eBay reported financial results for its first quarter which ended March 31, 2022 with revenues of $2.5 billion, down 6% on an as-reported basis and down 5% on an FX-Neutral basis.
More importantly, the company’s forecast for this quarter (Q2) is below Wall Street expectations, resulting in the stock dropping in after-hours trading.
eBay First Quarter Financial Highlights
- Revenue was $2.5 billion, down 6% on an as-reported basis and down 5% on a foreign exchange (FX) neutral basis.
- Gross merchandise volume (GMV) was $19.4 billion, down 20% on an as-reported basis and down 17% on an FX-Neutral basis.
- GAAP net loss from continuing operations was $1.3 billion, or $(2.28) per diluted share primarily driven by the change in fair value of our equity investments.
- Non-GAAP net income from continuing operations was $625 million, or $1.05 per diluted share.
- GAAP and Non-GAAP operating margin of 27.9% and 32.4%, respectively.
- Generated $629 million of operating cash flow and $546 million of free cash flow from continuing operations.
- Sold a portion of our shares in Adyen for $551 million.
- Returned $1.4 billion to shareholders, including $1.3 billion of share repurchases and $129 million paid in cash dividends.
“Our team has delivered another strong quarter, at the high end of our expectations.”Jamie Iannone, Chief Executive Officer of eBgay
“Despite the current macro headwinds, we remain confident in the long-term strategy we laid out during our Investor Day in March. We are building an eBay for the future with an eye toward delivering long-term, sustainable growth. Our enthusiast buyers continue to shop and engage on eBay regularly, and our results to date demonstrate our focus category playbook is working,” added Iannone.
eBay Business Highlights
- eBay announced an agreement with Klarna to enable invoice and installment payment methods to buyers in Germany. The company began testing the new features with customers during the first quarter and expects to make it available to all German buyers in the second quarter.
- eBay launched its new digital wallet where customers can use proceeds from their sales to conveniently purchase their next item or pay their selling expenses.
- Promoted Listings delivered $222 million of revenue in the first quarter, down 1% on an as-reported basis and up 2% on an FX-Neutral basis.
- The company’s total advertising offerings generated approximately $267 million in revenue in the first quarter, representing roughly 1.4% of GMV.
Tech-Led Reimagination of the Platform
- In April, eBay announced the appointment of Eddie Garcia as Chief Product Officer.
- During the quarter, eBay launched its Authenticity Guarantee service for trading cards sold for $750+ in the US With this addition, the company now offers authentication in four key enthusiast collector categories, including sneakers, watches, handbags and trading cards.
- eBay expanded its authentication of luxury handbags to the UK and Australia. The company also expanded the number of brands covered by Authenticity Guarantee and began authenticating men’s bags in the US.
- eBay continued to see great traction in its luxury watch category, with high customer satisfaction leading to positive double-digit growth. Building on its current authentication service for watches over $2,000, eBay added the ability for buyers to request, for a fee, expert verification for watches valued between $1,000 and $2,000.
- In January, eBay reintroduced final value fees for sneakers over $100 in the US and growth momentum and high customer satisfaction continued. In eBay’s international markets, sneaker GMV also grew significantly faster than the rest of the business.
- The company continued to invest in full-funnel marketing for Parts & Accessories, including partnerships with leading influencers and enthusiasts to showcase eBay’s vast inventory selection, and has started to see modest gains in initial consideration.
- The company expanded its eBay Refurbished program to smartwatches, tablets, laptops and desktops from vetted sellers across major markets. eBay also launched the program in France and Italy.
- The company announced the eBay Vault, a 31-thousand square foot, secure storage facility and digital marketplace for trading cards and collectibles, with plans to expand into luxury goods. The eBay Vault will provide peace of mind and convenience for the company’s millions of buyers and sellers, and within a few years, eBay expects the Vault will hold up to $3 billion in assets, making it one of the largest stores of non-governmental assets in the world.
