eBay Q2 2016 Earnings Deck

Q2 2016 FINANCIAL
HIGHLIGHTS
July 20, 2016
All reported results are from continuing operations
DISCLOSURES
This presentation contains non-GAAP measures relating to our 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 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 the future performance of eBay Inc. and its consolidated subsidiaries, including expected
financial results for the third quarter and full year 2016 and the future growth in our business.
Our actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other
factors that could cause or contribute to such differences include, but are not limited to: changes in political, business and economic conditions, any regional or general
economic downturn or crisis and any conditions that affect ecommerce growth or cross-border trade; fluctuations in foreign currency exchange rates; our need to
successfully react to the increasing importance of mobile commerce and the increasing social aspect of commerce; an increasingly competitive environment for our
business; changes to our capital allocation or management of operating cash; our ability to manage indebtedness, including managing exposure to interest rates and
maintaining credit ratings; our need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different
geographies; our need and ability to manage regulatory, tax, data security and litigation risks; whether the operational, marketing and strategic benefits of the
separation of the eBay and PayPal businesses can be achieved; our ability to timely upgrade and develop 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 that have been acquired or may be acquired in the future.
The forward-looking statements in this presentation do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed
after the date hereof.
More information about factors that could affect our operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may
be obtained by visiting our Investor Relations website at https://investors.ebayinc.com or the SEC's website at www.sec.gov. All information in this presentation is as of
July 20, 2016. Undue reliance should not be placed on the forward-looking statements in this presentation, which are based on information available to us on the date
hereof. We assume no obligation to update such statements
Q2 2016 FINANCIAL HIGHLIGHTS
2
STRUCTURED DATA
UPDATE
STRUCTURED DATA: Q2 PROGRESS
Total Listings
•
~1B listings
Relevant Listings
•
~90% of listings can be structured
Of the relevant listings,
Collecting*
•
~60% currently covered by requirements todate
Processing*
•
~42% have been processed as of Q2 16
•
~15M structured data pages live as of Q2 16 …
continuing to ramp over 2H 16
User experience
* Estimated percentage of relevant listings
Q2 2016 FINANCIAL HIGHLIGHTS
4
STRUCTURED DATA: USER EXPERIENCES
SEO
Organic
Traffic
Browse
Pages
Homepage
Product
Pages
View
Item
On-eBay Search
Results Pages
Structured Data needs to touch all aspects of the user experience …
focus to date has been on browse and product pages
Q2 2016 FINANCIAL HIGHLIGHTS
5
STRUCTURED DATA: PRODUCT EXPERIENCES
New browsing modules are performing better than pages without
… ~15M browse & product pages live as of Q2 16
Q2 2016 FINANCIAL HIGHLIGHTS
6
STRUCTURED DATA: PRODUCT EXPERIENCES
Updated product pages display spectrum of value … Product
pages in the US convert 10% better than view item pages
