Q Financial Highlights. October 15, 2014

Transcription

1 October 15, 2014

2 This presentation contains non-gaap measures relating to the company's performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the appendix at the end of this presentation. All growth rates represent year-over-year comparisons, except as otherwise noted. This presentation contains forward-looking statements relating to our future performance that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the fourth quarter and full year 2014; future growth in the Payments, Marketplaces and Enterprise businesses; and the planned separation of ebay Inc. s Marketplaces and PayPal businesses. Our actual results may differ materially from those included in this presentation for a variety of reasons, including, but not limited to: the timing of the separation or whether it will be completed; whether the operational, marketing and strategic benefits of the separation can be achieved; whether the costs and expenses of the separation can be controlled within expectations; changes in political, business, and economic conditions, including any European, Asian or general economic downturn or crisis; foreign exchange rate fluctuations; our need to successfully react to the increasing importance of mobile payments and mobile commerce and the social aspect of commerce; an increasingly competitive environment for our businesses; changes to our capital allocation or management of operating cash; the complexity of managing an increasingly large enterprise with a broad range of businesses; our need to manage regulatory, tax and litigation risks (including risks specific to PayPal and PayPal Credit, formerly Bill Me Later); our need to timely upgrade and develop our technology systems, infrastructure, and customer service capabilities at reasonable cost while maintaining site stability and performance and adding new products and features; and our ability to integrate, manage and grow businesses recently acquired or that may be acquired in the future. You can find more information about factors that could affect our operating results in our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q (available at You should not rely on any forward-looking statements, and we assume no obligation to update them. All information in this presentation is as of October 15, 2014, and we do not intend, and undertake no duty, to update this presentation. 2

3 ebay Inc. Enabled Commerce Volume (ECV*) of $63B, accelerated 1pt to 27%. Payment volume growth of 29%, Marketplaces volume growth of 9% Mobile momentum continues global volume acceleration Mobile payment volume ($12B) up 72%; Marketplaces mobile volume ($7B) up 41% Cross border trade volume ($14B) up 27% Revenue grew 12%. Non-GAAP EPS of $0.68, up 6% Strong balance sheet, completed $3.5B debt offering; generated $941M free cash flow Reducing full year revenue guidance, and expect to be at the lower end of full year Non-GAAP EPS guidance slower Marketplace growth; FX headwinds *Enabled Commerce Volume (ECV) includes Marketplaces GMV (excluding vehicles and real estate), Payments Merchant Services Net TPV and ebay Enterprise Gross Merchandise Sales not earned on ebay or paid for via PayPal or PayPal Credit (formerly Bill Me Later) during the period; excludes volume transacted through the Magento platform Calculations of Non-GAAP EPS and Free Cash Flow (FCF) are included in the Appendix of this presentation 3

4 ebay Inc. Revenue ($ millions) Revenue 3,877 3,892 4,530 4,262 4,366 4,353 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Reported Y/Y Growth 14% 14% 13% 14% 13% 12% Organic Y/Y Growth* 15% 14% 13% 13% 10% 10% *Calculation of Organic Y/Y Growth is included in the Appendix of this presentation 4

5 ebay Inc. Non-GAAP EPS Non-GAAP EPS* $0.81 $0.63 $0.64 $0.70 $0.69 $0.68 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Reported Y/Y Growth 12% 17% 16% 11% 9% 6% Non-GAAP Op. Margin* 26.3% 26.8% 29.2% 26.9% 24.4% 23.7% *Calculations of Non-GAAP EPS and Non-GAAP Op. Margin are included in the Appendix of this presentation 5

