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EBay Inc. Reports Strong Third Quarter 2012 Results

More information about factors that could affect the company's operating results is included under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations website at http://investor.ebayinc.com or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.

 

eBay Inc.

Unaudited Condensed Consolidated Balance Sheet

 
 

September 30,

2012

 

December 31,

2011

(In millions)
 
ASSETS
Current assets:
Cash and cash equivalents $ 7,331 $ 4,691
Short-term investments 1,804 1,238
Accounts receivable, net 694 682
Loans and interest receivable, net 1,792 1,501
Funds receivable and customer accounts 4,807 3,968
Other current assets 982   581
Total current assets 17,410 12,661
Long-term investments 2,500 2,453
Property and equipment, net 2,393 1,986
Goodwill 8,492 8,365
Intangible assets, net 1,234 1,406
Other assets 473   449
Total assets $ 32,502   $ 27,320
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 12 $ 565
Accounts payable 271 282
Funds payable and amounts due to customers 4,807 3,968
Accrued expenses and other current liabilities 1,776 1,511
Deferred revenue 132 110
Income taxes payable 63   298
Total current liabilities 7,061 6,734
Deferred and other tax liabilities, net 945 1,073
Long-term debt 4,506 1,525
Other liabilities 77   58
Total liabilities 12,589   9,390
 
Total stockholders' equity 19,913   17,930
Total liabilities and stockholders' equity $ 32,502   $ 27,320
 

eBay Inc.

Unaudited Condensed Consolidated Statement of Income

 
Three Months Ended September 30,   Nine Months Ended September 30,
2012   2011 2012   2011
(In millions, except per share amounts)
 
Net revenues $ 3,404 $ 2,966 $ 10,079 $ 8,272
Cost of net revenues (1) 1,022   920   2,992   2,426  
Gross profit 2,382   2,046   7,087   5,846  
Operating expenses:
Sales and marketing (1) 726 623 2,120 1,763
Product development (1) 389 319 1,157 891
General and administrative (1) 369 336 1,131 1,018
Provision for transaction and loan losses 148 146 413 372
Amortization of acquired intangible assets 83   85   251   182  
Total operating expenses 1,715   1,509   5,072   4,226  
Income from operations 667 537 2,015 1,620
Interest and other, net 5 79 74 111
Gain (loss) on divested business 0   0   118   (256 )
Income before income taxes 672 616 2,207 1,475
Provision for income taxes (75 ) (125 ) (348 ) (225 )
Net income $ 597   $ 491   $ 1,859   $ 1,250  
Net income per share:
Basic $ 0.46   $ 0.38   $ 1.44   $ 0.97  
Diluted $ 0.45   $ 0.37   $ 1.42   $ 0.95  
Weighted average shares:
Basic 1,292   1,290   1,291   1,291  
Diluted 1,314   1,309   1,311   1,311  
 
(1) Includes stock-based compensation as follows:
Cost of net revenues $ 13 $ 14 $ 41 $ 43
Sales and marketing 35 32 99 100
Product development 34 26 101 91
General and administrative 40   36   119   112  
$ 122   $ 108   $ 360   $ 346  
 

eBay Inc.

Unaudited Condensed Consolidated Statement of Cash Flows

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

2012   2011 2012   2011
(In millions)
Cash flows from operating activities:
Net income $ 597 $ 491 $ 1,859 $ 1,250
Adjustments:
Provision for transaction and loan losses 148 146 413 372
Depreciation and amortization 311 267 882 667
(Gain) loss on divested business 0 0 (118 ) 256
Gain on acquisition of a business 0 (56 ) 0 (73 )
Stock-based compensation 122 108 360 346
Changes in assets and liabilities, net of acquisition effects (24 ) (147 ) (943 ) (527 )
Net cash provided by operating activities 1,154   809   2,453   2,291  
Cash flows from investing activities:
Purchases of property and equipment, net (362 )

(283

) (961 ) (672 )
Changes in principal loans receivable, net (180 ) (155 ) (335 ) (254 )
Purchases of investments (126 ) (654 ) (1,470 ) (1,884 )
Maturities and sales of investments 309 437 938 1,298
Acquisitions, net of cash acquired (10 ) (308 ) (143 ) (3,155 )
Proceeds from divested business, net of cash disposed 0 0 144 0
Other (61 )

