01—Abstract
Summary
Summary of the 10-Q filed July 29, 2009. Cited figures are marked; the original filing is the authoritative source.
eBay Inc. reported a decrease in net revenues for the second quarter and first six months of 2009 compared to the prior year, primarily due to a stronger U.S. dollar.
Net revenues fell by 4% to $2.1 billiona for the quarter and by 6% to $4.1 billion for the first six months. This revenue decline was partially offset by contributions from recent acquisitions like Bill Me Later and Gmarket. Operating margin also decreased, impacting diluted earnings per share.
The company's Marketplaces segment experienced a significant revenue decline, largely driven by a 14%b and 17% decrease in Gross Merchandise Volume (GMV) due to macroeconomic conditions and a strong dollar, with the vehicles category showing particular weakness. Conversely, the Payments segment, primarily PayPal, demonstrated growth with an 11% increase in Net Total Payment Volume (TPV). The Communications segment, including Skype, also saw revenue growth, driven by an increase in SkypeOut minutes and registered users.
In terms of financial health, eBay generated substantial operating cash flow but utilized a significant portion for investments, notably the $1.2 billionc acquisition of Gmarket. The company's cash and cash equivalents decreased, largely due to this acquisition and debt repayments. Despite these pressures, eBay expects third-quarter revenues and net income to remain similar to the second quarter, with signs of stabilization in the Marketplaces business and continued growth in PayPal.
02—Key points
Key Highlights
- Net revenues decreased by 4% to $2.1 billion for the second quarter of 2009 and by 6% to $4.1 billion for the first six months of 2009, primarily due to foreign currency headwinds.
- The Marketplaces segment saw a 14% and 16% decline in net revenues for the quarter and year-to-date, respectively, driven by a 14% and 17% drop in Gross Merchandise Volume (GMV).
- The Payments segment, including PayPal, showed resilience with an 11% increase in Net Total Payment Volume (TPV) for both the quarter and year-to-date.
- The Communications segment (Skype) experienced a 20% revenue increase for both periods, fueled by a significant rise in SkypeOut minutes and registered users.
- The company completed the acquisition of Gmarket Inc. for approximately $1.2 billion, aiming to strengthen its e-commerce presence in South Korea and Asia.
- Operating income decreased year-over-year, with operating margin declining to 20% for the quarter, impacted by foreign currency movements, business mix, and acquisition dilution.
- eBay generated strong operating cash flow of $1.4 billion for the first six months of 2009, but net cash used in investing activities significantly increased due to acquisitions and capital expenditures.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2009, eBay Inc kept $0.16.
- Revenue$2.10B100.0%
- Cost of revenue−$591.8M28.2%
- Gross profit$1.51B71.8%
- Operating costs−$1.09B52.2%
- Operating income$411.7M19.6%
- Interest, other & tax−$84.3M4.0%
- Net income$327.3M15.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2009filed July 29, 2009Financial Statements
Q2 FY2009 against Q2 FY2008
| Line item | Q2 FY2009Q2 FY2008 | Change |
|---|---|---|
| Revenue | $2.10B$2.20B | −4.4% |
| Cost of Revenue | $591.77M$562.10M | +5.3% |
| Gross Profit | $1.51B$1.63B | −7.8% |
| R&D Expenses | $198.40M$186.79M | +6.2% |
| Operating Expenses | $1.09B$1.09B | +0.6% |
| Operating Income | $411.69M$545.37M | −24.5% |
| Net Income | $327.34M$460.35M | −28.9% |
| EPS (Basic) | $0.25$0.35 | −28.6% |
| EPS (Diluted) | $0.25$0.35 | −28.6% |
| Shares Outstanding (Basic) | 1.29B1.31B | −1.8% |
| Shares Outstanding (Diluted) | 1.30B1.33B | −1.9% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net revenues?
The primary driver for the decrease in net revenues was the strengthening of the U.S. dollar against other foreign currencies, which negatively impacted the translation of international revenues. Macroeconomic conditions and a decline in the vehicles business within the Marketplaces segment also contributed.
How did the acquisition of Gmarket impact the financial results?
The acquisition of Gmarket Inc. for approximately $1.2 billion in June 2009 contributed to the increase in total assets and goodwill. Its financial results were included in the consolidated statements from mid-June 2009, but their impact on revenue and earnings for the three and six months ended June 30, 2009, was not significant. The acquisition also increased net cash used in investing activities substantially.
What is the outlook for the third quarter of 2009?
eBay expects net revenues and net income in the third quarter of 2009 to be similar to the second quarter. This includes the full quarter impact of Gmarket, modest foreign currency benefits, offset by a decline in take rates, softness in advertising, and seasonality. The company sees signs of stabilization in its Marketplaces business but anticipates continued weakness in its vehicles business.
How is the company managing its liquidity and capital resources?
As of June 30, 2009, eBay had $2.6 billion in cash and cash equivalents. The company generated strong operating cash flow, but investing activities were heavily influenced by the Gmarket acquisition and capital expenditures. While the acquisition of Gmarket decreased cash balances, eBay believes its existing cash, expected operating cash flow, and available credit facilities are sufficient to fund its operations, capital expenditures, and acquisition activity for the foreseeable future.
06—Continue