Q Financial Highlights. July 16, 2014

Transcription

1 July 16, 2014

2 This presentation contains non-gaap measures relating to the company's performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the appendix at the end of this presentation. All growth rates represent year-over-year comparisons, except as otherwise noted. This presentation contains forward-looking statements relating to our future performance that are based on our 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 third quarter and full year 2014; future growth in the Payments, Marketplaces and Enterprise businesses; the company s plans regarding its stock repurchase programs; and the impact of the cyberattack on the company's results of operations. Our actual results may differ materially from those included in this presentation for a variety of reasons, including, but not limited to: changes in political, business, and economic conditions, including any European, Asian or general economic downturn or crisis (including sanctions related to Ukraine or Russia); foreign exchange rate fluctuations; our need to successfully react to the increasing importance of mobile payments and mobile commerce and the social aspect of commerce; an increasingly competitive environment for our businesses; changes to our capital allocation or management of operating cash; the complexity of managing an increasingly large enterprise with a broad range of businesses; our need to manage regulatory, tax and litigation risks (including risks specific to PayPal and Bill Me Later); our need to timely upgrade and develop our technology systems, infrastructure, and customer service capabilities at reasonable cost while maintaining site stability and performance and adding new products and features; and our ability to integrate, manage and grow businesses recently acquired or that may be acquired in the future. You can find more information about factors that could affect our operating results in our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q (available at You should not rely on any forward-looking statements, and we assume no obligation to update them. All information in this presentation is as of July 16, 2014, and we do not intend, and undertake no duty, to update this presentation. 2

3 ebay Inc. Solid Q2 performance in light of distractions Enabled Commerce Volume (ECV*) of $62B, accelerated 2pts to 26%, and mobile ECV up 68% ebay Inc. take rate** of 7.1% Revenue grew 13%. Non-GAAP EPS of $0.69, up 9% Generated $1.2B of free cash flow. Executed $1.7B stock buyback, leaving $2.2B authorization remaining for future repurchases Maintaining full year Non-GAAP EPS guidance lowering high-end of revenue guidance *Enabled Commerce Volume (ECV) includes Marketplaces GMV (excluding vehicles and real estate), Payments Merchant Services Net TPV and ebay Enterprise Gross Merchandise Sales not earned on ebay or paid for via PayPal or Bill Me Later during the period; excludes volume transacted through the Magento platform **ebay Inc. take rate is calculated as ebay Inc. Revenue / ECV Calculations of Non-GAAP EPS and Free Cash Flow (FCF) are included in the Appendix of this presentation 3

4 ebay Inc. Enabled Commerce Volume 47,091 Enabled Commerce Volume* 48,776 49,727 59,607 58,495 61,639 Global: Cross border trade up 26%; launched 10 new markets at PayPal; launched ebay in Latin America; acquired AppTek for machine translation Total ECV $M Mobile: 6.6M new buyers and accounts via mobile; 260M ebay Inc. app downloads to date Mobile ECV % of Total 14% 15% 16% 18% 19% 20% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Reported Y/Y Growth 20% 22% 23% 23% 24% 26% Fx-Neutral Y/Y Growth 20% 23% 22% 22% 23% 24% Take Rate** 8.0% 7.9% 7.8% 7.6% 7.3% 7.1% Local: Argos relationship expanded to ~650 stores following successful pilot; ~4k retail stores use ebay Enterprise to enable fulfillment from their physical stores Data: Enables us to grow faster, make better credit decisions, and manage losses; loss rate improved 3bps *Enabled Commerce Volume (ECV) includes Marketplaces GMV (excluding vehicles and real estate), Payments Merchant Services Net TPV and ebay Enterprise Gross Merchandise Sales not earned on ebay or paid for via PayPal or Bill Me Later during the period; excludes volume transacted through the Magento platform **ebay Inc. take rate is calculated as ebay Inc. Revenue / ECV 4

5 ebay Inc. Revenue ($ millions) Revenue 3,748 3,877 3,892 4,530 4,262 4,366 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Reported Y/Y Growth 14% 14% 14% 13% 14% 13% Organic Y/Y Growth* 15% 15% 14% 13% 13% 10% *Calculation of Organic Y/Y Growth is included in the Appendix of this presentation 5

