eBay Earnings Rebound on Higher Delivered GMV

eBay crossed the one billion live listings mark for the first time ever in Q2 FY16

Source: eBay
Source: eBay

Online auction house eBay Inc. (NASDAQ: EBAY) announced its Q2 FY16 financial results on July 20th, 2016. The San Jose, California-based company is a global commerce leader that connects various buyers and sellers worldwide. The company’s Marketplace platforms include its online marketplace ebay.com and the eBay mobile apps. The online ticket StubHub platform includes stubhub.com and the StubHub mobile apps. Its Classifieds platforms include Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Classifieds, and others that offer online classifieds. eBay’s platforms enable users to find, buy, sell, and pay for items through various online, mobile, and offline channels, which include retailers, distributors, import and export companies, auctioneers, catalog and mail-order companies, classifieds, directories, and shopping channels. In FY15, eBay enabled $82 billion of gross merchandise volume (GMV). Read more about eBay’sfinancial results below.

Q2 FY16 financial highlights

During Q2 FY16, eBay delivered GMV of $20.9 billion, increasing 6% on a currency-neutral basis and 4% on an as-reported basis. Revenue for Q2 FY16 was at $2.23 billion, up 7% on a currency-neutral basis and 6% on an as-reported basis as compared to $2.11 billion in the year-ago quarter.

eBay’s GAAP operating margin jumped 23.8% for Q2 FY16 compared to 20.3% for the same period last year. Non-GAAP operating margin decreased to 29.1% in Q2 FY16 compared to 32.1% for the year-ago quarter.

Source: Company's Website
Source: Company’s Website

Finally, eBay’s earnings are yet to rebound after it spun off PayPal Holdings Inc. (NASDAQ: PYPL) into its own publicly traded entity in Q3 FY15. The Company’s GAAP net income from continuing operations reported lackluster growth, inching up 2% to $437 million, or $0.38 per diluted share, during Q2 FY16. However, eBay’s non-GAAP net income from continuing operations declined 4% to $496 million, or $0.43 per diluted share, during the reporting quarter.

Segmental highlights

eBay’s Marketplace platforms achieved $19.8 billion of GMV and $1.8 billion of revenue in Q2 FY16 as compared to the year-ago period. The Marketplace platforms’ revenue was up 3% on a currency-neutral basis and 1% on an as-reported basis, mainly due to higher-than-expected GMV growth of 5% on acurrency-neutral basis and 3% on an as-reported basis as well as growth in Marketing Services & Other revenue.

StubHub growth jumped 35% during the reporting quarter, with GMV of $1.1 billion, and revenue growth of 40% to $225 million, aided by its strength across multiple genres and the continued benefit from ongoing product innovation.

The Classifieds platforms delivered a strong revenue growth of 15% to $207 million, mainly driven by the Automotive and Real Estate verticals across several key geographies, including Germany and Canada.

Other highlights

During Q2 FY16, eBay crossed the one billion live listings mark for the first time, reflecting its efforts to expand offerings to consumers, while enhancing its shopping platform to improve searches. However, online auctions have lost their viability in recent years, prompting eBay to abandon its core business in favor of more “buy it now” options.

Acquisitions

Source: Company's Website
Source: Company’s Website

Despite being one of the forerunners of e-commerce, eBay has been facing intense competition from big-box online players such as Amazon.com Inc. (NASDAQ: AMZN) and Wal-Mart Stores Inc. (NYSE: WMT), which are growing at a faster clip. Hence, eBay recently announced its plans to acquire several companies to strengthen its technology and expand its geographical footprint. On July 22nd, 2016, eBay completed the acquisition of SalesPredict, which leverages advanced analytics to predict customer buying behavior and sales conversion. SalesPredict will support eBay’s artificial intelligence, machine learning and data science efforts, and their deep expertise will contribute to eBay’s structured data efforts.

On July 14th, 2016, eBay agreed to buy TicketUtils, a leading provider of software that helps large ticket sellers manage inventory and distribution. TicketUtils will become part of eBay’s StubHub platform, enabling large StubHub sellers to enjoy a best-in-class solution for inventory management, ticket distribution, and inventory internationalization.

Source: Company's Website
Source: Company’s Website

On May19th, 2016, eBay completed the acquisition of Expertmaker, which specializes in providing intelligent solutions powered by artificial intelligence, machine learning and big data analytics. Expertmaker’s technology and expertise will play an important role in helping advance eBay’s structured data initiative.

The company generated $764 million of operating cash flow from continuing operations and $617 million of free cash flow from continuing operations during Q2FY16.

Stock repurchases

eBay repurchased approximately $500 million of its common stock, or 20.8 million shares, in Q2 FY16. The Company’s total repurchase authorization remaining as of June 30th, 2016, was $0.3 billion. In July 2016, eBay’s board of directors authorized an additional $2.5 billion stock repurchase program, with no expiration from the date of authorization.

Guidance for Q3 FY16 and full year FY16

In Q3 FY16, eBay expects net revenue between $2.16 billion and $2.19 billion, representing currency-neutral growth of 6%-7%. The Company’s non-GAAP earnings per diluted share from continuing operations is forecast in the range of $0.42-$0.44 and GAAP earnings per diluted share from continuing operations in the range of $0.35-$0.37.

eBay has large exposure to Britain and Europe; hence, the aftermath of Brexit, falling pound, and euro could have an adverse impact moving forward.

For the full year FY16, the Company expects net revenue between $8.85 billion and $8.95 billion, representing currency-neutral growth of 5%-6%. The Company’s non-GAAP earnings per diluted share from continuing operations is forecast inthe range of $1.85-$1.90 and GAAP earnings per diluted share from continuing operations in the range of $1.60-$1.65.

Stock Performance

E5eBay’s stock stood at $31.40, gaining 2.35%, at the close on Tuesday, July 26th, 2016, having vacillated between an intraday high of $31.41 and a low of $30.56 during the session. The stock’s trading volume was at 13,906,584 for the day. The Company’s market cap was at $35.41 billion as of Tuesday’s close.

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