eBay Inc. Reports Third Quarter 2009 Results
Wednesday, October 21, 2009 4:15:02 PM ET eBay Inc. (EBAY ) today reported financial results for the third
quarter ended September 30, 2009. The e-commerce company posted
third-quarter revenue of $2.2 billion, up $120.3 million from the same
period last year. The year-over-year revenue growth was driven primarily
by the continued growth in PayPal, Skype, the company’s classifieds
business as well as growth in eBay’s fixed-price format. The company
recorded net income on a GAAP basis of $349.7 million or $0.27 per
diluted share, and non-GAAP net income of $501.5 million or $0.38 per
diluted share.
GAAP operating margin decreased to 19.8% for the quarter, compared to
24.7% for the same period last year. Non-GAAP operating margin decreased
to 28.4% for the quarter, compared to 31.8% for the same period last
year. The decrease in operating margins was caused primarily by the
recently acquired Bill Me Later, the weaker U.S. dollar, and the
company’s continuing shift to faster growing, lower margin businesses,
partially offset by cost controls.
eBay Inc. generated $738.2 million of operating cash flow during the
third quarter. Free cash flow during the quarter was $563.5 million.
"Our third quarter results were strong with PayPal gaining momentum and
market share worldwide and our core eBay business showing positive
trends," said eBay Inc. President and CEO John Donahoe. "We’re
delivering on our commitments, executing on our plans and operating
smarter and faster."
Financial Highlights (presented in millions, except per share
data and percentages)
Third Quarter
2008 2009 Change
Net revenue $2,118 $2,238 $120 6%
GAAP
Net income $492 $350 ($142) (29%)
Earnings per diluted share $0.38 $0.27 ($0.11) (29%)
Non-GAAP
Net income $592 $502 ($91) (15%)
Earnings per diluted share $0.46 $0.38 ($0.07) (16%)
Quarterly Business Unit Discussion
Payments
The Payments business unit reported a strong quarter with $688.1 million
in revenue, an increase of 15% year over year. Net total payment volume
(TPV) for the quarter was $17.7 billion, an increase of 19% year over
year. The revenue and TPV increases were driven by continued consumer
and merchant adoption of PayPal. The payments business continued to
increase its penetration on eBay and across e-commerce. Active
registered accounts reached 78.0 million, an increase of 19% year over
year. The Payments business will continue to focus on the acquisition of
new merchants, greater penetration into the Marketplaces business and
the ongoing integration of Bill Me Later.
Marketplaces
The Marketplaces business unit, which consists of eBay, Shopping.com,
StubHub, Kijiji and other e-commerce sites, recorded $1.4 billion in
revenue, a 1% year over year decline. Marketplaces net transaction
revenue declined 1% year over year, improving 13 points over the second
quarter of 2009. The Marketplaces business unit benefited from strong
growth in its fixed-price format, the continuing success of its highest
rated sellers, and acceleration in sold items. Excluding the impact of
the stronger U.S. dollar, revenue growth in the Marketplaces business
was 4% year over year. Marketplaces continued to expand its
international business, which accounted for 56% of Marketplaces revenue.
GMV (excluding vehicles) was $12.2 billion for the quarter, an increase
of 7%, compared to the third quarter of 2008. Online classifieds revenue
increased 20% year over year driven primarily by the acquisition of Den
Bla Avis and BilBasen. A continued focus on trust, value and selection
in the eBay Marketplace coupled with format expansion are expected to
drive future GMV.
Communications
Skype contributed $185.2 million in revenue for the quarter,
representing 29% year-over-year growth. Skype added 40.3 million
registered users during the quarter and ended the period with more than
520.8 million registered users. In addition to growing its user base,
Skype is focused on product strategies to enhance customer engagement.
In September, eBay announced the sale of 65% of Skype to a group of
private equity investors that is expected to close in the fourth quarter.
Other Selected Financial Results
--
Taxes -- The GAAP effective tax rate for the quarter was 20%, compared
to 13% for the third quarter of 2008. The non-GAAP effective tax rate
was 21% for the third quarter of 2009, compared to 17% for the third
quarter of 2008.
