- Reports Record Q1 Net Revenues of $1.77 Billion
- Delivers Q1 GAAP Diluted EPS of $0.27 and Non-GAAP Diluted EPS of $0.33
- Raises Full Year Guidance
San Jose, Calif, April 19, 2007 — eBay Inc. (Nasdaq: EBAY;
www.ebay.com) reported financial results for its first quarter ended March 31, 2007.
eBay reported record consolidated Q1-07 net revenues of $1.77 billion, representing a growth rate of 27% year over year. GAAP operating income was $468 million, an increase of 45% year over year, and represented 26.5% of net revenues. Non-GAAP operating income in Q1-07 was $593 million, representing a 33.6% operating margin and a 29% year-over-year increase.
GAAP net income in Q1-07 increased 52% year over year to $377 million, or $0.27 earnings per diluted share. Non-GAAP net income increased 34% year over year to $460 million, or $0.33 earnings per diluted share. GAAP and non-GAAP earnings per diluted share increased 59% and 39% year over year, respectively.
The company purchased approximately 10 million shares of its common stock at a total cost of approximately $333 million during the quarter and may purchase up to an additional $2.0 billion of common stock through January 2009 under its stock repurchase program.
“This first quarter of 2007 was a very strong one for the company,” said eBay Inc. President and Chief Executive Officer, Meg Whitman. “The strength of our core businesses, as well as the significant traction we’re beginning to see across our newer businesses, helped us deliver great results across the board.”
Q1 Business Unit Discussion
Marketplaces
Our Marketplaces business had another solid quarter, highlighted by good conversion rates and ASPs, and great results from our non-Gross Merchandise Volume (GMV) driven businesses, which include Shopping.com, Rent.com and our Classifieds portfolio.
Marketplaces net revenues totaled a record $1.25 billion in Q1-07, a growth rate of 23% over the $1.02 billion reported in Q1-06. The eBay platform confirmed registered user base at the end of Q1-07 totaled 233 million, representing a 21% increase over the 193 million registered users reported at the end of Q1-06.
eBay’s users generated a total of 588 million listings in Q1-07, 2% higher than the 575 million listings reported in Q1-06. These listings led to eBay GMV of $14.28 billion in Q1-07, representing a 14% year-over-year increase from the $12.50 billion reported in Q1-06.
Payments
PayPal had a excellent quarter, with robust Total Payment Volume (TPV) growth, driven by increased eBay penetration around the world and another outstanding performance from its Merchant Services business.
PayPal net revenues totaled $439 million in Q1-07, a growth rate of 31% over the $335 million reported in Q1-06. PayPal had 143 million total accounts at the end of Q1-07, a 36% increase from the 105 million reported at the end of Q1-06. Those accounts helped drive record TPV of $11.36 billion in Q1-07, a 30% increase from the $8.77 billion reported in Q1-06.
PayPal Merchant Services contributed a record $4.38 billion to the $11.36 billion in global TPV in Q1-07, representing a 51% increase from the $2.91 billion reported in Q1-06.
Communications
Q1-07 was a very productive quarter for Skype, with continued momentum in user growth, and the launch of several new products intended to build community engagement and fuel Skype monetization over time.
Skype net revenues totaled $79 million in Q1-07, a growth rate of 123% over the $35 million reported in Q1-06.
Skype had 196 million registered users at the end of Q1-07, representing a 107% increase from the 95 million users at the end of Q1-06.
Other selected financial results
Operating Margin — GAAP operating margin increased to 26.5% in Q1-07, up from 23.2% in Q1-06. Non-GAAP operating margin increased to 33.6% in Q1-07, from 33.1% in Q1-06. The year-over-year increase in non-GAAP operating margin is the result of continued expense leverage and productivity and the benefit of a weaker US dollar, which was offset by the negative gross margin mix impact coming from our higher growth, lower margin businesses of PayPal and Skype.
