Ebay Q1 Conference Call Notes
4-18-07: After listening to Ebay’s earnings conference call, we came away impressed with the management team. They sounded bullish and appear to have an excellent handle on their overall business units. It is apparent to us these executives has a solid plan to grow Ebay. From shopping.com, Paypal, Skype, Stubhub and their core auction business, every unit are firing on all cylinders. It is no wonder Ebay continues to do well, beating their Q1 numbers by 3 cents per share. Here are the main points from the conference call:
- The revenue for Q1 is solid, both top and bottom line revenue are up nicely. Revenue is up 52% and net profit is up 27%. This equates to a very strong earning and free cash flow.
- Forward Outlook is strong. In fact, Ebay raised its estimates.
- The company beat street’s view by 3 cents per share, reporting 27 cents versus the expected 24 cents per share. The estimates are from Reuter.
- During Q1, the company purchase 10 million shares through its stock buy back program.
- Recent acquisition contributed about 1% to the top line. This was mainly from Stubhub.com.
- Q1 Marketplace revenue is up in both U.S and international.
- Ebay added 12 million new users in Q1, bringing the total number of users to 322 million.
- Despite the impressive number, the U.S listing down is actually down by 2% compared to last year. However, international listing grew by 6%.
- The Ebay Motor business was down by 2% in Q1. However, management believes this business will grow in the coming quarters as new features have been added. No specific numbers were provided.
- The conversion rate also improved in Q1. People are buying at a greater rate.
- The European market continues to grow, except in Germany. The UK, France and Italy are growing at a healthy rate.
- To help improve the situation in Germany, Ebay plans to engage in more marketing campaigns. For instance, the company recently launched an onsite shopping cart to fuel user engagement.
- Shopping.com had a great quarter, solid revenue growth here in the U.S and internationally.
- Paypal unit enjoyed a solid quarter; 31% increased in revenue from prior year.
- Paypal also added10 million new accounts in Q1.
- Paypal has 80% market share in U.S, 79% in UK.
- Paypal cost increase by 5% compared to prior year, due to R&D.
- Skype also showed an improvement. In Q1, the company recorded over 1.5 billion minutes and appears to be growing strong. However, there were sequential decline in growth as the recent promotion for Skype expired.
- The main take away about Skype is in Q1, the unit is now profitable.
- Overall expense are going down. R&D expense are down 6.9% from prior year. G&A – down 20% from prior year.
- Ebay/Yahoo deal is an extension of the June of last year deal. Paypal will be feature on Yahoo more prominently moving forward. Icons will now appear on Yahoo Sponsored search results. Economics impact not yet known, but this should drive traffic to Ebay. It’s a positive move.
- Getting good traction from the search partnership with Yahoo and Google.
