10-QPeriod: Q3 FY2018

EBAY INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 31, 2018For Securities:EBAY

Summary

eBay Inc. reported solid third-quarter 2018 results, with net revenues increasing by 6% year-over-year to $2.6 billion. This growth was driven by a 6% increase in net transaction revenues, primarily from the Marketplace and StubHub segments, as well as a 6% rise in Marketing Services & Other revenues, boosted by Classifieds. The company demonstrated strong operational execution, with diluted earnings per share (EPS) rising to $0.73 from $0.48 in the prior year's comparable quarter. While operating margin saw a slight decrease to 21.0% from 23.0%, this was influenced by increased sales and marketing expenses and other operational costs. eBay also generated significant cash flow from operations, amounting to $1.4 billion for the first nine months of the year, while actively managing its capital through substantial share repurchases totaling $3.0 billion during the same period.

Financial Highlights

55 data points
Beta

Revenue

$2.65B

77.0% Gross Margin

Net Income

$721.00M

27.2% Net Margin

EPS (Diluted)

$0.73

Total Assets

$23.65B

Cash & Equivalents

$2.09B

Free Cash Flow

$379.00M

Financial Statements
Beta
Revenue$2.65B
Cost of Revenue$608.00M
Gross Profit$2.04B
R&D Expenses$307.00M
Operating Expenses$1.49B
Operating Income$556.00M
Net Income$721.00M
EPS (Basic)$0.74
EPS (Diluted)$0.73
Shares Outstanding (Basic)974.00M
Shares Outstanding (Diluted)983.00M

Key Highlights

  • 1Net revenues grew 6% year-over-year to $2.65 billion for the third quarter of 2018.
  • 2Diluted earnings per share (EPS) increased to $0.73, up from $0.48 in the prior year's third quarter.
  • 3Total Gross Merchandise Volume (GMV) increased by 5% to $22.72 billion in Q3 2018.
  • 4The company repurchased $3.0 billion of common stock in the first nine months of 2018, with $4.7 billion remaining on authorized repurchase programs.
  • 5Goodwill increased by $532 million due to the acquisition of Giosis' Japan business.
  • 6eBay sold its investment in Flipkart, recognizing a gain of $313 million.
  • 7The effective tax rate for the nine months ended September 30, 2018 was 19.9%, a significant increase from 7.6% in the prior year, partly due to tax reform and legal structure realignments.

Frequently Asked Questions

eBay's revenue growth in Q3 2018 was primarily driven by an increase in net transaction revenues, particularly from its Marketplace platform, and growth in Marketing Services & Other revenues, notably from its Classifieds segment. This was supported by a 5% increase in Gross Merchandise Volume (GMV).

eBay has actively managed its capital through significant share repurchase programs. In the first nine months of 2018, the company repurchased $3.0 billion of its common stock and had approximately $4.7 billion remaining under its authorized repurchase programs as of September 30, 2018. This demonstrates a commitment to returning capital to shareholders.

Key non-operational events impacting eBay's results include the acquisition of Giosis' Japan business, which added $532 million in goodwill, and the sale of its investment in Flipkart, which generated a $313 million gain. Additionally, the company incurred $84 million in pre-tax restructuring charges related to a global workforce reduction.

The Tax Cuts and Jobs Act, enacted in late 2017, significantly impacted eBay's tax provision. The company recognized a provisional charge of $3.1 billion in Q4 2017. While analysis was ongoing as of September 30, 2018, an update in October 2018 indicated a favorable tax ruling would result in a $389 million income tax benefit related to U.S. tax reform in Q4 2018. The effective tax rate for the nine months of 2018 was 19.9% compared to 7.6% in the prior year.