Desktop Experience
Mobile Web Experience
Q2 2016 FINANCIAL HIGHLIGHTS
7
STRUCTURED DATA: PRODUCT REVIEWS
(SEO)
Added +3M new product reviews in Q2
(product page)
(browse page)
(view item page)
Q2 2016 FINANCIAL HIGHLIGHTS
8
CFO COMMENTS
Q2 RESULTS
• Revenue of $2.2B, up 6% Y/Y (up 7% FX-Neutral)
• Non-GAAP EPS of $0.43 up 2.1% Y/Y
• Generated ~$0.6B Free Cash Flow
• Repurchased $0.5B of eBay shares; board approves new $2.5B authorization
• Raising FY guidance for Revenue and EPS
Reconciliation of Non-GAAP figures and calculation of Free Cash Flow (FCF) is included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
10
TRAILING 12-MONTH ACTIVE BUYERS
(millions)
162
162
164
159
Y/Y Growth
156
157
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
8%
6%
5%
5%
4%
•
Added over 1M buyers
•
Q2 T12M stable Q/Q …
SEO traffic improved Q/Q,
but no material impact on
acquiring new buyers yet
Q2 16
4%
Q2 2016 FINANCIAL HIGHLIGHTS
11
GMV
($ millions)
20,151
20,061
19,601
Int’l
11,856
11,916
11,501
US
8,295
8,145
8,100
Q1 15
Q2 15
US Y/Y Growth
2%
Int'l FX-Neutral Y/Y Growth
21,860
12,965
20,450
20,850
•
Q2 Volume purchased
by US buyers (US
GMB) accelerated Q/Q
to 7%
11,924
12,312
•
Q2 FX-Neutral global
fixed price format grew
11% Y/Y and auction
format declined 16%
Y/Y
8,895
8,526
8,538
•
Q2 Sold Items
accelerated 1pt Q/Q
driven by volume
Q3 15
Q4 15
Q1 16
Q2 16
2%
3%
4%
3%
5%
7%
8%
7%
6%
6%
6%
Total FX-Neutral Y/Y Growth
5%
6%
6%
5%
5%
6%
Sold Items Y/Y Growth
9%
10%
7%
4%
3%
4%
Q2 2016 FINANCIAL HIGHLIGHTS
12
REVENUE
($ millions)
MS&O
2,061
2,110
393
425
2,099
2,322
2,137
2,230
460
484
506
440
1,668
1,685
1,659
1,816
1,677
1,746
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Y/Y Growth
-4%
-3%
-2%
0%
4%
6%
FX-Neutral Y/Y Growth
3%
5%
5%
5%
6%
7%
% International*
58%
59%
57%
57%
57%
58%
Trxn Take Rate
8.3%
8.4%
8.5%
8.3%
8.2%
8.4%
Transaction
•
Q2 FX-Neutral
Transaction Revenue up
5% Y/Y … up 2pts Q/Q
•
Q2 FX-Neutral MS&O
Revenue up 15% Y/Y ...
decelerated 4pts Q/Q,
primarily driven by
Marketplace Advertising
Calculation of total Revenue is included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
13
MARKETPLACE GMV & REVENUE
($ millions)
GMV
MS&O
Revenue
Transaction
Revenue
19,476
235
19,273
251
20,676
18,674
266
326
19,581
274
19,790
•
Q2 FX-Neutral GMV
accelerated 1pt Q/Q to
5% … early signs of
recovery in mobile, C2C
and SEO
•
Q2 FX-Neutral Transaction
Revenue up 2% Y/Y,
accelerated 1pt Q/Q …
impact of volume and
lower contra
•
Q2 FX-Neutral MS&O
Revenue up 11% Y/Y,
decelerated 8pts Q/Q …
driven by Advertising
277
1,536
1,524
1,459
1,584
1,500
1,521
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
FX-Neutral GMV Y/Y Growth
5%
6%
5%
4%
4%
5%
FX-Neutral Rev Y/Y Growth
2%
4%
3%
1%
3%
3%
% Rev International*
58%
60%
59%
60%
59%
60%
Trxn Take Rate
7.9%
7.9%
7.8%
7.7%
7.7%
7.7%
Q2 2016 FINANCIAL HIGHLIGHTS
14
STUBHUB GMV & REVENUE
($ millions)
1,184
1,060
927
GMV
869
788
675
Net
Revenue
200
132
232
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
FX-Neutral GMV Y/Y Growth
6%
1%
10%
30%
29%
35%
FX-Neutral Rev Y/Y Growth
-1%
8%
17%
34%
34%
40%
19.7%
20.4%
21.6%
19.6%
20.4%
21.2%
Trxn Take Rate
Q2 FX-Neutral GMV up
35% Y/Y … Q2 FXNeutral Revenue up
40% Y/Y
•
Strong performance
across genres as well as
from product innovations
225
177
161
•
Q2 2016 FINANCIAL HIGHLIGHTS
15
CLASSIFIEDS REVENUE