6 ebay Inc. Non-GAAP EPS Non-GAAP EPS* $0.81 $0.63 $0.63 $0.64 $0.70 $0.69 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Reported Y/Y Growth 14% 12% 17% 16% 11% 9% Non-GAAP Op. Margin* 27.4% 26.3% 26.8% 29.2% 26.9% 24.4% *Calculations of Non-GAAP EPS and Non-GAAP Op. Margin are included in the Appendix of this presentation 6

7 ebay Inc. Operating Expenses* Sales & Marketing (% of Revenue) Product Development (% of Revenue) General & Admin. (% of Revenue) Prov. for Trxn & Loan Loss** (% of Revenue) 18.8% 19.9% 10.4% 10.1% 9.3% 9.4% 5.0% 5.3% Q2 13 Q2 14 Q2 13 Q2 14 Q2 13 Q2 14 Q2 13 Q2 14 Incremental investment to offset cyberattack impact, & ramping marketing Product & customer experience investments ~Flat PayPal TPV growing faster than ebay Inc. revenue, partially offset by favorable loss rates Q2 14 Non-GAAP Op Income: $1,066M Q2 14 Non-GAAP Net Income: $868M *All expenses are shown on a Non-GAAP basis (calculations can be found in the Appendix of this presentation) **Prov. for Trxn & Loan Loss includes Marketplaces and PayPal transaction loss, Marketplaces consumer protection programs, bad debt expense and BML loan loss Calculations of Non-GAAP Operating Income and Non-GAAP Net Income are included in the Appendix of this presentation 7

8 ebay Inc. Free Cash Flow ($ millions) Free Cash Flow* 1,432 1,225 1, Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Reported Y/Y Growth 121% 60% 28% 31% 52% 86% Capex % of Revenue 8% 9% 8% 6% 5% 6% FCF % of Revenue 17% 17% 26% 32% 23% 28% *Calculation of Free Cash Flow (FCF) is included in the Appendix of this presentation 8

9 ebay Inc. Cash Flow & Capital Allocation ($ billions) Cash Balance/Flows Free Cash Flow / Other Movements Repurchased 32.4M shares for $1.7B, leaving $2.2B authorization remaining. Utilized $1.2 billion of commercial paper to fund the stock buyback Short/Long-Term Investments Int'l Cash 70% of PayPal credit loan receivables portfolio funded with offshore cash Total US cash, cash equivalents and non-equity investments at quarter end $2.6B US Cash Deal with GE to extend relationship and committed to purchase loan portfolio in 2016 for an estimated $1B, based on the size of the portfolio at that time Q1'14 Ending Balance* FCF** Buyback Credit Debt Other*** Q2'14 Ending Balance* *Cash balances/flows include cash, cash equivalents and non-equity investments **Calculation of Free Cash Flow is included in the Appendix of this presentation ***Other includes primarily employee stock issuance, debt related payments, and FX impact 9

10 Payments Revenue ($ millions) Revenue Marketing Services & Other Revenue Transaction Revenue 1,435 1,475 1,493 1,693 1,700 1,741 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Total Revenue 1,548 1,624 1,620 1,836 1,845 1,946 Y/Y Growth 18% 20% 19% 19% 19% 20% Fx-Neutral Y/Y Growth 20% 21% 20% 20% 20% 20% % Int'l 51% 51% 52% 53% 52% 51% 10

11 Payments Operating Metrics (In millions, except %) Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Global Active Accounts Y/Y Growth 16% 17% 17% 16% 16% 15% Net Number of Payments Y/Y Growth 23% 24% 24% 22% 22% 21% On ebay TPV 12,953 13,006 13,112 15,311 14,844 14,675 Y/Y Growth 13% 15% 14% 14% 15% 13% Fx-Neutral Y/Y Growth 14% 15% 15% 13% 13% 10% Merchant Services TPV* 28,087 29,807 30,725 36,662 37,162 40,371 Y/Y Growth 25% 29% 30% 31% 32% 35% Fx-Neutral Y/Y Growth 26% 29% 30% 31% 32% 33% Total TPV 41,040 42,813 43,837 51,973 52,006 55,046 Y/Y Growth 21% 24% 25% 25% 27% 29% Fx-Neutral Y/Y Growth 22% 25% 25% 25% 26% 26% % Int'l TPV 47% 48% 48% 49% 49% 49% Global On ebay Penetration Rate 76.9% 77.2% 78.2% 78.4% 78.9% 79.8% Take Rate 3.77% 3.79% 3.70% 3.53% 3.55% 3.53% Transaction Expense 1.05% 1.04% 1.05% 0.97% 0.99% 0.95% Loss Rate 0.29% 0.31% 0.30% 0.32% 0.27% 0.28% Transaction Margin** 64.4% 64.4% 63.4% 63.5% 64.6% 65.1% Payments Segment Margin 24.1% 23.0% 22.7% 25.7% 25.7% 24.5% TPV growth driven primarily by expanded merchant coverage and increased on-ebay penetration Transaction margin up due to an increase in our annual GE gain share, lower transaction expense and lower loss rate, partially offset by lower take rate due to large merchant mix, foreign currency hedges, and lower cross-currency transaction growth Segment margin up due primarily to higher transaction margin and operating leverage *Merchant Services TPV is the total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, Venmo, and payments processed through Braintree s full stack payments platform during the period; excludes PayPal s and Braintree s payment gateway businesses and payments for transactions on our Marketplaces platforms. **Transaction Margin calculation has been adjusted to include total revenues (including revenue from credit), less transaction expense (including credit cost of funds), less transaction loss (including credit loan losses), divided by global take rate (based on global total revenues divided by total TPV) 11

