On Wednesday, eBay reported financial results for its first quarter which ended March 31, 2020. The company also touched on the current coronavirus (COVID-19) conditions and how it is impacting business and operations.
“During these unprecedented times, I am extremely proud of how our team has come together to support one another, our buyers and sellers, our communities and the business, As we look at Q1, I am pleased that we delivered on all of our commitments for the quarter, with key metrics such as Buyers, GMV and Revenue performing at or better than our expectations. Over the past several months, we have remained focused and clear-eyed about the strategic direction of the company and have driven substantial changes to position the business for sustainable and profitable long-term growth.”
Scott Schenkel, eBay Inc. (Interim CEO during eBay, Inc. Q1 2020)
This is the first earnings call with newly appointed eBay CEO Jamie Iannone, who started this week.
“I appreciate the team’s hard work in the first quarter and their efforts to maintain focus amid so many factors affecting the business and the industry. I’m thrilled to return to eBay this week as CEO and I look forward to building on the positive momentum in the business, continuing to evolve the Company’s strategy and maximizing value for our shareholders.”
Jamie Iannone, Chief Executive Officer of eBay Inc.
COVID-19 Response and Business Impacts
- eBay believes its strong balance sheet, stable cash flows, low capital intensity and disciplined capital management approach gives it the strength and flexibility to adapt to this tough economic environment and to enable investment in our sellers and customers.
- As the COVID-19 pandemic continues, eBay’s priority is the safety and well-being of its employees, customers and communities. To that effect, the company has taken immediate action to support its stakeholders.
- Nearly all global employees are working from home. In mainland China, Taiwan and Korea, eBay is now managing a staggered return to the office.
- eBay Foundation has donated over $3.0 million in grants to nonprofits around the world, along with $500,000 in support to Silicon Valley Strong.
- Through eBay for Charity, the company is matching up to $1.0 million in contributions made by U.S. customers who donate a portion of sales to Feeding America, Direct Relief and Opportunity Fund.
- In the U.K., eBay announced a partnership with the National Health Service (NHS), the Department for Health and Social Care and others to pilot a new platform to supply primary care and social care providers with access to personal protective equipment for free at the point of order from NHS Supply Chain.
- Ebay has implemented measures designed to ensure its platform remains safe and trusted for buyers, removing or blocking over 15 million listings to date globally that make false health claims or offer products at inflated prices, in line with price gouging rules.
- The marketplace has offered to defer fees for hundreds of thousands of eBay sellers to support their cash flow needs, provided eBay Store subscribers with up to 100,000 extra listings for free and implemented additional protections for Seller Performance Standards.
- eBay has helped launch and grow hundreds of thousands of small businesses, and the company has created Up & Running to accelerate the start-up time frame for Main Street retailers opening online stores amid the pandemic.
- From the start of the quarter through mid-March the underlying business performance was better than expectations.
- Since mid-March, eBay’s Marketplace platforms have experienced strength in key metrics – traffic, buyer acquisition, conversion, sold items and GMV – due to ongoing shelter-in-place dynamics in many countries. The Marketplace platforms have also experienced improved acquisition of small business sellers. This strength has continued into April.
- eBay’s Classifieds platforms have been adversely impacted by recent auto dealer closures in many international markets, lower traffic to horizontal classifieds sites around the world due to social distancing requirements and lower advertising revenues. This pressure has continued into April.
- The impacts seen in both platforms to date could continue while shelter-in-place guidelines remain active, and it is difficult to predict what may result as shelter-in-place guidelines are eased and lifted and how global consumer demand and seller inventory may evolve over time.
- eBay’s capital allocation strategy and key tenets and targets have not changed.
First Quarter Financial Highlights
- Revenue was $2.4 billion, down 2% on an as-reported basis and up 1% on a foreign exchange (FX) neutral basis.
- Active buyers grew by 2%, for a total of 174 million global active buyers.
- Gross merchandise volume (GMV) was $21.3 billion, down 1% on an as-reported basis and remaining flat on a FX-Neutral basis.
- Marketplace platforms delivered $2.1 billion of revenue, down 1% on an as-reported basis and up 1% on a FX-Neutral basis.
- Classifieds platforms delivered revenue of $248 million, down 3% on an as-reported basis and remaining flat on a FX-Neutral basis.
- GAAP net income from continuing operations was $485 million, or $0.64 per diluted share.
- Non-GAAP net income from continuing operations was $586 million, or $0.77 per diluted share.