6 ebay Inc. Operating Expenses* Sales & Marketing (% of Revenue) Product Development (% of Revenue) General & Admin. (% of Revenue) Prov. for Trxn & Loan Loss** (% of Revenue) 18.4% 20.2% 10.1% 10.4% 9.3% 9.0% 4.7% 5.7% Q3 13 Q3 14 Q3 13 Q3 14 Q3 13 Q3 14 Q3 13 Q3 14 Ramp in marketing & brand spend at both Marketplaces & PayPal Product & customer experience investments Operating leverage Increase in PayPal loss rate & TPV growth above PayPal revenue growth Q3 14 Non-GAAP Op Income: $1,032M Q3 14 Non-GAAP Net Income: $848M *All expenses are shown on a Non-GAAP basis (calculations can be found in the Appendix of this presentation) **Prov. for Trxn & Loan Loss includes Marketplaces and PayPal transaction loss, Marketplaces consumer protection programs, bad debt expense and PayPal Credit loan loss Calculations of Non-GAAP Operating Income and Non-GAAP Net Income are included in the Appendix of this presentation 6

7 ebay Inc. Free Cash Flow ($ millions) Free Cash Flow* 1,432 1,225 1, Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Reported Y/Y Growth 60% 28% 31% 52% 86% -7% Capex % of Revenue 9% 8% 6% 5% 6% 10% FCF % of Revenue 17% 26% 32% 23% 28% 22% *Calculation of Free Cash Flow (FCF) is included in the Appendix of this presentation 7

8 ebay Inc. Cash Flow & Capital Allocation ($ billions) Cash Balance/Flows 15.1 Free Cash Flow / Other Movements Short/Long-Term Investments Int'l Cash Raised $3.5 billion through senior unsecured notes for general corporate purposes Paid down $1.2B of commercial paper; none outstanding 73% of PayPal Credit principal loan portfolio funded with offshore cash Total US cash, cash equivalents and non-equity investments at quarter end $5.1B US Cash Significant capacity to capitalize two independent companies with appropriate capital structures and funding flexibility Q2 14 Ending Balance* FCF** Buyback Credit Debt Other*** Q3 14 Ending Balance* *Cash balances/flows include cash, cash equivalents and non-equity investments **Calculation of Free Cash Flow is included in the Appendix of this presentation ***Other includes primarily employee stock issuance and FX impact 8

9 Payments Revenue ($ millions) Revenue Marketing Services & Other Revenue Transaction Revenue 1,475 1,493 1,693 1,700 1,741 1,783 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Total Revenue 1,624 1,620 1,836 1,845 1,946 1,950 Y/Y Growth 20% 19% 19% 19% 20% 20% Fx-Neutral Y/Y Growth 21% 20% 20% 20% 20% 21% % Int'l 51% 52% 53% 52% 51% 52% 9

10 Payments Operating Metrics (In millions, except %) Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Global Active Accounts Y/Y Growth 17% 17% 16% 16% 15% 14% Net Number of Payments Y/Y Growth 24% 24% 22% 22% 21% 23% On ebay TPV 13,006 13,112 15,311 14,844 14,675 14,341 Y/Y Growth 15% 14% 14% 15% 13% 9% Fx-Neutral Y/Y Growth 15% 15% 13% 13% 10% 8% Merchant Services TPV* 29,807 30,725 36,662 37,162 40,371 42,235 Y/Y Growth 29% 30% 31% 32% 35% 37% Fx-Neutral Y/Y Growth 29% 30% 31% 32% 33% 37% Total TPV 42,813 43,837 51,973 52,006 55,046 56,576 Y/Y Growth 24% 25% 25% 27% 29% 29% Fx-Neutral Y/Y Growth 25% 25% 25% 26% 26% 28% % Int'l TPV 48% 48% 49% 49% 49% 49% Global On ebay Penetration Rate 77.2% 78.2% 78.4% 78.9% 79.8% 80.5% Take Rate 3.79% 3.70% 3.53% 3.55% 3.53% 3.45% Transaction Expense 1.04% 1.05% 0.97% 0.99% 0.95% 0.95% Loss Rate 0.31% 0.30% 0.32% 0.27% 0.28% 0.33% Transaction Margin** 64.4% 63.4% 63.5% 64.6% 65.1% 62.8% TPV acceleration due primarily to Braintree, adding 3pts to Merchant Services FX-Neutral TPV growth Braintree negatively impacted transaction margin by 70bpts Lower take rate due to large merchant mix, Braintree, and foreign currency hedges Segment margin down due primarily to Braintree and increased investments in product and brand Payments Segment Margin 23.0% 22.7% 25.7% 25.7% 24.5% 20.9% *Merchant Services TPV is the total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including PayPal Credit (formerly Bill Me Later), Venmo, and payments processed through Braintree s full stack payments platform during the period; excludes PayPal s and Braintree s payment gateway businesses and payments for transactions on our Marketplaces platforms. **Transaction Margin calculation has been adjusted to include total revenues (including revenue from credit), less transaction expense (including credit cost of funds), less transaction loss (including credit loan losses), divided by global take rate (based on global total revenues divided by total TPV) 10

