eBay Inc. Reports Strong First Quarter 2013 Results
By: eBay Inc. Staff
Double-digit growth in revenue and net income, with customer growth accelerating at Marketplaces and PayPal; Total Company Enabled Commerce Volume Up 19% Year over Year
SAN JOSE, Calif., April 17, 2013 - Global commerce platform and payments leader eBay Inc. (Nasdaq: EBAY) today reported that revenue for the first quarter ended March 31, 2013, increased 14% to $3.7 billion, compared to the same period of 2012. The company reported first quarter net income on a GAAP basis of $677 million, or $0.51 per diluted share, and non-GAAP net income of $829 million, or $0.63 per diluted share. The year-over-year increase in first quarter GAAP and non-GAAP earnings per diluted share was driven primarily by strong top-line growth.
Downloads of eBay Inc.'s suite of mobile apps expanded the company's overall commerce footprint, surpassing 162 million since launch in the third quarter of 2008. eBay Inc. gained approximately 2.8 million new customers in the period through mobile, driving double-digit growth in active users at both PayPal and Marketplaces. Total company “enabled commerce volume” (ECV) grew 19% totaling $49 billion (ECV equals Marketplaces GMV, PayPal Merchant Services TPV, and GSI GeC Merchandise Sales not earned on eBay or paid for via PayPal or Bill Me Later).
"We had a strong first quarter, with accelerating user growth across both Marketplaces and PayPal, and with GSI enabling their retail clients to grow faster than ecommerce," said John Donahoe, eBay Inc. President and CEO. “Technology is creating a commerce revolution, and we are in the forefront with strong mobile leadership and a focus on helping retailers and brands engage consumers anytime, anywhere."
The company's PayPal business delivered strong first quarter performance with revenue increasing 18% to $1.5 billion. PayPal gained 5 million active registered accounts in the period and ended the quarter with 128 million, a 16% increase. PayPal's net total payment volume (TPV) grew 21% to $41 billion, driven by consumer and merchant use of PayPal both on and off eBay. PayPal continues to invest in growing its addressable market, product development, customer engagement and consumer awareness. The company's mobile payment solution for small business, PayPal Here, became available for sale at more than 2,700 SoftBank locations across Japan and the iPad version of the product was launched in the U.S. PayPal also announced the chip and PIN version of PayPal Here in the U.K. which it plans to roll out this summer. PayPal's offline initiatives are now live in almost 20,000 major retail locations in the U.S.
The company's Marketplaces business also delivered strong first quarter performance with revenue increasing 13% to $2.0 billion. Marketplaces gained 3.9 million active users in the period and ended the quarter with 116 million, a 13% increase. Gross merchandise volume (GMV), excluding vehicles, increased 13% to $18 billion, reflecting the continued improvements to eBay's core technology designed to make it easier and faster for consumers to shop and buy. Sold items increased 12%. Fixed price GMV grew 17% globally and represented 68% of total GMV. U.S. GMV, excluding vehicles, increased 16% as mobile engagement and momentum in fashion and tickets were key drivers of growth. International GMV, excluding vehicles, increased 11% to $11 billion. Marketplaces continues to invest in innovation and expanding its addressable market both locally and globally.
The company's GSI Commerce business contributed $236 million in revenue for the first quarter. Its enterprise commerce platform generated $807 million in global ecommerce (GeC) Merchandise Sales, while its marketing services fee business produced $50 million of revenue. GSI enabled its clients to grow faster than the ecommerce market as measured by the 16% same stores sales growth, but revenue was pressured by a reduction in take rate. The company expects GSI's integrated omnichannel product portfolio, including complementary eBay Inc. assets, to be increasingly adopted by merchants seeking opportunities to grow their businesses while seamlessly meeting the needs of their consumers.
