of up to 397 days from the date of issue. In 2024, we issued and repaid $180 million of commercial paper notes with original maturities less than 90 days and issued $450 million of commercial paper notes with original maturities greater than 90 days. As of December 31, 2024, we had $450 million aggregate principal amount of commercial paper notes outstanding with a weighted average interest rate of 5.10% per annum, and a weighted average remaining term of 144 days.

In January 2025, we repaid the $450 million aggregate principal amount of the previously outstanding commercial paper notes on the date of maturity.

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Credit Agreement

We have a 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 10 — Debt” to the consolidated financial statements included in this report. As of December 31, 2024, we had $450 million aggregate principal amount of commercial paper notes outstanding; therefore, $1.6 billion of borrowing capacity was available for other purposes permitted by the credit agreement.

Leases

We have operating leases for office space, data centers, as well as other corporate assets that we utilize under lease arrangements. As of December 31, 2024, we had fixed lease payment obligations of $544 million, with $142 million payable within 12 months. For additional details related to our leases, please see “Note 11 — Leases” to the consolidated financial statements included in this report.

Purchase Obligations

Purchase obligation amounts include minimum purchase commitments for advertising, capital expenditures (including for computer equipment, software applications, engineering development services, and construction contracts) and other goods and services entered into in the ordinary course of business. As of December 31, 2024, we had purchase obligations of $86 million, with $64 million payable within 12 months.

Income Taxes

The timing of the resolution and/or closure of audits is highly uncertain. 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. We expect the gross amount of unrecognized tax benefits to be reduced within the next 12 months by at least $170 million.

As of December 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 $1.6 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 15 — Income Taxes” to the consolidated financial statements included in this report.

Stock Repurchases

Our stock repurchase programs are intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of our common stock to reduce our outstanding share count and return value to stockholders. Any share repurchases under our stock repurchase programs will be funded from our working capital or other financing alternatives.

We expect to continue making opportunistic and programmatic repurchases of our common stock, subject to market conditions and other uncertainties. However, our stock repurchase programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors, including corporate and regulatory requirements, price and other market conditions and management’s determination as to the appropriate use of our cash.

In February and December 2024, our Board authorized an incremental $2.0 billion and $3.0 billion, respectively, under our stock repurchase program in addition to the $4.0 billion previously authorized in 2022. Our stock repurchase program has no expiration from the date of authorization.

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During 2024, we repurchased $3.1 billion of our common stock under our stock repurchase program. As of December 31, 2024, a total of $3.3 billion remained available for future repurchases of our common stock. See “Note 13 — Stockholders’ Equity” to the consolidated financial statements included in this report for more information about our stock repurchase program.

Dividends

We paid a total of $533 million and $528 million in cash dividends in 2024 and 2023, respectively. In February 2025, our Board declared a cash dividend of $0.29 per share of common stock to be paid on March 28, 2025 to stockholders of record as of March 14, 2025.

Other Capital Resource Requirements

We actively monitor all counterparties that hold our cash and cash equivalents and non-equity investments, focusing primarily on the safety of principal and secondarily on improving yield on these assets. We diversify our cash and cash equivalents and investments among various counterparties in order to reduce our exposure should any one of these counterparties fail or encounter difficulties. To date, we have not experienced any material loss or lack of access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets, including, without limitation, as a result of the impact of geopolitical events, inflationary pressure and foreign exchange rate volatility. At any point in time we have funds in our operating accounts and customer accounts that are deposited and invested with third party financial institutions.

We have entered into various indemnification agreements and, in the ordinary course of business, we have included limited indemnification provisions in certain of our agreements with parties with which we have commercial relations. It is not possible to determine the maximum potential loss under these various indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recognized in our consolidated statement of income in connection with our indemnification provisions have not been significant, either individually or collectively. See “Note 12 — Commitments and Contingencies” to the consolidated financial statements included in this report for more information about our indemnification provisions.

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Critical Accounting Policies, Judgments and Estimates

General

The preparation of our consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and related notes and other disclosures included in this report.

Revenue Recognition

We may enter into certain revenue contracts that include promises to transfer multiple goods or services, including discounts on future services. We also may enter into arrangements to purchase services from certain customers. As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions, including: (1) whether services are considered distinct performance obligations that should be accounted for separately or combined; (2) developing an estimate of the stand-alone selling price of each distinct performance obligation; (3) whether revenue should be reported gross (as eBay is acting as a principal), or net (as eBay is acting as an agent); (4) evaluating whether a promotion or incentive is a payment to a customer; and (5) whether the arrangement would be characterized as revenue or reimbursement of costs incurred. Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.

Income Taxes

Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties and the complexity of taxes on foreign earnings. We review our tax positions quarterly and adjust the balances as new information becomes available. Tax positions are evaluated for potential reserves for uncertainty based on the estimated probability of sustaining the position under examination. Our income tax rate is affected by the tax rates that apply to our foreign earnings including U.S. minimum taxes on foreign earnings. The deferred tax benefit derived from the amortization of our intellectual property is based on the fair value, which has been agreed with foreign tax authorities. The deferred tax benefit may from time to time change based on changes in tax rates. Management has no specific plans to indefinitely reinvest the undistributed earnings of our foreign subsidiaries at the balance sheet date.

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates that are based on a number of factors, including our historical experience and short-range and long-range business forecasts. As of December 31, 2024, we had a valuation allowance on certain net operating loss and tax credit carryforwards based on our assessment that it is more likely than not that the deferred tax asset will not be realized.

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We recognize and measure uncertain tax positions in accordance with generally accepted accounting principles in the United States, or GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. GAAP further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter in which such change occurs. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

We file annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited by the relevant tax authorities and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes reflect the most likely outcome. We adjust these reserves, as well as the related interest, where appropriate in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets or liabilities, or by changes or interpretations in tax laws, regulations or accounting principles. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service, as well as various state and foreign tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

Based on our results for the year ended December 31, 2024, a one-percentage point change in our provision for income taxes as a percentage of income before taxes would have resulted in an increase or decrease in the provision of $23 million, resulting in an approximate $0.05 change in diluted earnings per share.

Goodwill

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recognized as goodwill.

As of December 31, 2024, our goodwill totaled $4.3 billion. We assess the impairment of goodwill of our reporting unit annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair value of the reporting unit is estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. The market approach uses comparable company information to determine revenue and earnings multiples to value our reporting unit. Failure to achieve these expected results or market multiples may cause a future impairment of goodwill at the reporting unit. We conducted our annual impairment test of goodwill as of August 31, 2024 and 2023. As of December 31, 2024, we determined that no impairment of the carrying value of goodwill was required. See “Note 4 — Goodwill and Intangible Assets” to the consolidated financial statements included in this report.

Legal Contingencies

In connection with certain pending litigation and other claims, we have estimated the range of probable loss, net of expected recoveries, and provided for such losses through charges to our consolidated statements of income. These estimates have been based on our assessment of the facts and circumstances at each balance sheet date and are subject to change based upon new information and future events.

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From time to time, we are involved in disputes and regulatory inquiries that arise in the ordinary course of business. We are currently involved in legal proceedings, some of which are discussed in “Note 12 — Commitments and Contingencies” to the consolidated financial statements included in this report. We believe that we have meritorious defenses to the claims against us, and we intend to defend ourselves vigorously. However, even if successful, our defense against certain actions will be costly and could require significant amounts of management’s time and result in the diversion of significant operational resources. If the plaintiffs were to prevail on certain claims, we might be forced to pay significant damages and licensing fees, modify our business practices or even be prohibited from conducting a significant part of our business. Any such results could materially harm our business and could result in a material adverse impact on the financial position, results of operations or cash flows.

