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eBay Inc. (Nasdaq: EBAY), a global commerce leader that connects millions of buyers and sellers around the world, today reported financial results for its third quarter ended September 30, 2020.
"I'm pleased with the third quarter results," said Jamie Iannone, Chief Executive Officer at #ebay Inc. "On an apples to apples basis, we delivered results that exceeded expectations on both the top and bottom lines. Our third quarter performance reflects the strength of our newly focused strategy coupled with the enormous untapped potential of our marketplace. As we continue our multi-year journey to become the best global marketplace to buy and sell, I am proud of the progress our team is making toward our tech-led reimagination."
Third Quarter Marketplace Financial Highlights
Background on the Presentation of Results
On July 20, 2020, the company announced it entered into a definitive agreement to transfer its Classifieds business to Adevinta and has since determined that the business meets the discontinued operations accounting criteria.
To aid in the comparison to previously provided financial guidance, below are revised versions of the July 28, 2020 guidance metrics, reflecting the exclusion of the Classifieds business.
Q3 2020 | |||
In billions, except per share data | July 28, 2020 Guidance | Classifieds Impact | Implied Guidance |
Revenue | $2.64 - $2.71 | $(0.26) | $2.38 - $2.45 |
GAAP EPS | $0.58 - $0.64 | $(0.10) | $0.48 - $0.54 |
Non-GAAP EPS | $0.81 - $0.87 | $(0.13) | $0.68 - $0.74 |
FY 2020 | |||
In billions, except per share data | July 28, 2020 Guidance | Classifieds Impact | Implied Guidance |
Revenue | $10.56 - $10.75 | $(0.97) | $9.59 - $9.78 |
GAAP EPS | $2.85 - $3.00 | $(0.34) | $2.51 - $2.66 |
Non-GAAP EPS | $3.47 - $3.59 | $(0.43) | $3.04 - $3.16 |
Business Highlights
Third Quarter 2020 Financial Highlights (presented in millions, except per share data and percentages) | ||||
Third Quarter | ||||
2020 | 2019 | Change | ||
eBay Inc. | ||||
Net revenues | $2,606 | $2,083 | $523 | 25% |
GAAP - Continuing Operations | ||||
Income (loss) from continuing operations | $621 | $210 | $411 | 196% |
Earnings (loss) per diluted share from continuing operations | $0.88 | $0.25 | $0.63 | 250% |
Non-GAAP - Continuing Operations | ||||
Net income | $604 | $435 | $169 | 39% |
Earnings per diluted share | $0.85 | $0.52 | $0.33 | 64% |
Other Selected Financial and Operational Results
Business Outlook
Based on the company's improved revenue and earnings outlook for Q4 and full year 2020, #ebay has raised its full year guidance for continuing operations.
In billions, except per share data and percentages | Q4 2020 Guidance |
Revenue | $2.64 - $2.71 |
Organic FX-Neutral Y/Y Growth | 19 - 22% |
GAAP EPS | $0.58 - $0.64 |
Non-GAAP EPS | $0.78 - $0.84 |
FY 2020 | ||
In billions, except per share data and percentages | Prior Implied Guidance July 28, 2020 | Current Guidance October 28, 2020 |
Revenue | $9.59 - $9.78 | $10.04 - $10.11 |
Organic FX-Neutral Y/Y Growth | 14 - 16% | 19 - 20% |
GAAP EPS | $2.51 - $2.66 | $3.00 - $3.06 |
Non-GAAP EPS | $3.04 - $3.16 | $3.34 - $3.40 |
Capital Allocation
Quarterly Conference Call and Webcast
eBay Inc. will host a conference call to discuss third quarter 2020 results at 2:00 p.m. Pacific Time today. Investors and participants can access the call by dialing (833) 350-1438 in the U.S. and (647) 689-6641 internationally. The passcode for the conference line is 7665786. 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 at least three months 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 this website, in addition to following our press releases, SEC filings, public conference calls and webcasts.
About eBay
eBay Inc. (Nasdaq: EBAY) is a global commerce leader that connects millions of buyers and sellers in 190 markets around the world. We exist to enable economic opportunity for individuals, entrepreneurs, businesses and organizations of all sizes. Founded in 1995 in San Jose, California, #ebay is one of the world's largest and most vibrant marketplaces for discovering great value and unique selection. In 2019, #ebay enabled $86 billion of gross merchandise volume. For more information about the company and its global portfolio of online brands, visit www.ebayinc.com.
