This summary is based on the second quarter fiscal 2008 earnings call conducted by eBay Inc. (EBAY) on July 16, 2008.
Management:
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Vice President, Investor Relations: Mark Rowen
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President, Chief Executive Officer, Director: John J. Donahoe
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Chief Financial Officer, Senior Vice President – Finance: Robert H. Swan
Key Investors Issues
- Net revenues increased 20% to $2.2 billion from $1.8 billion in 2007.
- Earnings rose 25% to $460 million or 35 cents a share, from $375.8 million or 28 cents a share in the prior year.
- The firm repurchased 19 million eBay shares at a cost of $566 million, or $29.68 per share.
Half Year Highlights:
- Sales rose 22% to $4.4 billion from $3.6 billion in the prior year.
- Net income was $920 million or 70 cents a share, up 22% from $753 million or 55 cents a share in 2007.
- Cash and cash equivalents amounted to $3.6 billion, up from $3.4 billion in 2007.
Second Quarter Highlights
Net revenues of $2.2 billion, were a 20% increase over last year’s $1.8 billion as growth was propelled by the high growth PayPal merchant services, classifieds, advertising, and Skype.
- Earnings rose 25% to $460 million or 35 cents a share, from $375.8 million or 28 cents a share in the prior year driven by stronger-than-expected top line growth, increased productivity, a lower tax rate, and a lower share count.
- Operating margin came in at 31.9%, 50 basis points below last year, solely driven by a business mix shift towards the higher growth, lower margin, PayPal, and Skype businesses.
- The firm generated free cash flow of $617 million, an increase of 16% from the prior year, primarily driven by earnings expansion, while CapEx as a percent of revenues has held at 6% for the past four quarters.
Return on invested capital on a trailing 12-month basis was 28%.
- Sales and marketing as a percent of revenue improved by 260 basis points from the year-ago period, due in part to a more efficient online marketing spend and in part through investments in buyer loyalty and retention.
- Product development came in 40 basis points higher than last year as eBay continues to make enhancements to the customer experience, while G&A was 20 basis points lower than last year as it gained leverage and decreased PayPal fraud losses by 4 basis points.
- The firm ended the period with more than $3.7 billion in cash and cash equivalents, up slightly from the end of the first quarter.
- The firm repurchased approximately 19 million eBay shares at a cost of $566 million, or $29.68 per share.
Business Segment Highlights:
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In the marketplaces business which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, revenues were $1.46 billion, equating to 13% year-over-year growth.
- The business unit saw strong growth in advertising, StubHub and classifieds.
Revenue from the text and graphical advertising partnerships grew 183% year-over-year and net revenues generated outside the U.S. were 56% of total Marketplaces net revenues.
- Gross merchandise volume was $15.68 billion, an increase of 8% over the second quarter of 2007, impacted by lower average selling prices and a rapid decline in vehicle GMV.
- Marketplaces continues to focus on customer-facing initiatives designed to make transactions on the eBay platform safer and its various global sites easier to use, while enhancing selection in a uniquely eBay way.
More than 84 million active users were active on eBay''s marketplaces over the trailing 12 months, an increase of 1% over last year, or up 6% excluding China and Taiwan.
- U.S. GMV was $7 billion, an increase of 4% year-over-year, while international GMV grew 12% to $8.7 billion, accounting for 55% of global GMV.
- GMV in the fixed price format increased 19% over last year and now accounts for 43% of global GMV as the firm executes against initiatives to optimize fixed price offering.
- Average selling price declined by 6% compared to last year due to specific promotions ran in Germany which brought a significant amount of low-priced inventory onto the site, reducing ASPs.
- The firm enhanced safety and reduced fraud on the sites, and is doing a better job of removing bad, high ASP listings before they convert to GMV.
- Further, the slowing economies, particularly in the U.S. and the U.K., have caused consumers to trade down to lower priced items.
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Payments had a strong quarter with $602 million in net revenue, an increase of 33% year-over-year.
- Net total payment volume (TPV) was $14.93 billion, an increase of 35% year-over-year. - The net revenue and net TPV growth was driven primarily by the continued excellent growth of merchant services globally and increased penetration on eBay internationally.
- Global active registered accounts increased to 62.6 million, representing 19% year-over-year growth.
Globally, PayPal will continue to focus on greater penetration into the Marketplaces business and the acquisition of new merchants.
- TPV growth was fueled by increases in addressable GMV coupled with a five point increase in the global penetration rate to 57%, as buyers increasingly use PayPal as a safer way to pay online.
- Beyond the PayPal platform, PayPal merchant services business recorded $7.3 billion of global TPV, representing 57% year over year growth and accounting for 49% of total TPV.
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Communications: Skype continued its robust growth trajectory, reporting $136 million in revenue, representing 51% year over-year growth.
- Skype added nearly 29 million registered users, ending the period with more than 338.2 million registered users around the world.
- In addition to growing its user base, Skype is focused on product strategies to enhance customer engagement.
Effects of Prioritisation:
