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Wed July 20 2011 16:21:00

eBay Releases Second Quarter 2011 Earnings

By: Ina Steiner

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eBay's conference call with analysts is at 5:00 pm EST today, here is the company's press release announcing second quarter 2011 earnings, you can view the full release with tables on eBay's investor website.

eBay Inc. Reports Strong Second Quarter 2011 Results

SAN JOSE, Calif.-Global ecommerce and online payments leader eBay Inc. (Nasdaq:EBAY) today reported that revenue for the second quarter ended June 30, 2011, increased 25% to $2.8 billion, compared to the same period of 2010. The company recorded second quarter net income on a GAAP basis of $283.4 million, or $0.22 per diluted share, and non-GAAP net income of $630.9 million, or $0.48 per diluted share. In the second quarter GAAP net income decreased year over year compared to the second quarter of 2010 due to charges related to the GSI Commerce (GSI) transaction. The year-over-year increase in second quarter non-GAAP earnings per diluted share was driven by solid top-line growth and productivity.

* Merchant Services net TPV now includes net TPV for Bill Me Later whether used within or outside of the PayPal wallet.

** Reflects net revenue attributable to the GSI segment for the period from June 17, 2011 (the date that the acquisition was completed), to June 30, 2011.

"Second quarter revenue and earnings were strong, with PayPal surpassing 100 million active registered accounts and reporting its first billion-dollar revenue quarter, and eBay growth in the U.S. accelerating," said eBay Inc. President and CEO John Donahoe. "We also strengthened our portfolio in Q2 with acquisitions that we believe will more broadly position us to enable the future of commerce. We will partner with retailers of all sizes to help them grow in a rapidly shifting, technology-driven multichannel commerce environment, and we will help consumers shop and pay anytime, anywhere, any way."

The company's PayPal business delivered strong second quarter performance, expanding its leadership position in global payments. PayPal ended the quarter with 100.3 million active registered accounts, a 15% increase year over year. PayPal's net total payment volume (TPV) grew 34% to $28.7 billion in the second quarter of 2011 compared to the same period of last year. PayPal delivered its first-ever billion dollar revenue quarter, driven by strong performance in its Merchant Services business as well as increased penetration on eBay. PayPal continued to demonstrate strength in mobile payments and now expects more than $3 billion in mobile TPV this year, compared to $750 million in 2010.

The company's Marketplaces business also delivered strong second quarter performance. Gross merchandise volume excluding vehicles (GMV), increased by 17% year over year to $14.7 billion. GMV in the U.S. increased 14% year over year, the third consecutive quarter of acceleration, driven by improved customer experiences in search and navigation. International GMV increased 19% year over year, resulting from stable growth in Europe and improved performance in Korea, as well as positive impacts from foreign currency movements. The Marketplaces business continued to drive innovation in key areas such as mobile, where downloads of eBay's portfolio of mobile applications surpassed 45 million globally since the launch of mobile in the third quarter of 2008. The company remains on track to double eBay's mobile GMV including vehicles to over $4 billion in 2011.

The company completed the acquisition of GSI, a leading provider of ecommerce and interactive marketing services, on June 17, 2011. GSI will operate as a stand-alone business unit. The GSI segment contributed $23.8 million to revenue for the period from June 17, 2011, to June 30, 2011.

Other Selected Financial Results
* Operating margin - GAAP operating margin decreased to 18.8% for the second quarter of 2011 compared to 21.9% for the same period last year. Non-GAAP operating margin decreased to 27.6% for the quarter, compared to 29.1% for the same period last year. The decrease in non-GAAP operating margin was due primarily to a slight decrease in take rate, strong growth from our lower margin businesses and the impact of recently completed acquisitions.
    * Taxes - The GAAP effective tax rate for the second quarter of 2011 was 3%, compared to 17% for the second quarter of 2010. For the second quarter of 2011, the non-GAAP effective tax rate was 19%, compared to 21% for the second quarter of 2010.
    * Cash flow - The company generated $783 million of operating cash flow and $543 million of free cash flow during the second quarter.
    * Stock repurchase program - The company repurchased approximately $425 million of its common stock in the second quarter.
    * Cash and cash equivalents and non-equity investments - The company's cash and cash equivalents and non-equity investments portfolio totaled $6.0 billion at June 30, 2011, compared to $7.8 billion at December 31, 2010.