0

  (77 ) (102 )
Net cash used in investing activities (430 ) (963 ) (1,904 ) (4,769 )
Cash flows from financing activities:
Proceeds from issuance of common stock 134 31 359 188
Repurchases of common stock (47 ) (33 ) (642 ) (814 )
Excess tax benefits from stock-based compensation 27 7 95 65
Tax withholdings related to net share settlements of restricted stock units and awards (20 ) (16 ) (152 ) (130 )
Net (repayments) and borrowings under commercial paper program (550 ) 0 (550 ) 700
Proceeds from the issuance of debt, net of issuance costs 2,976 0 2,976 0
Repayment of acquired debt 0 (13 ) 0 (199 )
Funds receivable and customer accounts (511 ) 67 (839 ) (696 )
Funds payable and amounts due to customers 511 (67 ) 839 696
Other (4 ) 0   (4 ) 0  
Net cash (used in) provided by financing activities 2,516   (24 ) 2,082   (190 )
Effect of exchange rate changes on cash and cash equivalents 53   (89 ) 9   90  
Net (decrease) increase in cash and cash equivalents 3,293 (267 ) 2,640 (2,578 )
Cash and cash equivalents at beginning of period 4,038   3,266   4,691   5,577  
Cash and cash equivalents at end of period $ 7,331   $ 2,999   $ 7,331   $ 2,999  
 

eBay Inc.

Unaudited Summary of Consolidated Net Revenues

 

Net Revenues by Type (1)

         
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2012   2012     2012     2011     2011  
Net transaction revenues (In millions, except percentages)
Marketplaces $ 1,490 $ 1,491 $ 1,425 $ 1,443 $ 1,354
Current quarter vs prior quarter 0 % 5 % (1 )% 7 % 0 %
Current quarter vs prior year quarter 10 % 10 % 11 % 15 % 14 %
Percent of Marketplaces revenue from international 55 % 57 % 55 % 57 % 56 %
 
Payments 1,264 1,234 1,216 1,157 1,032
Current quarter vs prior quarter 2 % 1 % 5 % 12 % 4 %
Current quarter vs prior year quarter 22 % 25 % 29 % 25 % 29 %
Percent of Payments revenue from international 55 % 55 % 54 % 55 % 53 %
 
GSI 170 164 182 295 148
Current quarter vs prior quarter 3 % (10 )% (38 )% 99 % N/A
Current quarter vs prior year quarter 14 % N/A N/A N/A N/A
Percent of GSI revenue from international 3 % 4 % 4 % 3 % 3 %
                         
Total net transaction revenues 2,925 2,889 2,823 2,895 2,535
Current quarter vs prior quarter 1 % 2 % (2 )% 14 % 8 %
Current quarter vs prior year quarter 15 % 23 % 27 % 32 % 28 %
 
Marketing services and other revenues
Marketplaces 316 323 303 329 299
Current quarter vs prior quarter (2 )% 7 % (8 )% 10 % (4 )%
Current quarter vs prior year quarter 5 % 3 % 13 % 24 % 32 %
Percent of Marketplaces revenue from international 75 % 74 % 75 % 72 % 74 %
 
Payments 102 123 93 83 74
Current quarter vs prior quarter (17 )% 32 % 12 % 12 % (9 )%
Current quarter vs prior year quarter 37 % 50 % 87 % 84 % 84 %
Percent of Payments revenue from international 15 % 11 % 15 % 17 % 9 %
 
GSI 57 57 55 68 54
Current quarter vs prior quarter

0

%

3

% (19 )% 26 % N/A
Current quarter vs prior year quarter 4 % N/A N/A N/A N/A
Percent of GSI revenue from international 0 % 0 % 0 % 0 % 0 %
 
Corporate and other 11 10 6 5 3
                         
Total marketing services and other revenues 485 513 457 485 431
Current quarter vs prior quarter (5 )% 12 % (6 )% 13 % 7 %
Current quarter vs prior year quarter 13 % 27 % 43 % 56 % 62 %
 
Elimination of inter-segment net revenue and other (2) (6 )   (4 )   (3 )   N/A     N/A  
Total net revenues $ 3,404     $ 3,398     $ 3,277     $ 3,380     $ 2,966  
Current quarter vs prior quarter 0 % 4 % (3 )% 14 % 7 %
Current quarter vs prior year quarter 15 % 23 % 29 % 35 % 32 %
(1) Certain amounts may not add/subtract due to rounding and may not recalculate using the rounded dollar amounts provided.
(2) Represents revenue generated between our reportable segments.
 
