10-QPeriod: Q1 FY2014

EBAY INC Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 1, 2014For Securities:EBAY

Summary

eBay Inc. reported its first-quarter 2014 financial results, showing a 14% increase in net revenues to $4.3 billion compared to the prior year's quarter, driven by growth across all segments, particularly strong performance in Payments (driven by PayPal and Braintree) and Marketplaces. However, the company posted a net loss of $(2.3) billion, or $(1.82) per diluted share, a significant decline from the prior year's net income of $677 million. This loss was primarily attributed to a substantial $3.0 billion deferred tax liability recognized on $9.0 billion of previously indefinitely reinvested foreign earnings, a strategic decision to increase available U.S. cash. Despite the net loss, cash flow from operations remained robust at $1.2 billion, indicating underlying operational strength. The company also continued its aggressive share repurchase program, buying back $1.8 billion of its stock in the quarter, underscoring its commitment to returning capital to shareholders.

Financial Highlights

51 data points
Beta

Revenue

$2.15B

81.5% Gross Margin

Net Income

-$2.33B

-108.2% Net Margin

EPS (Diluted)

$-1.82

Total Assets

$40.55B

Cash & Equivalents

$4.42B

Free Cash Flow

$968.00M

Financial Statements
Beta
Revenue$2.15B
Cost of Revenue$1.35B
Gross Profit$1.75B
R&D Expenses$480.00M
Operating Expenses$2.03B
Operating Income$878.00M
Net Income-$2.33B
EPS (Basic)$-1.82
EPS (Diluted)$-1.82
Shares Outstanding (Basic)1.28B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Net revenues increased 14% year-over-year to $4.3 billion, driven by growth in Marketplaces, Payments, and Enterprise segments.
  • 2The company reported a net loss of $(2.3) billion, primarily due to a $3.0 billion deferred tax liability on previously indefinitely reinvested foreign earnings.
  • 3Diluted EPS decreased to $(1.82) from $0.51 in the prior year's quarter.
  • 4Cash flow from operations was strong at $1.2 billion, up from $937 million in the prior year.
  • 5eBay repurchased $1.8 billion of its common stock during the quarter, demonstrating a commitment to capital return.
  • 6The Payments segment saw a 19% revenue increase, fueled by a 27% rise in TPV and growth in Braintree.
  • 7Marketplaces segment revenue grew 10%, with a 12% increase in GMV, although operating margin declined due to increased investments.

Frequently Asked Questions

The net loss of $(2.3) billion was primarily caused by a $3.0 billion deferred tax liability recorded on $9.0 billion of undistributed foreign earnings that eBay decided to no longer treat as indefinitely reinvested. This strategic decision was made to increase U.S. cash availability.

All three segments showed revenue growth. The Payments segment saw a 19% increase in revenue, driven by a 27% rise in Total Payment Volume (TPV) and growth from Braintree. The Marketplaces segment grew revenue by 10% with a 12% increase in Gross Merchandise Volume (GMV). The Enterprise segment also reported an 8% revenue increase.

eBay repurchased approximately $1.8 billion of its common stock during the first quarter of 2014, indicating an aggressive approach to capital return. This activity is intended to offset dilution from equity compensation programs and opportunistically reduce the outstanding share count.

The company demonstrated strong operating cash flow, generating $1.2 billion in the first quarter of 2014, an increase from $937 million in the same period of the prior year. This indicates healthy underlying cash generation from its operations.