Recent Accounting Pronouncements

See "Note 1 — The Company and Summary of Significant Accounting Policies" to the consolidated financial statements included in this report, regarding the impact of certain recent accounting pronouncements in our consolidated financial statements.

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ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the consolidated financial statements and the related notes included in this report. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

OVERVIEW

Business

eBay Inc. is a global commerce leader that connects people and builds communities to create economic opportunity for all. Our technology empowers millions of buyers and sellers in more than 190 markets around the world, providing everyone the opportunity to grow and thrive. Our Marketplace platforms, including our online marketplace located at www.ebay.com and its localized counterparts, our off-platform businesses in Japan and the United States, and our suite of mobile apps, together, create one of the world's largest and most vibrant marketplaces for discovering great value and unique selection.

Throughout most of 2023, we experienced reduced traffic in most markets resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility, elevated interest rates and lower consumer confidence. These factors negatively impacted discretionary consumer spending, are uncertain in duration and we expect them to continue into 2024.

Presentation

In addition to the corresponding measures under generally accepted accounting principles (“GAAP”), management uses non-GAAP measures in reviewing our financial results. The foreign exchange neutral (“FX-Neutral”), or constant currency, net revenue amounts discussed below are non-GAAP financial measures and are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Accordingly, the FX-Neutral information appearing in the following discussion of our results of operations should be read in conjunction with the information provided below in “Non-GAAP Measures of Financial Performance,” which includes reconciliations of FX-Neutral financial measures to the most directly comparable GAAP measures. We calculate the year-over-year impact of foreign currency movements using prior period foreign currency rates, excluding hedging activity, applied to current year transactional currency amounts.

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Fiscal Year Highlights

Net revenues increased 3% to $10.1 billion during 2023 compared to $9.8 billion in 2022. FX-Neutral net revenues (as defined above) increased 4% compared to 2022. Operating margin decreased to 19.2% in 2023 compared to 24.0% in 2022.

We generated cash flow from continuing operating activities of $2.4 billion in 2023 compared to $2.6 billion in 2022.

We recorded $1.8 billion of aggregate gains on equity investments and warrant in our consolidated statement of income during 2023 compared to $3.8 billion of aggregate losses recorded during 2022.

In 2023, we repurchased $1.4 billion of common stock and paid $528 million in cash dividends.

In 2023, we repaid debt of $1.2 billion consisting of the floating rate and 2.750% senior notes due 2023.

In 2023, we announced our support for the voluntary tender offer led by Permira and Blackstone to acquire all the publicly traded shares of Adevinta (the “Adevinta Transaction”). As part of the Adevinta Transaction, eBay agreed to sell 50% of its shares for an estimated $2.2 billion and to exchange the remaining shares for an equity stake of approximately 20% in the newly privatized company. The Adevinta Transaction remains subject to closing conditions and is expected to be completed in the second quarter of 2024.

In February 2024, our Board authorized an additional $2.0 billion stock repurchase program with no expiration from the date of authorization.

In February 2024, we declared a cash dividend for the first quarter of 2024 of $0.27 per share of common stock to be paid on March 25, 2024 to stockholders of record as of March 11, 2024.

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RESULTS OF OPERATIONS

We have one reportable segment to reflect the way management and our chief operating decision maker (“CODM”) review and assess performance of the business. Our reportable segment is Marketplace, which includes our online marketplace located at www.ebay.com, its localized counterparts and the eBay suite of mobile apps. The accounting policies of our segment are the same as those described in “Note 1 — The Company and Summary of Significant Accounting Policies” in our consolidated financial statements included elsewhere in this report.

Net Revenues

Net revenues primarily include final value fees, feature fees, fees to promote listings, payment service fees, listing fees, and store subscription fees from sellers on our platforms. Our net revenues also include revenues from the sale of advertisements, revenue sharing arrangements and shipping fees. Our net revenues are reduced by incentives, including discounts, coupons and rewards, provided to our customers.

The following table presents net revenues for the periods indicated (in millions, except percentages):

Seasonality

We expect transaction activity patterns on our platforms to trend with general consumer buying patterns and expect that these trends will continue. Seasonal trends in net revenues may be influenced as we introduce and scale new products throughout the year. In addition, macroeconomic conditions, including the impact of COVID-19, have in the past disrupted seasonal patterns in net revenues, particularly in the first quarter of 2021. The following table presents our total net revenues and the sequential quarterly movements of these net revenues for the periods indicated (in millions, except percentages):

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Net Revenues by Geography

Revenues are attributed to U.S. and international geographies primarily based upon the country in which the seller, platform that displays advertising, other service provider or customer, as the case may be, is located. The following table presents net revenues by geography for the periods indicated (in millions, except percentages):

(1)Net revenues were net of $56 million and $140 million of hedging gains and $65 million of hedging losses during the years ended December 31, 2023, 2022 and 2021, respectively.

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $52 million, an unfavorable impact of $320 million and a favorable impact of $188 million during the years ended December 31, 2023, 2022 and 2021, respectively. The effect of foreign currency exchange rate movements in 2023 compared to 2022 was primarily attributable to the weakening of the U.S. dollar against the British pound and other major currencies.

Our commerce platforms operate globally, resulting in certain revenues that are denominated in foreign currencies, primarily the British pound and euro. Year-over-year appreciation or depreciation of the U.S. dollar may have a material impact to our financial results, and we have seen and could continue to see elevated foreign currency volatility in the future. Through our hedging programs, we actively monitor foreign currency volatility and attempt to mitigate significant risk. As shown in the table above, we generate approximately half of our net revenues internationally. Therefore, we are subject to the risks related to conducting business in foreign countries as discussed under “Item 1A: Risk Factors” in Part I of this report.

Key Operating Metrics

Gross Merchandise Volume (“GMV”) and take rate are significant factors that we believe affect our net revenues.

GMV consists of the total value of all paid transactions between users on our platforms during the applicable period inclusive of shipping fees and taxes. Despite GMV’s divergence from revenue, we still believe that GMV provides a useful measure of the overall volume of paid transactions that flow through our platforms in a given period.

Take rate is defined as net revenues divided by GMV and represents net revenue as a percentage of overall volume on our platforms. We believe that take rate provides a useful measure of our ability to monetize volume through marketplace services on our platforms in a given period. We use take rate to identify key revenue drivers on our marketplace.

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The following table presents net revenues, GMV and take rate for the periods indicated (in millions, except percentages):

(1)Net revenues were net of $56 million and $140 million of hedging gains and $65 million of hedging losses during the years ended December 31, 2023, 2022 and 2021, respectively.

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $52 million, an unfavorable impact of $320 million and a favorable impact of $188 million during the years ended December 31, 2023, 2022 and 2021, respectively.

(3)Take rate is defined as net revenues divided by GMV, as discussed above.

Net revenues increased primarily due to the investment in focus categories and a higher take rate driven by the expansion of promoted listings and payment services and the launch of eBay International Shipping. 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 2023 compared to 2022.

Net revenues continued to outpace GMV during 2023 primarily due to the benefit of a higher take rate. While we expect this trend to continue to a lesser extent into 2024, we still believe GMV provides a useful measure of overall volume of paid transactions that flow through the platform in a given period.

Cost of Net Revenues

Cost of net revenues represents costs associated with customer support, site operations and payment processing. Significant components of these costs primarily consist of employee compensation (including stock-based compensation), contractor costs, facilities costs, depreciation of equipment and amortization expense, bank transaction fees, credit card interchange and assessment fees, authentication costs, shipping costs and digital services tax. The following table presents cost of net revenues for the periods indicated (in millions, except percentages):

(1)Cost of net revenues were net of immaterial hedging activity during the years ended December 31, 2023, 2022 and 2021, respectively.

(2)Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $2 million, a favorable impact of $81 million and an unfavorable impact of $31 million on cost of net revenues during the years ended December 31, 2023, 2022 and 2021, respectively.

