ebay Inc. to Acquire GSI Commerce

Transcription

1 ebay Inc. to Acquire GSI Commerce Investor/Analyst Call March 28, 2011

2 Forward-looking statements This presentation contains non-gaap measures relating to the company's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the appendix at the end of this presentation This announcement contains forward-looking statements relating to ebay s future performance that are based on its current expectations, forecasts and assumptions. Those statements involve risks and uncertainties, and actual results may differ materially from those predicted or discussed. These statements include, but are not limited to, statements regarding ebay and GSI Commerce and the expected impact of the transaction on ebay s expected financial results for full year 2011 and projected financial outlook. Factors that could cause or contribute to such differences include, but are not limited to, the receipt and timing of regulatory approval for the transaction; the possibility that the transaction may not close; the reaction of consumers and GSI Commerce s customers; the future growth of GSI Commerce; the reaction of competitors to the transaction; the possibility that integration following the transaction may be more difficult than expected; our need to manage regulatory, tax, IP and litigation risks (including risks specific to PayPal, Bill Me Later and the financial industry as well as those risks relating to the transaction itself); the after effects of the global economic downturn; changes in political, business and economic conditions; the impact and integration of recent and future acquisitions; our increasing need to grow revenues from existing users in established markets; an increasingly competitive environment for our businesses; the complexity of managing an increasingly large enterprise, with a broad range of businesses; and our need to upgrade our technology and customer service infrastructure at reasonable cost while adding new features and maintaining site stability. More information about factors that could affect ebay s operating results can be found in the company s most recent annual report on its Form 10-K and its subsequent quarterly reports on Form 10-Q (available at All forward-looking statements are based on information available to ebay on the date hereof, and ebay assumes no obligation to update such statements. 2

3 Executive summary Our key messages from last month s analyst day Commerce market evolving new retail environment retailers looking for help ebay Inc. well positioned with a strong set of assets Two strong core businesses PayPal and Marketplaces with growing synergy Accelerating pace of innovation Expanding opportunity set through open commerce platform Today s announcement the acquisition of GSI Commerce: Extends ebay Inc. s reach with large brands/retailers Brings together complementary capabilities in a manner which strengthens GSI and helps our existing core businesses Extends our open commerce platform capabilities 3

4 Traditional boundaries are blurring On-line Off-line 4

5 Retailers of all sizes must reach new buyers in new ways Multi- channel Sole proprietors Millions of buyers Global competition Small and medium size businesses Pace of innovation Large merchants 5

6 The new retail future: our unique position ebay PayPal Classifieds Buyers Mobile Apps StubHub Sellers Platform Capabilities 6

7 Strengthens our position with large retailers and brands Opportunity* $160B Large merchants $36B Small and medium size businesses $12B Sole proprietors * Source Data: Internal estimates 7

8 Playing offense enabling commerce Commerce Platform to drive innovation across ebay, PayPal and GSIC Separate BU led by Chris Saridakis GSIC to continue focus on leading retailers/brands Commerce Platform drives innovation across ebay, PayPal and GSIC 8

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10 GSIC a great business Global l Commerce Services Global Marketing Services Commerce Technology Fulfillment Customer Care Full-Service Digital Agencies Webstore Multi- Channel 7 Fulfillment Centers 4 Call Centers Mobile Advertising Order Management ShipQuik Program Telephone / and Affiliate Marketing Technology Operations International 11 Languages Analytics The only company that enables all aspects of multi-channel commerce 10

11 supporting leading brands and retailers Categories Apparel, Accessories & Footwear Appliances & Tools Baby Products Cosmetics & Fragrances Consumer Electronics Entertainment Media General Merchandise Gifts Home Furnishings Jewelry Pets Personal Care Specialty Foods Sporting Goods Toys & Video Games 11

12 Retailers need a partner, not a competitor Retailers need Access to multiple channels to reach customers and generate demand Flexible, customized solutions and ability to keep up with innovation and technology off and on-line A trusted global partner to help them enable growth ebay/gsic offer Global marketplace with access to more than 95M customers, 9M+ SMBs and 180+ large retailers Global, full suite, commerce solutions with on-line, off-line, payments, and mobile capabilities i Investing > $1B in technology annually to build out next generation of products/services The goal: ebay/gsic combination as the strategic t commerce partner of choice 12

13 Commitment to best in class platform GSI s Enhanced Platform V11 Cutting-edge site management tools Enhanced promotions capability Integration architecture Operationally efficient Data-driven store configuration Together, we can make it even better Future vx Commerce OS leveraging g best of GSI and ebay s platforms Key offerings as services fulfillment, inventory management, promotions, etc Leverage developer network to iterate and improve platform Most cost-effective less intensive to maintain to help retailers to grow their business 13

