EBAY

eBay Inc. (EBAY)

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eBay Inc. (EBAY)

Q3 2010 Earnings Call Transcript

October 20, 2010 5:00 pm ET

Executives

Tracey Ford – Director, IR

John Donahoe – President & CEO

Bob Swan – SVP, Finance & CFO

Analysts

Youssef Squali – Jefferies

Scott Devitt – Morgan Stanley

Spencer Wang – Credit Suisse

Sandeep Aggarwal – Caris and Company

James Mitchell – Goldman Sachs

Steve Weinstein – Pacific Crest

Stephen Ju – RBC Capital Markets

Brian Pitz – UBS

Douglas Anmuth – Barclays Capital

Imran Khan – JP Morgan

Presentation

Operator

Good day, ladies and gentlemen, and welcome to eBay’s Q3 2010 earnings call. At this time, all participants will be in a listen-only mode, but later we will conduct a question-and-answer session, which instructions will be given at that time. As a reminder, today’s conference is being recorded.

Now, it’s my pleasure to announce your host, Tracey Ford, Director of Investor Relations.

Tracey Ford

Good afternoon. Thank you for joining us and welcome to eBay’s earnings release conference call for the third quarter of 2010. Joining me today on the call are John Donahoe, our President and Chief Executive Officer; and Bob Swan, our Chief Financial Officer.

We’re providing a slide presentation to accompany Bob’s commentary during the call. This conference call is also being broadcast on the Internet. Both the presentation and call are available through the Investor Relations section of the eBay Web site at investor.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.

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 a reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call.

In addition, management may make forward-looking statements relating to our future performance that are based on 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 and full year 2010, and focus on the future growth of the Payments and Marketplaces businesses.

Our actual results may differ materially from those discussed in this call for a variety of reasons, including, but not limited to, the continuing impact of the global economic downturn, changes in political, business and economic conditions, foreign exchange rate fluctuations, the impact of integration of recent and future acquisitions, our increasing need to grow revenues from existing users and established markets, an increasingly competitive environment for our businesses, the complexity of managing increasingly large enterprise with broad range of businesses at different stages of maturity, 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 cost 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, available at investor.ebayinc.com. You should not rely on any forward-looking statements and we assume no obligation to update them. All information in this presentation is as of October 20, 2010. We do not intend or undertake no duty to update this presentation.

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

John Donahoe

Thanks, Tracey, and good afternoon, everyone and welcome to our Q3 earnings call. Today, I’ll talk about our results for the quarter and how we are sharpening our focus on our strategic priorities and growth opportunities, and then Bob will give more operating details and provide guidance before we’ll answer your questions.

Each quarter, I’ve consistently highlighted the three ways in which we’re driving our growth. First, we’re focused on customers, measured by net promoter score, velocity, and market share, with the portion of our senior executive compensation tied to customer satisfaction.

Second, we’re focused on technology to drive increased innovation as seen in areas such as mobile platform, and our overall user experience.

Third, we’re operating more efficiently taking $2 billion out of our cost structure over three years to reinvest in growth.

Our focus on these priorities is paying off as we made progress each quarter against our goals, positioning PayPal to be the leader in global online payments and (inaudible) eBay as a global leader in ecommerce and mobile-commerce.

In Q3, both revenue and earnings exceeded our guidance. Excluding Skype, revenue increased 10% and non-GAAP EPS was up 14% year-over-year. PayPal drove strong growth in revenue, total payment volume, and active registered accounts.

eBay continued to improve key metrics, such as net promoter scores for active users, which are up globally and sold items which are up 13% excluding Gmarket.

Now let’s take a look at the results from each business unit. PayPal had a great quarter, expanding its leadership position in online payments and gaining share across global ecommerce.

For the fourth consecutive quarter, PayPal’s total payment volume for merchant services grew at 40% or more year-over-year. This consistently strong growth reflects what more and more merchants worldwide understand PayPal is good for their business.

PayPal helps drive incremental sales by providing merchants access to a global base of 90 million active accounts, and for both merchants and buyers, PayPal’s secure digital wallet provides a safe and convenient way to pay online and via mobile, enabling frictionless domestic and global trade.

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