11 Credit Operating Metrics Early stage of growth Accelerates growth for merchants Offers consumers more choice Lowers transaction expense 30% PayPal Credit Growth 4 6% PayPal Credit Share of U.S. GMV & TPV Portfolio Balance ($B)* 3 Share of US Addressable GMV 20% 4% Risk Adjusted Margin** 2 Share of US Addressable GMV & MS TPV 10% 2% 1 Share of US MS TPV 0% Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q % Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 PayPal Credit TPV ($M) 934 1,009 1,314 1,092 1,252 1,302 Y/Y growth 34% 30% 27% 29% 34% 29% Portfolio Balance ($M)* 2,391 2,564 2,915 2,892 3,099 3,338 Risk Adjusted Margin** 16.2% 16.1% 15.8% 16.2% 16.6% 16.8% Net Charge-Off Rate*** 5.6% 5.5% 6.3% 5.4% 5.5% 5.3% *Gross receivables balance as of 9/30/14. **Risk adjusted margin represents annualized credit portfolio revenue, excluding contra-revenue incentives to customers or merchants, less cost of funds and less net credit and fraud losses during the period, divided by average loan receivables for the period. ***Net charge-off rate is the annualized ratio of net credit losses over the average daily loan receivables balance during the period. Net credit losses are the principal loan losses, exclusive of interest and late fee write offs, less recoveries of previously charged off balances. % of US Marketplaces GMV and Merchant Services TPV funded using PayPal Credit (formerly Bill Me Later, excluding Bill Me Later legacy business) 11

12 Marketplaces Revenue ($ millions) Revenue Marketing Services & Other Revenue Transaction Revenue 1,578 1,609 1,828 1,727 1,722 1,707 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Total Revenue 2,001 2,027 2,299 2,156 2,174 2,156 Y/Y Growth 10% 12% 12% 10% 9% 6% Fx-Neutral Y/Y Growth 10% 12% 11% 9% 6% 5% % Int'l 59% 58% 59% 60% 61% 59% Reflects reclassification of vehicles and real estate revenues from transaction revenue to marketing services and other revenue 12

13 Marketplaces Operating Metrics (In millions, except percentages) Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Global Active Buyers Y/Y Growth 13% 13% 14% 14% 14% 13% Y/Y Growth in Sold Items 11.4% 11.4% 11.2% 11.4% 9.5% 9.1% US GMV* 7,253 7,408 8,342 8,141 7,972 7,896 Y/Y Growth 17% 15% 14% 11% 10% 7% International GMV* 11,023 10,937 13,162 12,404 12,513 12,179 Y/Y Growth 11% 12% 12% 13% 14% 11% Fx-Neutral Y/Y Growth 11% 11% 10% 11% 8% 7% GMV* 18,276 18,345 21,503 20,545 20,485 20,075 Y/Y Growth 13% 13% 13% 12% 12% 9% Fx-Neutral Y/Y Growth 13% 12% 12% 11% 8% 7% GMV pressure due to reduced traffic from cyberattack and SEO algorithm changes Free shipping on 58% of transactions across US, UK, DE Global fixed price GMV grew 15% and auctions GMV declined 7% Segment margin down due primarily to increased spend in marketing and contra Marketplaces Segment Margin 39.7% 38.9% 41.1% 39.7% 36.3% 35.9% *Gross Merchandise Volume (GMV) is the total value of all successfully closed transactions between users on Marketplaces platforms during the period regardless of whether the buyer and seller actually consummated the transaction; excludes vehicles and real estate gross merchandise volume 13

