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EBay Inc. Reports Strong Second Quarter 2013 Results

Stocks in this article: EBAY

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 press release, which are based on information available to the company on the date hereof. The company assumes no obligation to update such statements.

 
eBay Inc.
Unaudited Condensed Consolidated Balance Sheet
 
 

June 30, 2013

 

December 31, 2012

(In millions)
 
ASSETS
Current assets:
Cash and cash equivalents $ 6,855 $ 6,817
Short-term investments 3,581 2,591
Accounts receivable, net 743 822
Loans and interest receivable, net 2,273 2,160
Funds receivable and customer accounts 9,012 8,094
Other current assets

982

914
Total current assets 23,446 21,398
Long-term investments 2,506 3,044
Property and equipment, net 2,697 2,491
Goodwill 8,394 8,537
Intangible assets, net 926 1,128
Other assets 581 476
Total assets $ 38,550 $ 37,074
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 410 $ 413
Accounts payable 313 301
Funds payable and amounts due to customers 9,012 8,094
Accrued expenses and other current liabilities 1,711 1,916
Deferred revenue 154 137
Income taxes payable 70 63
Total current liabilities 11,670 10,924
Deferred and other tax liabilities, net 889 972
Long-term debt 4,123 4,106
Other liabilities 217 207
Total liabilities 16,899 16,209
 
Total stockholders' equity 21,651 20,865
Total liabilities and stockholders' equity $ 38,550 $ 37,074
 
eBay Inc.
Unaudited Condensed Consolidated Statement of Income
 
  Three Months Ended June 30,   Six Months Ended June 30,
2013   2012 2013   2012
(In millions, except per share amounts)
 
Net revenues $ 3,877 $ 3,398 $ 7,625 $ 6,675
Cost of net revenues (1) 1,211   987   2,363   1,970  
Gross profit 2,666   2,411   5,262   4,705  
Operating expenses:
Sales and marketing (1) 771 717 1,468 1,394
Product development (1) 451 394 885 768
General and administrative (1) 419 390 827 762
Provision for transaction and loan losses 193 131 368 265
Amortization of acquired intangible assets 82   84   164   168  
Total operating expenses 1,916   1,716   3,712   3,357  
Income from operations 750 695 1,550 1,348
Interest and other, net 6 38 15 69
Gain on divested business   118     118  
Income before income taxes 756 851 1,565 1,535
Provision for income taxes (116 ) (159 ) (248 ) (273 )
Net income $ 640   $ 692   $ 1,317   $ 1,262  
Net income per share:
Basic $ 0.49   $ 0.54   $ 1.02   $ 0.98  
Diluted $ 0.49   $ 0.53   $ 1.00   $ 0.96  
Weighted average shares:
Basic 1,297   1,291   1,296   1,290  
Diluted 1,313   1,309   1,316   1,309  
 
(1) Includes stock-based compensation as follows:
Cost of net revenues $ 23 $ 14 $ 36 $ 28
Sales and marketing 41 34 74 64
Product development 46 37 78 67
General and administrative 51   42   84   79  
$ 161   $ 127   $ 272   $ 238  
 
