eBay beats estimates on profit, sees sales rise

eBay beats estimates on profit, sees sales rise

eBay beats estimates on profit, sees sales rise

The FINANCIAL -- eBay Inc., a global commerce leader, delivered gross merchandise volume (GMV) for the quarter ended March 31, 2017 of $20.9 billion, increasing 2% on an as-reported basis and 5% on a foreign exchange (FX) neutral basis. Revenue for the quarter was $2.2 billion, up 4% on an as-reported basis and 7% on an FX-Neutral basis.

During the quarter, eBay delivered GAAP net income from continuing operations of $1.0 billion, or $0.94 per diluted share, driven by a non-cash $695 million income tax benefit related to the continued realignment of its legal structure, primarily impacting its foreign Classifieds platforms. Non-GAAP net income from continuing operations was $538 million, or $0.49 per diluted share. During the quarter, the company generated $582 million of operating cash flow and $447 million of free cash flow from continuing operations. The company also repurchased $350 million of its common stock in the quarter, according to eBay.

"The first quarter was a strong start to the year with accelerating growth in active buyers, revenue and our core U.S. business," said Devin Wenig, President and CEO of eBay Inc. "We are on the right path as we continue to evolve our shopping platform for consumers, leverage our technology advantages and market a sharpened eBay brand globally."

Underlying total eBay Inc. performance, the Marketplace platforms delivered $20.0 billion of GMV and $1.8 billion of revenue. Marketplace GMV was up 2% on an as-reported basis and 5% on an FX-Neutral basis, driven by growth of active buyers, continued expansion of new user experiences and brand advertising, which led to revenue growth of 2% on an as-reported basis and 5% on an FX-Neutral basis. StubHub drove GMV of $916 million, up 6%, and revenue of $210 million, up 18% on an as-reported basis and 19% on an FX-Neutral basis, aided by strength in international markets with the integration of the Ticketbis acquisition. Classifieds had another quarter of strong growth delivering revenue of $199 million, up 7% on an as-reported basis and 10% on an FX-Neutral basis with strength across its German platforms.

In the first quarter, eBay added two million active buyers across its platforms, for a total of 169 million global active buyers.  Marketplace launched several new consumer experiences built on the foundation of its structured data efforts, coupled with continued investment in brand advertising, including the launch of a billboard and radio campaign across the United States. The company also began the roll out of a new, personalized homepage and announced new services that will be available later this year, including a Guaranteed Delivery program on millions of eligible items that arrive in three days or less, and an authentication program to boost consumer confidence when purchasing high-end merchandise. During Q1, StubHub became the official ticket resale marketplace for the Los Angeles Angels and Toronto Blue Jays, offering pricing guidance for sellers and panoramic 360-degree virtual view-from-seats for buyers. Classifieds continued to enhance user experiences across its platforms, including launching a personalized homepage feed on Marktplaats.nl, as well as expanding its inventory integration with the eBay Marketplace platform across multiple regions.

eBay recently announced a strategic agreement with Flipkart. In exchange for an equity stake, eBay will make a $500 million cash investment in and sell its eBay.in business to Flipkart. The companies will also exclusively pursue cross-border trade opportunities together.

Other Selected Financial and Operational Results

Operating margin — GAAP operating margin decreased to 24.6% for the first quarter of 2017, compared to 28.7% for the same period last year. Non-GAAP operating margin decreased to 30.0% in the first quarter of 2017, compared to 33.4% for the same period last year.

Taxes — The GAAP effective tax rate for continuing operations for the first quarter of 2017 was (85.5)%, driven by a $695 million income tax benefit related to a legal structure realignment, primarily impacting its foreign Classifieds platforms, compared to 18.4% for the first quarter of 2016. The non-GAAP effective tax rate for continuing operations for the first quarter of 2017 was 18.7%, compared to 20.4% for the first quarter of 2016.

Cash flow — The company generated $582 million of operating cash flow from continuing operations and $447 million of free cash flow from continuing operations during the first quarter of 2017.

Stock repurchase program — The company repurchased approximately $350 million of its common stock, or 10 million shares, in the first quarter of 2017. The company's total repurchase authorization remaining as of March 31, 2017 was $986 million.

Cash and cash equivalents and non-equity investments — The company's cash and cash equivalents and non-equity investments portfolio totaled $11.2 billion as of March 31, 2017.

Business Outlook

Second quarter 2017 — The company expects net revenue between $2.28 billion and $2.32 billion, representing FX-Neutral growth of 5% - 7%, with non-GAAP earnings per diluted share from continuing operations in the range of $0.43 - $0.45 and GAAP earnings per diluted share from continuing operations in the range of $0.20 - $0.40.

Full year 2017 — The company expects net revenue between $9.3 billion and $9.5 billion, representing FX-Neutral growth of 6% - 8%, with non-GAAP earnings per diluted share from continuing operations in the range of $1.98 - $2.03 and GAAP earnings per diluted share from continuing operations in the range of $1.85 - $2.10.