The increase in cost of net revenues during 2023 compared to 2022 was primarily driven by a $96 million increase related to the launch of eBay International Shipping, a $39 million increase related to the expansion of authentication services, and a $24 million increase in customer support costs, partially offset by a $17 million decrease in payment processing costs incurred.

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Operating Expenses

The following table presents operating expenses for the periods indicated (in millions, except percentages):

(1)Operating expenses were net of immaterial hedging activity during the years ended December 31, 2023, 2022 and 2021, respectively.

(2)Foreign currency movements relative to the U.S. dollar had a favorable impact of $16 million and $193 million and an unfavorable impact of $82 million on operating expenses during the years ended December 31, 2023, 2022 and 2021, respectively.

**     Not meaningful

Sales and Marketing

Sales and marketing expenses primarily consist of advertising and marketing program costs (both online and offline), employee compensation (including stock-based compensation), certain user coupons and rewards, contractor costs, facilities costs and depreciation on equipment. Online marketing expenses represent traffic acquisition costs in various channels such as paid search, affiliates marketing and display advertising. Offline advertising primarily includes brand campaigns and buyer/seller communications.

The increase in sales and marketing expenses during 2023 compared to 2022 was primarily due to a $91 million increase in employee related costs and a $13 million increase in advertising and marketing program costs (both online and offline), partially offset by a $26 million decrease in user coupons and rewards.

Product Development

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.

The increase in product development expenses during 2023 compared to 2022 was primarily due to an increase in employee related costs as we continued to innovate and modernize the shopping experience across our platforms powered by intelligent computing at scale.

Capitalized internal use and platform development costs were $115 million and $130 million in 2023 and 2022, respectively. These costs are primarily reflected as a cost of net revenues when amortized in future periods.

General and Administrative

General and administrative expenses primarily consist of employee compensation (including stock-based compensation), contractor costs, facilities costs, depreciation of equipment, legal expenses, restructuring, insurance premiums and professional fees. Our legal expenses, including those related to various ongoing legal proceedings, may fluctuate substantially from period to period.

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The increase in general and administrative expenses during 2023 compared to 2022 was primarily due to $141 million of restructuring costs that did not occur in 2022, an $84 million increase in employee related costs, and an incremental $18 million accrual for probable losses related to legal matters. For additional details related to our legal matters, please see “Note 13 — Commitments and Contingencies” to the consolidated financial statements included in this report.

Provision for Transaction Losses

Provision for transaction losses primarily consists of transaction loss expense associated with our buyer protection programs, losses from our managed payments services, fraud and bad debt expense associated with our accounts receivable balance. We expect our provision for transaction losses to fluctuate depending on many factors, including changes to our protection programs and the impact of regulatory changes.

The increase in provision for transaction losses during 2023 compared to 2022 was primarily due to $17 million higher transaction loss expense related to the launch of eBay International Shipping.

Gain (Loss) on Equity Investments and Warrant, Net

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, KakaoBank and Gmarket, 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):

(1)Gain (loss) on sale of shares in Adevinta included: (i) in 2022, a $2 million gain on the change in fair value of shares sold; (ii) in 2021, an $88 million gain recognized on the sale of the shares offset by a $79 million loss on the change in fair value of the shares sold.

(2)Gain (loss) on other investments primarily included: (i) in 2022, primarily downward adjustments of $13 million recorded on equity investments under the fair value option and $7 million recorded on equity investments without readily determinable fair values; (ii) in 2021, primarily a $41 million upward adjustment and a $10 million impairment recorded on equity investments without readily determinable fair values.

**     Not meaningful

The change in gain (loss) on equity investments and warrant, net during 2023 compared to 2022 was primarily driven by the change in the fair value of our equity investments in Adevinta, Gmarket and KakaoBank and the warrant.

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Interest Expense, Interest Income and Other, Net

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

Interest expense increased primarily due to higher rates offset by lower average notional on outstanding debt during 2023. In 2023, we repaid two tranches of senior notes at substantially lower interest rates than the senior notes that were issued during the fourth quarter of 2022. As a result, we expect continued upward pressure on interest expense into 2024.

Interest income increased primarily due to higher yields on corporate debt and government and agency securities in a higher interest rate environment. We expect this trend to continue into 2024.

Income Tax Provision

The following table presents provision for income taxes and effective tax rate for the periods indicated (in millions, except percentages):

The increase in our effective tax rate for 2023 compared to 2022 was primarily due to a remeasurement of deferred tax assets related to a tax rate reduction and an increase in reserves for uncertain tax positions partially offset by a benefit from the release of a valuation allowance.

We are regularly under examination by tax authorities both domestically and internationally. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations, although there are inherent uncertainties in these examinations. Due to the ongoing tax examinations, it is generally impractical to determine the amount and timing of these adjustments. However, we expect several tax examinations to close within the next twelve months. See “Note 16 — Income Taxes” to the consolidated financial statements included in this report for more information on estimated settlements within the next twelve months.

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Non-GAAP Measures of Financial Performance

To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles, we use FX-Neutral net revenues, which are non-GAAP financial measures. Management uses the foregoing non-GAAP measures in reviewing our financial results. We define FX-Neutral net revenues as net revenues minus the exchange rate effect. We define exchange rate effect as the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts, excluding hedging activity.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. These measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

These non-GAAP measures are provided to enhance investors’ overall understanding of our current financial performance and its prospects for the future. Specifically, we believe these non-GAAP measures provide useful information to both management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook. In addition, because we have historically reported certain non-GAAP results to investors, we believe that the inclusion of these non-GAAP measures provide consistency in our financial reporting.

The following tables present a reconciliation of FX-Neutral GMV and FX-Neutral net revenues (each as defined below) to our reported GMV and net revenues for the periods indicated (in millions, except percentages):

(1)We define exchange rate effect as the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts, excluding hedging activity.

(2)We define FX-Neutral GMV as GMV minus the exchange rate effect. We define the non-GAAP financial measures of FX-Neutral net revenues as net revenues minus the exchange rate effect.

(3)Net revenues were net of $56 million and $140 million of hedging gains and $65 million of hedging losses during the years ended December 31, 2023, 2022 and 2021, respectively.

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Liquidity and Capital Resources

Cash Flows

Continuing Operating Activities

Our operating cash flows arise primarily from cash received from our customers on our platforms offset by cash payments for sales and marketing, employee compensation and payment processing expenses.

Cash provided by continuing operating activities of $2.4 billion in 2023 compared to $2.6 billion in 2022 was primarily attributable to a $409 million decrease in operating income as well as working capital movements and changes in non-cash items.

Continuing Investing Activities

Cash provided by continuing investing activities of $240 million in 2023 was primarily attributable to proceeds of $14.5 billion from the maturities and sales of investments, partially offset by cash paid for investments of $13.9 billion and property and equipment of $456 million.

Cash provided by investing activities of $2.5 billion in 2022 was primarily attributable to proceeds of $20.6 billion from the maturities and sales of investments and proceeds of $1.1 billion in the aggregate from the sales of shares in Adevinta, Adyen and KakaoBank, partially offset by cash paid for investments of $18.5 billion, property and equipment of $449 million and cash paid for the acquisition of TCGplayer of $208 million.

The largely offsetting effects of purchases of investments and maturities and sale of investments results from the management of our investments. As our immediate cash needs change, purchase and sale activity will fluctuate.

Continuing Financing Activities

Cash used in continuing financing activities of $2.5 billion in 2023 was primarily driven by common stock repurchases of $1.4 billion, debt repayments of $1.2 billion related to the redemption of our floating rate and 2.750% senior notes due 2023, and $528 million of cash dividends paid, partially offset by net funds receivable and payable activity of $717 million driven by changes in payment processors.