Presentation
All growth rates represent year-over-year comparisons, except as otherwise noted. All amounts in tables are presented in U.S. dollars, rounded to the nearest million, except as otherwise noted. As a result, certain amounts may not sum or recalculate using the rounded dollar amounts provided. References to "revenue" refer to "net revenues" as reported in the company's consolidated statement of income.
Non-GAAP Financial Measures
This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission (SEC): non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, free cash flow and FX-Neutral basis. These non-GAAP financial measures are presented on a continuing operations basis. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures, except for figures in this press release presented on an "FX-Neutral basis", to the nearest comparable GAAP measures, see "Business Outlook," "Non-GAAP Measures of Financial Performance," "Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin," "Reconciliation of GAAP Net Income to Non-GAAP Net Income and Reconciliation of GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate" and "Reconciliation of Operating Cash Flow to Free Cash Flow" included in this press release. For figures in this press release reported "on an FX-Neutral basis", we calculate the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts. We define Organic FX-Neutral revenue growth as reported revenue growth, excluding incremental revenue from acquisitions or dispositions for the twelve-month period following such acquisitions or dispositions and foreign exchange rate effects.
Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, the future performance of #ebay Inc. and its consolidated subsidiaries that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of #ebay Inc. and its consolidated subsidiaries, including management's vision for the future of #ebay and our ability to accomplish our vision, expected financial results for the fourth quarter and full year 2020 and the future growth in its business, the effects of COVID-19 on our business and operations and our ability to respond to such effects, operating efficiency and margins, reinvestments, dividends, share repurchases, and the closing of the announced transaction with Adevinta ASA (the "Transaction"), the potential benefits of the Transaction and the impact of the Transaction on future results. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other factors that could cause or contribute to such differences include, but are not limited to: changes in political, business and economic conditions, the duration of the COVID-19 pandemic and the effects of COVID-19 on our business and operations and on the general economy, including effects on our sellers and customers, any regional or general economic downturn or crisis and any conditions that affect e-commerce growth or cross-border trade; the company's ability to realize expected growth opportunities in payments intermediation and advertising; fluctuations in foreign currency exchange rates; the company's need to successfully react to the increasing importance of mobile commerce and the increasing social aspect of commerce; an increasingly competitive environment for its business; changes to the company's capital allocation, including the timing, declaration, amount and payment of any future dividends or levels of the company's share repurchases, or management of operating cash; the company's ability to increase operating efficiency to drive margin improvements and enable reinvestments; the company's ability to manage its indebtedness, including managing exposure to interest rates and maintaining its credit ratings; the company's need to manage a large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the ability to successfully intermediate payments on our marketplace platform; the company's need and ability to manage regulatory, tax, data security and litigation risks; whether the operational, marketing and strategic benefits of the separation of the #ebay and PayPal businesses can be achieved; the company's ability to timely upgrade and develop its technology systems, infrastructure and customer service capabilities at reasonable cost while maintaining site stability and performance and adding new products and features; the company's ability to integrate, manage and grow businesses that have been acquired or may be acquired in the future; the possibility that regulatory and other approvals and conditions to the Transaction are not received or satisfied on a timely basis or at all; the possibility that #ebay may not fully realize the projected benefits of the Transaction; changes in the anticipated timing for closing the Transaction; business disruption during the pendency of or following the Transaction; diversion of management time on Transaction-related issues; the reaction of customers and other persons to the Transaction; and other events that could adversely impact the completion of the Transaction, including COVID-19 and industry or economic conditions outside of our control.
The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.
More information about factors that could affect the company's operating results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations website at https://investors.ebayinc.com or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the company on the date hereof. The company assumes no obligation to update such statements.
