eBay Inc. Reports Strong Fourth Quarter and Full Year 2012 Results

eBay Inc. Reports Strong Fourth Quarter and Full Year 2012 Results

Net Income up Double Digits in 2012 on Record Revenue

SAN JOSE, Calif.--(BUSINESS WIRE)-- eBay Inc., a global commerce platform and payments leader (NAS: EBAY) , today reported that revenue for the fourth quarter ended December 31, 2012 increased 18% to $4.0 billion, compared to the same period of 2011. The company reported fourth quarter net income on a GAAP basis of $751 million, or $0.57 per diluted share, and net income on a non-GAAP basis of $927 million, or $0.70 per diluted share. The increase in non-GAAP earnings per diluted share was driven by double digit user growth across the portfolio, strong gains in mobile adoption, and accelerating growth in the company's Marketplaces business, reflecting a 19% increase in U.S. gross merchandise volume (GMV), excluding vehicles.


For the full year, revenue increased 21% to $14.1 billion, compared to 2011. The company reported net income on a GAAP basis of $2.6 billion, or $1.99 per diluted share, and net income on a non-GAAP basis of $3.1 billion, or $2.36 per diluted share. eBay Inc. enabled more than $175 billion of commerce volume (ECV) in 2012, representing growth of 18%. ECV is the total commerce and payment volume across all three business units consisting of Marketplaces GMV, PayPal merchant services net total payment volume and GSI global ecommerce (GeC) merchandise sales.

"We had a great finish to an excellent year, with fourth quarter results exceeding our expectations," said John Donahoe, eBay Inc. President and CEO. "eBay Marketplaces in particular had a terrific fourth quarter, with growth in the U.S. accelerating three points, outpacing ecommerce."

"Mobile continues to rewrite the commerce playbook, and we continue to be a mobile commerce and payments leader," Donahoe said. "eBay mobile finished the year with $13 billion in volume - more than double the prior year - and PayPal mobile handled almost $14 billion in payment volume, more than triple the prior year. In 2013, we expect each to exceed $20 billion."

"Web-enabled multichannel commerce is evolving quickly, and consumer shopping behavior is changing rapidly. Our focus is on being a global commerce leader in this new environment, connecting buyers and sellers everywhere, and being a preferred multichannel partner of choice for retailers and brands of all sizes."

The company's PayPal business continued to expand its leadership position in global payments. PayPal's active account growth accelerated to 15% and ended the year with approximately 123 million registered accounts. PayPal added nearly 2 million accounts a month in the fourth quarter, representing the company's fastest active account growth rate in years. Net total payment volume (TPV) increased 24%, producing revenue growth of 24%. Key drivers included continued merchant and consumer adoption coupled with geographic expansion. PayPal's mobile payment volume reached nearly $14 billion in 2012, up more than 250% over the prior year, as more consumers used their smartphones and tablets to pay online. In addition, PayPal continued to invest in future growth initiatives and made significant progress towards the rollout of its offline payment solutions. Twenty-three major retailers adopted PayPal's offline payment solutions in 18,000 locations in 2012.

The company's Marketplaces business delivered a record $2 billion revenue in the fourth quarter, propelled by strong performance in the U.S. Revenue for the full year was driven by continued investments in the customer experience and efforts to bring the world's inventory to global buyers. Active user growth accelerated two points to 12%, driven by mobile, site enhancements designed to streamline the shopping experience on eBay and emerging markets. Fixed price GMV, excluding vehicles, increased 21% and contributed to a 16% increase in GMV, excluding vehicles. U.S. GMV growth, excluding vehicles, accelerated three points to 19%. Mobile commerce volume in 2012 grew more than 120% to $13 billion driven primarily by increased adoption of eBay's mobile apps and increased engagement from product innovation. eBay's suite of mobile apps attracted more than 4 million new customers in 2012.

GSI revenue for the quarter increased 10% to $398 million driven primarily by a 17% increase in GeC merchandise sales. Same store sales grew 19% outpacing ecommerce. For the full year, GSI shipped a record 146 million units for its clients. GSI contributed revenue of $1.1 billion in 2012, as GSI continued to grow its relationships, investing and driving value to its clients through eBay Inc. technology solutions, including mobile app development, buy online and pick up in-store and mobile express checkout.