Cash used in financing activities of $3.8 billion in 2022 was primarily driven by common stock repurchases of $3.1 billion, debt repayments of $1.4 billion, which was comprised of $750 million related to our 3.800% senior fixed rate notes due 2022 and $605 million related to our 2.600% senior fixed rate notes due 2022, and $489 million of cash dividends paid, partially offset by proceeds from debt issuances of $1.2 billion.

The positive and negative effects of exchange rate movements on cash, cash equivalents and restricted cash were due to the weakening and strengthening of the U.S. dollar against other currencies, primarily the British pound and euro, during 2023 and 2022, respectively.

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Liquidity and Capital Resource Requirements

As of December 31, 2023 and December 31, 2022, we had assets classified as cash and cash equivalents, as well as short-term and long-term non-equity investments from continuing operations, in an aggregate amount of $5.1 billion and $5.9 billion, respectively. We believe that our cash, cash equivalents and short-term and long-term investments, 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.

However, geopolitical events, inflationary pressure, foreign exchange volatility, elevated interest rates and global economic uncertainty have caused material disruptions in both U.S. and international financial markets and economies and are uncertain in duration. The impact of these events has increased, and may continue to increase, our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity. The future impact of these events cannot be predicted with certainty and we cannot assure that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward.

We have certain fixed contractual obligations and commitments that include future estimated payments for general operating purposes. Changes in our business needs, contractual cancellation provisions, fluctuating interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of these payments. The following sections summarizes our fixed contractual obligations and commitments.

Senior Notes

In January 2023, we redeemed the $1.2 billion aggregate principal amount of our 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.

As of December 31, 2023, we had fixed-rate senior notes outstanding with an aggregate principal amount of $7.8 billion, with $750 million aggregate principal amount payable within 12 months. Future interest payments associated with the senior notes totaled an aggregate of $2.4 billion, with an aggregate of $0.3 billion payable within 12 months. The net proceeds from the issuances of these senior notes were used for general corporate purposes, including, among other things, capital expenditures, share repurchases, repayment of indebtedness and acquisitions.

Commercial Paper

We have a commercial paper program pursuant to which we may issue commercial paper notes in an aggregate principal amount at maturity of up to $1.5 billion outstanding at any time with maturities of up to 397 days from the date of issue. As of December 31, 2023, there were no commercial paper notes outstanding.

Credit Agreement

In March 2020, we entered into a credit agreement that provided for an unsecured $2.0 billion five-year credit facility (the “Prior Credit Agreement”). As of December 31, 2023, no borrowings were outstanding under the Prior Credit Agreement.

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 consistent with the covenants of the Prior Credit Agreement.

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Leases

We have operating leases for office space, data centers, as well as other corporate assets that we utilize under lease arrangements. As of December 31, 2023, we had fixed lease payment obligations of $638 million, with $136 million payable within 12 months. For additional details related to our leases, please see “Note 12 — Leases” to the consolidated financial statements included in this report.

Purchase Obligations

Purchase obligation amounts include minimum purchase commitments for advertising, capital expenditures (computer equipment, software applications, engineering development services, construction contracts) and other goods and services entered into in the ordinary course of business. As of December 31, 2023, we had purchase obligations of $100 million, with $30 million payable within 12 months.

Income Taxes

We are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits of $457 million included in other liabilities on our consolidated balance sheet as of December 31, 2023. 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.

As of December 31, 2023, our assets classified as cash and cash equivalents, and short-term and long-term non-equity investments from continuing operations 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.

See “Note 16 — Income Taxes” to the consolidated financial statements included in this report for more information on unrecognized tax benefits and deferred taxes.

Stock Repurchases

Our stock repurchase programs are intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of our common stock to reduce our outstanding share count. Any share repurchases under our stock repurchase programs will be funded from our working capital or other financing alternatives.

We expect, subject to market conditions and other uncertainties, to continue making opportunistic and programmatic repurchases of our common stock. However, our stock repurchase programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors, including corporate and regulatory requirements, price and other market conditions and management’s determination as to the appropriate use of our cash.

In February 2022 our Board authorized an additional $4.0 billion stock repurchase program, with no expiration from the date of authorization. During 2023, we repurchased approximately $1.4 billion of our common stock under our stock repurchase programs. As of December 31, 2023, a total of approximately $1.4 billion remained available for future repurchases of our common stock under our stock repurchase programs. In February 2024, our Board authorized an additional $2.0 billion stock repurchase program, with no expiration from the date of authorization. See “Note 14 — Stockholders’ Equity” to the consolidated financial statements included in this report for more information about our stock repurchase programs.

Dividends

We paid a total of $528 million and $489 million in cash dividends in 2023 and 2022, respectively. In February 2024, we declared a cash dividend for the first quarter of 2024 of $0.27 per share of common stock to be paid on March 25, 2024 to stockholders of record as of March 11, 2024.

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Other Capital Resource Requirements

We actively monitor all counterparties that hold our cash and cash equivalents and non-equity investments, focusing primarily on the safety of principal and secondarily on improving yield on these assets. We diversify our cash and cash equivalents and investments among various counterparties in order to reduce our exposure should any one of these counterparties fail or encounter difficulties. To date, we have not experienced any material loss or lack of access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets, including, without limitation, as a result of the impact of geopolitical events, inflationary pressure and foreign exchange rate volatility. At any point in time we have funds in our operating accounts and customer accounts that are deposited and invested with third party financial institutions.

We have entered into various indemnification agreements and, in the ordinary course of business, we have included limited indemnification provisions in certain of our agreements with parties with which we have commercial relations. It is not possible to determine the maximum potential loss under these various indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in our consolidated statement of income in connection with our indemnification provisions have not been significant, either individually or collectively. See “Note 13 — Commitments and Contingencies” to the consolidated financial statements included in this report for more information about our indemnification provisions.

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Critical Accounting Policies, Judgments and Estimates

General

The preparation of our consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and related notes and other disclosures included in this report.

Revenue Recognition

We may enter into certain revenue contracts that include promises to transfer multiple goods or services, including discounts on future services. We also may enter into arrangements to purchase services from certain customers. As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions, including: (1) whether services are considered distinct performance obligations that should be accounted for separately or combined; (2) developing an estimate of the stand-alone selling price of each distinct performance obligation; (3) whether revenue should be reported gross (as eBay is acting as a principal), or net (as eBay is acting as an agent); (4) evaluating whether a promotion or incentive is a payment to a customer; and (5) whether the arrangement would be characterized as revenue or reimbursement of costs incurred. Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.

Income Taxes

Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties and the complexity of taxes on foreign earnings. We review our tax positions quarterly and adjust the balances as new information becomes available. Tax positions are evaluated for potential reserves for uncertainty based on the estimated probability of sustaining the position under examination. Our income tax rate is affected by the tax rates that apply to our foreign earnings including U.S. minimum taxes on foreign earnings. The deferred tax benefit derived from the amortization of our intellectual property is based on the fair value, which has been agreed with foreign tax authorities. The deferred tax benefit may from time to time change based on changes in tax rates. Management has no specific plans to indefinitely reinvest the undistributed earnings of our foreign subsidiaries at the balance sheet date.

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates that are based on a number of factors, including our historical experience and short-range and long-range business forecasts. As of December 31, 2023, we had a valuation allowance on certain net operating loss and tax credit carryforwards based on our assessment that it is more likely than not that the deferred tax asset will not be realized.

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We recognize and measure uncertain tax positions in accordance with generally accepted accounting principles in the United States, or GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. GAAP further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter in which such change occurs. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

We file annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited by the relevant tax authorities and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes reflect the most likely outcome. We adjust these reserves, as well as the related interest, where appropriate in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets or liabilities, or by changes or interpretations in tax laws, regulations or accounting principles. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service, as well as various state and foreign tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

Based on our results for the year ended December 31, 2023, a one-percentage point change in our provision for income taxes as a percentage of income before taxes would have resulted in an increase or decrease in the provision of approximately $37 million, resulting in an approximate $0.07 change in diluted earnings per share.