First Quarter 2013 Financial Highlights (presented in millions, except per share data and percentages)
Other Selected Financial Results
- Operating margin — GAAP operating margin increased to 21.3% for the first quarter of 2013, compared to 19.9% for the same period last year. Non-GAAP operating margin increased to 27.4% in the first quarter, compared to 26.9% for the same period last year.
- Taxes — The GAAP effective tax rate for the first quarter of 2013 was 16%, compared to 17% for the first quarter of 2012. For the first quarter of 2013 and 2012, the non-GAAP effective tax rate was 20% for both periods.
- Cash flow — The company generated $937 million of operating cash flow and $638 million of free cash flow during the first quarter of 2013.
- Stock repurchase program — The company repurchased approximately $476 million of its common stock in the first quarter of 2013.
- Cash and cash equivalents and non-equity investments — The company's cash and cash equivalents and non-equity investments portfolio totaled $11.5 billion at both March 31, 2013 and December 31, 2012.
- Second quarter 2013 — eBay expects net revenues in the range of $3,800 - $3,900 million with GAAP earnings per diluted share in the range of $0.46 - $0.48 and non-GAAP earnings per diluted share in the range of $0.61 - $0.63.
- Full year 2013 — eBay expects net revenues in the range of $16,000- $16,500 million with GAAP earnings per diluted share in the range of $2.23 - $2.29 and non-GAAP earnings per diluted share in the range of $2.70 - $2.75.
Quarterly Conference Call
eBay will host a conference call to discuss first quarter 2013 results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company's Investor Relations website at http://investor.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.
About eBay Inc.
Founded in 1995 in San Jose, Calif., eBay Inc. (NASDAQ:EBAY) is a global commerce platform and payments leader connecting millions of buyers and sellers. We do so through eBay, the world's largest online marketplace, which allows users to buy and sell in nearly every country on earth; through PayPal, which enables individuals and businesses to securely, easily and quickly send and receive digital payments; and through GSI, which facilitates ecommerce, multichannel retailing and digital marketing for global enterprises. X.commerce harnesses the developer community of Magento, an ecommerce platform, by providing technology solutions and eBay Inc. capabilities to merchants of all sizes, supporting eBay Inc.'s mission of enabling commerce. We also reach millions through specialized marketplaces such as StubHub, the world's largest ticket marketplace, and eBay classifieds sites, which together have a presence in more than 1,000 cities around the world. For more information about the company and its global portfolio of online brands, visit www.ebayinc.com.
All growth rates represent year over year comparisons, except as otherwise noted. All amounts in tables are presented in U.S. dollars, rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not sum or recalculate using the rounded dollar amounts provided.
Non-GAAP Financial Measures
This press release includes the following financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission (SEC): non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate and free cash flow. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see “Business Outlook,” “Non-GAAP Measures of Financial Performance,” “Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin,” “Reconciliation of GAAP Net Income to Non-GAAP Net Income and Reconciliation of GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate” and “Reconciliation of Operating Cash Flow to Free Cash Flow” included in this press release.
This press release contains forward-looking statements relating to, among other things, the future performance of eBay and its consolidated subsidiaries that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the second quarter and full year 2013, and the future growth in the Payments, Marketplaces and GSI businesses, mobile payments and mobile commerce. The company's actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: changes in political, business and economic conditions, including any European or general economic downturn or crisis and any conditions that affect ecommerce growth; fluctuations in foreign currency exchange rates; the company's ability to profitably integrate, manage and grow businesses that have been acquired recently or may be acquired in the future; the company's need to successfully react to the increasing importance of mobile payments and mobile commerce and the increasing social aspect of commerce; the company's ability to deal with the increasingly competitive ecommerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the company's need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the effect of management changes and business initiatives; the company's need and ability to manage other regulatory, tax and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; any changes the company may make to its product offerings; the competitive, regulatory, credit card association-related and other risks specific to PayPal and Bill Me Later, especially as PayPal continues to expand geographically and introduce new products and as new laws and regulations related to financial services companies come into effect; the company's ability to timely upgrade and develop its systems, infrastructure and customer service capabilities, including GSI's v.11 initiative, at reasonable cost; and the company's ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion. The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.
