eBay Inc. Reports Strong Second Quarter 2013 Results

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eBay Inc. Reports Strong Second Quarter 2013 Results

Double-digit growth in revenue and net income, with customer growth accelerating at Marketplaces and PayPal

Total Company Enabled Commerce Volume Up 21% Year over Year

SAN JOSE, Calif.--(BUSINESS WIRE)-- Global commerce platform and payments leader eBay Inc. (NAS: EBAY) today reported that revenue for the second quarter ended June 30, 2013, increased 14% to $3.9 billion, compared to the same period of 2012. The company reported second quarter net income on a GAAP basis of $640 million, or $0.49 per diluted share, and non-GAAP net income of $822 million, or $0.63 per diluted share. The year-over-year increase in second quarter non-GAAP earnings per diluted share was driven primarily by strong top-line growth. GAAP earnings per diluted share declined on a year-over-year basis due to a gain on the divestiture of a business in 2012.

Total company Enabled Commerce Volume (ECV) grew 21% for the quarter, to $51 billion. The growth demonstrates the power of the company's global commerce platforms. Marketplaces, PayPal and eBay Enterprise connect merchants, retailers and brands of all sizes with consumers everywhere. Cross-border trade in the second quarter was $11 billion, representing 22% of the company's total ECV. The company's mobile commerce leadership is also driving an efficient channel for growth and engagement, with mobile attracting 3 million new customers in the quarter and growing more than 90%. eBay Inc.'s mobile assets and capabilities are delivering innovative, seamless commerce experiences for merchants and consumers across multiscreen shopping environments.

"We had a strong second quarter, with $51 billion of enabled commerce volume across Marketplaces, PayPal and eBay Enterprise driving double-digit revenue and earnings growth," said eBay Inc. President and CEO John Donahoe. "Macroeconomic headwinds in Europe and Korea will continue to be a challenge in the second half of the year. But our core businesses are strong and we continue to attract millions of new customers each quarter through mobile innovation. We remain confident in our ability to meet our goals and drive global commerce innovation and leadership."

PayPal delivered a strong second quarter performance with revenue increasing 20% to $1.6 billion. PayPal gained 4.7 million active registered accounts in the period and ended the quarter with 132 million, a 17% increase. PayPal's net total payment volume (TPV) grew 24% to $43 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, and consumer awareness. Payment velocity increased with a sequential acceleration of both the number of transactions and payment volume. PayPal made strides offline with PayPal Here now live in six countries while growing domestic merchant coverage by signing agreements with more than 50 merchant acquirers to facilitate usage of PayPal over the Discover network.

Marketplaces delivered a strong second quarter performance with revenue of $2.0 billion, increasing 10%, or 12% excluding the gain from the resolution of an indirect tax dispute in 2012. Marketplaces gained 3.5 million active users in the period and ended the quarter with 120 million, a 14% increase. Gross merchandise volume (GMV), excluding vehicles, increased 13% to $18 billion. Fixed price GMV grew 17% globally and represented 69% of total GMV. U.S. GMV, excluding vehicles, increased 16% to $7.3 billion driven by mobile and momentum in the parts & accessories and home & garden categories. International GMV, excluding vehicles, increased 11% to $11 billion, showing stable growth while facing a tougher macroeconomic environment. Marketplace's new search engine, which went live in North America in the second quarter, will help to enable smarter, faster and more intuitive search experiences.

GSI Commerce was renamed eBay Enterprise, reflecting the partnership that the business offers to retailers and brands through its comprehensive technology solutions and marketing services. eBay Enterprise contributed $246 million in revenue for the second quarter, an 11% increase. Its enterprise commerce platform generated $815 million in global ecommerce (GeC) Merchandise Sales, a 21% increase. eBay Enterprise enabled its clients to grow faster than the ecommerce market as measured by the 19% same store sales growth, but revenue was pressured by a reduction in take rate. The company expects its 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 customers.


Second Quarter 2013 Financial Highlights (presented in millions, except per share data and percentages)

  Second Quarter  
    2013   2012   Change
eBay Inc.                
Net revenue   $3,877   $3,398   $479   14%
Enabled commerce volume (ECV)   $50,597   $41,906   $8,691   21%


Net income   $640   $692   $(52)   (8%)
Earnings per diluted share   $0.49   $0.53   $(0.04)   (8%)
Net income   $822   $730   $92   13%
Earnings per diluted share   $0.63   $0.56   $0.07   13%


Second Quarter
    2013   2012   Change
Business Units                
Net revenue   $1,624   $1,357   $267   20%
Net total payment volume   $42,813   $34,451   $8,362   24%
Net revenue   $2,001   $1,814   $187   10%
Gross merchandise volume (GMV), excl. vehicles   $18,292   $16,171   $2,121   13%
Net revenue   $246   $221   $25   11%
GeC Merchandise Sales   $815   $674   $141   21%

Other Selected Financial Results

  • Operating margin — GAAP operating margin decreased to 19.3% for the second quarter of 2013, compared to 20.5% for the same period last year. Non-GAAP operating margin decreased to 26.3% in the second quarter, compared to 27.3% for the same period last year.
  • Taxes — The GAAP effective tax rate for the second quarter of 2013 was 15%, compared to 19% for the second quarter of 2012. For the second quarter of 2013 and 2012, the non-GAAP effective tax rate was 19% and 24%, respectively. The decrease in the company's GAAP and non-GAAP effective tax rates was due primarily to discrete items recorded in 2012 related to uncertain tax positions.
  • Cash flow — The company generated $1.0 billion of operating cash flow and $658 million of free cash flow during the second quarter of 2013.
  • Stock repurchase program — The company repurchased approximately $466 million of its common stock in the second quarter of 2013.
  • Cash and cash equivalents and non-equity investments — The company's cash and cash equivalents and non-equity investments portfolio totaled $11.7 billion at June 30, 2013 up from $11.5 billion at December 31, 2012.

Business Outlook

  • Third quarter 2013 — the company expects net revenues in the range of $3,850 - $3,950 million with GAAP earnings per diluted share in the range of $0.49 - $0.51 and non-GAAP earnings per diluted share in the range of $0.61 - $0.63.
  • Full year 2013 — the company expects net revenues in the range of $16,000 - $16,500 million with GAAP earnings per diluted share in the range of $2.21 - $2.26 and non-GAAP earnings per diluted share in the range of $2.70 - $2.75.

Quarterly Conference Call

eBay Inc. will host a conference call to discuss second 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.

eBay Inc. (NAS: EBAY) is a global commerce and payments leader, providing a robust platform where merchants of all sizes can compete and win. Founded in 1995 in San Jose, Calif., eBay Inc. connects millions of buyers and sellers and enabled $175 billion of commerce volume in 2012. 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 eBay Enterprise, which enables omnichannel commerce, multichannel retailing and digital marketing for global enterprises in the U.S. and internationally. 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 of, 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.

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, the future performance of eBay Inc. 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 third quarter and full year 2013, and the future growth in the Payments, Marketplaces and Enterprise 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 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 technology systems, infrastructure and customer service capabilities, including Enterprise's commerce platform, at reasonable cost; 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; and the company's ability to profitably integrate, manage and grow businesses that have been acquired or may be acquired in the future. 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 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,


December 31,

(In millions)
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


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
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
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