Business Outlook
    * Third quarter 2011 - eBay expects net revenues in the range of $2.850 to $2.950 billion with GAAP earnings per diluted share in the range of $0.37 to $0.38 and non-GAAP earnings per diluted share in the range of $0.46 to $0.47.
    * Full year 2011 - eBay now expects net revenues in the range of $11.300 to $11.600 billion with GAAP earnings per diluted share in the range of $2.41 to $2.44 and non-GAAP earnings per diluted share in the range of $1.97 to $2.00.

Quarterly Conference Call
eBay will host a conference call to discuss second quarter 2011 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 http://investor.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.

See Thursday's EcommerceBytes Newsflash story for more details.




Comments (33) | Permalink

Readers Comments

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

This user has validated their user name. by: Ina

Wed Jul 20 16:25:03 2011

Revenue up 25% year over year, net income is down - eBay says: "In the second quarter GAAP net income decreased year over year compared to the second quarter of 2010 due to charges related to the GSI Commerce (GSI) transaction."

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

This user has validated their user name. by: Ric

Wed Jul 20 17:00:03 2011

When one looks at eBay marketplace "growth", one needs to remember that eBay used the new Final Value Fee on shipping to push sellers into offering "free" shipping.

That said, a significant amount of what eBay  is trumpeting as "growth" to Wall Street is not really a reflection of increased buying activity, only the fact that shipping costs have been manipulated into reflecting as "sales".

Wall Street Analysts and investors should be concerned that another layer of transparency has been removed, making it more difficult to realistically gauge the factual health of eBay's marketplace unit.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Ron

Wed Jul 20 17:14:58 2011

Ina,

Isn't creative finance interesting?

Maybe someone can explain this to me.

GAAP earnings are 22 cents a share while non-GAAP earnings are 48 cents a share.
eBay has 1.286 billion shares outstanding, so if you do the math, the one time cost that is attributed to the acquisition of GSI is 334.5 million dollars.  The GSI deal was to cost eBay 2.4 billion dollars.  So what I'm confused about is how was the 334.5 million dollar cost arrived at?  I find it suspicious that net GAAP income dropped and non-GAAP just happened to beat the street by 2 cents.

The other thing that I find interesting is the lack of segmented earnings.  Obviously, the payments business is doing well, so with such a poor GAAP showing, I would think that marketplaces is not doing well.

Can anyone shed light on the GAAP vs non-GAAP results?

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

This user has validated their user name. by: Anonymous Annie

Wed Jul 20 17:21:33 2011

IT'S WORTH REPEATING: That said, a significant amount of what eBay  is trumpeting as ''growth'' to Wall Street is not really a reflection of increased buying activity, only the fact that shipping costs have been manipulated into reflecting as ''sales''.

(Thanks, Ric!)

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Mr perfect

Wed Jul 20 18:01:16 2011

The main reason why there's such a big growth for PayPal is because Ebay made it compulsary. I hardly ever used PayPal before it became compulsary and will immediatly stop offering it when it's no longer compulsary. I was a hobby seller. Now I'm a fulltime Ebayseller. Didn't need PayPal to grow the business.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: anyone out there

Wed Jul 20 19:10:54 2011

You people are missing the whole point of Donut holes lies. As long as he has wall street in his back pocket, he and Fleecebay are going to be around for a very long time.

Wall street doesn't care what the guy on the street thinks. All they are interested in is the bottom line and if you are foolish enough to keep donating they will willing take your money and laugh all the way to the bank.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

This user has validated their user name. by: Philip Cohen
Web Site

Wed Jul 20 19:51:42 2011

GAAP net revenue UP 25%; net income DOWN 31%!

Gee, aren’t those “generally accepted accounting principles” a real bummer. Still, the non-GAAP figures look good, whatever they actually mean, and as eBay never pays shareholders a cash dividends, what matter? Only senior executive staff get to stash any cash under their beds from the regular exercising and selling of their steady supply of share options. No going down with the ship for this crew.

Enron / eBay / PayPal / Donahoe: Dead Men Walking.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

This user has validated their user name. by: Ina

Wed Jul 20 20:46:43 2011

I'm working up my summary of eBay conference call with analysts - not sure if you saw my Tweet that eBay will begin advertising on TV in the third quarter, I thought that was interesting.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Ron

Wed Jul 20 20:54:00 2011

Phil,

GAAP is a strict accounting of net operating income while non-GAAP allows the corporation to add in profits to net income that they would have made if they hadn't incurred a "one time" expenditure, such as the expenditure to buy GSI, the reason that eBay gives for their poor GAAP net income result.

The thing is that eBay is paying $2.4 billion dollars to buy GSI.  That purchase can be handled a number of ways, through stock swaps, cash on hand or debt.