12 Credit Operating Metrics Early stage of growth Accelerates growth for merchants Offers consumers more choice Lowers transaction expense 30% Credit Growth 4 6% BML Share of U.S. GMV & TPV Portfolio Balance ($B)* 3 BML Share of US Addressable GMV 20% Risk Adjusted Margin** 2 4% BML Share of US Addressable GMV & MS TPV 10% 2% 1 BML Share of US MS TPV 0% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q % Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 BML TPV ($M) ,009 1,314 1,092 1,252 BML TPV (Y/Y growth) 31% 34% 30% 27% 29% 34% Portfolio Balance ($M)* 2,258 2,391 2,564 2,915 2,892 3,099 Risk Adjusted Margin** 15.8% 16.2% 16.1% 15.8% 16.2% 16.6% Net Charge-Off Rate*** 5.3% 5.6% 5.5% 6.3% 5.4% 5.5% *Gross receivables balance as of 6/30/14. **Risk adjusted margin represents annualized credit portfolio revenue, excluding contra-revenue incentives to customers or merchants, less cost of funds and less net credit and fraud losses during the period, divided by average loan receivables for the period. ***Net charge-off rate is the annualized ratio of net credit losses over the average daily loan receivables balance during the period. Net credit losses are the principal loan losses, exclusive of interest and late fee write offs, less recoveries of previously charged off balances. % of US Marketplaces GMV and Merchant Services TPV funded using Bill Me Later (excluding Bill Me Later legacy business) 12

13 Marketplaces Revenue ($ millions) Revenue Marketing Services & Other Revenue Transaction Revenue 1,554 1,578 1,609 1,828 1,727 1,722 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Total Revenue 1,957 2,001 2,027 2,299 2,156 2,174 Y/Y Growth 13% 10% 12% 12% 10% 9% Fx-Neutral Y/Y Growth 13% 10% 12% 11% 9% 6% % Int'l 59% 59% 58% 59% 60% 61% Reflects reclassification of vehicles and real estate revenues from transaction revenue to marketing services and other revenue 13

14 Marketplaces Operating Metrics (In millions, except percentages) Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Global Active Buyers Y/Y Growth 13% 13% 13% 14% 14% 14% Y/Y Growth in Sold Items 11.7% 11.4% 11.4% 11.2% 11.4% 9.5% US GMV* 7,349 7,253 7,408 8,342 8,141 7,972 Y/Y Growth 16% 17% 15% 14% 11% 10% International GMV* 10,958 11,023 10,937 13,162 12,404 12,513 Y/Y Growth 11% 11% 12% 12% 13% 14% Fx-Neutral Y/Y Growth 11% 11% 11% 10% 11% 8% GMV* 18,307 18,276 18,345 21,503 20,545 20,485 Y/Y Growth 13% 13% 13% 13% 12% 12% Fx-Neutral Y/Y Growth 13% 13% 12% 12% 11% 8% Strong active buyer growth slowed in June Cyberattack and SEO impacted conversion and new buyer growth Across US, UK, DE: Top Rated Sellers represented 50% of GMV Free shipping on 56% of transactions Global fixed price GMV grew 19% and auctions GMV declined 7% Segment margin down due primarily to increased marketing Marketplaces Segment Margin 42.1% 39.7% 38.9% 41.1% 39.7% 36.3% *Gross Merchandise Volume (GMV) is the total value of all successfully closed transactions between users on Marketplaces platforms during the period regardless of whether the buyer and seller actually consummated the transaction; excludes vehicles and real estate gross merchandise volume 14