14 with some near-term opportunities to enhance GSIC s platform Local Shopping Mobile Capabilities Mobile Development $1B+ combined R&D spend 14

15 In summary, GSIC 2013 Outlook* Revenue $1.1B to $1.3B Key growth drivers Comp growth led by multi- channel, new clients, geographic expansion, new products Direct segment margin 19% to 21%** * Assumes closing of the proposed transaction and the planned divestitures ** Consistent with GSI Commerce s definition of Non-GAAP income from operations, or NGIO 15

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17 Today s announcement ebay to acquire GSIC for $29.25 per share ($2.4B), financed with cash and debt and expected to close in the 3 rd quarter GSIC is a leading, full service provider of on-line commerce solutions and interactive marketing services for brands and retailers We believe the combination of ebay and GSIC enhances ebay s position as the strategic commerce partner of choice for leading retailers and consumer brands Simultaneous with closing, we expect to sell certain businesses of GSIC that are not core to our long-term strategy to an entity formed by GSIC s current CEO, Michael Rubin, while retaining a financial interest in certain of them Assuming we close in mid 3 rd quarter, we expect the acquisition to be immaterial to our 2011 non-gaap EPS guidance announced January 19 th and have ea$030 $ $0.34 negative impact to our 2011 GAAP EPS guidance, including a GAAP charge primarily related to the divested GSIC businesses Using our balance sheet to enhance ebay s position as the strategic commerce partner of choice 17

18 Structure of transaction enables us to acquire highly strategic assets... Acquiring Wholeco Divesting Assets for ~ $0.6B Retaining Strategic Assets Licensed Sports Merchandise 100% $0.5B (1) 70% 30% ownership +ROFR $1.4B (1) GSIC 70% Global Marketing Services ~$0.2B (1) Consideration (3) $467M Loan from ebay $31M Cash Global ~$0.7B (1) ecommerce Services (1) 2010 Revenue ~$0.9B (2) (2) Includes approximately $170M of revenue associated with owned inventory model that will be transitioned away by 2013 (3) Excludes value of retained minority stakes in Rue La La and ShopRunner 18

19 Our framework for growth Protect and Expand Plant and extend core Adjacencies Grow Seeds businesses Leverage our platform... and balance sheet 19

20 Synergistic Value Framework Enhance GSI Platform Revenue ~$1.2B Expand large merchant Extend PayPal / BML reach presence on ebay platform on GSIC a ~$3.5B platform Merchant coverage ~$0.9B (1) E ebay Synergies Leverage platform capabilities Global expansion Reduce G&A / payment processing costs Consumer preference 13 Est. Synergies ~$60M+ (1) Includes approximately $170M of revenue associated with owned inventory model expected to be transitioned away by

21 Our revised 3 year outlook to 2013* Revenue $6B - $7B $7B - $8B $1.1B - $1.3B Key growth drivers Direct segment margin Consumer Preferences, Merchant coverage, New Products, New Markets Tailored shopping experiences, Local C2C strength, global tickets, Mobile, Offline, Platform 24% to 26%** 38% to 42%** Comp growth led by multi-channel, new clients, geographic expansion, New products 19% to 21%*** ** Direct segment margin does not include ~3 points of corporate overhead for PayPal and ebay * Assumes closing of the proposed transaction and the planned divestitures *** Consistent with GSI Commerce s definition of Non-GAAP income from operations, or NGIO 21

22 Our revised aspirations for 2013* Revenue Goal $14.1B 1B - $16.3B Revenue Goal 2013 Non-GAAP EPS CAGR ** 12% - 16% Free Cash Flow*** $8.0B - $9.0B * Assumes closing of the proposed transaction and the planned divestitures **CAGR is measured using 2010 as the bases ***Reconciliation in the appendix 22

23 Executive summary Our key messages from last month s analyst day Commerce market evolving new retail environment retailers looking for help ebay Inc. well positioned with a strong set of assets Two strong core businesses PayPal and Marketplaces with growing synergy Accelerating pace of innovation Expanding opportunity set through open commerce platform Today s announcement the acquisition of GSI Commerce: Extends ebay Inc. s reach with large brands/retailers Brings together complementary capabilities in a manner which strengthens GSI and helps our existing core businesses Extends our open commerce platform capabilities 23

24 Appendix 24

25 Reconciliation of FY2011-FY2013 Free Cash Flow (FCF) projection Reconciliation of Operating Cash Flow to Free Cash Flow 3 Years Total (in Billions) FY FY2013 GAAP operating cash flow $ $10.7B - $12.0B Purchases of property and equipment, net ($2.7B - $3.0B) Free cash flow $ $8.0B to $9.0B