Goodwill

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill.

As of December 31, 2023, our goodwill totaled $4.3 billion. We assess the impairment of goodwill of our reporting unit annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair value of the reporting unit is estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. The market approach uses comparable company information to determine revenue and earnings multiples to value our reporting unit. Failure to achieve these expected results or market multiples may cause a future impairment of goodwill at the reporting unit. We conducted our annual impairment test of goodwill as of August 31, 2023 and 2022. As of December 31, 2023, we determined that no impairment of the carrying value of goodwill was required. See “Note 5 — Goodwill and Intangible Assets” to the consolidated financial statements included in this report.

Legal Contingencies

In connection with certain pending litigation and other claims, we have estimated the range of probable loss, net of expected recoveries, and provided for such losses through charges to our consolidated statements of income. These estimates have been based on our assessment of the facts and circumstances at each balance sheet date and are subject to change based upon new information and future events.

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From time to time, we are involved in disputes and regulatory inquiries that arise in the ordinary course of business. We are currently involved in legal proceedings, some of which are discussed in “Note 13 — Commitments and Contingencies” to the consolidated financial statements included in this report. We believe that we have meritorious defenses to the claims against us, and we intend to defend ourselves vigorously. However, even if successful, our defense against certain actions will be costly and could require significant amounts of management’s time and result in the diversion of significant operational resources. If the plaintiffs were to prevail on certain claims, we might be forced to pay significant damages and licensing fees, modify our business practices or even be prohibited from conducting a significant part of our business. Any such results could materially harm our business and could result in a material adverse impact on the financial position, results of operations or cash flows.

Recent Accounting Pronouncements

See "Note 1 — The Company and Summary of Significant Accounting Policies" to the consolidated financial statements included in this report, regarding the impact of certain recent accounting pronouncements on our consolidated financial statements.

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ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, including with respect to the ongoing effects of COVID-19, inflationary pressure, foreign exchange rate volatility and geopolitical events, such as the ongoing war in Ukraine, new or planned features or services, or management strategies). You can generally identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in “Item 1A: Risk Factors” of this Annual Report on Form 10-K, as well as in our consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the consolidated financial statements and the related notes included in this report. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

OVERVIEW

Business

eBay Inc., is a global commerce leader, which includes our Marketplace platforms. Founded in 1995 in San Jose, California, eBay is one of the world’s largest and most vibrant marketplaces for discovering great value and unique selection. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity. Our technologies and services are designed to provide buyers choice and a breadth of relevant inventory and to enable sellers worldwide to organize and offer their inventory for sale, virtually anytime and anywhere. In 2022, we focused on our strategic playbook — to understand the customer and their needs; build experiences they will love, at scale; and tell our story in new and different ways.

In 2020 and extending into 2021, there were changes in consumer behavior that resulted in more online shopping driven by the outbreak of a coronavirus and its variants (“COVID-19”). Our Marketplace platforms experienced elevated traffic as well as the acquisition of buyers and small sellers due to the impacts of measures taken globally to contain the spread of COVID-19, which were unprecedented and are not expected to recur. In 2022, we also experienced reduced traffic in most markets resulting from geopolitical events, inflationary pressure, foreign exchange rate volatility and lower consumer confidence. These factors negatively impacted discretionary consumer spending, are uncertain in duration and we expect them to continue into 2023.

In 2021, we completed the transfer of our Classifieds business to Adevinta ASA (“Adevinta”), and subsequently completed the sale of 80.01% of the outstanding equity interests of eBay Korea LLC, a limited liability company incorporated under the laws of Korea and a wholly owned subsidiary of eBay KTA (“eBay Korea”) to E-mart Inc. and one of its wholly owned subsidiaries (together, “Emart”). The results of our eBay Korea and Classifieds businesses have been presented as discontinued operations in our consolidated statement of income for all periods presented through the respective transaction close dates as the transactions represented a strategic shift in our business that had a major effect on our operations and financial results.

See “Note 4 — Discontinued Operations” in our consolidated financial statements included elsewhere in this report for additional information.

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Presentation

In addition to the corresponding measures under generally accepted accounting principles (“GAAP”), management uses non-GAAP measures in reviewing our financial results. The foreign exchange neutral (“FX-Neutral”), or constant currency, net revenue amounts discussed below are non-GAAP financial measures and are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Accordingly, the FX-Neutral information appearing in the following discussion of our results of operations should be read in conjunction with the information provided below in “Non-GAAP Measures of Financial Performance,” which includes reconciliations of FX-Neutral financial measures to the most directly comparable GAAP measures. We calculate the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts.

Fiscal Year Highlights

Net revenues decreased 6% to $9.8 billion primarily due to a decline in traffic resulting from the normalization of consumer behavior during 2022 compared to the elevated traffic experienced on our Marketplace platforms from the impact of COVID-19 during 2021. Net revenues were also impacted by reduced traffic in most markets resulting from geopolitical and inflationary pressure during 2022 compared to 2021. In addition, net revenues were impacted by a stronger U.S. dollar in 2022 as FX-Neutral net revenues (as defined above) decreased only 4% compared to 2021. Operating margin decreased to 24.0% in 2022 compared to 28.1% in 2021.

We generated cash flow from continuing operating activities of $2.6 billion in 2022 compared to $3.1 billion in 2021, ending the year with cash, cash equivalents and non-equity investments of $5.9 billion.

In 2022, we received cash proceeds of $1.1 billion in the aggregate from the sales of shares in Adevinta, Adyen and KakaoBank. We recorded realized losses on the change in fair value of shares sold of $216 million in the aggregate in gain (loss) on equity investments and warrant, net on our consolidated statement of income for 2022.

In 2022, we repurchased $3.1 billion of common stock and paid $489 million in cash dividends.

In 2022, we repaid debt of $1.4 billion consisting of the 2.600% and 3.800% senior notes.

In October 2022, we completed the acquisition of TCGplayer for $228 million. TCGplayer is a trusted marketplace offering more selection for collectible card game enthusiasts.

In November 2022, we issued senior notes of $1.2 billion aggregate principal amount, which consisted of $425 million of 5.900% fixed rate notes due 2025, $300 million of 5.950% fixed rate notes due to 2027 and $425 million of 6.300% fixed rate notes due 2032.

In January 2023, we repaid debt of $1.2 billion consisting of the floating rate and 2.750% senior notes.

In February 2023, we declared a quarterly cash dividend of $0.25 per share of common stock to be paid on March 24, 2023 to stockholders of record as of March 10, 2023.

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RESULTS OF OPERATIONS

We have one reportable segment to reflect the way management and our chief operating decision maker (“CODM”) review and assess performance of the business. Our reportable segment is Marketplace, which includes our online marketplace located at www.ebay.com, its localized counterparts and the eBay suite of mobile apps. The accounting policies of our segment are the same as those described in “Note 1 — The Company and Summary of Significant Accounting Policies” in our consolidated financial statements included elsewhere in this report.

Net Revenues

Beginning in the fourth quarter of 2022, we present revenues generated from our Marketplace GMV and from non-GMV based businesses as “Net revenues” in order to more closely align our presentation of net revenues with how our business is operated. We formerly presented such amounts as “Net transaction revenues” and “Marketing services and other (MS&O) revenues,” and those line items for such prior periods have been conformed to current period presentation. Consolidated net revenues are unchanged.

Net revenues primarily include final value fees and feature fees, which include fees to promote listings and listing fees from sellers on our platforms. Our net revenues also include store subscription and other fees often from large enterprise sellers as well as revenues from the sale of advertisements and revenue sharing arrangements. Our net revenues are reduced by incentives, including discounts, coupons and rewards, provided to our customers.