($ millions)
•
207
180
178
183
186
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Rev Y/Y Growth
-2%
-4%
-3%
2%
15%
15%
FX-Neutral Rev Y/Y Growth
17%
13%
14%
14%
17%
15%
162
Q2 FX-Neutral
Revenue up 15% Y/Y,
driven by strength in
Automotive and Real
Estate verticals
Q2 2016 FINANCIAL HIGHLIGHTS
16
NON-GAAP EXPENSES
(% of revenue)
Operating Expense at 49.5%, up ~1.5pts Y/Y
Cost of Revenue
Sales & Marketing
26.8%
19.8%
Q2 15
Product Development
26.7%
21.4%
9.8%
Q2 16
PayPal processing costs
and impact of stronger
USD
Q2 15
General & Admin
Q2 16
Relatively flat
Q2 15
11.4%
Q2 16
Increased investment and
impact of stronger USD
8.4%
8.5%
Q2 15
Q2 16
Stand-up costs offset by
productivity
Reconciliation of Non-GAAP expenses is included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
17
NON-GAAP EPS
$0.50
$0.48
$0.47
$0.42
Y/Y Growth
Non-GAAP Operating Margin
$0.43
$0.43
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
8%
-3%
-6%
-10%
-1%
2%
35.6%
32.1%
31.9%
34.4%
33.4%
29.1%
•
Q2 Y/Y increase in EPS
driven by share
repurchases, offset by
FX, stand-up costs and
product investment
•
Q2 Non-GAAP Operating
Margin declined ~300bps
Y/Y driven by FX, standup costs and product
investments
Reconciliation of Non-GAAP EPS and Non-GAAP Operating Margin is included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
18
FREE CASH FLOW
($ millions)
•
997
405
345
Q1 15
Q2 15
-31%
CapEx % of Revenue
FCF % of Revenue
Y/Y Growth
483
462
Q3 15
Q4 15
-56%
-23%
5%
10%
20%
16%
Q2 FCF up 79% Y/Y
due to lapping 2015
separation related costs
617
Q1 16
Q2 16
56%
19%
79%
12%
6%
7%
7%
22%
43%
23%
28%
Calculation of Free Cash Flow (FCF) is included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
19
CASH & CAPITAL ALLOCATION
Capital Allocation Tenets
$10.4B
Int’l
US
•
Focus on long term value
creation while maintaining the
resources to execute the
strategy
•
Drive growth while balancing
profitability
•
Supplement organic growth
with disciplined acquisitions
and investments
•
Optimize financial flexibility,
access to debt and cost of
capital
$7.3B
$3.1B
Debt
$1.3B
Net Cash
Q2 16 Ending Cash
and Investments*
$9.1B
Repurchased $0.5B of eBay shares …
$0.3B authorization remaining … Board approves additional
authorization of $2.5B
* Cash balances/flows include cash, cash equivalents and non-equity investments
Q2 2016 FINANCIAL HIGHLIGHTS
20
Q3 GUIDANCE
Q3 16
Revenue
(in $ billions)
Y/Y Growth
FX-Neutral Growth
Non-GAAP EPS
Y/Y Growth
•
•
Low
High
$2.16
$2.19
3%
6%
4%
7%
$0.42
$0.44
-2%
2%
EPS growth impacted by:
•
Stronger USD ~(7pts)
•
Offset in part by net benefit of share repurchase program ~4pts
Q3 tax rate 19% - 20%
Reconciliations of Non-GAAP EPS and Non-GAAP Effective Tax Rate are included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
21
2016 GUIDANCE
Revenue
Non-GAAP EPS Drivers (vs Prev Guide)
$8.85B - $8.95B
Y/Y Growth
3% - 4%
Y/Y FX-Neutral Growth
5% - 6%
Operating Margin
31% - 33%
Previous Guide
$1.82 - $1.87
Higher Revenue
$0.05 - $0.07
Investments
$(0.03) - $(0.04)
Stronger USD
Non-GAAP EPS
Y/Y Growth
FCF
$1.85 - $1.90
1% - 4%
$2.2B - $2.4B
(includes impact of hedging program)
Tax rate
$0.00 - $(0.01)
~$0.01
Current Guide
~$1.85 - $1.90
Guidance Context
•
•
•
•
Raising full-year Revenue and Earnings guidance driven by continued strength across platforms
Expecting Operating Margin at the low end of 31% - 33% guidance range
