) reported third-quarter earnings of 54 cents, just a penny
higher than the Zacks Consensus Estimate. Guidance was rather
disappointing, sending shares down 5.3%.
Gross revenue of $3.89 billion was up 0.4% sequentially and
14.3% year over year, more or less in line with our expectations
of around $3.90 billion and in the middle of eBay's guidance
range of $3.85-3.95 billion.
Over 86% of total revenue was transactions-based, while the
remaining 14% came from marketing services. Transactions-based
revenue grew 1.2% sequentially, while marketing services revenue
declined 4.6%. Growing 14.4% and 13.5%, respectively from the
year-ago quarter, both contributed to the upside versus
The Marketplaces segment essentially refers to the revenue
earned from the sale of goods available on eBay properties. The
Payments segment refers to revenues generated through Paypal.
Consequently, both segments derive revenue from transactions, as
well as marketing services.
eBay's core gross merchandise volume (GMV) during the quarter
excluding vehicles volume was flattish sequentially while growing
12.8% year over year. Non-vehicle GMV grew 12% on a
currency-neutral basis (U.S. alone was up 12.8% year over year so
there was some drag in international although EU and Korea
The overall increase from the year-ago quarter was helped by
better customer experience, as site improvements continued and
mobile engagement grew. Vehicles GMV was down 2% and 11%
respectively from the previous and year-ago quarters. Sales
through the fixed price format comprised 71% of GMV in the last
eBay's Paypal remains strong, generating total payment volume
(TPV) growth of 2.4% and 24.7% (25% on a currency-adjusted basis)
from the previous and year-ago quarters, respectively. TPV
strength in the last quarter was on account of increased Paypal
adoption by merchant sites all over the world, an increasing
share of checkout and a 160 bp increase in Paypal penetration on
eBay (now 78%).
Management has a three-pronged growth plan here, targeting the
online, mobile and offline segments. Opportunities abound in the
first two areas, while they continue to unfold in the offline
segment as well. Its agreements with
) and Discover will help it to further extend its reach.
revenue for the quarter was up 1.3% sequentially and 12.2% from
the year-ago quarter. The sequential revenue increase was the net
impact of a 1.9% increase in transaction revenue and a 1.4%
decline in marketing services revenue. The year-over-year
increase was due to an 11.9% increase in transaction revenue and
a 13.6% increase in marketing services revenue. Active users in
Marketplaces were 137.4 million, up 5 million during the quarter.
Marketplaces generated 52% of total revenue.
eBay's top-rated sellers accounted for 46% of GMV in the U.S.,
with same store sales growing 17% year over year.
revenue was flat sequentially and up 18.6% from the year-ago
quarter. Revenue from transactions was up 1.2% sequentially and
18.1% year over year. The revenue per user dropped sequentially
but stayed above year-ago levels. The revenue per transaction
followed the same pattern. Revenue from marketing services was
down 14.8% sequentially and up 24.5% from the year-ago quarter.
The Payments segment generated 42% of total revenue.
This is the re-branded GSI (a commerce partner for retailers and
brands), bringing in the remaining 6% of revenue. Segment revenue
was down 3.3% sequentially and up 4.8% from the year-ago
eBay's mobile business was very strong in the last quarter
with the company stating that 36% of all new customers were
acquired on the mobile platform. It now expects eBay and Paypal
mobile volumes of $20 billion each. Mobile brought 2.4 million
new users. Better technology and improved user experience should
increase engagement on eBay properties.
Revenue by Geography
Around 48% of total revenue was generated in the U.S.,
representing sequential and year-over-year increases of 0.2% and
14.4%, respectively. The balance came from international markets,
which were up 0.6% sequentially and 14.3% from last year.
The pro forma gross margin for the quarter was 68.6%, down 21
bps sequentially and 201 bps year over year. Volumes were a
positive in both comparisons. The Payments transaction margin was
flat sequentially, but down from last year due to the combined
effect of a lower take rate, higher transaction expenses and a
flattish loss rate.
Operating expenses of $1.79 billion were down 2.5%
sequentially. The operating margin was 22.6%, up 115 bps
sequentially and down 1 bp from the year-ago quarter. All
expenses increased as a percentage of sales from the previous
quarter, though G&A declined from the year-ago quarter.
Excluding the impact of amortization of intangible assets, a
gain on the sale of RueLaLa and ShopRunner, as well as related
tax adjustments, the pro forma net income was $710 million or
18.2% of sales, compared to $679 million or 17.5% in the previous
quarter and $620 million or 18.2% in the year-ago quarter.
Including the special items, the GAAP net income was $689
million ($0.53 per share) compared to $640 million ($0.49 per
share) in the Jun 2013 quarter and $597 million ($0.45 per share)
in the Sep quarter of last year.
Balance Sheet and Cash Flow
The company has a solid balance sheet, with cash and short
term investments of $10.27 billion, down $165 million during the
quarter. eBay generated $1.13 billion in cash from operations and
spent $317 million on capex, netting a free cash flow of $1.02
billion (up from $658 million in the last quarter). eBay also
spent $70 million on acquisitions and $146 million on share
Management expects fourth quarter 2013 revenue of $4.50-4.60
billion (up 16.9% sequentially and 14.0% year over year at the
mid-point), which was short of consensus expectations of $4.64
billion. The company expects to generate a GAAP EPS of 67 to 69
cents and a non GAAP EPS of 79 to 81 cents. The EPS guidance is
better than the Zacks Consensus of 74 cents.
This indicates that 2013 revenue will now be at the low end of
the previously-guided range of $16.00-$16.50 billion. The GAAP
EPS will therefore also come in at the low end of the previously
guided range of $2.21 to $2.26. The non GAAP EPS, even including
the penny of dilution related to the Braintree acquisition
therefore works out to much lower than the previously-guided
$2.70 to $2.75.
eBay's business continues to show all signs of improvement.
Both Payments and Marketplaces are showing improving trends
versus the year-ago quarter, an indication of the changing
We think that eBay has taken all the necessary measures,
beginning with the fixed price format, moving on to wooing big
sellers and customers, improving the technology and navigation of
its properties, investing in better fulfillment services and
specially focusing on mobile customers. Its drive to provide
complete online solutions for traditional retailers should
further add to its growth going forward.
It goes without saying that major online retailers, such as
) are not going to make things easy for eBay. Additionally,
) has been making some plays in the online retail/payments
segment that potentially increase competition for the company.
While eBay's payments business shows great promise and innovation
has been very strong here, competition is not far behind.
eBay shares have a Zacks Rank #4 (Sell).
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