01—Abstract
Summary
Summary of the 10-Q filed October 27, 2009. Cited figures are marked; the original filing is the authoritative source.
eBay Inc.'s third-quarter 2009 report shows a mixed financial performance, with net revenues increasing by 6% year-over-year to $2.24 billiona, primarily driven by growth in PayPal, Skype, and classifieds businesses.
However, the operating margin declined due to dilution from recent acquisitions like Bill Me Later and foreign currency movements. Diluted earnings per share saw a decrease to $0.27b. The company announced a significant strategic move: an agreement to sell a majority of its Skype business for $2.75 billion, expected to close in Q4 2009, which is projected to result in a gain of approximately $1.0 billion and lead to a significant increase in Q4 net income.
Operationally, the Marketplaces segment experienced a slight revenue decrease, impacted by increased seller discounts and a decline in vehicle sales, though overall GMV excluding vehicles saw growth, partly due to the acquisition of Gmarket. The Payments segment, bolstered by PayPal and Bill Me Later, showed robust growth in net transaction revenues and total payment volume. The Communications segment (Skype) also demonstrated strong revenue growth, largely due to an increase in registered users and SkypeOut minutes.
Cash flow from operations remained strong, but investing activities saw a substantial outflow due to the acquisition of Gmarket. The company also saw a significant reduction in cash used in financing activities compared to the prior year, primarily due to a lack of stock repurchases. eBay expects Q4 2009 net revenues to be moderately stronger than Q3, benefiting from seasonal trends and momentum in its core businesses.
02—Key points
Key Highlights
- Net revenues increased by 6% to $2.24 billion in Q3 2009 compared to Q3 2008.
- Agreement to sell the majority of the Skype business for $2.75 billion, with an expected gain of approximately $1.0 billion.
- Operating margin decreased to 19.8% due to acquisition dilution and foreign currency impacts.
- Diluted earnings per share decreased to $0.27 from $0.38 in the prior year's quarter.
- Marketplaces segment revenue saw a slight decline, while Payments and Communications segments experienced revenue growth.
- Acquisition of Gmarket ($1.2 billion) significantly impacted investing activities.
- Cash flow from operations remained strong at $738.2 million for the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2009, eBay Inc kept $0.16.
- Revenue$2.24B100.0%
- Cost of revenue−$643.9M28.8%
- Gross profit$1.59B71.2%
- Operating costs−$1.15B51.4%
- Operating income$442.9M19.8%
- Interest, other & tax−$93.2M4.2%
- Net income$349.7M15.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2009filed October 27, 2009Financial Statements
Q3 FY2009 against Q3 FY2008
| Line item | Q3 FY2009Q3 FY2008 | Change |
|---|---|---|
| Revenue | $2.24B$2.12B | +5.7% |
| Cost of Revenue | $643.91M$560.96M | +14.8% |
| Gross Profit | $1.59B$1.56B | +2.4% |
| R&D Expenses | $205.21M$190.84M | +7.5% |
| Operating Expenses | $1.15B$1.03B | +11.5% |
| Operating Income | $442.94M$524.08M | −15.5% |
| Net Income | $349.74M$492.22M | −28.9% |
| EPS (Basic) | $0.27$0.38 | −28.9% |
| EPS (Diluted) | $0.27$0.38 | −28.9% |
| Shares Outstanding (Basic) | 1.29B1.29B | +0.4% |
| Shares Outstanding (Diluted) | 1.31B1.30B | +1.1% |
05—Questions
Frequently Asked Questions
What is the impact of the pending Skype sale on eBay's financial outlook?
The pending sale of the majority of the Skype business is expected to close in the fourth quarter of 2009 and is projected to result in a significant gain of approximately $1.0 billion. This gain is anticipated to lead to a substantial increase in net income for Q4 2009.
How did the acquisitions of Bill Me Later and Gmarket affect the financial results?
The acquisitions of Bill Me Later (in November 2008) and Gmarket (in June 2009) contributed to revenue growth, particularly in the Payments and Marketplaces segments, respectively. However, they also contributed to a decrease in the overall operating margin due to acquisition dilution and increased amortization expenses.
What is the performance of eBay's core Marketplaces business?
The Marketplaces segment saw a slight year-over-year decrease in net revenues, primarily due to increased seller discounts and a decline in vehicle sales. However, Gross Merchandise Volume (GMV) excluding vehicles grew, partly supported by the Gmarket acquisition. The segment's revenue growth was also negatively impacted by foreign currency movements.
How is eBay managing its cash and investments?
eBay generated strong cash flow from operations. However, investing activities showed a significant outflow primarily due to the $1.2 billion acquisition of Gmarket. The company had $2.6 billion in cash and cash equivalents at the end of the quarter and indicated that existing cash, future operational cash flow, and available credit facilities are expected to be sufficient for its foreseeable needs.
06—Continue