The decent news: eBay did its job in Q3, hitting diminished expectations. Net revenue of $2.11 billion was at the low-end of previous forecasts, while non-GAAP earnings of $.46 per share exceeded estimates of $.41 share.
But outlook for the Q4 looks bad. Non-GAAP EPS is expected to be between $.39-$.41, well below current expectations of about $.47. Expected revenue of $2.02b-$2.17B is well below current estimates of $2.43B. Note that this excludes an estimated $70-$80 million in restructuring charges associated with its latest layoff announcement.
Shares of eBay are off again after hours, bringing the shares down around 20% for the day. We’ll be listening on the call for more. Stay tuned. (In the meantime, while we’re waiting, here’s a little silver lining: Skype revenue hit $143 million, growing 46% from last year! Now can they find a buyer for it?)
Conference call notes:
5:00: Hide the children, some of the numbers discussed will be non-GAAP, and outlook can always change!
5:05: John Donahue: Q3 results were in-online on revenue and exceeded on bottom line. (And that may be the last positive statement for the entire call.) Strengthening through acquisitions, while “proactively streamlining” by layoffs. “Strong results in a very challenging external environment, an environment we expect to continue in fourth quarter and beyond.”
5:07: “Challenging times can create opportunities for companies that are prepared to lead” (no mention of a certain Chinese character). Opportunity: “We offer a low cost way for people to earn money.” Another plus: Strong balance sheet.
5:08: Starting with PayPal: Generating 28% of total revenues. Payment volume grew 12% in Q3. “People love PayPal.” BillMeLater: We will have online #1 and #2 payment brands.
5:10: StubHub, Advertising, etc. growing faster than e-commerce. Classifieds: “In just four years, we have built classifieds into a global business generating a quarter billion in revenue.”
5:12: Skype: registered users up 51% in the quarter. Shows the power of a “free voice and free video product in this challenging economy.”
5:13: Now to the core eBay transaction business. 3Q not what we would have liked, but we’re confident. “Need to drive bold changes.” We’re making eBay safer (did that back in March). Are these changes working? “We believe that we’re beginning to drive a better buyer experience… more and more buyers are reporting positive experiences.” Highest rated sellers seeing faster growth. These sellers saw their same-store sales grow 23%. Sellers with lower ratings are seeing a decline — we’re seeing a share shift within ebay.
5:16: But! None of this has yet translated into a gross increase in buyer activity.
5:17: Promoting fixed price at the expense of auctions? No: it’s about choice.
5:20: CFO, Bob Swan, taking over, running down financials.
5:22: EPS beat was couresty of lower tax rates and tight cost controls. Margins improved in all three business units.
5:23: Consumers have reined in their spending. Vehicles decellerated by 12 points from Q2-Q3. Non-vehicles started to decelerate sharply in mid-August. Also a slowdown at StubHub. Not seeing anything good yet for Q4, hence the ugly holiday outlook.
5:24: Shopping search engine Shopping.com nailed by search engine tweaks (read: Google is not interested in giving free traffic to its rivals), hurting marketplace revenue by “about a point”.
5:26: Average selling price down 7% in the quarter, as consumer look for cheaper stuff.
5:29: First quarter that PayPal’s off-eBay volume was larger than its on-eBay volume.
5:33: Outlook: It’s weak because the consumer is. Go figure.
5:35: First question: Your guidance assumes no Christmas! Answer: Yep, consumer is weak.
5:39: When will you restructure to unlock value (The question on everyone’s mind)? Answer: still seeing strong synergies between eBay and PayPal. There’s nothing about being part of our portfolioholding PayPal back. On Skype? “Obviously, the more we let it standalone, the more it seems to deliver fantastic results… right now it’s not a distraction — we’ll continue to assess it’s role in the portfolio.”
5:43: GMarket? Will continue to main flexibility to grow business via acquisition. Areas: geographic strengtheny, adjacencies, technology that strengthens our core business.
5:47: Currency hedges? “For the most part, our hedging strategy are entered into at the beginning of the quarter for the next 90 days”
5:58: Share buybacks or dividends? A lot of our cash is offshore, so it’s not that easy to use our balance sheet for these purposes. Second: With the acquisition of BillMeLater, as we will be using both our cash and available line of credit, we will have net borrowings here in the US. We’re always looking for best ways to invest and grow. Bottom line: don’t expect a fat dividend anytime soon.
6:00 And that’s it, classical music.
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