eBay Inc.
Unaudited Condensed Consolidated Statement of Cash Flows
 
  Three Months Ended June 30,   Six Months Ended June 30,
2013   2012 2013   2012
(In millions)
Cash flows from operating activities:
Net income $ 640 $ 692 $ 1,317 $ 1,262
Adjustments:
Provision for transaction and loan losses 193 131 368 265
Depreciation and amortization 347 290 676 571
Gain on divested business (118 ) (118 )
Stock-based compensation 161 127 272 238
Changes in assets and liabilities, net of acquisition effects (330 ) (354 ) (685 ) (919 )
Net cash provided by operating activities 1,011   768   1,948   1,299  
Cash flows from investing activities:
Purchases of property and equipment (353 ) (357 ) (652 ) (599 )
Changes in principal loans receivable, net (154 ) (120 ) (183 ) (155 )
Purchases of investments (598 ) (328 ) (2,024 ) (1,344 )
Maturities and sales of investments 750 221 1,798 629
Acquisitions, net of cash acquired (7 ) (130 ) (15 ) (133 )
Proceeds from divested business, net of cash disposed 144 144
Other (9 ) (11 ) (14 ) (16 )
Net cash used in investing activities (371 ) (581 ) (1,090 ) (1,474 )
Cash flows from financing activities:
Proceeds from issuance of common stock 142 140 244 225
Repurchases of common stock (466 ) (355 ) (942 ) (595 )
Excess tax benefits from stock-based compensation 45 14 161 68
Tax withholdings related to net share settlements of restricted stock units and awards (73 ) (14 ) (226 ) (132 )
Funds receivable and customer accounts, net (115 ) 45 (918 ) (328 )
Funds payable and amounts due to customers, net 115   (45 ) 918   328  
Net cash (used in) provided by financing activities (352 ) (215 ) (763 ) (434 )
Effect of exchange rate changes on cash and cash equivalents 37   (98 ) (57 ) (44 )
Net (decrease) increase in cash and cash equivalents 325 (126 ) 38 (653 )
Cash and cash equivalents at beginning of period 6,530   4,164   6,817   4,691  
Cash and cash equivalents at end of period $ 6,855   $ 4,038   $ 6,855   $ 4,038  
 
eBay Inc.
Unaudited Summary of Consolidated Net Revenues
 
Net Revenues by Type  
Three Months Ended
June 30,   March 31,   December 31,   September 30,   June 30,
2013   2013   2012   2012   2012
Net transaction revenues (In millions, except percentages)
Marketplaces $ 1,637 $ 1,608 $ 1,672 $ 1,490 $ 1,491
Current quarter vs prior quarter 2 % (4 )% 12 % % 5 %
Current quarter vs prior year quarter 10 % 13 % 16 % 10 % 10 %
Percent of Marketplaces revenue from international 55 % 55 % 56 % 55 % 57 %
 
Payments 1,475 1,435 1,432 1,264 1,234
Current quarter vs prior quarter 3 % % 13 % 2 % 1 %
Current quarter vs prior year quarter 20 % 18 % 24 % 22 % 25 %
Percent of Payments revenue from international 56 % 55 % 56 % 55 % 55 %
 
Enterprise 194 186 333 170 164
Current quarter vs prior quarter 4 % (44 )% 97 % 3 % (10 )%
Current quarter vs prior year quarter 18 % 2 % 13 % 14 % N/A
Percent of Enterprise revenue from international 5 % 5 % 3 % 3 % 4 %
                 
Total net transaction revenues 3,306 3,229 3,437 2,925 2,889
Current quarter vs prior quarter 2 % (6 )% 17 % 1 % 2 %
Current quarter vs prior year quarter 14 % 14 % 19 % 15 % 23 %
 
Marketing services and other revenues
Marketplaces 364 349 378 316 323
Current quarter vs prior quarter 4 % (8 )% 20 % (2 )% 7 %
Current quarter vs prior year quarter 13 % 15 % 15 % 5 % 3 %
Percent of Marketplaces revenue from international 75 % 75 % 72 % 75 % 74 %
 
Payments 149 113 109 102 123
Current quarter vs prior quarter 32 % 4 % 7 % (17 )% 32 %
Current quarter vs prior year quarter 21 % 22 % 32 % 37 % 50 %
Percent of Payments revenue from international 3 % 4 % 5 % 6 % 4 %
 
Enterprise 52 50 65 57 57
Current quarter vs prior quarter 4 % (23 )% 14 % % 3 %
Current quarter vs prior year quarter (9 )% (9 )% (6 )% 4 % N/A
Percent of Enterprise revenue from international % % % % %
 
Corporate and other 14 12 12 11 10
                 
Total marketing services and other revenues 579 524 564 485 513
Current quarter vs prior quarter 10 % (7 )% 16 % (5 )% 12 %
Current quarter vs prior year quarter 13 % 15 % 16 % 13 % 27 %
 
Elimination of inter-segment net revenue and other (1) (8 )   (5 )   (9 )   $ (6 )   $ (4 )
Total net revenues $ 3,877     $ 3,748     $ 3,992     $ 3,404     $ 3,398  
Current quarter vs prior quarter 3 % (6 )% 17 % % 4 %
Current quarter vs prior year quarter 14 % 14 % 18 % 15 % 23 %

(1)

 

Represents revenue generated between our reportable segments.