14 ebay Enterprise Revenue & Operating Metrics ($ millions) Revenue/Metrics 74 Marketing Services & Other Revenue Transaction Revenue Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Total Revenue* Y/Y Growth 12% 6% -1% 8% 3% 3% Gross Merchandise Sales** , Y/Y Growth 21% 13% 13% 16% 15% 14% Same Store Sales (SSS) Y/Y Growth 19% 13% 13% 11% 14% 13% Segment Margin* 1.0% 3.4% 15.4% 4.7% 1.1% -0.5% Strong volume growth offset by business mix Segment margin down due primarily to Marketing Services softness and gearing up for Holiday *From Q1 2014, Magento is included in ebay Enterprise MS&O revenue and segment margin with prior quarters restated **Gross Merchandise Sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowance for returns and discounts, which flow through our Enterprise commerce technologies, whether we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee; excludes volume transacted through the Magento platform 14

15 Guidance Q Guidance Low High Revenue (in billions) $4.85 $4.95 Y/Y Growth 7% 9% Non-GAAP EPS* $0.88 $0.91 Y/Y Growth 8% 12% Guidance Context Slower Marketplaces growth and a stronger US$ than expected approximately ($300M) revenue and ($0.07) Non-GAAP EPS impact in H2, partially offset by cost control and favorable tax rate Expect Q4 Non-GAAP Effective Tax Rate of 18%-19% helped by geographic business mix Continue to expect US R&D tax credit will be extended in 2014 Reducing full year revenue guidance to $17.85-$17.95B, and expect to be at the low end of prior Non-GAAP EPS full year guidance range *Calculations of Non-GAAP EPS and Non-GAAP Effective Tax Rate are included in the Appendix of this presentation 15

16 Creating Two World Class Independent Platforms Operating agreements Capital structure Regulatory Preserve current relationships Minimize dis-synergies Strategic flexibility Manage trade-offs Strong balance sheets capitalized for success Current debt and significant cash balance expected to remain at new ebay Cash for PayPal to finance loan receivables portfolio While opportunistically buying stock in the interim Need favorable opinion and/or rulings on taxfree nature of transaction Effectiveness of Form 10 registration statement filed with the SEC Anticipate H1 15 filing and H2 15 separation 16

17 Summary We have two great businesses in markets with strong tailwinds supporting them Consumers continue to embrace ecommerce and digital payments, playing directly to our strengths With other large ecosystem players embracing mobile commerce, we believe this will accelerate the blurring of lines between offline and online, raising consumer awareness and expanding our addressable market We will continue to focus on execution while moving with speed to effectuate the separation 17

18 Q&A

19 Appendix

20 Calculation of Organic Revenue Growth June 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, Total revenue growth 14 % 14 % 13 % 14 % 13 % 12 % Acquisition/Disposition impact % % % (0.5)% (1)% (1)% Foreign currency impact 1 % % % (0.5)% (2)% (1)% Total organic revenue growth 15 % 14 % 13 % 13 % 10 % 10 % 20

21 Reconciliation of Quarterly GAAP to Non-GAAP Operating Margin (in millions) Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, Sept 30, GAAP operating income $ 750 $ 799 $ 1, $ 794 $ 781 Stock-based compensation expense and related employer payroll taxes Acquisition related transaction expense 9 Amortization of acquired intangible assets (1) Restructuring (2) Non-GAAP operating income $ 1,019 $ 1,040 $ 1,322 1,145 $ 1,066 $ 1,032 Revenues $ 3,877 $ 3,892 $ 4,530 4,262 $ 4,366 $ 4,353 GAAP operating margin 19.3 % 20.5 % 22.6 % 20.6 % 18.2 % 17.9 % Non-GAAP operating margin 26.3 % 26.8 % 29.2 % 26.9 % 24.4 % 23.7 % (1) Includes amortization of acquired intangible assets within cost of net revenues and operating expenses. 21