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.
Investor Relations Contact:
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Unaudited Condensed Consolidated Balance Sheet
Unaudited Condensed Consolidated Statement of Income
Unaudited Condensed Consolidated Statement of Cash Flows
Unaudited Summary of Consolidated Net Revenues
Unaudited Payments Supplemental Operating Data
Unaudited Marketplaces Supplemental Operating Data
Unaudited GSI Supplemental Operating Data
Unaudited eBay Inc. Supplemental Operating Data
(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.
(a) Estimated non-GAAP amounts above for the three months ending June 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 $5 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 $560-$600 million, and the accretion of a note receivable of approximately $20 million as well as the related tax impact.
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, 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.
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 eBay's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate eBay's results of operations in conjunction with the corresponding GAAP measures.
Reconciliation to the nearest GAAP measure of all non-GAAP measures included in this press release can be found in the tables included in this press release.
These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses or net purchases of property and equipment, as the case may be, that may not be indicative of its core operating results and business outlook. In addition, because eBay has historically reported certain non-GAAP results to investors, the company believes that the inclusion of non-GAAP measures provides consistency in the company's financial reporting.
For its internal budgeting process, and as discussed further below, eBay's management uses financial measures that do not include stock-based compensation expense, employer payroll taxes on stock-based compensation, amortization or impairment of acquired intangible assets, impairment of goodwill, significant gains or losses from the disposal/acquisition of a business, restructuring-related charges and the income taxes associated with the foregoing. In addition to the corresponding GAAP measures, eBay's management also uses the foregoing non-GAAP measures in reviewing the financial results of eBay.
eBay excludes the following items from non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin and non-GAAP effective tax rate:
Stock-based compensation expense and related employer payroll taxes. This expense consists of expenses for stock options, restricted stock and employee stock purchases. eBay excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that management does not believe are reflective of ongoing operating results. eBay also previously excluded its proportionate share of Skype's stock-based compensation expense. The related employer payroll taxes is dependent on eBay's stock price and the timing and size of exercises by employees of their stock options and the vesting of their restricted stock, over which management has limited to no control, and as such management does not believe it correlates to eBay's operation of the business.
Amortization or impairment of acquired intangible assets, impairment of goodwill and significant gains or losses and transaction expenses from the acquisition or disposal of a business. eBay incurs amortization or impairment of acquired intangible assets and goodwill in connection with acquisitions and may incur significant gains or losses from the acquisition or disposal of a business and therefore excludes these amounts from its non-GAAP measures. eBay also previously excluded its proportionate share of Skype's amortization of acquired intangibles expense. eBay also settled a legal exposure in conjunction with the acquisition of a business and excludes this settlement payment. In addition, eBay's results are also impacted by hedge transactions related to unique movements of cash from significant business acquisitions or dispositions. eBay excludes the impact of the accretion of a note receivable associated with the disposal of certain businesses. eBay excludes these items because management does not believe they correlate to the ongoing operating results of eBay's business.
Restructuring. These charges consist of expenses for employee severance and other exit and disposal costs. eBay excludes significant restructuring charges primarily because management does not believe they are reflective of ongoing operating results.
Tax effect of non-GAAP adjustments. This amount is used to present stock-based compensation and the other amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.
In addition to the non-GAAP measures discussed above, eBay also uses free cash flow. Free cash flow represents operating cash flows less purchases of property and equipment. eBay considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property, buildings, and equipment, which can then be used to, among other things, invest in eBay's business, make strategic acquisitions, and repurchase stock. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company's cash balance for the period.
Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
Reconciliation of GAAP Net Income to Non-GAAP Net Income and
GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate
Reconciliation of GAAP Net Income to Non-GAAP Net Income and
Reconciliation of Operating Cash Flow to Free Cash Flow