eBay Inc. | |||||||
Unaudited Condensed Consolidated Balance Sheet | |||||||
September 30, 2020 | December 31, 2019 | ||||||
(In millions) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 963 | $ | 901 | |||
Short-term investments | 2,697 | 1,850 | |||||
Accounts receivable, net of allowance for doubtful accounts of $105 and $82 | 477 | 555 | |||||
Other current assets | 1,486 | 1,064 | |||||
Current assets of discontinued operations | — | 141 | |||||
Current assets held for sale | 1,116 | 195 | |||||
Total current assets | 6,739 | 4,706 | |||||
Long-term investments | 663 | 1,275 | |||||
Property and equipment, net | 1,301 | 1,460 | |||||
Goodwill | 4,537 | 4,533 | |||||
Intangible assets, net | 19 | 39 | |||||
Operating lease right-of-use assets | 499 | 583 | |||||
Deferred tax assets | 3,749 | 3,980 | |||||
Other assets | 914 | 414 | |||||
Long-term assets of discontinued operations | — | 306 | |||||
Long-term assets held for sale | — | 878 | |||||
Total assets | $ | 18,421 | $ | 18,174 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 17 | $ | 1,020 | |||
Accounts payable | 307 | 229 | |||||
Accrued expenses and other current liabilities | 2,536 | 2,097 | |||||
Deferred revenue | 105 | 129 | |||||
Income taxes payable | 379 | 169 | |||||
Current liabilities of discontinued operations | — | 259 | |||||
Current liabilities held for sale | 496 | 163 | |||||
Total current liabilities | 3,840 | 4,066 | |||||
Operating lease liabilities | 379 | 461 | |||||
Deferred tax liabilities | 2,280 | 2,355 | |||||
Long-term debt | 7,738 | 6,738 | |||||
Other liabilities | 1,264 | 1,353 | |||||
Long-term liabilities of discontinued operations | — | 26 | |||||
Long-term liabilities held for sale | — | 305 | |||||
Total liabilities | 15,501 | 15,304 | |||||
Total stockholders' equity | 2,920 | 2,870 | |||||
Total liabilities and stockholders' equity | $ | 18,421 | $ | 18,174 |
eBay Inc. | |||||||||||||||
Unaudited Condensed Consolidated Statement of Income | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In millions, except per share amounts) | |||||||||||||||
Net revenues | $ | 2,606 | $ | 2,083 | $ | 7,403 | $ | 6,400 | |||||||
Cost of net revenues (1) | 656 | 530 | 1,731 | 1,580 | |||||||||||
Gross profit | 1,950 | 1,553 | 5,672 | 4,820 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing (1) | 660 | 577 | 1,835 | 1,731 | |||||||||||
Product development (1) | 287 | 243 | 788 | 735 | |||||||||||
General and administrative (1) | 258 | 250 | 750 | 756 | |||||||||||
Provision for transaction losses | 60 | 68 | 245 | 194 | |||||||||||
Amortization of acquired intangible assets | 6 | 7 | 20 | 21 | |||||||||||
Total operating expenses | 1,271 | 1,145 | 3,638 | 3,437 | |||||||||||
Income from operations | 679 | 408 | 2,034 | 1,383 | |||||||||||
Interest and other, net | 95 | (142) | 277 | (128) | |||||||||||
Income from continuing operations before income taxes | 774 | 266 | 2,311 | 1,255 | |||||||||||
Income tax provision | (153) | (56) | (550) | (208) | |||||||||||
Income from continuing operations | $ | 621 | $ | 210 | $ | 1,761 | $ | 1,047 | |||||||
Income from discontinued operations, net of income taxes | 43 | 100 | 3,061 | 183 | |||||||||||
Net income | $ | 664 | $ | 310 | $ | 4,822 | $ | 1,230 | |||||||
Income per share - basic: | |||||||||||||||
Continuing operations | $ | 0.89 | $ | 0.25 | $ | 2.46 | $ | 1.21 | |||||||
Discontinued operations | 0.06 | 0.12 | 4.26 | 0.22 | |||||||||||
Net income per share - basic | $ | 0.95 | $ | 0.37 | $ | 6.72 | $ | 1.43 | |||||||
Income per share - diluted: | |||||||||||||||
Continuing operations | $ | 0.88 | $ | 0.25 | $ | 2.43 | $ | 1.20 | |||||||
Discontinued operations | 0.06 | 0.12 | 4.22 | 0.22 | |||||||||||
Net income per share - diluted | $ | 0.94 | $ | 0.37 | $ | 6.65 | $ | 1.42 | |||||||
Weighted average shares: | |||||||||||||||
Basic | 696 | 830 | 717 | 863 | |||||||||||
Diluted | 708 | 837 | 725 | 870 | |||||||||||
(1) Includes stock-based compensation as follows: | |||||||||||||||
Cost of net revenues | $ | 11 | $ | 11 | $ | 32 | $ | 35 | |||||||
Sales and marketing | 24 | 19 | 60 | 56 | |||||||||||
Product development | 38 | 41 | 116 | 127 | |||||||||||