- Generated $702 million of operating cash flow and $604 million of free cash flow from continuing operations.
- Announced pricing of $1.0 billion senior unsecured notes offering on March 4, 2020, with the intention of using proceeds from the offering to repay maturities coming due this year.
- Following a comprehensive CEO search, on April 13, 2020, eBay announced that its Board of Directors appointed Jamie Iannone as Chief Executive Officer, effective April 27, 2020. Mr. Iannone was also appointed as a member of the Board, effective as of April 27, 2020.
- eBay’s transition to managed payments continues to build momentum, processing over $3.0 billion of GMV for over 32,000 sellers. The service will be available in several new markets this July, including in the U.K., which was announced in February, and most recently announced in Canada and Australia.
- In Q1, Promoted Listings delivered $137 million of revenue, up 109% on an as-reported basis and up 111% on a FX-Neutral basis. Nearly 1.2 million sellers promoted more than 310 million listings in the quarter.
- Seller Initiated Offers scaled to over 1.5 million per day driven by increased adoption and item eligibility.
- Introduced a new feature, “Image Clean-Up,” available in all markets, that uses computer vision technology to create a more consistent-looking buyer experience and is more effective in Google Shopping for both Android and iOS. Since launch, more than one-third of sellers are using this new tool.
- eBay’s Retail Revival program launched in Austin, Texas, with adaptations of the program, “Export Revival,” also launching globally in Athens, Greece.
- eBay continues to explore potential value-creating alternatives for its Classifieds business, is holding active discussions with multiple parties, and anticipates having an update by the middle of the year.
- The company completed the sale of StubHub to viagogo on February 13, 2020, for $4.1 billion in proceeds, with net proceeds of $3.2 billion net of income taxes of $900 million, subject to working capital adjustments.
Other Selected Financial and Operational Results
- Operating margin – GAAP operating margin increased to 26.5% for the first quarter of 2020, compared to 24.6% for the same period last year. Non-GAAP operating margin decreased to 31.5% in the first quarter of 2020, compared to 31.6% for the same period last year.
- Taxes – The GAAP effective tax rate for continuing operations for the first quarter of 2020 was 23.2%, compared to 21.3% for the first quarter of 2019. The non-GAAP effective tax rate for continuing operations for the first quarter of 2020 was 16.4%, compared to 17.0% for the first quarter of 2019.
- Cash flow – The company generated $702 million of operating cash flow from continuing operations and $604 million of free cash flow during the first quarter of 2020.
- Capital returns – The company repurchased approximately $4.0 billion of its common stock, or approximately 98 million shares, in the first quarter of 2020. The company’s total repurchase authorization remaining as of March 31, 2020 was $3.2 billion. The company also paid cash dividends of $114 million during the first quarter of 2020.
- Cash and cash equivalents and non-equity investments – The company’s cash and cash equivalents and non-equity investments portfolio totaled $5.2 billion as of March 31, 2020.
eBay Business Outlook
- Second-quarter 2020: The company expects net revenue between $2.38 billion and $2.48 billion, representing Organic FX-Neutral growth of 2% – 6%, with GAAP earnings per diluted share from continuing operations in the range of $0.50 – $0.57 and non-GAAP earnings per diluted share from continuing operations in the range of $0.73 – $0.80.
- Full-year 2020: eBay expects net revenue between $9.56 billion and $9.76 billion, representing Organic FX-Neutral growth of 1% – 3%, with GAAP earnings per diluted share from continuing operations in the range of $2.20 – $2.30 and non-GAAP earnings per diluted share from continuing operations in the range of $3.00 – $3.10.
- Outlook: Given the dynamic environment, eBay is not revising its full-year revenue and EPS estimates. This guidance reflects management’s expectations for operational performance and the impacts seen in both of its Marketplaces and Classifieds platforms to date, but given the uncertainty surrounding the extent and duration of the impact of the COVID-19 pandemic, it is difficult for eBay to predict what may result as shelter-in-place guidelines are eased and lifted and how global consumer demand, the effects of COVID-19 on the general economy, seller inventory and advertising spending may evolve over time.
- Distributed $4.0 billion in the form of share buybacks and repurchased nearly 98 million shares, inclusive of an accelerated share repurchase plan that will be completed later this year.
- eBay’s Board of Directors has declared a cash dividend of $0.16 per share of the company’s common stock. The dividend is payable on June 19, 2020, to stockholders of record as of June 1, 2020.
Further details on financials are available in eBay’s Investors Portal.
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