--
Cash and cash equivalents -- The company’s cash and cash equivalents
totaled $2.6 billion at September 30, 2009, compared to $3.2 billion
at December 31, 2008.
Business Outlook
--
Fourth-quarter 2009 -- eBay expects net revenues in the range of $2.20
billion to $2.30 billion with GAAP earnings per diluted share in the
range of $0.28 to $0.30 and non-GAAP earnings per diluted share in the
range of $0.38 to $0.40. These amounts assume a mid-quarter close date
for the pending sale of Skype and do not reflect the gain on the
pending sale of Skype of approximately $1.0 billion.
Quarterly Conference Call
eBay will host a conference call to discuss third quarter results at
2 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 Web site at http://investor.ebayinc.com .
In addition, an archive of the webcast will be accessible through the
same link.
About eBay Inc.
Founded in 1995, eBay Inc. connects hundreds of millions of people
around the world every day, empowering them to explore new opportunities
and innovate together. eBay Inc. does this by providing the Internet
platforms of choice for global commerce, payments and communications.
Since its inception, eBay Inc. has expanded to include some of the
strongest brands in the world, including eBay, PayPal, Skype, StubHub,
Shopping.com, and others. eBay Inc. is headquartered in San Jose, Calif.
Non-GAAP Financial Measures
This press release includes the following financial measures defined as
"non-GAAP financial measures" by the Securities and Exchange Commission,
or 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. For a
reconciliation of these non-GAAP financial measures to the nearest
comparable GAAP measures, see "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," "Reconciliation of GAAP to Non-GAAP Effective Tax
Rate," "Reconciliation of Operating Cash Flows to Free Cash Flow" and
"Business Outlook" included in this press release.
Forward-Looking Statements
This press release contains forward-looking statements relating to the
future performance of eBay and its consolidated subsidiaries that are
based on our 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 fourth
quarter of 2009, anticipated future stability and growth in the
Marketplaces business unit, and the sale of Skype. The company’s actual
results could differ materially from those predicted 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: the impact of the credit crisis, economic downturn
and other changes in political, business and economic conditions,
including conditions that affect consumer confidence or ecommerce
growth; fluctuations in foreign 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
increasingly achieve growth from its existing users, particularly in its
more established markets; 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, and other risks specific to PayPal and Bill Me Later,
especially as PayPal continues to expand geographically; the company’s
ability to upgrade and develop its systems, infrastructure and customer
service capabilities 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 web site at http://investor.ebayinc.com
or the SEC’s web site 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
December 31, September 30,
2008 2009
ASSETS (In thousands)
Current assets:
Cash and cash equivalents $ 3,188,928 $ 2,557,859
Short-term investments 163,734 601,443
Accounts receivable, net 435,197 419,982
Loans and interest receivable, net 570,071 511,809
Funds receivable and customer accounts 1,467,962 1,993,294
Other current assets 460,698 389,200
Total current assets 6,286,590 6,473,587
Long-term investments 106,178 479,285
Property and equipment, net 1,198,714 1,293,775
Goodwill 7,025,398 8,016,465
Intangible assets, net 736,134 909,401
Other assets 239,425 183,859
Total assets $ 15,592,439 $ 17,356,372
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable $ 170,332 $ 209,333
Funds payable and amounts due to customers 1,467,962 1,993,294
Accrued expenses and other current liabilities 784,774 961,966
Deferred revenue and customer advances 181,596 231,992
Income taxes payable 100,423 50,093
Borrowings from credit agreement 1,000,000 200,000
Total current liabilities 3,705,087 3,646,678
Deferred and other tax liabilities, net 753,965 907,342
Other liabilities 49,529 51,185
Total liabilities 4,508,581 4,605,205
Total stockholders’ equity 11,083,858 12,751,167
Total liabilities and stockholders’ equity $ 15,592,439 $ 17,356,372
eBay Inc.