15 ebay Enterprise Revenue & Operating Metrics ($ millions) Revenue/Metrics 74 Marketing Services & Other Revenue Transaction Revenue Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Total Revenue* Y/Y Growth 2% 12% 6% -1% 8% 3% Gross Merchandise Sales** , Y/Y Growth 13% 21% 13% 13% 16% 15% Same Store Sales (SSS) Y/Y Growth 16% 19% 13% 13% 11% 14% Segment Margin* -0.5% 1.0% 3.4% 15.4% 4.7% 1.1% Revenue growth down due primarily to lower take rate from client and product mix *From Q1 2014, Magento is included in ebay Enterprise MS&O revenue and segment margin with prior quarters restated **Gross Merchandise Sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowance for returns and discounts, which flow through our Enterprise commerce technologies, whether we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee; excludes volume transacted through the Magento platform Reconciliation of ebay Enterprise revenue / operating metrics to amounts reported in ebay Inc. s financial statements can be found in the Appendix of this presentation 15

16 Guidance Q Guidance FY 2014 Guidance Low High Low High Revenue (in billions) $4.30 $4.40 $18.00 $18.30 Y/Y Growth 10% 13% 12% 14% Non-GAAP EPS* $0.65 $0.67 $2.95 $3.00 Y/Y Growth 2% 5% 9% 11% Challenging start to the year Guidance Context PayPal has good momentum and ebay Enterprise has stabilized Marketplaces has to dig out of a hole confident we can work through the challenges but it will take longer and cost more PayPal leverage and lower share count offset impact of slower revenue growth Expect full year 2014 Non-GAAP Tax Rate of 20%-21% *Calculation of Non-GAAP EPS is included in the Appendix of this presentation 16

17 Summary We had a challenging quarter with several distractions However, we still delivered 26% ECV growth, double digit revenue growth, and we met our earnings commitment This is a testament to the power of the portfolio and the resiliency of our team 17

18 Q&A

19 Appendix

20 Calculation of Organic Revenue Growth Mar 31, June 30, Sept 30, Dec 31, Mar 31, June 30, Total revenue grow th 14 % 14 % 14 % 13 % 14 % 13 % Acquisition/Disposition impact 0.5 % % % % (0.5)% (1)% Foreign currency impact 0.5 % 1 % % % (0.5)% (2)% Total organic revenue grow th 15 % 15 % 14 % 13 % 13 % 10 % 20

21 Reconciliation of Quarterly GAAP to Non-GAAP Operating Margin (in millions) Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, June 30, GAAP operating income $ 800 $ 750 $ 799 $ 1,022 $ Stock-based compensation expense and related employer payroll taxes Acquisition related transaction expense 9 Amortization of acquired intangible assets (1) Restructuring (4) (2) Non-GAAP operating income $ 1,025 $ 1,019 $ 1,040 $ 1,322 $ 1,145 1,066 Revenues $ 3,748 $ 3,877 $ 3,892 $ 4,530 $ 4,262 4,366 GAAP operating margin 21.3 % 19.3 % 20.5 % 22.6 % 20.6 % 18.2 % Non-GAAP operating margin 27.4 % 26.3 % 26.8 % 29.2 % 26.9 % 24.4 % (1) Includes amortization of acquired intangible assets w ithin cost of net revenues and operating expenses. 21

22 Reconciliation of Quarterly GAAP to Non-GAAP Net Income / EPS (in millions, except per share data) Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, June 30, GAAP net income (loss) $ 677 $ 640 $ 689 $ 850 $ (2,326) $ 676 Stock-based compensation expense and related employer payroll taxes Acquisition related transaction expense 9 Amortization of acquired intangible assets (1) Restructuring (4) (2) Skype sale and transaction related items Acquisition related items Loss on divested business Accretion of note receivable (5) (5) (5) Amortization of intangibles Gain on sale of RueLaLa and ShopRunner (75) Gain on investment (5) Gain from the divestiture of a business Income taxes associated w ith certain non- GAAP entries (70) (79) (15) (84) 2,957 (82) Non-GAAP net income $ 829 $ 822 $ 837 $ 1,067 $ 899 $ 868 Non-GAAP net income per diluted share $ 0.63 $ 0.63 $ 0.64 $ 0.81 $ 0.70 $ 0.69 Shares used in non-gaap diluted share calculation 1,319 1,313 1,310 1,310 1,292 1,267 (1) Includes amortization of acquired intangible assets w ithin cost of net revenues and operating expenses. 22

