eBay reported 2% growth in GMV (the value of sales on its marketplace) in the fourth quarter of 2018. CEO Devin Wenig said the company would issue a dividend for the first time ever, as he and the Board of Directors face pressure
from activist investor Elliott Management to show better performance.
Update 1/30/2019: See our take on the post-earnings conference call with analysts in today's Newsflash story.
Press release follows (see eBay website for full release):
eBay Inc. (NASDAQ: EBAY), a global commerce leader, delivered revenue for the quarter ended December 31, 2018 of $2.9 billion, increasing 6% on both an as-reported basis and a foreign exchange (FX) neutral basis, primarily driven by gross merchandise volume (GMV) of $24.6 billion, up 1% on an as-reported basis and 2% on a FX-Neutral basis.
During the quarter, eBay delivered GAAP net income from continuing operations of $763 million, or $0.80 per diluted share and Non-GAAP net income from continuing operations of $670 million, or $0.71 per diluted share. The company generated $1.2 billion of operating cash flow and $1.1 billion of free cash flow from continuing operations while also repurchasing approximately $1.5 billion of its common stock in the quarter.
"We delivered record earnings for the fourth quarter and full year 2018," said Devin Wenig, President and CEO of eBay Inc. "In 2019, our focus will be on further improvements to the eBay user experience, while pursuing significant long-term growth opportunities in advertising and payments. We are confident in the strength of our business and future growth prospects, as demonstrated by our decision to institute eBay's first-ever dividend and increase our share repurchase program."
In the fourth quarter, eBay grew active buyers by 4% across its platforms, for a total of 179 million global active buyers. Underlying total eBay performance, the Marketplace platforms delivered $2.3 billion of revenue and $23.2 billion of GMV. Marketplace revenue growth was 7% on an as-reported basis and 6% on a FX-Neutral basis, and GMV was up 1% on an as-reported basis and 3% on a FX-Neutral basis. StubHub drove revenue of $314 million, up 2% on both an as-reported and FX-Neutral basis, and GMV of $1.4 billion, down 2% on an as-reported basis and down 1% on a FX-Neutral basis. Classifieds platforms delivered revenue of $263 million, up 8% on an as-reported basis and 11% on a FX-Neutral basis.
During the quarter, eBay continued strong execution of its advertising and payments growth priorities. The company experienced nearly 150% revenue growth in promoted listings, with 600 thousand active sellers promoting 200 million listings. The multi-year rollout of eBay's managed payments capability, which was initially launched in the third quarter, marks an important shift in strategic direction and a commitment to enhancing the customer experience. During the fourth quarter, eBay intermediated nearly $140 million in GMV.
eBay continued introducing new or expanded programs that improve buying and selling throughout the fourth quarter. Enabling an easier buying experience, eBay partnered with leading service providers to allow shoppers the ability to select and schedule professional auto, home and electronics installation services for eBay purchases. The company also continued to improve purchase confidence when shopping high-priced luxury items by expanding eBay Authenticate into the jewelry category. Additionally, the launch of eBay Instant Selling allows consumers to sell their smartphone devices and get paid instantly with an eBay voucher, without having to manage the selling process.
For the full year 2018, eBay delivered revenue of $10.7 billion, growing 8% on an as-reported basis and 6% on a FX-Neutral basis, primarily driven by GMV of $95 billion, up 7% on an as-reported basis and 5% on a FX-Neutral basis. The company delivered strong operating and free cash flow on a continuing operations basis, generating $2.7 billion and $2.0 billion, respectively, during 2018. eBay also returned $4.5 billion of capital to shareholders through repurchases of its common stock.
Other Selected Financial and Operational Results
Operating margin — GAAP operating margin decreased to 23.7% for the fourth quarter of 2018, compared to 24.5% for the same period last year. Non-GAAP operating margin decreased to 29.2% in the fourth quarter of 2018, compared to 29.8% for the same period last year.
Taxes — The GAAP effective tax rate for continuing operations for the fourth quarter of 2018 was (47.9)%, compared to 563.4% for the fourth quarter of 2017. The non-GAAP effective tax rate for continuing operations for the fourth quarter of 2018 was 16.4%, compared to 19.4% for the fourth quarter of 2017.
Cash flow — The company generated $1.2 billion of operating cash flow from continuing operations and $1.1 billion of free cash flow during the fourth quarter of 2018.
Stock repurchase program — The company repurchased approximately $1.5 billion of its common stock, or 52 million shares, in the fourth quarter of 2018. The company's total repurchase authorization remaining as of December 31, 2018 was $3.2 billion.
Cash and cash equivalents and non-equity investments — The company's cash and cash equivalents and non-equity investments portfolio totaled $8.6 billion as of December 31, 2018.
First quarter 2019 — The company expects net revenue between $2.55 billion and $2.60 billion, representing Organic FX-Neutral growth of 0% - 2%, with GAAP earnings per diluted share from continuing operations in the range of $0.40 - $0.44 and non-GAAP earnings per diluted share from continuing operations in the range of $0.62 - $0.64.
Full year 2019 — The company expects net revenue between $10.7 billion and $10.9 billion, representing Organic FX-Neutral growth of 1% - 3%, with GAAP earnings per diluted share from continuing operations in the range of $1.83 - $1.93 and non-GAAP earnings per diluted share from continuing operations in the range of $2.62 - $2.68.
Capital Structure Evolution
In order to evolve eBay's capital structure given its strong cash generation profile and shareholder return objectives, the company today announced:
Initiation of a quarterly dividend of $0.14 per share, with the first quarterly dividend to be paid on or about March 20, 2019 to shareholders of record as of the close of business on March 1, 2019
Expect to exit 2019 with cash and investments of approximately $3.5 billion
Targeting mid-term leverage of approximately 1.5x net debt and gross debt below 3.0x EBITDA
Increase in share repurchase authorization by an additional $4.0 billion with no expiration, with an expected 2019 share repurchase of approximately $5.0 billion
Expect to return approximately $7.0 billion to shareholders through dividends and repurchases over the next two years, with approximately $5.5 billion in 2019 and approximately $1.5 billion in 2020
The company's stock repurchase program is intended to programmatically offset the impact of dilution from its equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of its common stock to reduce its outstanding share count. Any share repurchases under the company's 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 the company's working capital or other financing alternatives.
See the following link to the full press release including charts.