Fourth Quarter and Full Year 2012 Financial Highlights (presented in millions, except per share data and percentages)

 
  Fourth Quarter     Full Year  
    2012   2011   Change   2012   2011   Change
GAAP                                
Net revenue   $3,992   $3,380   $612   18%   $14,072   $11,652   $2,420   21%
Net income*   $751   $1,980   $(1,229)   (62%)   $2,609   $3,229   $(620)   (19)%
Earnings per diluted share   $0.57   $1.51   $(0.94)   (62%)   $1.99   $2.46   $(0.47)  

(19)%

Non-GAAP                                
Net income   $927   $789   $138   17%   $3,100   $2,667   $433   16%
Earnings per diluted share   $0.70   $0.60   $0.10   17%   $2.36   $2.03   $0.33   16%

 

    Fourth Quarter       Full Year    
    2012   2011   Change   2012   2011   Change
Business Units                                
Payments                                
Net revenue   $1,541   $1,240   $301   24%   $5,574   $4,412   $1,162   26%
Net total payment volume   $41,471   $33,372   $8,099   24%   $144,937   $118,758   $26,179   22%

Merchant Services

  $28,026   $21,959   $6,067   28%   $97,277   $77,700   $19,577   25%
On eBay   $13,444   $11,413   $2,031   18%   $47,660   $41,058   $6,602   16%
Marketplaces                                
Net revenue   $2,050   $1,772   $278   16%   $7,398   $6,642   $756   11%
Gross merchandise volume (excl. vehicles)   $19,105   $16,490   $2,615   16%   $67,763   $60,332   $7,431   12%
U.S.   $7,338   $6,157   $1,181   19%   $26,424   $22,866   $3,558   16%
International   $11,767   $10,333   $1,434   14%   $41,339   $37,466   $3,873   10%
GSI                                
Net revenue**   $398   $364   $34   10%   $1,083   $590   N/A   N/A
GeC Merchandise Sales   $1,595   $1,362   $233   17%   $3,682   $2,046   N/A   N/A

* GAAP net income for the fourth quarter of 2011 reflects the gain on the sale of the company's remaining investment in Skype.
** Full year 2011 results reflect net revenue attributable to the GSI segment for the period from June 17, 2011 (the date that the acquisition was completed) through December 31, 2011.

Other Selected Financial Results

  • Operating margin — GAAP operating margin decreased to 21.9% for the fourth quarter of 2012, compared to 22.3% for the same period last year. Non-GAAP operating margin decreased to 28.5% for the quarter, compared to 28.7% for the same period last year. The decrease in GAAP operating margin and non-GAAP operating margin was due primarily to the impact of acquisitions and business mix.
  • Taxes — The GAAP effective tax rate for the fourth quarter of 2012 was 14%, compared to 19% for the fourth quarter of 2011. For the fourth quarter of 2012, the non-GAAP effective tax rate was 18% compared to 20% for the fourth quarter of 2011. The decrease in the GAAP effective tax rate was due primarily to U.S. taxes on the sale of the remaining equity interest in Skype in the fourth quarter of 2011.
  • Cash flow — The company generated $1.4 billion of operating cash flow and $1.1 billion of free cash flow during the fourth quarter. For the full year the company generated $3.8 billion of operating cash flow and $2.6 billion of free cash flow.
  • Stock repurchase program — The company repurchased approximately $256 million of its common stock in the fourth quarter.
  • Cash and cash equivalents and non-equity investments — The company's cash and cash equivalents and non-equity investments portfolio totaled $11.5 billion at December 31, 2012.
  • PayPal customer balances — The company now holds PayPal U.S. customer balances directly, rather than as a custodian for its customers. As a result, PayPal U.S. customer balances and the associated customer liability are now reflected on the company's consolidated balance sheet, contributing to the $8.1 billion balance in funds receivable and customer accounts at December 31, 2012.
  • Restructuring — The company incurred restructuring charges of $31 million during the fourth quarter of 2012 related to work force reductions designed to simplify and streamline its organization and strengthen the overall competitiveness of its existing businesses.