Non-GAAP effective tax rate of 19.0% - 20.0%; CapEx 7% - 9% of revenue
Guidance includes share repurchases at similar rate to Q2 16, subject to market conditions
Reconciliations of Non-GAAP EPS and Non-GAAP Effective Tax Rate are included in the Appendix of this presentation
Q2 2016 FINANCIAL HIGHLIGHTS
22
SUMMARY
• Q2 was a good quarter, and we are on the right trajectory
• Executing our strategy around best choice, the most relevance, and the most
powerful selling platform … will take time, but we are encouraged by some of the
green shoots we are beginning to see
• Delivered on our financial commitments in first half 2016; raising FY guidance
• Disciplined in our use of capital, while architecting for the long term
Q2 2016 FINANCIAL HIGHLIGHTS
23
Q&A
APPENDIX
GAAP TO NON-GAAP QUARTERLY RECONCILIATIONS
OPERATING MARGIN
March 31,
2015
GAAP operating income
Stock-based compensation expense and related employer payroll taxes
Amortization of acquired intangible assets within cost of net revenues
Amortization of acquired intangible assets within operating expenses
Other significant gains, losses or charges
Separation
Restructuring
Non-GAAP operating income
$
Revenues
GAAP operating margin
Non-GAAP operating margin
$
$
June 30,
2015
529
100
6
10
—
30
59
734
$
2,061
25.7 %
35.6 %
$
$
Three months ended
September 30,
December 31,
March 31,
2015
2015
2016
(in millions, except per share data and percentages)
428
$
578
$
662
$
614
125
94
78
89
6
4
5
4
10
10
11
8
17
(16)
—
—
89
—
43
(1)
3
—
—
—
678
$
670
$
799
$
714
2,110
20.3 %
32.1 %
$
2,099
27.5 %
31.9 %
$
2,322
28.5 %
34.4 %
$
2,137
28.7 %
33.4 %
June 30,
2016
$
$
$
531
120
4
7
(13)
—
—
649
2,230
23.8 %
29.1 %
Q2 2016 FINANCIAL HIGHLIGHTS
26
GAAP TO NON-GAAP QUARTERLY RECONCILIATIONS
NET INCOME / EPS
March 31,
2015
June 30,
2015
GAAP Income from continuing operations
Stock-based compensation expense and related employer payroll taxes
Amortization of acquired intangible assets within cost of net revenues
Amortization of acquired intangible assets within operating expenses
Separation
Restructuring
Other significant gains, losses or charges
Gains or losses on investments
Tax effect of non-GAAP adjustments
Non-GAAP net income from continuing operations
$
$
$
449
100
6
10
30
59
(10)
—
(58)
586
$
430
125
6
10
89
3
17
(160)
(3)
517
Non-GAAP net income from continuing operations per diluted share
$
0.48
$
0.42
Shares used in non-GAAP diluted share calculation
1,229
1,225
Three months ended
September 30, December 31,
2015
2015
(in millions, except per share data)
$
545
$
523
94
78
4
5
10
11
—
43
—
—
(16)
—
(94)
—
(14)
(60)
$
529
$
600
$
0.43
1,223
$
0.50
1,204
March 31,
2016
June 30,
2016
$
$
$
482
89
4
8
(1)
—
—
—
(32)
550
$
437
120
4
7
—
—
(13)
(35)
(24)
496
$
0.47
$
0.43
1,170
1,149
Q2 2016 FINANCIAL HIGHLIGHTS
27
GAAP TO NON-GAAP QUARTERLY RECONCILIATIONS
STATEMENT OF INCOME
Reported
Net revenues
Cost of net revenues
Gross Profit
Operating expenses:
Sales and marketing
Product development
General and administrative
Provision for transaction losses
Amortization of acquired intangible assets
Total operating expense
Income from operations
Interest and other income, net
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
$
$
2,230
493
1,737
622
295
218
64
7
1,206
531
(8)
523
(86)
437
Three months ended
June 30, 2016
June 30, 2015
Non-GAAP
Non-GAAP
Entries
Non-GAAP
Reported
Entries