Unaudited Condensed Consolidated
Statement of Income
Three Months Ended September 30, Nine Months Ended September 30,
2008 2009 2008 2009
(In thousands, except per share amounts)
Net revenues (2) $ 2,117,531 $ 2,237,852 $ 6,505,415 $ 6,356,430
Cost of net revenues (1) 560,963 643,908 1,648,478 1,809,067
Gross profit 1,556,568 1,593,944 4,856,937 4,547,363
Operating expenses:
Sales and marketing (1) 451,753 491,461 1,463,190 1,359,277
Product development (1) 190,842 205,207 554,393 605,126
General and administrative (1) 248,909 272,177 793,791 797,966
Provision for transaction and loan losses 88,269 96,682 260,872 270,597
Amortization of acquired intangible assets 52,720 72,803 162,472 200,066
Restructuring - 12,673 - 36,937
Total operating expenses 1,032,493 1,151,003 3,234,718 3,269,969
Income from operations (2) 524,075 442,941 1,622,219 1,277,394
Interest and other income (expense), net 38,567 (4,606 ) 88,077 8,957
Income before income taxes 562,642 438,335 1,710,296 1,286,351
Provision for income taxes (70,423 ) (88,599 ) (298,014 ) (252,160 )
Net income $ 492,219 $ 349,736 $ 1,412,282 $ 1,034,191
Net income per share:
Basic $ 0.38 $ 0.27 $ 1.08 $ 0.80
Diluted $ 0.38 $ 0.27 $ 1.07 $ 0.80
Weighted average shares:
Basic 1,288,937 1,293,511 1,311,501 1,288,150
Diluted 1,297,484 1,311,274 1,322,126 1,299,279
(1) Includes stock-based compensation as follows:
Cost of net revenues $ 10,395 $ 11,134 $ 31,908 $ 37,614
Sales and marketing 23,745 28,265 72,096 91,154
Product development 23,458 22,795 71,627 78,546
General and administrative 32,653 30,296 93,850 95,455
$ 90,251 $ 92,490 $ 269,481 $ 302,769
(2) For the three-month period ended September30, 2009, foreign
currency movements against the dollar negatively impacted net
revenues and operating income by approximately $96.7 million and
$48.3 million, respectively, compared to the same period of the
prior year. For the nine-month period ended September30, 2009,
foreign currency movements against the dollar negatively impacted
net revenues and operating income by approximately $463.9 million
and $221.2 million, respectively, compared to the same period of
the prior year.
eBay Inc.
Unaudited Condensed Consolidated
Statement of Cash Flows
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
Cash flows from operating activities: (In thousands)
Net income $ 492,219 $ 349,736 $ 1,412,282 $ 1,034,191
Adjustments:
Provision for transaction and loan losses 88,269 96,682 260,872 270,597
Depreciation and amortization 178,578 215,068 517,917 610,162
Stock-based compensation expense 90,251 92,490 269,481 302,769
Changes in assets and liabilities, net of acquisition effects (155,914 ) (15,735 ) (262,500 ) (80,233 )
Net cash provided by operating activities 693,403 738,241 2,198,052 2,137,486
Cash flows from investing activities:
Purchases of property and equipment, net (150,412 ) (174,768 ) (406,739 ) (394,156 )
Changes in principal loans receivable, net - (24,218 ) - 7,517
Purchases of investments (84,062 ) (415,914 ) (107,990 ) (468,371 )
Maturities and sales of investments 9,541 21,027 42,248 26,971
Acquisitions, net of cash acquired - - (159,064 ) (1,209,433 )
Other (165 ) (9,526 ) (51,369 ) 5,889
Net cash used in investing activities (225,098 ) (603,399 ) (682,914 ) (2,031,583 )
Cash flows from financing activities:
Proceeds from issuance of common stock 16,896 16,061 115,615 51,796
Repurchases of common stock, net (623,247 ) - (2,177,942 ) -
Excess tax benefits from stock-based compensation 846 569 4,670 585
Tax withholdings related to net share settlements of restricted (4,555 ) (6,949 ) (18,498 ) (26,361 )
stock awards and units
Net payments from borrowings under credit agreement - (200,000 ) (200,000 ) (800,000 )
Other - (8,063 ) - (8,063 )
Net cash used in by financing activities (610,060 ) (198,382 ) (2,276,155 ) (782,043 )
Effect of exchange rate changes on cash and cash equivalents (211,556 ) 47,782 (117,457 ) 45,071
Net decrease in cash and cash equivalents (353,311 ) (15,758 ) (878,474 ) (631,069 )
Cash and cash equivalents at beginning of period 3,696,028 2,573,617 4,221,191 3,188,928
Cash and cash equivalents at end of period $ 3,342,717 $ 2,557,859 $ 3,342,717 $ 2,557,859
eBay Inc.