Business Outlook

  • First quarter 2013 — eBay expects net revenues in the range of $3,650 - $3,750 million with GAAP earnings per diluted share in the range of $0.48 - $0.50 and non-GAAP earnings per diluted share in the range of $0.60 - $0.62.
  • Full year 2013 — eBay expects net revenues in the range of $16,000 - $16,500 million with GAAP earnings per diluted share in the range of $2.23 - $2.29 and non-GAAP earnings per diluted share in the range of $2.70 - $2.75.

Quarterly Conference Call

eBay Inc. will host a conference call to discuss fourth quarter and full year 2012 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.

About eBay Inc.

Founded in 1995 in San Jose, Calif., eBay Inc. (NAS: EBAY) is a global commerce platform and payments leader connecting millions of buyers and sellers. We do so through eBay, the world's largest online marketplace, which allows users to buy and sell in nearly every country on earth; through PayPal, which enables individuals and businesses to securely, easily and quickly send and receive digital payments; and through GSI, which facilitates ecommerce, multichannel retailing and digital marketing for global enterprises. X.commerce harnesses the developer community of Magento, an ecommerce platform, by providing technology solutions and eBay Inc. capabilities to merchants of all sizes, supporting eBay Inc.'s mission of enabling commerce. We also reach millions through specialized marketplaces such as StubHub, the world's largest ticket marketplace, and eBay classifieds sites, which together have a presence in more than 1,000 cities around the world. 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 millions, except as otherwise noted. As a result, certain amounts may not sum or recalculate using the rounded dollar amounts provided.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission, or SEC: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate and free cash flow. 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 or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. For a reconciliation of these non-GAAP financial measures 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.

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, the future performance of eBay 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 expected financial results for the first quarter and full year 2013, and the future growth in the Payments, Marketplaces and GSI businesses, mobile payments and mobile commerce. The company's actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: changes in political, business and economic conditions, including any European or general economic downturn or crisis and any conditions that affect ecommerce growth; fluctuations in foreign currency exchange rates; the company's ability to profitably integrate, manage and grow businesses that have been acquired recently or may be acquired in the future; the company's need to successfully react to the increasing importance of mobile payments and mobile commerce and the increasing social aspect of commerce; the company's ability to deal with the increasingly competitive ecommerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the company's need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the effect of management changes and business initiatives; the company's need and ability to manage other regulatory, tax and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; any changes the company may make to its product offerings; the competitive, regulatory, credit card association-related and other risks specific to PayPal and Bill Me Later, especially as PayPal continues to expand geographically and introduce new products and as new laws and regulations related to financial services companies come into effect; the company's ability to timely upgrade and develop its systems, infrastructure and customer service capabilities, including GSI's v.11 initiative, at reasonable cost; and the company's ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion. 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 http://investor.ebayinc.com or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.

 

eBay Inc.

Unaudited Condensed Consolidated Balance Sheet

 
  December 31,   December 31,
2012 2011
(In millions)
 
ASSETS
Current assets:
Cash and cash equivalents $ 6,817 $ 4,691
Short-term investments 2,591 1,238
Accounts receivable, net 822 682
Loans and interest receivable, net 2,160 1,501
Funds receivable and customer accounts 8,094 3,968
Other current assets 1,099   581
Total current assets 21,583 12,661
Long-term investments 3,044 2,453
Property and equipment, net 2,491 1,986
Goodwill 8,537 8,365
Intangible assets, net 1,128 1,406
Other assets 491   449
Total assets $ 37,274   $ 27,320
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 413 $ 565
Accounts payable 301 282
Funds payable and amounts due to customers 8,094 3,968
Accrued expenses and other current liabilities 2,058 1,511
Deferred revenue 137 110
Income taxes payable 63   298
Total current liabilities 11,066 6,734
Deferred and other tax liabilities, net 1,020 1,073
Long-term debt 4,106 1,525
Other liabilities 207   58
Total liabilities 16,399   9,390
 
Total stockholders' equity 20,875   17,930
Total liabilities and stockholders' equity $ 37,274   $ 27,320
 
eBay Inc.
Unaudited Condensed Consolidated Statement of Income
 
  Three Months Ended December 31,   Year Ended December 31,
2012   2011 2012   2011
(In millions, except per share amounts)
 
Net revenues $ 3,992 $ 3,380 $ 14,072 $ 11,652
Cost of net revenues (1) 1,223   1,034   4,216   3,461  
Gross profit 2,769   2,346   9,856  

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