(in millions, except per share data and percentages)
$
—
$
2,230
$
2,110
$
—
(16) (a)(b)
477
434
(16)
(a)(b)
16
1,753
1,676
16
$
(26) (a)
(41) (a)
(28) (a)(f)
—
(7) (b)
(102)
118
(35) (g)
83
(24) (c)
59
$
Net income (loss) from continuing operations per
share:
Basic
$
0.38
$
Diluted
$
0.38
$
Weighted average shares:
Basic
1,144
Diluted
1,149
Operating margin
23.8 %
5.3 %
Effective tax rate
16.4 %
1.8 %
Notes:
(a) Stock-based compensation expense and related employer payroll taxes
(b) Amortization of acquired intangible assets
(c) Income taxes associated with certain non-GAAP entries
(d) Separation related charges
(e) Restructuring
(f) Other signficant gains, losses or charges
(g) Gains or losses on investments
596
254
190
64
—
1,104
649
(43)
606
(110)
496
$
588
232
353
65
10
1,248
428
124
552
(122)
430
0.43
0.43
$
$
0.35
0.35
1,144
1,149
29.1 %
18.2 %
1,217
1,225
20.3 %
22.1 %
$
(23)
(a)
(25)
(a)
(176) (a)(d)(e)(f)
—
(10)
(b)
(234)
250
(160)
(g)
90
(3)
(c)
87
11.8 %
(2.6)%
Non-GAAP
$
2,110
418
1,692
$
565
207
177
65
—
1,014
678
(36)
642
(125)
517
$
$
0.42
0.42
1,217
1,225
32.1 %
19.5 %
Q2 2016 FINANCIAL HIGHLIGHTS
28
CALCULATION OF FREE CASH FLOW
March 31,
2015
Net cash provided by continuing operating activities
Less: Purchases of property and equipment, net
Free cash flow from continuing operations
501
(96)
405
June 30,
2015
546
(201)
345
Three months ended
September 30,
December 31,
2015
2015
(in millions)
704
1,126
(242)
(129)
462
997
March 31,
2016
641
(158)
483
June 30,
2016
764
(147)
617
Q2 2016 FINANCIAL HIGHLIGHTS
29
RECONCILIATION OF TOTAL REVENUE
March 31,
2015
Net Revenues by Type
Net Transaction Revenues:
Marketplace
StubHub
Total net transaction revenues
Marketing services and other revenues:
Marketplace
Classifieds
Corporate and other
Total marketing and other revenues
Total net revenues
$
1,536
132
1,668
$
$
$
235
162
(4)
393
$
2,061
$
$
Three months ended
September 30,
December 31,
2015
2015
(in millions)
June 30,
2015
1,524
161
1,685
$
$
$
251
180
(6)
425
$
2,110
$
1,459
200
1,659
$
$
$
266
178
(4)
440
$
2,099
$
March 31,
2016
1,584
232
1,816
$
$
$
326
183
(3)
506
$
2,322
$
June 30,
2016
1,500
177
1,677
$
$
$
274
186
—
460
$
277
207
—
484
$
2,137
$
2,230
$
$
1,521
225
1,746
Q2 2016 FINANCIAL HIGHLIGHTS
30
GAAP TO NON-GAAP QUARTERLY RECONCILIATIONS
GUIDANCE
Three Months Ending
September 30, 2016
(in millions, except per share amounts)
Diluted EPS
GAAP
$0.35 - $0.37
Non-GAAP (a)
$0.42 - $0.44
(in millions, except per share amounts)
Diluted EPS
Twelve Months Ending
December 31, 2016
GAAP
Non-GAAP (b)
$1.60 - $1.65
$1.85 - $1.90
(a) Estimated non-GAAP amounts above for the three months ending September 30, 2016, reflect adjustments that exclude the estimated
amortization of acquired intangible assets of approximately $10 - $15 million and estimated stock-based compensation expense and employer
payroll taxes on stock-based compensation expense of approximately $105 - $115 million as well as the related tax impact.
(b) Estimated non-GAAP amounts above for the twelve months ending December 31, 2016, reflect adjustments that exclude the estimated
amortization of acquired intangible assets of approximately $35 - $45 million and estimated stock-based compensation expense and employer
payroll taxes on stock-based compensation expense of approximately $420 - $440 million as well as the related tax impact.
Q2 2016 FINANCIAL HIGHLIGHTS
31