Net Revenues by Geography (1) Three Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,
2012   2012   2012   2011   2011
(In millions, except percentages)
U.S. net revenues $ 1,637 $ 1,611 $ 1,581 $ 1,665 $ 1,428
Current quarter vs prior quarter 2 % 2 % (5 )% 17 % 14 %
Current quarter vs prior year quarter 15 % 29 % 39 % 49 % 35 %
Percent of total 48 % 47 % 48 % 49 % 48 %
 
International net revenues 1,767 1,787 1,696 1,715 1,538
Current quarter vs prior quarter (1 )% 5 % (1 )% 12 % 2 %
Current quarter vs prior year quarter 15 % 18 % 21 % 25 % 29 %
Percent of total 52 % 53 % 52 % 51 % 52 %
                 
Total net revenues $ 3,404     $ 3,398     $ 3,277     $ 3,380     $ 2,966  
Current quarter vs prior quarter 0 % 4 % (3 )% 14 % 7 %
Current quarter vs prior year quarter 15 % 23 % 29 % 35 % 32 %

(1)

 

Revenues are attributed to U.S. and international geographies primarily based upon the country in which the seller, payment recipient, customer, website that displays advertising, or other service provider, as the case may be, is located.

 

eBay Inc.

Unaudited Payments Supplemental Operating Data

 
  Three Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,
2012   2012   2012   2011   2011
(In millions, except percentages)
Active registered accounts (1) 117.4 113.2 109.8 106.3 103.0
Current quarter vs prior quarter 4 % 3 % 3 % 3 % 3 %
Current quarter vs prior year quarter 14 % 13 % 12 % 13 % 14 %
 
Net number of payments (2) 589.2 564.8 555.7 548.1 459.2
Current quarter vs prior quarter 4 % 2 % 1 % 19 % 6 %
Current quarter vs prior year quarter 28 % 31 % 31 % 30 % 29 %
 
Net total payment volume (3) $35,159 $34,451 $33,857 $33,372 $29,282
Current quarter vs prior quarter 2 % 2 % 1 % 14 % 2 %
Current quarter vs prior year quarter 20 % 20 % 24 % 24 % 31 %
Merchant Services net total payment volume as % of net total payment volume 67 % 67 % 66 % 66 % 66 %
 
Transaction rates
Take rate 3.89 % 3.94 % 3.87 % 3.71 % 3.78 %
Transaction expense 1.07 % 1.07 % 1.07 % 1.04 % 1.14 %
Loss rate 0.30 % 0.26 % 0.26 % 0.27 % 0.31 %
Transaction margin (4) 64.8 % 66.3 % 65.6 % 64.8 % 61.5 %
 
Loan portfolio rates
Risk adjusted margin (5) 16.5 % 15.5 % 16.8 % 16.9 % 18.0 %
Net charge-off rate (6) 4.9 % 4.6 % 4.5 % 4.4 % 4.3 %
90-day delinquency rate (7) 2.9 % 2.5 % 2.4 % 2.4 % 2.6 %
 
(1)   All registered accounts that successfully sent or received at least one payment or payment reversal through the PayPal system or Bill Me Later accounts that are currently able to transact and that received a statement within the last 12 months.
(2) Number of payments, net of payment reversals, successfully completed through our Payments networks and Zong, excluding PayPal's payments gateway business, and on Bill Me Later accounts during the quarter.
(3) Total dollar volume of payments, net of payment reversals, successfully completed through our Payments networks, Bill Me Later accounts and Zong during the period, excluding PayPal's payment gateway business.
(4) Transaction Margin calculation has been adjusted to include total revenues (including revenue from credit) less transaction expense (including credit cost of funds) less transaction loss (including credit loan losses), divided by global take rate (based on global total revenues divided by total TPV).
(5) The risk adjusted margin represents the annualized ratio of Bill Me Later revenue, excluding contra-revenue incentives to customers or merchants, less cost of funds, and less net credit and fraud losses relative to average loans receivable for the quarter.
(6) Net charge-off rate represents the annualized ratio of Bill Me Later net credit losses relative to average loans receivable for the quarter.
(7) 90-day delinquency rate is the ratio of Bill Me Later end of period account balances that have missed three or more consecutive payments relative to total ending loan receivables.
 
 

eBay Inc.

