EBAY

eBay Inc. (EBAY)

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eBay Inc. (EBAY)

Q4 2009 Earnings Call

January 20, 2010 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

Doug Anmuth - Barclays

James Mitchell - Goldman Sachs

Scott Devitt - Morgan Stanley

Imran Khan - J.P. Morgan

Stephen Ju - RBC Capital Markets

Gene Munster – Piper Jaffray

Justin Post – Bank of America/Merrill Lynch

Spencer Wang – Credit Suisse

Heath Terry – FBR Capital Markets

Brian Pitz - UBS

Presentation

Operator

Hello and welcome to eBay Incorporated's fourth quarter 2009 earnings call. Today’s call is being recorded. At this time, I would like to turn it over to Mark Rowen, Vice President of Investor Relations. Please go ahead.

Mark Rowen

Thank you, Kevin. Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the fourth quarter and full year of 2009. Joining me today on the call are John Donahoe, our President and 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 first quarter and full year of 2010; the focus of the payments and marketplaces business units going forward; and future growth in the marketplaces and payments businesses.

Our actual results may differ materially from those discussed in this call for a variety of reasons, including but not limited to: the continuation or worsening of the global economic downturn; changes in political, business and economic conditions; foreign exchange rate fluctuations; the impact and integration of recent and future acquisitions; 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 our 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 January 20, 2010 and we do not intend and undertake no duty to update this presentation.

With that said, let me turn the call over to John.

John J. Donahoe

Thank you, Mark and good afternoon, everyone and welcome to our Q4 earnings call. Today I will talk about our results from both the Q4 and full year perspective, and I will then outline our key priorities for 2010 before turning it over to Bob for more details on the quarter and our 2010 Q1 and full year guidance.

Let us start by taking a quick look at our Q4 results. Revenue growth was up 16% to $2.4 billion; non-GAAP EPS was up 9% to $0.44 and we generated free cash flow of almost $600 million.

In addition, we successfully completed the sale of 70% of Skype for approximately $1.9 billion. This move allows us to focus our energies on our two core businesses, payments and marketplaces.

All in all, we had a strong Q4 with both of these core businesses accelerating sharply from the third quarter. Let’s take a look at what we have accomplished in each business unit in Q4, and for the year.

PayPal posted terrific results, significantly expanding its global presence. For the first time, PayPal’s total payment volume past $20 billion in a single quarter. PayPal is truly a global business, now supporting 24 currencies in 190 markets with 81 million active accounts.

In 2009 for the first time annual revenue and TPV from PayPal’s Merchant Services business exceeded PayPal’s volume on eBay. And PayPal’s volume is predicated on a core, fundamental strength: merchants realize higher conversion rates when PayPal is available as a payment option.

By almost every measure, PayPal’s strengthened its competitive position in Q4. Total revenue and TPV both grew significantly year over year. Penetration on eBay increased 3 points year over year, PayPal’s Merchant Services business once again delivered very strong performance, with TPV growth of 50% in Q4.

This growth is global. In the U.S., PayPal’s Merchant Services TPV grew at 10X the market growth rate for ecommerce. International Merchant Services TPV grew 80% year over year, and volume from outside the U.S. now accounts for 40% of PayPal’s total TPV.

PayPal continues to leverage this unique global footprint by making it easy to send and receive payments across borders. In fact, cross-border trade now accounts for almost 25% of PayPal’s total payment volume. And PayPal continues to drive further penetration in major markets. For example, in Japan PayPal has signed agreements with five of the country’s leading gateways, representing over $14 billion in new addressable TPV.

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