The following table presents net revenues for the periods indicated (in millions, except percentages):

Seasonality

We expect transaction activity patterns on our platforms to trend with general consumer buying patterns and expect that these trends will continue. As we introduce new products and platforms, such as managed payments which was completed by the end of 2021, we expect net revenues to fluctuate. In addition, macroeconomic conditions, including the impact of COVID-19, disrupted seasonal patterns in net revenues, particularly in the second quarter of 2020 and in the first quarter of 2021. The following table presents our total net revenues and the sequential quarterly movements of these net revenues for the periods indicated (in millions, except percentages):

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Net Revenues by Geography

Revenues are attributed to U.S. and international geographies primarily based upon the country in which the seller, platform that displays advertising, other service provider or customer, as the case may be, is located. The following table presents net revenues by geography for the periods indicated (in millions, except percentages):

Our commerce platforms operate globally, resulting in certain revenues that are denominated in foreign currencies, primarily the British pound and euro. The recent appreciation of the U.S. dollar may have a material impact to our financial results, and we have seen and could continue to see elevated foreign currency volatility in the future. Through our hedging programs, we actively monitor foreign currency volatility and attempt to mitigate the risk. As shown in the table above, we generate approximately half of our net revenues internationally. Because of these factors, we are subject to the risks related to doing business in foreign countries as discussed under “Item 1A: Risk Factors” in Part I of this report.

Net revenues included $140 million of hedging gains during 2022, $65 million of hedging losses during 2021 and $15 million of hedging gains during 2020. Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $320 million on net revenues in 2022 and a favorable impact of $188 million and $26 million on net revenues in 2021 and 2020, respectively. The effect of foreign currency exchange rate movements in 2022 compared to 2021 was primarily attributable to the strengthening of the U.S. dollar against the British pound and euro.

Key Operating Metrics

Gross Merchandise Volume (“GMV”) and take rate are significant factors that we believe affect our net revenues.

GMV consists of the total value of all paid transactions between users on our platforms during the applicable period inclusive of shipping fees and taxes. Despite GMV’s divergence from revenue, we still believe that GMV provides a useful measure of the overall volume of paid transactions that flow through our platforms in a given period.

Take rate is defined as net revenues divided by GMV and represents net revenue as a percentage of overall volume on our platforms. We believe that take rate provides a useful measure of our ability to monetize volume through marketplace services on our platforms in a given period. We use take rate to identify key revenue drivers on our marketplace.

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The following table presents net revenues, GMV and take rate for the periods indicated (in millions, except percentages):

(1)Marketplace net revenues were net of $140 million, $65 million and $15 million hedging activity during the years ended December 31, 2022, 2021 and 2020 respectively.

(2)GMV has been retrospectively recast to reflect the new definition of GMV announced in December 2021.

(3)Take rate is defined as net revenues divided by GMV, as discussed above.

Net revenues and GMV decreased across major categories primarily due to a decline in traffic resulting from the normalization of consumer behavior during 2022 compared to the elevated traffic experienced on our Marketplace platforms from the impact of COVID-19 during 2021. Net revenues were also impacted by reduced traffic in most markets resulting from geopolitical events, inflationary pressure, foreign exchange volatility and lower consumer confidence, which negatively impacted discretionary consumer spending during 2022 compared to 2021. The decrease in net revenues was partially offset by a higher take rate during 2022 compared to 2021 as a result of revenue initiatives such as global payments and promoted listings.

Net revenues decreased at a lower rate than GMV during 2022 compared to 2021 primarily due to the benefit of a higher take rate during the same periods, as discussed above. We expect the divergence between net revenues and GMV to continue to a lesser extent into 2023. Despite GMV’s divergence from net revenues, we still believe the metric provides a useful measure of overall volume of paid transactions that flow through the platform in a given period.

Cost of Net Revenues

Cost of net revenues represents costs associated with customer support, site operations and payment processing. Significant components of these costs primarily consist of employee compensation including stock-based compensation, contractor costs, facilities costs, depreciation of equipment and amortization expense, bank transaction fees, credit card interchange and assessment fees, authentication costs and digital services tax. The following table presents cost of net revenues for the periods indicated (in millions, except percentages):

Cost of net revenues, net of immaterial hedging activities, was favorably impacted by $113 million attributable to foreign currency movements relative to the U.S. dollar in 2022 compared to 2021. The increase in cost of net revenues in 2022 compared to 2021 was primarily due to higher payment processing costs incurred for managed payments, partially offset by the favorable impact of foreign currency movements described above.

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Operating Expenses

The following table presents operating expenses for the periods indicated (in millions, except percentages):

Foreign currency movements relative to the U.S. dollar had a favorable impact of $274 million on operating expenses in 2022 compared to 2021. There was no hedging activity within operating expenses.

Sales and Marketing

Sales and marketing expenses primarily consist of advertising and marketing program costs (both online and offline), employee compensation including stock-based compensation, certain user coupons and rewards, contractor costs, facilities costs and depreciation on equipment. Online marketing expenses represent traffic acquisition costs in various channels such as paid search, affiliates marketing and display advertising. Offline advertising primarily includes brand campaigns and buyer/seller communications.

The decrease in sales and marketing expenses in 2022 compared to 2021 was primarily due to the favorable impact of foreign currency movements of $180 million and a decrease in certain user coupons and rewards of $27 million, partially offset by an increase in online and offline advertising expense of $178 million.

Product Development

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 payment intermediation capabilities, products to grow the seller tools ecosystem and product experiences that delight our customers and enhance the buying experience for our enthusiasts.

Product development expenses were flat in 2022 compared to 2021 primarily due to an increase in employee related costs of $36 million offset by the favorable impact of foreign currency movements of $31 million.

Capitalized internal use and platform development costs were $130 million and $127 million in 2022 and 2021, respectively. These costs are primarily reflected as a cost of net revenues when amortized in future periods.

General and Administrative

General and administrative expenses primarily consist of employee compensation including stock-based compensation, contractor costs, facilities costs, depreciation of equipment, employer payroll taxes on stock-based compensation, legal expenses, restructuring, insurance premiums and professional fees. Our legal expenses, including those related to various ongoing legal proceedings, may fluctuate substantially from period to period.

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The decrease in general and administrative expenses in 2022 compared to 2021 was primarily due to the favorable impact of foreign currency movements of $42 million and restructuring costs of $33 million that did not occur in 2022, partially offset by a charge relating to legal contingencies of $50 million, charitable contributions of $35 million, one-time transaction support costs of $20 million and exit costs of $13 million related to the announcement to close our marketplace in Turkey.

Provision for Transaction Losses

Provision for transaction losses primarily consists of transaction loss expense associated with our buyer protection programs, losses from our managed payments services, fraud and bad debt expense associated with our accounts receivable balance. We expect our provision for transaction losses to fluctuate depending on many factors, including changes to our protection programs and the impact of regulatory changes.

The decrease in provision for transaction losses in 2022 compared to the same period in 2021 was primarily due to lower bad debt expense and losses as a result of fees collected through the managed payments platform of $52 million, the favorable impact of foreign currency movements of $21 million and lower customer protection program costs of $16 million.

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Gain (Loss) on Equity Investments and Warrant, Net

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, KakaoBank and Gmarket, 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):

(1)Gain (loss) on sale of shares in Adevinta included: (i) in 2022, a $2 million gain on the change in fair value of shares sold; (ii) in 2021, an $88 million gain recognized on the sale of the shares offset by a $79 million loss on the change in fair value of the shares sold.