Unaudited eBay Marketplaces Supplemental Operating Data

 
  Three Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,
2012   2012   2012   2011   2011
(In millions, except percentages)
Active Users (1) 108.3 104.8 102.4 100.4 98.7
Current quarter vs prior quarter 3 % 2 % 2 % 2 % 2 %
Current quarter vs prior year quarter 10 % 8 % 7 % 6 % 6 %
 
Gross Merchandise Volume (excluding vehicles) (2) $16,281 $16,171 $16,206 $16,490 $14,666
Current quarter vs prior quarter 1 % 0 % (2 )% 12 % 0 %
Current quarter vs prior year quarter 11 % 10 % 12 % 10 % 16 %
 
Vehicles Gross Merchandise Volume (3) $1,994 $2,021 $1,871 $1,864 $2,149
Current quarter vs prior quarter (1 )% 8 % 0 % (13 )% (4 )%
Current quarter vs prior year quarter (7 )% (10 )% (9 )% (3 )% 0 %
 
Fixed Price Trading (4) as % of total gross merchandise volume 66 % 65 % 64 % 64 % 63 %
 
eBay's classifieds websites and Shopping.com are not included in these metrics.
 
(1)   All users, excluding users of Half.com, StubHub, and our Korean subsidiaries (Gmarket and eBay Auction Co.), who bid on, bought, listed or sold an item within the previous 12-month period. Users may register more than once, and as a result, may have more than one account.
(2) Total value of all successfully closed items between users on eBay Marketplaces trading platforms during the quarter, regardless of whether the buyer and seller actually consummated the transaction, excluding vehicles gross merchandise volume.
(3) Total value of all successfully closed vehicle transactions between users on eBay Marketplaces trading platforms during the quarter, regardless of whether the buyer and seller actually consummated the transaction.
(4) Primarily, total gross merchandise volume related to eBay's “Buy It Now” feature on eBay Marketplaces trading platforms relative to total gross merchandise volume during the quarter.
 

 

eBay Inc.

Unaudited GSI Supplemental Operating Data

 
  Three Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,
2012   2012   2012     2011     2011
(In millions, except percentages)
GeC Merchandise Sales (1) $698 $674 $715 $1,362 $601
Current quarter vs prior quarter 4 % (6 %) (48 %) 127 % N/A
Current quarter vs prior year quarter 16 % N/A N/A N/A N/A
(1)   Represents the retail value of all sales transactions, inclusive of freight charges and net of allowance for returns and discounts, which flow through the GSI ecommerce services platform, whether we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee.
 

eBay Inc. Business Outlook (In Millions, Except Per Share Amounts)

The guidance figures provided below and elsewhere in this press release are forward-looking statements, reflect a number of estimates, assumptions and other uncertainties, and are approximate in nature because eBay's future performance is difficult to predict. Such guidance is based on information available on the date of this press release, and eBay assumes no obligation to update it.

eBay's future performance involves risks and uncertainties, and the company's actual results could differ materially from the information below and elsewhere in this press release. Some of the factors that could affect the company's operating results are set forth under the caption “Forward-Looking Statements” above in this press release. More information about factors that could affect eBay's operating results is included under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's investor relations website at http://investor.ebayinc.com or the SEC's website at www.sec.gov.

    Three Months Ending
December 31, 2012
(In millions, except per share amounts) GAAP   Non-GAAP (a)
Net Revenue $3,850 - $4,000 $3,850 - $4,000
Diluted EPS $0.55 - $0.58 $0.66 - $0.69
 
 
Twelve Months Ending
December 31, 2012
(In millions, except per share amounts) GAAP Non-GAAP (b)
Net Revenue $13,950 - $14,100 $13,950 - $14,100
Diluted EPS $1.95 - $1.99 $2.32 - $2.35
 
(a) Estimated non-GAAP amounts above for the three months ending December 31, 2012, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $95-$105 million, estimated stock-based compensation expense and employer payroll taxes on stock-based compensation expense of approximately $115-$135 million, and the accretion of a note receivable of approximately $5 million as well as the related tax impact.
 

(b)

Estimated non-GAAP amounts above for the 12 months ending December 31, 2012, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $400-$420 million, estimated stock-based compensation expense and employer payroll taxes on stock-based compensation expense of approximately $485-$515 million, the gain on a divestiture of approximately $118 million, and the accretion of a note receivable of approximately $20-$25 million as well as the related tax impact.

 

eBay Inc. Non-GAAP Measures of Financial Performance

To supplement the company's condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), eBay uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flow.

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