 
Net Revenues by Geography (1)   Three Months Ended
June 30,   March 31,  

December 31,

  September 30,   June 30,
2013   2013   2012   2012   2012
(In millions, except percentages)
U.S. net revenues $ 1,870 $ 1,789 $ 1,949 $ 1,637 $ 1,611
Current quarter vs prior quarter 5 % (8 )% 19 % 2 % 2 %
Current quarter vs prior year quarter 16 % 13 % 17 % 15 % 29 %
Percent of total 48 % 48 % 49 % 48 % 47 %
 
International net revenues 2,007 1,959 2,043 1,767 1,787
Current quarter vs prior quarter 2 % (4 )% 16 % (1 )% 5 %
Current quarter vs prior year quarter 12 % 16 % 19 % 15 % 18 %
Percent of total 52 % 52 % 51 % 52 % 53 %
                 
Total net revenues $ 3,877     $ 3,748     $ 3,992     $ 3,404     $ 3,398  
Current quarter vs prior quarter 3 % (6 )% 17 % % 4 %
Current quarter vs prior year quarter 14 % 14 % 18 % 15 % 23 %

(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 eBay Inc. Supplemental Operating Data

 

  Three Months Ended
June 30,   March 31,   December 31,   September 30,   June 30,
  2013       2013       2012       2012       2012  
(In millions, except percentages)

ECV (1)

$ 50,597 $ 48,795 $ 50,186 $ 42,593 $ 41,906
Current quarter vs prior quarter 4 % (3 %)

18

%

2 % 2 %
Current quarter vs prior year quarter 21 % 19 % N/A N/A N/A

(1)

 

Represents the total commerce and payment volume across all three business units consisting of Marketplaces GMV, PayPal Merchant Services TPV and Enterprise GeC Merchandise Sales not earned on eBay or paid for via PayPal or Bill Me Later during the period. Excludes volume transacted through the Magento platform. PayPal Merchant Services TPV is the 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 and payments for transactions on our Marketplaces and Enterprise platforms.

 
eBay Inc.
Unaudited Payments Supplemental Operating Data
 
  Three Months Ended
June 30,   March 31,   December 31,   September 30,   June 30,
2013   2013   2012   2012   2012
(In millions, except percentages)
Active registered accounts (1) 132.4 127.7 122.7 117.4 113.2
Current quarter vs prior quarter 4 % 4 % 5 % 4 % 3 %
Current quarter vs prior year quarter 17 % 16 % 15 % 14 % 13 %
 
Net number of payments (2) 700.6 681.6 691.7 589.2 564.8
Current quarter vs prior quarter 3 % (1 )% 17 % 4 % 2 %
Current quarter vs prior year quarter 24 % 23 % 26 % 28 % 31 %
 
Net total payment volume (3) $ 42,813 $ 41,040 $ 41,471 $ 35,159 $ 34,451
Current quarter vs prior quarter 4 % (1 )% 18 % 2 % 2 %
Current quarter vs prior year quarter 24 % 21 % 24 % 20 % 20 %
On eBay net total payment volume as % of net total payment volume 30 % 32 % 32 % 33 % 33 %
Merchant Services net total payment volume as % of net total payment volume 70 % 68 % 68 % 67 % 67 %
 
Transaction rates
Take rate 3.79 % 3.77 % 3.72 % 3.89 % 3.94 %
Transaction expense 1.04 % 1.05 % 1.03 % 1.07 % 1.07 %
Loss rate 0.31 % 0.29 % 0.28 % 0.30 % 0.26 %
Transaction margin (4) 64.4 % 64.4 % 64.7 % 64.8 % 66.3 %
 
Loan portfolio rates
Risk adjusted margin (5) 16.2 % 15.8 % 15.6 % 16.5 % 15.5 %
Net charge-off rate (6) 5.6 % 5.3 % 5.3 % 4.9 % 4.6 %
90-day delinquency rate (7) 2.7 % 2.7 % 2.7 % 2.9 % 2.5 %
(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, Bill Me Later accounts and Zong during the quarter, excluding PayPal's payments gateway business.
(3) Total dollar volume of payments, net of payment reversals, successfully completed through our Payments networks, Bill Me Later accounts and Zong during the quarter, 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 Marketplaces Supplemental Operating Data
 
  Three Months Ended
June 30,   March 31,   December 31,   September 30,   June 30,
2013   2013   2012   2012   2012
(In millions, except percentages)
Active Users (1) 119.7 116.2 112.3 108.3 104.8
Current quarter vs prior quarter 3 % 3 % 4 % 3 % 2 %
Current quarter vs prior year quarter 14 % 13 % 12 % 10 % 8 %
 
Gross Merchandise Volume (excluding vehicles) (2) $ 18,292 $ 18,326 $ 19,105 $ 16,281 $ 16,171
Current quarter vs prior quarter % (4 )% 17 % 1 % %
Current quarter vs prior year quarter 13 % 13 % 16 % 11 % 10 %
U.S. GMV as % of total GMV 40 % 40 % 38 % 40 % 39 %
International GMV as % of total GMV 60 % 60 % 62 % 60 % 61 %
 
Vehicles Gross Merchandise Volume (3) $ 1,805 $ 1,686 $ 1,727 $ 1,994 $ 2,021
Current quarter vs prior quarter 7 % (2 )% (13 )% (1 )% 8 %
Current quarter vs prior year quarter (11 )% (10 )% (7 )% (7 )% (10 )%
 
Fixed Price Trading (4) as % of total gross merchandise volume 69 % 68 % 68 % 66 % 65 %
eBay's classifieds websites, brands4friends and Shopping.com are not included in these metrics.
 
(1)   All users, excluding users of Half.com, StubHub, and our Korean subsidiary, 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 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 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 Marketplaces trading platforms relative to total gross merchandise volume during the quarter.
 
eBay Inc.
Unaudited Enterprise Supplemental Operating Data
 
  Three Months Ended
June 30,   March 31,   December 31,   September 30,   June 30,
2013   2013   2012   2012   2012
(In millions, except percentages)
GeC Merchandise Sales (1) $ 815 $ 807 $ 1,595 $ 698 $ 674
Current quarter vs prior quarter 1 % (49 %) 129 % 4 % (6 %)
Current quarter vs prior year quarter 21 % 13 % 17 % 16 % 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 Enterprise 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 the company's future performance is difficult to predict. Such guidance is based on information available on the date of this press release, and the company assumes no obligation to update it.

The company'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 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 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
September 30, 2013
(In millions, except per share amounts) GAAP     Non-GAAP (a)
Net Revenue $3,850 - $3,950 $3,850 - $3,950
Diluted EPS

$0.49 - $0.51

$0.61 - $0.63
 
 
Twelve Months Ending
December 31, 2013
(In millions, except per share amounts) GAAP Non-GAAP (b)
Net Revenue

$16,000 - $16,500

$16,000 - $16,500

Diluted EPS

$2.21 - $2.26

$2.70 - $2.75
 
(a)   Estimated non-GAAP amounts above for the three months ending September 30, 2013, 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 $145-$155 million, and the accretion of a note receivable of approximately $15 million as well as the related tax impact.
 
(b) Estimated non-GAAP amounts above for the 12 months ending December 31, 2013, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $380-$400 million, estimated stock-based compensation expense and employer payroll taxes on stock-based compensation expense of approximately $580-$620 million, and the accretion of a note receivable of approximately $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, or GAAP, the company 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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