eBay Inc. Reports Second Quarter 2016 Results

20 Jul

eBay Inc., a global commerce leader, delivered gross merchandise volume (GMV) for the quarter ended June 30, 2016 of $20.9 billion, increasing 6% on a foreign exchange (FX) neutral basis and 4% on an as-reported basis. Revenue for the quarter was $2.2 billion, up 7% on an FX-Neutral basis and 6% on an as-reported basis, driving GAAP net income from continuing operations of $437 million, or $0.38 per diluted share, and non-GAAP net income from continuing operations of $496 million, or $0.43 per diluted share. During the quarter, the company generated $764 million of operating cash flow and $617 million of free cash flow from continuing operations while also repurchasing $500 million of its common stock.

“Q2 was another good quarter where we delivered strong results and had acceleration in growth,” said Devin Wenig, President and CEO of eBay Inc. “We are now one year into executing our strategy to provide the best choice, the most relevance and the most powerful selling platform, and there are signs of momentum in our business. We continue to invest in our platforms to ensure eBay is a global commerce leader for years to come.”

Underlying total eBay Inc. performance, the Marketplace platforms delivered $19.8 billion of GMV and $1.8 billion of revenue in the second quarter. Marketplace revenue was up 3% on an FX-Neutral basis and 1% on an as-reported basis, driven by accelerating GMV growth of 5% on an FX-Neutral basis and 3% on an as-reported basis as well as growth in Marketing Services & Other revenue. StubHub growth accelerated in the quarter, with GMV of $1.1 billion, up 35%, and revenue of $225 million, up 40%, aided by strength across multiple genres and the continued benefit from ongoing product innovation. The Classifieds platforms delivered another quarter of strong performance with revenue of $207 million, up 15%, primarily driven by the Automotive and Real Estate verticals across several key geographies, including Germany and Canada.

In the second quarter, eBay crossed the one billion live listings mark for the first time, underscoring efforts to expand the breadth of selection offered to consumers, while making progress on enhancing its shopping platform to improve discoverability. eBay also recently announced its intent to acquire several companies to strengthen its technology and expand its geographical footprint. Expertmaker, which closed in Q2, and SalesPredict will help contribute to eBay’s efforts to build the world’s most comprehensive product knowledge base, in addition to furthering capabilities in artificial intelligence and machine learning. TicketBis will strengthen StubHub’s international footprint, and Ticket Utils will provide sellers with enhanced tools to better manage their inventory.

Second Quarter 2016 Financial Highlights (presented in millions, except per share data and percentages)

Second Quarter
2016 2015 Change
eBay Inc.
Net revenues $2,230 $2,110 $120 6%
GAAP – Continuing Operations
Income from continuing operations $437 $430 $7 2%
Earnings per diluted share from continuing operations $0.38 $0.35 $0.03 8%
Non-GAAP – Continuing Operations
Net income $496 $517 $(21) (4)%
Earnings per diluted share $0.43 $0.42 $0.01 2%

Other Selected Financial and Operational Results

  • Operating margin — GAAP operating margin increased to 23.8% for the second quarter of 2016, compared to 20.3% for the same period last year. Non-GAAP operating margin decreased to 29.1% in the second quarter of 2016, compared to 32.1% for the same period last year.
  • Taxes — The GAAP effective tax rate for continuing operations for the second quarter of 2016 was 16.4%, compared to 22.1% for the second quarter of 2015. The non-GAAP effective tax rate for continuing operations for the second quarter of 2016 was 18.2%, compared to 19.5% for the second quarter of 2015.
  • Cash flow — The company generated $764 million of operating cash flow from continuing operations and $617 million of free cash flow from continuing operations during the second quarter of 2016.
  • Stock repurchase program — The company repurchased approximately $500 million of its common stock, or 20.8 million shares, in the second quarter of 2016. The company’s total repurchase authorization remaining as of June 30, 2016 was $0.3 billion.
  • Cash and cash equivalents and non-equity investments — The company’s cash and cash equivalents and non-equity investments portfolio totaled $10.4 billion as of June 30, 2016.

Business Outlook

  • Third quarter 2016 — The company expects net revenue between $2.16 billion and $2.19 billion, representing FX-Neutral growth of 6% – 7%, with non-GAAP earnings per diluted share from continuing operations in the range of $0.42 – $0.44 and GAAP earnings per diluted share from continuing operations in the range of $0.35 – $0.37.
  • Full year 2016 — The company expects net revenue between $8.85 billion and $8.95 billion, representing FX-Neutral growth of 5% – 6%, with non-GAAP earnings per diluted share from continuing operations in the range of $1.85 – $1.90 and GAAP earnings per diluted share from continuing operations in the range of $1.60 – $1.65.

In July 2016, eBay’s board of directors authorized an additional $2.5 billion stock repurchase program, with no expiration from the date of authorization. The stock repurchase program is intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic repurchases of our common stock to reduce our outstanding share count. Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means at times and in such amounts as management deems appropriate and will be funded from our working capital or other financing alternatives.

Quarterly Conference Call and Webcast

eBay Inc. will host a conference call to discuss second quarter 2016 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 https://investors.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.

eBay Inc. uses its Investor Relations website at https://investors.ebayinc.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor, in addition to following press releases, SEC filings, public conference calls and webcasts.

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