23 Reconciliation of Quarterly GAAP to Non-GAAP Quarterly Statement of Income Three Months Ended Three Months Ended June 30, 2014 June 30, 2013 Reported Non-GAAP Entries Non-GAAP Reported Non-GAAP Entries Non-GAAP Notes: Net revenues $ 4,366 4,366 3,877 3,877 Cost of net revenues 1,392 (20) (a) 1,350 1,211 (23) (a) 1,169 (22) (c) (19) (c) Gross Profit 2,974 (42) 3,016 2,666 (42) 2,708 Operating expenses: Sales and marketing 914 (45) (a) (41) (a) 730 Product development 500 (59) (a) (46) (a) 405 General and administrative 461 (42) (a) (51) (a) 361 (11) (b) (7) (b) (e) Provision for transaction and loan losses Amortization of acquired intangible assets 73 (73) (c) 82 (82) (c) Total operating expense 2,180 (230) 1,950 1,916 (227) 1,689 Income from operations , ,019 Interest and other income, net 9 2 (r) (r) (2) Accretion of note receivable (5) (s) (5) (m) Income before income taxes , ,017 Provision for income taxes (127) (82) (d) (209) (116) (79) (d) (195) Net income (loss) $ Net income (loss) per share: Basic $ Diluted $ Weighted average shares: (in millions, except per share data and percentages) (a) Stock-based compensation expense (b) Employer payroll taxes on stockbased compensation (c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated w ith certain non-gaap entries (e) Restructuring charges (h) Sale of Skype and transaction related items (i) Acquisition related transaction expense (j) Gain from the acquisition of a business (k) Loss on divested business (m) Accretion of note receivable (p) Gain on the divestiture of a business (q) Fanatics law suit settlement (r) Intangible amortization (t) Gain on sale of RueLaLa and ShopRunner (s) Gain on investment Basic 1,258 1,258 1,297 1,297 Diluted 1,267 1,267 1,313 1,313 Operating margin 18 % 6 % 24 % 19 % 7 % 26 % Effective tax rate 16 % 3 % 19 % 15 % 4 % 19 % 23

24 Calculation of Free Cash Flow Three Months Ended Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, June 30, (in millions) GAAP operating cash flow $ 937 1,011 1,334 1,713 1,174 1,494 Purchases of property and equipment, net (299) (353) (317) (281) (206) (269) Free cash flow $ ,017 1, ,225 24

25 Q and FY 2014 GAAP and Non-GAAP Guidance Three Months Ending September 30, 2014 (in millions, except per share amounts) GAAP Non-GAAP (a) Revenues $4,300 - $4,400 $4,300 - $4,400 Diluted EPS $ $0.53 $ $0.67 Tw elve Months Ending December 31, 2014 (in millions, except per share amounts) GAAP Non-GAAP (b) Revenues $18,000 - $18,300 $18,000 - $18,300 Diluted EPS $ $0.09 $ $3.00 (a) Estimated non-gaap amounts above for the three months end September 30, 2014, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $70- $80 million and estimated stock-based compensation expense and employer payroll taxes on stockbased compensation expense of approximately $165-$175 million as w ell as the related tax impact. (b) Estimated non-gaap amounts above for the tw elve months ending December 31, 2014, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $340- $360 million and estimated stock-based compensation expense and employer payroll taxes on stockbased compensation expense of approximately $675 -$695 million. 25

26 Reconciliation of ebay Enterprise Revenue & Operating Metrics Q4'12 Q4 13 Gross Merchandise Sales ($M): As reported in ebay Inc. financial statements 1,595 1,771 Accounting adjustment (26) - Adjusted Gross Merchandise Sales 1,569 1,771 Gross Merchandise Sales y/y Growth: As reported in ebay Inc. financial statements 17% 11% Accounting adjustment -2% 2% Adjusted Gross Merchandise Sales 15% 13% Same Store Sales (SSS) y/y Growth: As reported in ebay Inc. financial statements 19% 11% Accounting adjustment -2% 2% Adjusted SSS y/y Growth 17% 13% 26