Unaudited Summary of Consolidated Net
Revenues
Net Revenues by Type
Three Months Ended
September 30, December 31, March 31, June 30, September 30,
2008 2008 2009 2009 2009
Net transaction revenues (In thousands, except percentages)
Marketplaces $ 1,163,890 $ 1,046,227 $ 1,033,827 $ 1,056,917 $ 1,151,361
Current quarter vs prior quarter (6%) (10%) (1%) 2% 9%
Current quarter vs prior year quarter 1% (18%) (18%) (14%) (1%)
Percent of Marketplaces revenue from international 52% 54% 51% 54% 54%
Payments 576,302 604,186 604,833 630,162 649,159
Current quarter vs prior quarter (1%) 5% 0% 4% 3%
Current quarter vs prior year quarter 29% 12% 8% 9% 13%
Percent of Payments revenue from international 45% 45% 44% 45% 46%
Communications 137,201 138,660 143,238 155,661 172,957
Current quarter vs prior quarter 5% 1% 3% 9% 11%
Current quarter vs prior year quarter 46% 26% 20% 20% 26%
Percent of Communications revenue from international 82% 81% 82% 83% 83%
Total net transaction revenues 1,877,393 1,789,073 1,781,898 1,842,740 1,973,477
Current quarter vs prior quarter (3%) (5%) (0%) 3% 7%
Current quarter vs prior year quarter 11% (7%) (8%) (5%) 5%
Marketing services and other revenues
Marketplaces 212,963 221,323 190,622 201,782 213,222
Current quarter vs prior quarter (5%) 4% (14%) 6% 6%
Current quarter vs prior year quarter 29% (0%) (12%) (10%) 0%
Percent of Marketplaces revenue from international 61% 62% 68% 71% 69%
Payments 20,909 18,898 38,125 39,139 38,904
Current quarter vs prior quarter (3%) (10%) 102% 3% (1%)
Current quarter vs prior year quarter (7%) (19%) 74% 82% 86%
Percent of Payments revenue from international 52% 33% 6% 6% 6%
Communications 6,266 6,552 9,941 14,331 12,249
Current quarter vs prior quarter 10% 5% 52% 44% (15%)
Current quarter vs prior year quarter 43% 30% 52% 152% 95%
Percent of Communications revenue from international 64% 61% 65% 68% 65%
Total marketing services and other revenues 240,138 246,773 238,688 255,252 264,375
Current quarter vs prior quarter (5%) 3% (3%) 7% 4%
Current quarter vs prior year quarter 25% (2%) (3%) 1% 10%
Total net revenues $ 2,117,531 $ 2,035,846 $ 2,020,586 $ 2,097,992 $ 2,237,852
Current quarter vs prior quarter (4%) (4%) (1%) 4% 7%
Current quarter vs prior year quarter 12% (7%) (8%) (4%) 6%
eBay Inc.