22 Reconciliation of Quarterly GAAP to Non-GAAP Net Income / EPS (in millions, except per share data) Jun 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, GAAP net income (loss) $ 640 $ 689 $ 850 $ (2,326) $ 676 $ 673 Stock-based compensation expense and related employer payroll taxes Acquisition related transaction expense 9 Amortization of acquired intangible assets (1) Restructuring (2) Skype sale and transaction related items Acquisition related items Loss on divested business Accretion of note receivable (5) (5) Amortization of intangibles Gain on sale of RueLaLa and ShopRunner (75) Gain on investment (5) (3) Gain from the divestiture of a business Income taxes associated with certain non-gaap entries (79) (15) (84) 2,957 (82) (74) Non-GAAP net income $ 822 $ 837 $ 1, $ 868 $ 848 Non-GAAP net income per diluted share $ 0.63 $ 0.64 $ $ 0.69 $ 0.68 Shares used in non-gaap diluted share calculation 1,313 1,310 1,310 1,292 1,267 $ 1,251 (1) Includes amortization of acquired intangible assets within cost of net revenues and operating expenses. 22

23 Reconciliation of Quarterly GAAP to Non-GAAP Quarterly Statement of Income Reported Three Months Ended Non-GAAP Entries Non-GAAP Reported Three Months Ended September 30, 2014 September 30, 2013 Non-GAAP Entries (in millions, except per share data and percentages) Non-GAAP Net revenues $ 4,353 $ 4,353 $ 3,892 $ $ 3,892 Cost of net revenues 1,389 (19) (a) 1,350 1,224 (9) (a) 1,196 (20) (c) (19) (c) Gross Profit 2, ,003 2,668 (28) 2,696 Operating expenses: Sales and marketing 923 (46) (a) (38) (a) 717 Product development 511 (57) (a) (42) (a) 391 General and administrative 442 (51) (a) (51) (a) 363 (1) (b) Notes: Provision for transaction and loan losses Amortization of acquired intangible assets 58 (58) (c) 81 (81) (c) Total operating expense 2,183 (212) 1,971 1,869 (213) 1,656 Income from operations , ,040 Interest and other income, net 20 1 (r) (r) (4) Accretion of note receivable (3) (s) (75) (t) (5) (m) Income before income taxes , ,036 Provision for income taxes (128) (74) (d) (202) (184) (15) (d) (199) Net income (loss) $ $ 848 $ 689 $ 148 $ 837 Net income (loss) per share: Basic $ 0.54 $ 0.68 $ 0.53 $ 0.65 Diluted $ 0.54 $ 0.68 $ 0.53 $ 0.64 Weighted average shares: Basic 1,242 1,242 1,295 1,295 Diluted 1,251 1,251 1,310 1,310 Operating margin 18 % 6 % 24 % 21 % 6 % 27 % Effective tax rate 16 % 3 % 19 % 21 % (2)% 19 % (a) Stock-based compensation expense (b) Employer payroll taxes on stock-based compensation (c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-gaap entries (e) Restructuring charges (h) Sale of Skype and transaction related items (i) Acquisition related transaction expense (j) Gain from the acquisition of a business (k) Loss on divested business (m) Accretion of note receivable (p) Gain on the divestiture of a business (q) Fanatics lawsuit settlement (r) Intangible amortization (t) Gain on sale of RueLaLa and ShopRunner (s) Gain on investment 23

24 Calculation of Free Cash Flow Three months ended Jun 30, Sept 30, Dec 31, Mar 31, June 30, Sept 30, (in millions) GAAP operating cash flow 1,011 1,334 1,713 1,174 1,494 1,368 Purchases of property and equipment, net (353) (317) (281) (206) (269) (427) Free cash flow 658 1,017 1, ,

25 Q and FY 2014 GAAP and Non-GAAP Guidance Three Months Ending December 31, 2014 (in millions, except per share amounts) GAAP Non-GAAP (a) Revenues $4,850 - $4,950 $4,850 - $4,950 Diluted EPS $ $0.76 $ $0.91 (a) Estimated non-gaap amounts above for the three months ending December 31, 2014 reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $70-$80 million and estimated stock-based compensation expense and employer payroll taxes on stock-based compensation expense of approximately $170-$180 million as well as the related tax impact. 25