GSI Q3 Revenues Advance 16 Percent

EBay Inc., the parent of GSI Commerce, reported that revenue for the third quarter ended Sept. 30, increased 15 percent to $3.4 billion. Net income on a GAAP basis of $597 million, or 45 cents per diluted share, and non-GAAP net income of $718 million, or 55 cents per diluted share. GAAP and non-GAAP net income were up 22 percent and 14 percent, respectively, year over year due primarily to strong top-line growth. Segment margin in each of our three business segments expanded on a year-over-year basis.

“We had a great third quarter across our company, with Marketplaces and PayPal accelerating customer growth,” said John Donahoe, eBay Inc. President and CEO. “Mobile continues to be a game changer for us, and we continue to be a clear leader in mobile commerce and payments. With our strong portfolio and global reach, we are consistently demonstrating our capabilities to help consumers shop anytime, anywhere. And we are enabling retailers of all sizes to compete in a rapidly evolving, multichannel commerce environment.”

PayPal delivered a strong third quarter performance. It ended the quarter with 117.4 million active registered accounts, a 14 percent increase over the third quarter of 2011. Revenue increased 23 percent year over year and net total payment volume (TPV) grew 20 percent year over year to $35.2 billion. PayPal continues to innovate on a global scale while expanding its addressable market to offline. PayPal's offline initiative is following a three-pronged approach: soliciting direct merchant relationships; partnering with Discover to access its 7 million retail locations in the United States; and using a direct and indirect approach to distribute its small business payment solution, PayPal Here, both domestically and internationally.

Marketplaces delivered another strong quarter with accelerating user growth. Gross merchandise volume (GMV), excluding vehicles, increased 11 percent year over year to $16 billion in the third quarter of 2012. Marketplaces revenue increased 9 percent year over year, driven by strong growth in the United States and Asia Pacific. Active user growth continued to accelerate during the quarter, reaching 10 percent year over year, the fastest growth since 2007, with 800,000 new users coming from mobile. This helped boost sold items growth, which was up 19 percent year over year in the third quarter of 2012. U.S. GMV, excluding vehicles, increased 16 percent year over year, while International GMV, excluding vehicles, increased 8 percent year over year, in both cases driven by investment in the customer experience, growth of mobile as a channel and continued strong performance in key verticals. Downloads of eBay's suite of mobile apps have now surpassed 100 million globally, becoming an increasing point of differentiation and engagement.

GSI revenue increased 12 percent year over year to $226 million, driven primarily by a 16 percent year over year increase in global ecommerce (GeC) merchandise sales. Same store sales grew 19 percent year over year, reflecting strong ecommerce sales from retail clients. GSI is winning new clients and bringing eBay's innovative technology solutions and services to merchants of all sizes.
 

Third Quarter 2012 Financial Highlights (presented in millions, except per share data and percentages) (1)
	Third Quarter
	2012	2011	Change
GAAP
Net revenue	$3,404	$2,966	$438	15%
Net income	$597	$491	$106	22%
Earnings per diluted share	$0.45	$0.37	$0.08	21%
Non-GAAP
Net income	$718	$628	$90	14%
Earnings per diluted share	$0.55	$0.48	$0.07	14%
	Third Quarter
	2012	2011	Change
Business Units
Payments
Net revenue	$1,367	$1,107	$260	23%
Net total payment volume	$35,159	$29,282	$5,877	20%
Merchant Services	$23,704	$19,314	$4,390	23%
On eBay	$11,455	$9,968	$1,487	15%
Marketplaces
Net revenue	$1,806	$1,653	$153	9%
Gross merchandise volume (GMV), excl. vehicles	$16,281	$14,666	$1,615	11%
U.S. GMV	$6,479	$5,588	$891	16%
International GMV	$9,801	$9,078	$723	8%
GSI
Net revenue	$226	$202	$24	12%
GeC Merchandise Sales	$698	$601	$97	16%
(1) Certain amounts may not add/subtract due to rounding and may not recalculate using the rounded dollar amounts provided.

Other Selected Financial Results

    Operating margin – GAAP operating margin increased to 19.6 percent for the third quarter of 2012, compared to 18.1 percent for the same period last year. Non-GAAP operating margin increased to 26.3 percent in the third quarter, compared to 25.3 percent for the same period last year.
    Taxes – The GAAP effective tax rate for the third quarter of 2012 was 11 percent, compared to 20 percent for the third quarter of 2011. The decrease was due primarily to increased earnings in low tax jurisdictions and the favorable impact of discrete items, primarily related to stock-based compensation. For the third quarter of 2012 and 2011, the non-GAAP effective tax rate was 20 percent and 21 percent, respectively.
    Cash flow – The company generated $1.2 billion of operating cash flow and $792 million of free cash flow during the third quarter of 2012.
    Stock repurchase programs – The company repurchased approximately $47 million of its common stock in the third quarter of 2012.
    Debt issuance – The company issued senior unsecured notes in an aggregate principal amount of $3 billion during the third quarter of 2012.
    Cash and cash equivalents and non-equity investments – The company's cash and cash equivalents and non-equity investments portfolio totaled $10.8 billion at September 30, 2012, up from $7.5 billion at December 31, 2011.

Business Outlook

    Fourth quarter 2012 – eBay expects net revenues in the range of $3,850 – $4,000 million with GAAP earnings per diluted share in the range of $0.55 – $0.58 and non-GAAP earnings per diluted share in the range of $0.66 – $0.69.
    Full year 2012 – eBay now expects net revenues in the range of $13,950 – $14,100 million with GAAP earnings per diluted share in the range of $1.95 – $1.99 and non-GAAP earnings per diluted share in the range of $2.32 – $2.35.