Taxes — The GAAP effective tax rate for Q1-07 was 24%, which was a decrease from 29% for Q1-06 and 28% in Q4-06. The non-GAAP effective tax rate in Q1-07 was 26%, which was a decrease from 29% for Q1-06 and Q4-06. The lower tax rates in Q1-07 resulted primarily from expansion of our international operations and tax regulations affecting the allocation of costs to our international businesses. During Q1-07, the company implemented Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” which resulted in a reclassification of certain tax liabilities from current to non-current on the balance sheet and had no impact on net income.
Cash Flows — GAAP operating cash flows decreased 3% year over year to $564 million in Q1-07. Free cash flow increased to $479 million in Q1-07 compared to $451 million in Q1-06.
Cash, Cash Equivalents, and Investments — The company’s cash, cash equivalents, and investments totaled approximately $3.50 billion at the end of Q1-07.
“Our Q1 results reflect a strong start to 2007,” said Bob Swan, chief financial officer, eBay Inc. “We delivered solid revenue growth, expanded operating margins and strong earnings and free cash flow, while deploying capital to strengthen our business with our acquisition of StubHub and our continued share repurchase program.”
Business Outlook
Second Quarter 2007 — eBay expects consolidated net revenues for Q2 2007 to be in the range of $1.750 billion to $1.800 billion. Non-GAAP earnings per diluted share for Q2 2007 are expected to be in the range of $0.31 to $0.33. These amounts assume a US dollar to Euro exchange rate of $1.30.
Full Year 2007 — eBay now expects consolidated net revenues for 2007 to be in the range of $7.200 billion to $7.450 billion. Non-GAAP operating margin for 2007 is expected to be 33%. Non-GAAP earnings per diluted share for 2007 are now expected to be in the range of $1.30 to $1.34. These amounts assume a US dollar to Euro exchange rate of $1.30.
Quarterly Conference Call
eBay will host a conference call to discuss first quarter results at 2 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation which includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations website at
investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.
About eBay Inc.
Founded in 1995, eBay Inc. connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay Inc. does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay Inc. has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, Shopping.com, and others. eBay Inc. is headquartered in San Jose, California.
Non-GAAP Measures
This press release includes the following financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flows. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See “Non-GAAP Measures of Financial Performance,” “Reconciliation of GAAP to Non-GAAP Operating Income,” “Reconciliation of GAAP to Non-GAAP Net Income,” “Reconciliation of GAAP to Non-GAAP Effective Tax Rate,” “Reconciliation of Operating Cash Flow to Free Cash Flow” and “Business Outlook” included in this press release for further information regarding these non-GAAP financial measures, including a reconciliation of these measures to the nearest comparable GAAP measures.
Forward-Looking Statements
This press release contains forward-looking statements relating to the future performance of eBay and its consolidated subsidiaries. These statements involve risks and uncertainties, and the company’s actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to: the company’s need to increasingly achieve growth from its existing users as well as from new users in its more established markets; the company’s ability to deal with the increasingly competitive e-commerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the regulatory, patent, and competitive risks specific to Skype; the competitive, regulatory, credit card association, and other risks specific to PayPal, especially as it continues to expand geographically; the company’s need to manage other regulatory, tax, and litigation risks as its product offerings expand and its services are offered in more jurisdictions; the company’s ability to upgrade and develop its systems, infrastructure and customer service capabilities to accommodate growth at a reasonable cost; the company’s ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion; fluctuations in foreign exchange rates; the company’s ability to profitably expand its model to new types of merchandise and sellers; assumptions and methods used to value and expense stock options provided to employees; and, the company’s ability to profitably integrate, manage and grow recent and future acquisitions and other transactions. The forward looking statements in this release do not include the potential impact of any acquisitions that may be announced and/or completed after the date hereof.
More information about factors that could affect the company’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s investor relations website at
investor.ebay.com or the SEC’s website at
www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.