Unaudited Summary of Consolidated Net
Revenues
Net Revenues by Segment
Three Months Ended
September 30, December 31, March 31, June 30, September 30,
2008 2008 2009 2009 2009
(In thousands, except percentages)
Marketplaces $ 1,376,853 $ 1,267,550 $ 1,224,449 $ 1,258,699 $ 1,364,583
Current quarter vs prior quarter (6%) (8%) (3%) 3% 8%
Current quarter vs prior year quarter 4% (16%) (18%) (14%) (1%)
Percent of Marketplaces revenue from international 53% 55% 54% 57% 56%
Payments 597,211 623,084 642,958 669,301 688,063
Current quarter vs prior quarter (1%) 4% 3% 4% 3%
Current quarter vs prior year quarter 27% 11% 11% 11% 15%
Percent of Payments revenue from international 45% 45% 42% 43% 44%
Communications 143,467 145,212 153,179 169,992 185,206
Current quarter vs prior quarter 6% 1% 5% 11% 9%
Current quarter vs prior year quarter 46% 26% 21% 25% 29%
Percent of Communications revenue from international 82% 80% 80% 81% 81%
Total net revenues $ 2,117,531 $ 2,035,846 $ 2,020,586 $ 2,097,992 $ 2,237,852
Current quarter vs prior quarter (4%) (4%) (1%) 4% 7%
Current quarter vs prior year quarter 12% (7%) (8%) (4%) 6%
Net Revenues by Geography*
Three Months Ended
September 30, December 31, March 31, June 30, September 30,
2008 2008 2009 2009 2009
(In thousands, except percentages)
U.S. net revenues $ 1,001,637 $ 941,368 $ 968,584 $ 959,697 $ 1,013,477
Current quarter vs prior quarter (0%) (6%) 3% (1%) 6%
Current quarter vs prior year quarter 8% (9%) (5%) (4%) 1%
Percent of total 47% 46% 48% 46% 45%
International net revenues 1,115,894 1,094,478 1,052,002 1,138,295 1,224,375
Current quarter vs prior quarter (7%) (2%) (4%) 8% 8%
Current quarter vs prior year quarter 16% (5%) (10%) (5%) 10%
Percent of total 53% 54% 52% 54% 55%
Total net revenues $ 2,117,531 $ 2,035,846 $ 2,020,586 $ 2,097,992 $ 2,237,852
Current quarter vs prior quarter (4%) (4%) (1%) 4% 7%
Current quarter vs prior year quarter 12% (7%) (8%) (4%) 6%
* Revenues are attributed to U.S. and international geographies
primarily based upon the country in which the seller, payment
recipient, customer, Skype user’s Internet protocol address,
online property that generates advertising, or other service
provider, as the case may be, is located.
eBay Inc.
Unaudited Payments Supplemental Operating
Data
September 30, December 31, March 31, June 30, September 30,
2008 2008 2009 2009 2009
(In millions, except percentages)
Active registered accounts (1) 65.3 70.4 73.1 75.4 78.0
Current quarter vs prior quarter 4% 8% 4% 3% 3%
Current quarter vs prior year quarter 19% 23% 22% 20% 19%
Net number of payments (2) 214.5 252.2 254.1 259.6 273.9
Current quarter vs prior quarter 2% 18% 1% 2% 6%
Current quarter vs prior year quarter 25% 24% 20% 23% 28%
Net total payment volume (3) $ 14,812 $ 15,988 $ 15,859 $ 16,705 $ 17,686
Current quarter vs prior quarter (1%) 8% (1%) 5% 6%
Current quarter vs prior year quarter 28% 14% 10% 12% 19%
Merchant Services net total payment volume as % of net total 51% 50% 53% 55% 56%
payment volume
Bill Me Later net total payment volume as % of net total payment - 1% 1% 1% 1%
volume
Transaction rates (4)
Transaction revenue rate 3.89% 3.78% 3.81% 3.77% 3.67%
Transaction processing expense rate 1.20% 1.16% 1.16% 1.15% 1.16%
Transaction loss rate 0.29% 0.33% 0.28% 0.30% 0.25%
Loan portfolio rates
Risk adjusted margin (5) - 13.37% 11.36% 10.28% 8.98%
Net charge off rate (6) - 8.75% 8.95% 11.08% 11.53%
90-day delinquency rate (7) - 3.94% 4.57% 4.64% 4.97%
(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 12months.