(2)Gain (loss) on other investments primarily included: (i) in 2022, primarily downward adjustments of $13 million recorded on equity investments under the fair value option and $7 million recorded on equity investments without readily determinable fair values; (ii) in 2021, primarily a $41 million upward adjustment and a $10 million impairment recorded on equity investments without readily determinable fair values; (iii) in 2020, primarily a $40 million impairment recorded on an investment and a $37 million gain for the receipt of proceeds that were held in escrow related to a long-term investment that was sold in 2018.

**    Not meaningful

The increase in total losses on equity method investments and warrant, net in 2022 compared to 2021 was primarily driven by a $158 million and $621 million increase in realized and unrealized losses, respectively, recorded related to the change in fair value of our equity investment in KakaoBank, a $584 million increase in the loss recorded related to the change in fair value of the Adyen warrant, and a $291 million increase in the loss recorded related to the change in fair value of our equity investment in Gmarket, partially offset by a $377 million decrease in the unrealized loss recorded related to the change in fair value of our equity investment in Adevinta.

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Interest and Other, Net

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

** Not meaningful

Interest income increased in 2022 compared to 2021 due to higher yields on corporate debt and government agency securities in a higher interest rate environment. We expect this trend to continue into 2023.

Interest expense decreased in 2022 compared to 2021, primarily due to a higher average notional on outstanding debt during 2021 to fund early 2022 maturities. In 2022, we repaid two tranches of senior notes at substantially lower interest rates than the senior notes that were issued during the year. As a result, we expect continued upward pressure on interest expense to continue into 2023.

Foreign exchange and other decreased in 2022 compared to 2021, primarily due to a gain on a foreign exchange rate hedging program in 2021 that did not recur in 2022.

Income Tax Provision

The following table presents provision for income taxes for the periods indicated (in millions, except percentages):

The decrease in our effective tax rate in 2022 compared to 2021 was primarily due to the decrease in proportion of non-deductible losses on investments to total income (loss) from continuing operations before taxes, partially offset by a benefit from the release of a valuation allowance in 2021. The effective tax rate in 2020 included the effects of a retroactive California law change including incremental taxes on the gain on the sale of StubHub, partially offset by an increased tax benefit from stock-based compensation.

We are regularly under examination by tax authorities both domestically and internationally. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations, although we cannot assure you that this will be the case given the inherent uncertainties in these examinations. Due to the ongoing tax examinations, it is generally impractical to determine the amount and timing of these adjustments. However, we expect several tax examinations to close within the next twelve months. See “Note 16 — Income Taxes” to the consolidated financial statements included in this report for more information on estimated settlements within the next twelve months.

Discontinued Operations

In 2021, we completed the transfer of our Classifieds business to Adevinta ASA (“Adevinta”), and subsequently completed the sale of 80.01% of the outstanding equity interests of eBay Korea LLC, a limited liability

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company incorporated under the laws of Korea and a wholly owned subsidiary of eBay KTA (“eBay Korea”) to E-mart Inc. and one of its wholly owned subsidiaries (together, “Emart”). The results of our eBay Korea and Classifieds businesses have been presented as discontinued operations in our consolidated statement of income for all periods presented through the respective transaction close dates as the transactions represented a strategic shift in our business that had a major effect on our operations and financial results.

See “Note 4 — Discontinued Operations” in our consolidated financial statements included elsewhere in this report for additional information.

Non-GAAP Measures of Financial Performance

To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles, we use FX-Neutral net revenues, which are non-GAAP financial measures. Management uses the foregoing non-GAAP measures in reviewing our financial results. We define FX-Neutral net revenues as net revenues minus the exchange rate effect. We define exchange rate effect as the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts, excluding hedging activity.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. These measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

These non-GAAP measures are provided to enhance investors’ overall understanding of our current financial performance and its prospects for the future. Specifically, we believe these non-GAAP measures provide useful information to both management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook. In addition, because we have historically reported certain non-GAAP results to investors, we believe that the inclusion of these non-GAAP measures provide consistency in our financial reporting.

The following tables present a reconciliation of FX-Neutral GMV and FX-Neutral net revenues (each as defined below) to our reported GMV and net revenues for the periods indicated (in millions, except percentages):

(1)We define exchange rate effect as the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts, excluding hedging activity.

(2)We define FX-Neutral GMV as GMV minus the exchange rate effect. We define the non-GAAP financial measures of FX-Neutral net revenues as net revenues minus the exchange rate effect.

(3)Net revenues were net of $140 million, $65 million and $15 million of hedging activity in 2022, 2021 and 2020, respectively.

(4)GMV for 2021 and 2020 has been retrospectively recast to reflect the new definition of GMV announced in December 2021.

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Liquidity and Capital Resources

Cash Flows

Continuing Operating Activities

Our operating cash flows arise primarily from cash received from our customers on our platforms offset by cash payments for sales and marketing, employee compensation and payment processing expenses.

Cash provided by continuing operating activities of $2.6 billion in 2022 compared to $3.1 billion in 2021 was primarily attributable to a decrease in operating income from continuing operations of $573 million. The decrease in operating income was driven by a decrease in net revenues during 2022 compared to the elevated traffic from the impact of COVID-19 during the same period in 2021, as noted in our comments on “Net Revenues.” The remaining changes in continuing operating cash flows are attributable to working capital movements and changes in non-cash items.

Continuing Investing Activities

Cash provided by continuing investing activities of $2.5 billion in 2022 was primarily attributable to proceeds of $20.6 billion from the maturities and sales of investments and proceeds of $1.1 billion in the aggregate from the sales of shares in Adevinta, Adyen and KakaoBank, partially offset by cash paid for investments of $18.5 billion, property and equipment of $449 million and cash paid for the acquisition of TCGplayer of $208 million.

Cash used in investing activities of $1.4 billion in 2021 was primarily attributable to purchases of investments of $22.2 billion and property and equipment of $444 million. These purchases were partially offset by proceeds of $18.9 billion from the maturities and sales of investments and $2.3 billion from the sale of approximately 135 million of our voting shares in Adevinta.

The largely offsetting effects of purchases of investments and maturities and sale of investments results from the management of our investments. As our immediate cash needs change, purchase and sale activity will fluctuate.

Continuing Financing Activities

Cash used in financing activities of $3.8 billion in 2022 was primarily driven by common stock repurchases of $3.1 billion, debt repayments of $1.4 billion, which was comprised of $750 million related to our 3.800% senior fixed rate notes due 2022 and $605 million related to our 2.600% senior fixed rate notes due 2022, and $489 million of cash dividends paid, partially offset by proceeds from debt issuances of $1.2 billion.

Cash used in financing activities of $6.6 billion in 2021 was primarily driven by common stock repurchases of $7.1 billion, of which $2.5 billion related to repurchases under an accelerated share repurchase program. Cash used in financing activities also included debt repayments of $1.2 billion, which was comprised of $750 million related to our 6.000% senior fixed rate notes due 2056 that were redeemed and $405 million related to our 2.600% senior fixed rate notes due 2022 that were repurchased pursuant to a tender offer, and $466 million of cash dividends paid, partially offset by proceeds from debt issuances of $2.5 billion.

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The negative and positive effect of exchange rate movements on cash, cash equivalents and restricted cash was due to the strengthening and weakening of the U.S. dollar against other currencies, primarily the British pound and euro, during 2022 and 2021, respectively.

Liquidity and Capital Resource Requirements

As of December 31, 2022 and December 31, 2021, we had assets classified as cash and cash equivalents, as well as short-term and long-term non-equity investments from continuing operations, in an aggregate amount of $5.9 billion and $7.3 billion, respectively. We believe that our cash, cash equivalents and short-term and long-term investments, 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.

However, geopolitical and macroeconomic events including the impact of COVID-19, the war in Ukraine, foreign exchange volatility and global economic uncertainty have caused material disruptions in both U.S. and international financial markets and economies and are uncertain in duration. The future impact of these events cannot be predicted with certainty and have increased our borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity, and we cannot assure that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward.