General and administrative | 40 | 26 | 103 | 103 | |||||||||||
$ | 113 | $ | 97 | $ | 311 | $ | 321 |
eBay Inc. | |||||||||||||||
Unaudited Condensed Consolidated Statement of Cash Flows | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In millions) | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 664 | $ | 310 | $ | 4,822 | $ | 1,230 | |||||||
(Income) loss from discontinued operations, net of income taxes | (43) | (100) | (3,061) | (183) | |||||||||||
Adjustments: | |||||||||||||||
Provision for transaction losses | 60 | 68 | 245 | 194 | |||||||||||
Depreciation and amortization | 163 | 159 | 471 | 474 | |||||||||||
Stock-based compensation | 113 | 97 | 311 | 321 | |||||||||||
(Gain) loss on sale of business | — | 52 | — | 52 | |||||||||||
(Gain) loss on investments, net | (1) | — | 1 | 1 | |||||||||||
Deferred income taxes | 70 | (1) | 169 | (22) | |||||||||||
Change in fair value of warrant | (191) | 49 | (496) | (56) | |||||||||||
Changes in assets and liabilities, net of acquisition effects | (119) | 167 | (199) | (122) | |||||||||||
Net cash provided by continuing operating activities | 716 | 801 | 2,263 | 1,889 | |||||||||||
Net cash provided by (used in) discontinued operating activities | (611) | 208 | (602) | 414 | |||||||||||
Net cash provided by operating activities | 105 | 1,009 | 1,661 | 2,303 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Purchases of property and equipment | (132) | (92) | (326) | (394) | |||||||||||
Purchases of investments | (7,224) | (13,223) | (28,897) | (37,390) | |||||||||||
Maturities and sales of investments | 9,074 | 14,656 | 28,740 | 40,483 | |||||||||||
Equity investment in Paytm Mall | — | (160) | — | (160) | |||||||||||
Other | — | (34) | 39 | 15 | |||||||||||
Net cash provided by (used in) continuing investing activities | 1,718 | 1,147 | (444) | 2,554 | |||||||||||
Net cash provided by (used in) discontinued investing activities | (7) | (4) | 4,024 | (125) | |||||||||||
Net cash provided by investing activities | 1,711 | 1,143 | 3,580 | 2,429 | |||||||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from issuance of common stock | 5 | 4 | 55 | 59 | |||||||||||
Repurchases of common stock | (680) | (1,022) | (4,710) | (3,971) | |||||||||||
Payments for taxes related to net share settlements of restricted stock units and awards | (48) | (43) | (131) | (162) | |||||||||||
Payments for dividends | (111) | (115) | (337) | (360) | |||||||||||
Proceeds from issuance of long-term debt, net | — | — | 1,765 | — | |||||||||||
Repayment of debt | (932) | (1,550) | (1,771) | (1,550) | |||||||||||
Other | (7) | 1 | (12) | 1 | |||||||||||
Net cash used in continuing financing activities | (1,773) | (2,725) | (5,141) | (5,983) | |||||||||||
Net cash used in discontinued financing activities | — | — | (2) | — | |||||||||||
Net cash used in financing activities | (1,773) | (2,725) | (5,143) | (5,983) | |||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 51 | (39) | 25 | (59) | |||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 94 | (612) | 123 | (1,310) | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 1,025 | 1,521 | 996 | 2,219 | |||||||||||
Cash, cash equivalents and restricted cash at end of period | 1,119 | 909 | 1,119 | 909 | |||||||||||
Less: Cash and cash equivalents and restricted cash of held for sale business | 30 | 41 | 30 | 41 | |||||||||||
Less: Cash, cash equivalents and restricted cash of discontinued operations | — | 23 | — | 23 | |||||||||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 1,089 | $ | 845 | $ | 1,089 | $ | 845 |
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eBay Inc. | |||||||||||||||||||
Unaudited Summary of Consolidated Net Revenues | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | |||||||||||||||
(In millions, except percentages) | |||||||||||||||||||
Net Revenues by Type: | |||||||||||||||||||
Net transaction revenues | $ | 2,355 | $ | 2,447 | $ | 1,900 | $ | 1,977 | $ | 1,829 | |||||||||
Current quarter vs prior year quarter | 29 | % | 30 | % | 1 | % | — | % | 1 | % | |||||||||
Percent from international | 59 | % | 60 | % | 62 | % | 64 | % | 63 | % | |||||||||
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