(2) Number of payments, net of payment reversals, successfully
completed through our payments network or on Bill Me Later
accounts during the period, excluding the payment gateway business.
(3) Total dollar volume of payments, net of payment reversals,
successfully completed through our payments network or on Bill Me
Later accounts during the quarter, excluding the payment gateway
business.
(4) Transaction rates represent the ratio of Payments net transaction
revenues (including the payment gateway business and Bill Me
Later), Payments third-party processing expenses, and Payments
fraud and protection program losses relative to net total payment
volume.
(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 less net credit and fraud losses
relative to average loans receivable for the 3-month period.
(6) Net charge-off rate represents the annualized ratio of Bill Me
Later net credit losses relative to average loans receivable for
the 3-month period.
(7) 90-day delinquency rate is the ratio of Bill Me Later end of
period account balances that have missed 3 or more consecutive
payments relative to total ending loan receivables.
eBay Inc.
Unaudited eBay Marketplaces Supplemental
Operating Data
September 30, December 31, March 31, June 30, September 30,
2008 2008 2009 2009 2009
(In millions, except percentages)
Active Users (1) 87.2 87.7 88.3 88.4 89.2
Current quarter vs prior quarter 1% 1% 1% 0% 1%
Current quarter vs prior year quarter 3% 3% 2% 2% 2%
Gross Merchandise Volume (excluding vehicles) (2) $ 11,361 $ 11,470 $ 10,797 $ 11,127 $ 12,192
Current quarter vs prior quarter (8%) 1% (6%) 3% 10%
Current quarter vs prior year quarter 3% (12%) (16%) (10%) 7%
Vehicles Gross Merchandise Volume (3) $ 2,922 $ 2,176 $ 2,074 $ 2,300 $ 2,386
Current quarter vs prior quarter (14%) (26%) (5%) 11% 4%
Current quarter vs prior year quarter (12%) (30%) (35%) (32%) (18%)
Fixed Price Trading (4) as % of total gross merchandise 46% 49% 49% 51% 56%
volume
Rent.com, Shopping.com and eBay’s classifieds websites are not
included in these metrics.
(1) All users, excluding users of Half.com, StubHub, and our Korean
subsidiaries (Gmarket and Internet 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 GMV related to eBay’s "Buy It Now" feature on
eBay Marketplaces trading platforms during the quarter.
eBay Inc.
Unaudited Communications Supplemental
Operating Data
September 30, December 31, March 31, June 30, September 30,
2008 2008 2009 2009 2009
(In millions, except percentages)
Registered users (1) 370.2 405.3 443.2 480.5 520.8
Current quarter vs prior quarter 9% 9% 9% 8% 8%
Current quarter vs prior year quarter 51% 47% 43% 42% 41%
(1) Cumulative number of unique user accounts, which includes, among
other things, users who may have registered via non-Skype based
websites and users that have more than one account.
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 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. 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 web site at http://investor.ebayinc.com
or the SEC’s web site at www.sec.gov
Three Months Ending
December 31, 2009
GAAP Non-GAAP (a)
Revenues (b) $2,200 - $2,300 $2,200 - $2,300
Diluted EPS (b) $0.28 - $0.30 $0.38 - $0.40
(a) Estimated non-GAAP amounts above for the three months ending
December 31, 2009, reflect the estimated quarterly adjustments
that exclude the amortization of acquired intangible assets of
approximately $65-$75 million, stock-based compensation expense
and employer payroll taxes on stock-based compensation expense of
approximately $90-$105 million, and restructuring charges of
approximately $20-$25 million.
(b) The GAAP and non-GAAP amounts above assume a mid-quarter close
date for the pending sale of Skype, and do not reflect the gain on
the pending sale of Skype of approximately $1.0 billion.
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, 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 on
pages 12, 14 and 15 of 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, and net
purchases of property and equipment 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 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 statements 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 on from the disposal
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. This expense consists of
expenses for stock options, restricted stock and employee stock
purchases. eBay excludes stock-based compensation expenses from its
non-GAAP measures primarily because they are non-cash expenses that
management does not believe are reflective of ongoing operating results.
Employer payroll taxes on stock-based compensation. This amount
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 from the disposal of a
business. eBay incurs amortization or impairments of acquired
intangible assets and goodwill in connection with acquisitions and may
incur significant gains or losses from the disposal of a business. eBay
excludes these items because they arise from eBay’s prior acquisitions
and management does not believe it has any direct correlation to the
current operating results of eBay’s business.
Restructuring. These charges consist of expenses for employee
severance and other exit and disposal costs. eBay excludes restructuring
charges primarily because management does not believe they are
reflective of ongoing operating results.
Income taxes associated with certain non-GAAP entries. 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 net
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.
eBay Inc.
Reconciliation of GAAP Operating Margin to Non-GAAP
Operating Margin
Three Months Ended
September 30, September 30,
2008 2009
(In thousands, except percentages)
GAAP operating income $ 524,075 $ 442,941
Stock-based compensation expense 90,251 92,490
Employer payroll taxes on stock-based compensation 530 888
Amortization of acquired intangible assets within cost of net 6,743 13,673
revenues
Amortization of acquired intangible assets within operating expenses 52,720 72,803
Restructuring - 12,673
Non-GAAP operating income $ 674,319 $ 635,468
Non-GAAP operating margin 31.8 % 28.4 %
Reconciliation of GAAP to Non-GAAP Net Income
Three Months Ended
September 30, September 30,
2008 2009
(In thousands, except per share amounts)
GAAP net income $ 492,219 $ 349,736
Stock-based compensation expense 90,251 92,490
Employer payroll taxes on stock-based compensation 530 888
Amortization of acquired intangible assets within cost of net 6,743 13,673
revenues
Amortization of acquired intangible assets within operating expenses 52,720 72,803
Restructuring - 12,673
Income taxes associated with certain non-GAAP entries (50,340 ) (40,728 )
Non-GAAP net income $ 592,123 $ 501,535
Diluted net income per share:
GAAP $ 0.38 $ 0.27
Non-GAAP $ 0.46 $ 0.38
Shares used in GAAP and non-GAAP diluted net income per-share 1,297,484 1,311,274
calculation
Reconciliation of GAAP to Non-GAAP Effective Tax Rate
Three Months Ended
September 30, September 30,
2008 2009
(In thousands, except percentages)
GAAP provision for income taxes (a) $ 70,423 $ 88,599
Income taxes associated with certain non-GAAP entries 50,340 40,728
Non-GAAP provision for income taxes (b) $ 120,763 $ 129,327
GAAP income before income taxes (c) $ 562,642 $ 438,335
Stock-based compensation expense 90,251 92,490
Employer payroll taxes on stock-based compensation 530 888
Amortization of acquired intangible assets within cost of net 6,743 13,673
revenues
Amortization of acquired intangible assets within operating expenses 52,720 72,803
Restructuring - 12,673
Non-GAAP income before income taxes (d) $ 712,886 $ 630,862
GAAP effective tax rate (a/c) 13 % 20 %
Non-GAAP effective tax rate (b/d) 17 % 21 %
Reconciliation of Operating Cash Flow to Free Cash Flow
Three Months Ended
September 30, September 30,
2008 2009
(In thousands)
Net cash provided by operating activities $ 693,403 $ 738,241
Less: Purchases of property and equipment, net (150,412 ) (174,768 )
Free cash flow $ 542,991 $ 563,473
SOURCE: eBay Inc.
eBay Inc.
Tracey Ford, 408-376-7205 (Investor Relations)
John Pluhowski, 408-376-7458 (Media Relations)
Investor Information Request: 408-376-7493
Company News: http://www.businesswire.com
Investor Relations Web site: http://investor.ebayinc.com
