EBAY

eBay Inc. (EBAY)

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eBay Inc. (EBAY)

Q3 2009 Earnings Call

October 21, 2009 5:00 pm ET

Executives

Mark Rowen - Vice President, Investor Relations

John J. Donahoe - President, Chief Executive Officer, Director

Robert H. Swan - Chief Financial Officer, Senior Vice President - Finance

Analysts

Mark Mahaney - Citi

Christa Quarles - Thomas Weisel Partners

Jeffrey Lindsay - Sanford C. Bernstein

Brian Pitz - UBS

James Mitchell - Goldman Sachs

Imran Khan - J.P. Morgan

Youssef Squali - Jefferies & Company

Sandeep Aggarwal - Collins Stewart

Benjamin Schachter - Broadpoint Amtech

Scott Devitt - Morgan Stanley

Presentation

Operator

Ladies and gentlemen, good day. Welcome to eBay's third quarter 2009 earnings results conference call. This call is being recorded and at this time, I would like to turn the call over to Mark Rowen, Vice President of Investor Relations. Please go ahead, sir.

Mark Rowen

Thank you, Operator. Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the third quarter of 2009. Joining me on today’s call are John Donahoe, our Chief Executive Officer; and Bob Swan, our Chief Financial Officer.

We are providing a slide presentation to accompany Bob’s commentary during the call.

This conference call is also being broadcast on the Internet and both the presentation and call are available through the investor relations section of the eBay website at investor.ebayinc.com.

Before we begin, I’d like to remind you that during the course of this conference call we will discuss some non-GAAP measures in talking about our company’s performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation accompanying the conference call.

In addition, management may make forward-looking statements relating to our future performance 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 marketplace’s business unit, and the sale of Skype.

Our actual results may differ materially from those discussed in this call for a variety of reasons, including but not limited to the impact of recent global economic events and the global economic downturn, foreign exchange rate fluctuations, changes in political, business, and economic conditions, the impact and integration of recent and future acquisitions, the impact of divestitures, including Skype; our increasing need to grow revenues from existing users in established markets; an increasingly competitive environment for our businesses; the complexity of managing an increasingly large enterprise with a broad range of businesses; our need to manage regulatory tax, IP and litigation risks, including risks specific to PayPal, Bill Me Later, and the financial industry; and our need to upgrade our technology and customer service infrastructure at reasonable costs while adding new features and maintaining site stability.

You can find more information about factors that could affect our operating results in our most recent annual report on our Form 10-K and subsequent quarterly reports on Form 10-Q, also available at investor.ebayinc.com.

You should not unduly rely on any forward-looking statements and we assume no obligation to update them.

All information in the presentation is as of October 21, 2009 and we do not intend and undertake no duty to update this presentation.

And now, let me turn the call over to John.

John J. Donahoe

Thank you, Mark and good afternoon, everybody, and welcome to our Q3 earnings call. Our Q3 revenues topped $2.2 billion, with organic growth up 5% over the prior year. Our non-GAAP EPS was $0.38 and we generated free cash flow of $563 million during the quarter.

These are strong results for a strong company getting stronger. Our strategies are working and I continue to be pleased with our pace, our progress, and our performance. Our teams are executing well against the three-year growth strategies we outlined earlier this year. PayPal continues to gain share and drive strong global growth across e-commerce. eBay has stabilized and is beginning to show some positive trends. Core GMV accelerated for the second quarter in a row, and we announced the sale of Skype this quarter, setting this terrific business on a path we believe will enable it to achieve its full potential.

As a company, we are operating faster and more efficiently and we are making the right investments in our two core businesses, e-commerce and payments. We are delivering on our commitments and managing our portfolio with focus, discipline, and accountability. All in all, we continue to take the bold steps required to lead and win.

Now let’s look at our results from each of our business units. PayPal had a strong quarter with revenue, total payment volume, and active registered accounts up across the board. PayPal's penetration on eBay increased six points year over year to nearly 66% globally, drive by a more streamlined checkout experience and increased adoption of electronic payment.

And we just announced the integration of Bill Me Later into the PayPal wallet both on eBay and across e-commerce, giving consumers more choice when they pay online.

PayPal's merchant services business gained market share in all regions around the world, with total payment volume increasing 35% year over year on an FX neutral basis and acceleration from Q2. The integrated sales team for PayPal/Bill Me Later is driving a strong pipeline. More than 100 large merchants in the U.S. have been signed thus far this year, expanding addressable sales for PayPal and Bill Me Later by $27 billion.

Read the rest of this transcript for free on seekingalpha.com