So instead, they've applied $334 million dollars in net operating income against that purchase.  If they amortized the whole cost of $2.4 billion dollars over 8 quarters/2 years, they could boost their non-GAAP every quarter.

Now, I'm not that they can in fact continue to do this and I'm not sure how Wall Street would view this if they were to continue doing this, but it's a nice accounting trick to have in your back pocket - make an acquisition and apply "profit" that would have been there had you not made that acquisition.

Are there any financial experts out there that can further enlighten us?

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Digby
Web Site

Wed Jul 20 21:47:21 2011

Notice how they put Paypal first then marketplaces when they discuss their results !

But I think Paypal is doingg well. Its up 43% in merchant services and up 23% on ebay. So its growing well without ebay!

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: pete

Wed Jul 20 21:55:30 2011

Its amazing Our eBay fees are around 10% of what they were even 2 years ago, so many of our colleagues who also sold a minimum of $10,000 a month in eBay fees have long gone…traffic is dead, selection is terrible but eBay still wont say there is a problem, the thing is eBay we all know there is a problem.

As soon as Paypal are restricted via the Banks circling their prey, eBays profits will plunge and it will be a very nice day for all of us who have been abused by eBay Inc

Small sellers will start to see there is NO profit to be made on eBay and just walk away.
Amazon is now the only way to make serious sales WITH a profit…just like 2001

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Joe Average

Thu Jul 21 01:17:28 2011

I agree with Pete, the selection is dismal on eBay now. Especially when you bypass the annoying, obvious fake items, that are shipping from China.

So where is eBay's Market Place growth coming from? Electronics perhaps?

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Rich

Thu Jul 21 01:59:01 2011

Profit miss due to 9 acquisitions.  The CEO is out of control.  From a different article or I missed it here: in June, Ebay drew 65.5 million visitors in the U.S., a drop of 2.3 percent from the previous year. Amazon increased its visitors 26 percent to 95.8 million.  Bottom line--Amazon kicking Ebay's ass still.  paypal remains strong

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Bernnie

Thu Jul 21 05:48:50 2011

@Digby

". . . Paypal is doing well. Its up 43% . . ."
Eliminate money in frozen accounts, take into account buyer refunds as a paypal credit then re-calculate.

@Ron
"Are there any financial experts out there that can further enlighten us?"  
Yep. Prisons are full of them.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Digby
Web Site

Thu Jul 21 06:20:42 2011

@Bernnie

Re Paypal, the 43% up was for non ebay sales by Paypal.

These are sales by all the other auction sites, and B&M stores, online websites and other services eg people sending money to friends and family etc.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Steve

Thu Jul 21 08:53:49 2011

It's quite amazing that almost every seller on the eBay discussion boards is complaining about the dismal sales on eBay.  So where is this growth coming from?  I'm not buying it.  I guess I am not as stupid or gullible as a Wall Street analyst.   And it appears that the business magazines such as  Forbes print anything that eBay communications sends to them without doing any research whatsoever.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: William

Thu Jul 21 11:51:05 2011

Yes...take a bite out of shipping and hide it in the sale. yes...you too can incease your bottom line

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: sparky

Thu Jul 21 11:52:09 2011

Paypal is the engine. Ebay is the boat holding people with cans to bail out water to keep it afloat. In retail, are people going to have megaprint blinding guaranteed 'seller protection', say at Macy's? Ebay could make them money buy itself if they threw Donohoe overboard.

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Earnings?

Thu Jul 21 13:00:02 2011

Take a look at this especially the comments. Seems to me a lot of commenters are living in la-la land without a clue about what is really going on. Dismissing sellers as usual as complainers.

http://seekingalpha.com/article/280496-5-ceos-who-
should-be-fired-this-year?source=email_portfolio

Auctions
now at 25%. IMO if eBay were to end all auctions and go strictly retail, the consumers (buyers) wouldn't even visit the eBay marketplace. Ebay would be thought of in past tense and an occasional ''Oh, is eBay still around?''.

As far as Paypal being such a success, I don't see it surviving in the long run without a thriving eBay marketplace. Sure it is doing well now due to sellers being held hostage at virtual gunpoint to accept it. These same sellers sell on other sites including their own websites. Would they still use Paypal if they no longer sold on eBay?

eBay Releases Second Quarter 2011 Earnings   eBay Releases Second Quarter 2011 Earnings

by: Digby
Web Site

Thu Jul 21 17:35:18 2011

@Earnings

You obviously have a thing against Paypal. (or you have not read the report)

According to the report...
18,000 income from payment services ie other sites and b&m etc
9,000 from ebay.

So two thirds of Paypals revenue is coming from outside of ebay. This is a good sign.


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