eBay Inc. (Nasdaq: EBAY), a global commerce leader that connects millions of buyers and sellers around the world, today reported financial results for its second quarter ended June 30, 2020.
“Our team’s focus on supporting small businesses and communities during a period of heightened need allowed us to re-engage our existing buyers and sellers while introducing approximately 8 million new customers to our platform during the quarter,” said Jamie Iannone, Chief Executive Officer of eBay Inc. “This contributed to a very strong second quarter, ahead of expectations. Recently, we’ve also accelerated the rollout of managed payments and signed an agreement to transfer our Classifieds business to Adevinta, bringing together two highly complementary businesses to create the world’s largest online classifieds group.”
“Our purpose has always been to empower people and create economic opportunity for all,” continued Iannone. “As we look to the future, our vision is clear – we will build on our powerful strengths to become the best global marketplace for buyers and sellers through a technology-led reimagination. We will accomplish this vision through three key priorities: build compelling next-gen experiences for our enthusiasts; become the partner of choice for sellers; and cultivate life-long trusted buyer relationships.”
Second Quarter Financial Highlights
- Revenue was $2.9 billion, up 18% on an as-reported basis and up 21% on a foreign exchange (FX) neutral basis.
- Annual active buyers grew by 5%, adding approximately 8 million buyers in the quarter, for a total of 182 million global active buyers.
- Gross merchandise volume (GMV) was $27.1 billion, with growth accelerating sequentially since Q1, and up 26% on an as-reported basis and up 29% on a FX-Neutral basis, year on year.
- Marketplace platforms delivered $2.7 billion of revenue, up 24% on an as-reported basis and up 26% on a FX-Neutral basis.
- Classifieds platforms delivered revenue of $201 million, down 26% on an as-reported basis and down 24% on a FX-Neutral basis.
- GAAP net income from continuing operations was $740 million, or $1.04 per diluted share.
- Non-GAAP net income from continuing operations was $770 million, or $1.08 per diluted share.
- Generated $964 million of operating cash flow and $866 million of free cash flow from continuing operations.
- Announced pricing of $750 million senior unsecured notes offering on June 8, 2020, with the intention of using proceeds from the offering to repay debt maturities coming due in 2021.
- Repaid $500 million of 2.150% senior fixed rate notes due 2020 that matured in the quarter, and completed a tender offer to purchase any and all of the $750 million of 2.875% senior fixed rate notes due in 2021, purchasing approximately 44% of the outstanding 2.875% senior notes in Q2.
Business Highlights
- Following a thorough review of eBay’s Classifieds business, on July 21, 2020, eBay announced it had entered into a definitive agreement to transfer its Classifieds business to Adevinta for a total consideration valued at approximately $9.2 billion, based on the closing trading price of Adevinta shares on the Oslo Stock Exchange on July 17, 2020. eBay will receive $2.5 billion of cash and 540 million shares of Adevinta, representing 44% ownership of the pro forma company, and an approximate 33.3% voting stake. The transaction is expected to close by Q1 2021, subject to approval of Adevinta stockholders and other customary conditions.
- eBay’s managed payments reached a significant milestone at the end of July with the expiration of its Operating Agreement with PayPal. Now, eBay is able to scale its management of payments globally, offering buyers more choice and flexibility in payment options and simplifying business operations for sellers. Since launch, eBay has managed payments for nearly 42,000 sellers and processed $4.7 billion in GMV.
- Marketplace platforms have experienced strength in key metrics – traffic, buyer acquisition, conversion, sold items, and GMV – driven by consumer behavior shift to e-commerce shopping resulting from the COVID-19 pandemic. All major verticals accelerated significantly compared to previous quarters, including Home & Garden, Electronics, Fashion, Auto Parts and Collectibles.
- In Q2, Promoted Listings delivered $196 million of revenue, up 120% on an as-reported basis and up 124% on a FX-Neutral basis.
- Programs like eBay’s Up & Running to support small businesses continued to expand globally, now with adaptations in over 25 markets, most recently announced in the Baltics, Malaysia and Singapore.
- To improve seller onboarding, eBay recently launched improvements to seller registration, updating the Welcome Tour and Get Started overview in an effort to help new sellers onboard more easily. The company also boosted seller presence by launching Storefronts in the mobile app.
- Seller Hub capabilities continue to grow with the launch of several new features including expanded multi-user authentication capabilities, real-time competitive pricing and traffic data and enhanced our competitive pricing analytics to include the search of item specifics in addition to title.
- eBay announced the launch of Dark Mode, a feature that provides a more comfortable viewing experience for users and can be enabled in the device settings, for eBay mobile apps on iOS and Android. This was the most requested app feature by customers, and eBay was one of the first e-commerce companies to implement the feature.
- eBay Motors mobile app launched escrow services to enable a safe, secure transaction via a new partnership with Escrow.com, along with additional chat features.
- Through its Gumtree Australia classifieds business, the acquisition of Cox Australia Media Solutions completed on June 1, 2020, combining the strength of Gumtree, CarsGuide.com.au and Autotrader.com.au to create an attractive car-buying platform for Australian consumers.
- In addition to the charitable donations reported during the company’s mid-quarter update in June, in the U.K., the company donated $2.1 million as part of the Charity Connect training program to upskill U.K. charities to boost their online sales, $650,000 to NHS Charities Together COVID Appeal, and $260,000 to the Stephen Lawrence Charitable Foundation, which works to build a fair and inclusive society.
Other Selected Financial and Operational Results
- Operating margin – GAAP operating margin increased to 28.7% for the second quarter of 2020, compared to 23.0% for the same period last year. Non-GAAP operating margin increased to 34.3% in the second quarter of 2020, compared to 29.2% for the same period last year.
- Taxes – The GAAP effective tax rate for continuing operations for the second quarter of 2020 was 26.2%, compared to 21.0% for the second quarter of 2019. The non-GAAP effective tax rate for continuing operations for the second quarter of 2020 was 15.7%, compared to 13.3% for the second quarter of 2019.
- Cash flow – The company generated $964 million of operating cash flow from continuing operations and $866 million of free cash flow during the second quarter of 2020.
- Capital returns – The company paid cash dividends of $112 million during the second quarter of 2020.
- Cash and cash equivalents and non-equity investments – The company’s cash and cash equivalents and non-equity investments portfolio totaled $5.8 billion as of June 30, 2020.
Business Outlook
- Third quarter 2020 — The company expects net revenue between $2.64 billion and $2.71 billion, representing Organic FX-Neutral growth of 14% – 17%, with GAAP earnings per diluted share from continuing operations in the range of $0.58 – $0.64 and non-GAAP earnings per diluted share from continuing operations in the range of $0.81 – $0.87.
- Full year 2020 — The company expects net revenue between $10.56 billion and $10.75 billion, representing Organic FX-Neutral growth of 12% – 14%, with GAAP earnings per diluted share from continuing operations in the range of $2.85 – $3.00 and non-GAAP earnings per diluted share from continuing operations in the range of $3.47 – $3.59.
- This guidance reflects management’s expectations for operational performance and the impacts seen in both of our Marketplaces and Classifieds platforms to date, but it is difficult to predict exactly how buyer behavior, retail channel shifts, and changes in the economic environment will affect our volume over time. The guidance we are providing assumes Classifieds results are included in the entire year. We will provide updates moving forward as appropriate.
