No Signs of a Slowdown as eBay’s Revenues Jump 23 Percent in Q2

EBay’s shares rallied today in after-hours trading after the company reported second-quarter results that included a revenue increase of 23 percent and profits of more than double.

Despite economic uncertainty in Europe, eBay, which has been busy fixing its core e-commerce business and betting big on the next generation of payments, was expected to report strong results today.

The company reported a profit of $692 million, increasing 144 percent year over year, on revenues of $3.4 billion. On a non-GAAP basis, the company reported a profit of 56 cents a share, which was up a more modest 16 percent due to strong top-line growth, partially offset by increased investments in the shopping experience and acquisitions.

After an already strong day, eBay’s shares continued to soar in late trading, increasing another 5.6 percent, to hover near $42.71.

The results easily beat analyst expectations, which were more bullish than the company’s own estimates. In a survey by FactSet Research, analysts were estimating that eBay would earn 55 cents a share, excluding one-time items, on revenue of $3.36 billion.

A big question was whether the company was going to maintain its outlook for the third quarter, given currency struggles in Europe. But signs are good. EBay is forecasting revenues in the range of $3.3 billion to $3.4 billion and a profit of 53 cents to 55 cents a share, excluding some items, to closely match analyst expectations of earning 55 cents a share on $3.42 billion in sales. It also did not adjust full-year guidance, which is expecting revenue in the range of $13.8 billion to $14.1 billion, and GAAP earnings per share of $1.91 to $1.96.

In a statement, eBay’s CEO John Donahoe, said: “Our entire company is strong, but we’re particularly pleased with eBay Marketplaces, which delivered its strongest organic growth in gross merchandise volume, excluding vehicles, since 2006.”

He also said the company is seeing a “staggering surge” in mobile shopping and that the company now expects eBay and PayPal to each transact $10 billion in mobile volume in 2012 — more than doubling 2011 numbers.

A quick update on the company’s three core divisions:

  • EBay Marketplaces: Contributed $1.8 billion in net revenue, jumping 9 percent year over year.
  • PayPal: Contributed $1.4 billion in net revenue, jumping 26 percent.
  • GSI: The division, which was acquired in the second quarter a year ago, contributed $221 million in revenue.

Notes from the Q2 earnings conference call:

  • John Donahoe jumps on the call, saying they had another great quarter and that every part of the company is strong.
  • A reflection point is occurring in retail, mobile is becoming the digital nexus of people’s lives. We now expect eBay and PayPal mobile to each transact $10 billion this year.
  • This is Donahoe’s mantra that he repeats on a regular basis: Retailers of all sizes need partners to help them compete in this world, and this is our focus: Enabling commerce. We will not compete with them.
  • PayPal’s global reach is a competitive advantage; more than half of the revenue came from outside the U.S., he said.
  • PayPal added more than one million active accounts in Q2, ending with 113 million active accounts. In Q2, Abercrombie & Fitch and Joseph A. Banks are aggressively rolling out PayPal offline to hundreds of their stores.
  • Now on to Marketplaces: Donahoe says this was our best year since 2006. EBay is revitalized, we are more relevant today than ever to buyers and sellers. Our fixed price format grew 20 percent in the quarter, and is well over 60 percent of sales — that means a majority of items are sold for full price, and not at auction.
  • 48 percent of transactions shipped free, up 11 points from the prior year.
  • EBay apps have been downloaded 90 million times, sellers are listing almost two million devices every week, and a handbag is purchased every 30 seconds.
  • Closed one acquisition in the quarter, which might be referencing the purchase disclosed yesterday, but no meaningful M&A activity is expected in the near term, the company says.
  • Opening it up to Q&A.
  • On mobile and when and where consumers are using it: Donahoe says lots of male users are buying auto parts while they are under the hood of the car, but also consumers are using their devices to shop or investigate while walking down the street. He says with PayPal it’s the same thing. PayPal is being used to close transactions on the eBay mobile apps, but it’s growing elsewhere, too, as retailers find it useful to add PayPal to their check-out processes.
  • With respect to online sales tax, eBay’s position remains the same: The company is working with authorities to lessen the burden on small sellers, so they don’t have to jump through the same administrative hoops as larger retailers.

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