Senior Notes

As of December 31, 2022, we had floating- and fixed-rate senior notes outstanding with varying maturities for an aggregate principal amount of $8.9 billion, with $1.2 billion payable within 12 months. Future interest payments associated with the senior notes totaled $2.6 billion, with $0.3 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.

During 2022, we redeemed the $1.4 billion aggregate principal amount of the 2.600% and 3.800% senior notes due 2022. Total cash consideration paid was $1.4 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.

In November 2022, we issued senior notes of $1.2 billion aggregate principal amount, which consisted of $425 million of 5.900% fixed rate notes due 2025, $300 million of 5.950% fixed rate notes due to 2027 and $425 million of 6.300% fixed rate notes due 2032.

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.

Commercial Paper

We have a commercial paper program pursuant to which we may issue commercial paper notes in an aggregate principal amount at maturity of up to $1.5 billion outstanding at any time with maturities of up to 397 days from the date of issue. As of December 31, 2022, there were no commercial paper notes outstanding.

Credit Agreement

In March 2020, we entered into a credit agreement that provides for an unsecured $2 billion five-year credit facility. We may also, subject to the agreement of the applicable lenders, increase commitments under the revolving credit facility by up to $1 billion. Funds borrowed under the credit agreement may be used for working capital, capital expenditures, acquisitions and other general corporate purposes. As of December 31, 2022, no borrowings were outstanding under our $2 billion credit agreement.

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Credit Ratings

As of December 31, 2022, we were rated investment grade by Standard and Poor’s Financial Services, LLC (long-term rated BBB+, short-term rated A-2, with a stable outlook) and Moody’s Investor Service (long-term rated Baa1, short-term rated P-2, with a stable outlook). We disclose these ratings to enhance the understanding of our sources of liquidity and the effects of our ratings on our costs of funds. Our borrowing costs depend, in part, on our credit ratings and any actions taken by these credit rating agencies to lower our credit ratings will likely increase our borrowing costs.

We were in compliance with all financial covenants in our outstanding debt instruments for the period ended December 31, 2022. For additional details related to our debt, please see “Note 11 — Debt” to the consolidated financial statements included in this report.

Leases

We have operating leases for office space, data centers, as well as other corporate assets that we utilize under lease arrangements. As of December 31, 2022, we had fixed lease payment obligations of $695 million, with $149 million payable within 12 months. For additional details related to our leases, please see “Note 12 — Leases” to the consolidated financial statements included in this report.

Purchase Obligations

Purchase obligation amounts include minimum purchase commitments for advertising, capital expenditures (computer equipment, software applications, engineering development services, construction contracts) and other goods and services entered into in the ordinary course of business. As of December 31, 2022, we had purchase obligations of $164 million, with $117 million payable within 12 months.

Income Taxes

We are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits of $331 million included in other liabilities on our consolidated balance sheet as of December 31, 2022. 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.

As of December 31, 2022, our assets classified as cash and cash equivalents, and short-term and long-term non-equity investments from continuing operations included assets held in certain of our foreign operations totaling approximately $2.1 billion. As we repatriate these funds to the U.S., 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 U.S.

See “Note 16 — Income Taxes” to the consolidated financial statements included in this report for more information on unrecognized tax benefits and deferred taxes.

Stock Repurchases

Our stock repurchase programs are intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of our common stock to reduce our outstanding share count. Any share repurchases under our stock repurchase programs will be funded from our working capital or other financing alternatives.

We expect, subject to market conditions and other uncertainties, to continue making opportunistic and programmatic repurchases of our common stock. However, our stock repurchase programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors, including corporate and regulatory requirements, price and other market conditions and management’s determination as to the appropriate use of our cash.

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During 2022, we repurchased approximately $3.1 billion of our common stock under our stock repurchase programs. In February 2022 our Board authorized an additional $4.0 billion stock repurchase program, with no expiration from the date of authorization. As of December 31, 2022, a total of approximately $2.8 billion remained available for future repurchases of our common stock under our stock repurchase programs. See “Note 14 — Stockholders’ Equity” to the consolidated financial statements included in this report for more information about our stock repurchase programs.

Dividends

The company paid a total of $489 million and $466 million in cash dividends in 2022 and 2021, respectively. In February 2023, we declared a quarterly cash dividend of $0.25 per share of common stock to be paid on March 24, 2023 to stockholders of record as of March 10, 2023.

Other Capital Resource Requirements

We actively monitor all counterparties that hold our cash and cash equivalents and non-equity investments, focusing primarily on the safety of principal and secondarily on improving yield on these assets. We diversify our cash and cash equivalents and investments among various counterparties in order to reduce our exposure should any one of these counterparties fail or encounter difficulties. To date, we have not experienced any material loss or lack of access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets, including, without limitation, as a result of the impact of geopolitical events, inflationary pressure, lower consumer spending and foreign exchange rate volatility. At any point in time we have funds in our operating accounts and customer accounts that are deposited and invested with third party financial institutions.

We have a cash pooling arrangement with a financial institution for cash management purposes. As of December 31, 2022, we had a total of $246 million in aggregate cash deposits, partially offset by $32 million in cash withdrawals, held within the financial institution under the cash pooling arrangement. See “Note 13 — Commitments and Contingencies” to the consolidated financial statements included in this report for more information about our cash pooling arrangement.

We have entered into various indemnification agreements and, in the ordinary course of business, we have included limited indemnification provisions in certain of our agreements with parties with which we have commercial relations. It is not possible to determine the maximum potential loss under these various indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in our consolidated statement of income in connection with our indemnification provisions have not been significant, either individually or collectively. See “Note 13 — Commitments and Contingencies” to the consolidated financial statements included in this report for more information about our indemnification provisions.

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Critical Accounting Policies, Judgments and Estimates

General

The preparation of our consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and related notes and other disclosures included in this report.

Revenue Recognition

We may enter into certain revenue contracts that include promises to transfer multiple goods or services including discounts on future services. We also may enter into arrangements to purchase services from certain customers. As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions including: (1) whether services are considered distinct performance obligations that should be accounted for separately or combined; (2) developing an estimate of the stand-alone selling price of each distinct performance obligation; (3) whether revenue should be reported gross (as eBay is acting as a principal), or net (as eBay is acting as an agent); (4) evaluating whether a promotion or incentive is a payment to a customer; and (5) whether the arrangement would be characterized as revenue or reimbursement of costs incurred. Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.

Income Taxes

Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties and the complexity of taxes on foreign earnings. We review our tax positions quarterly and adjust the balances as new information becomes available. Tax positions are evaluated for potential reserves for uncertainty based on the estimated probability of sustaining the position under examination. Our income tax rate is affected by the tax rates that apply to our foreign earnings including U.S. minimum taxes on foreign earnings. The deferred tax benefit derived from the amortization of our intellectual property is based on the fair value, which has been agreed with foreign tax authorities. The deferred tax benefit may from time to time change based on changes in tax rates. Management has no specific plans to indefinitely reinvest the undistributed earnings of our foreign subsidiaries at the balance sheet date.

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates that are based on a number of factors, including our historical experience and short-range and long-range business forecasts. As of December 31, 2022, we had a valuation allowance on certain net operating loss and tax credit carryforwards based on our assessment that it is more likely than not that the deferred tax asset will not be realized.

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We recognize and measure uncertain tax positions in accordance with generally accepted accounting principles in the U.S., or GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. GAAP further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter in which such change occurs. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

We file annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited by the relevant tax authorities and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes reflect the most likely outcome. We adjust these reserves, as well as the related interest, where appropriate in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

The following table presents our effective tax rates for the periods indicated (in millions, except percentages):