- eBay made significant changes towards modernizing its Stores experience, including a new storefront that provides sellers the ability to tell their story, showcase their brand and increase trust in their business. The company also optimized SEO for Stores to drive more free traffic, increased the prominence of Store inventory and made it easier for enthusiasts to find Stores throughout the buyer journey.
- To further support sellers and help them grow their buyer base, eBay more frequently encourages buyers to save sellers for future purchases. To date, this has driven an increase in the number of saved sellers by four times.
- The company launched a new eBay app messaging experience to better connect sellers to their buyers, improve the way sellers communicate and make it easier to manage messages.
- To reduce friction on cross-border transactions, in Q1 eBay enabled a new feature to give buyers the option to pay in their local currency in addition to the currency of the listing.
- In support of Ukraine, eBay is waiving Ukrainian seller fees, protecting sellers from late shipment penalties and negative feedback, and matching employee donations to organizations supporting Ukraine. In the US, UK, Canada and Australia, the company also launched a “Give at Checkout” campaign where customers can support Ukraine relief organizations.
- The eBay Foundation committed $11 million in grants to nonprofit organizations during the first quarter, furthering its mission to remove systemic barriers to entrepreneurship. In addition, over $2.4 million was raised in March from employee contributions and eBay Foundation matching gifts, many of which went to support Ukrainian relief efforts.
- eBay for Charity contributed over $36 million globally during the quarter, up 2% year-over-year.
- In recognition of the company’s ESG efforts, eBay was named to JUST Capital’s “The Just 100 List” in January, which evaluates companies for its efforts to combat climate change, diversity, equity and inclusion, employee wellness, local job creation and customer privacy.
- In January, eBay was also honored with a 2022 Employees’ Choice Award by Glassdoor, recognizing it as a best place to work among US companies with more than 1,000 employees.
Other Selected Financial and Operational Results
- Operating margin – GAAP operating margin decreased to 27.9% for the first quarter of 2022, compared to 31.9% for the same period last year. Non-GAAP operating margin decreased to 32.4% in the first quarter of 2022, compared to 37.3% for the same period last year.
- Taxes – The GAAP effective tax rate for continuing operations for the first quarter of 2022 was 18.8%, compared to 21.6% for the first quarter of 2021. The non-GAAP effective tax rate for continuing operations for the first quarter of 2022 was 16.5% (See Note 1).
- Cash flow – The company generated $629 million of operating cash flow and $546 million of free cash flow from continuing operations during the first quarter of 2022.
- Capital returns – The company repurchased approximately $1.25 billion of its common stock, or approximately 22 million shares, in the first quarter of 2022. The company’s total repurchase authorization remaining as of March 31, 2022 was $4.7 billion. The company also paid cash dividends of $129 million during the first quarter of 2022.
- Cash and cash equivalents and non-equity investments – The company’s cash and cash equivalents and non-equity investments portfolio totaled $6.3 billion as of March 31, 2022.
Note: (1) eBay uses a non-GAAP tax rate for evaluating its operating results. Based on the company’s current long-term projections, they are using a non-GAAP tax rate of 16.5%. This non-GAAP tax rate could change for various reasons including significant changes in its geographic earnings mix or fundamental tax law changes in major jurisdictions in which they operate.
eBay Business Outlook
eBay is providing the following guidance for continuing operations for the second quarter and full-year 2022.
|In billions, except per share data and percentages||Q2 2022 Guidance||Full Year 2022 Guidance|
|Revenue||$2.35 – $2.40||$9.6 – $9.9|
|Organic FX-Neutral Y/Y Growth||(9)% – (7)%||(6)% – (3)%|
|Diluted GAAP EPS||$0.61 – $0.65||$(0.25) – $(0.05)|
|Diluted Non-GAAP EPS||$0.87 – $0.91||$3.90 – $4.10|
eBay’s Board of Directors has declared a cash dividend of $0.22 per share of the company’s common stock. The dividend is payable on June 17, 2022 to stockholders of record as of June 1, 2022.
For full details on the eBay first-quarter earnings report, please visit the eBay investor relations site here.
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