eBay Inc (EBAY)’s Q4 2014 Earnings Call Transcript

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Before I talk more about 2014 Q4, let me just take a moment to provide context as we head over to 2015, an important year of transition for our company. With the planned separation of eBay and PayPal in 2015, we are moving forward with clarity and speed. We’re taking aggressive, decisive actions to address both opportunities we see and challenges we face. At the same time we’re creating sharper, strategic focus at eBay and PayPal. And we’re implementing more competitive cost structures for each business. All of these actions are designed to set up eBay and PayPal to succeed. We remain deeply committed in doing what’s best for eBay and PayPal and to delivering sustainable value for shareholders. And we believe more strongly than ever that separation is the right path for our company.

Now, let’s take a look at the results for the quarter. We enabled $72 billion of commerce volume in the fourth quarter up 21%. Mobile continues to be a major contributor. For Q4, mobile commerce volume $17 billion of 59%, and mobile now represents 23% of enabled commerce volume. Overall, revenue was up 9% Q4 and non-GAAP EPS was up 10%. eBay and PayPal both generated double digit customer growth with PayPal reaching nearly 162 million active registered accounts and eBay exceeding 155 million active buyers.

At PayPal, Dan Showman joined in Q4 as president and CEO designee and we’re excited to have him on our leadership team. Dan is quickly immersing himself in all aspects of PayPal’s business and providing strong, focused leadership on 2015, prior to this, and positioning PayPal for continued competitive success.
PayPal had another strong quarter, finishing a very strong year. Merchant Services TPV grew 36% on an FX neutral basis in Q4 and revenue was up 18% on an FX neutral basis.

Throughout the holiday season, PayPal was strong consumer engagement adding nearly 5 million active accounts and processing record payments volume. PayPal continues to deliver great product experiences that offer choice and flexibility for consumers and help merchants grow their business. For example, PayPal’s One Touch has continued its international expansion effort. And for both consumers and merchants, PayPal extended its credit offers including adding instalment payment options. And PayPal working capital, launched in Australia and the UK, offering merchants more convenient ways to invest in and grow their businesses. In a rapidly changing global payments environment, we believe that PayPal’s in position to leverages global footprint, digital payments leadership and unique competitive strengths.
Turning to eBay Market Places. Q4 was disappointing. Significant events in 2014 have disrupted our ecosystem and overwhelmed the progress making on a number of fronts, impacting our performance. We’ve experienced ecosystem disruptions before and they simply take time to work through and correct.

Here’s what happened and here’s what we’re doing about it. First, the password reset in SEO changes significantly impacted traffic, which did not recover in the second half as expected. eBay’s loyal customers are back following the reset of our passwords, but our more occasional customers have not returned as quickly as expected in Q4. And the SEO changes significantly diminished the base present in natural search results which impacted new year’s growth in the second half and had accumulative effect on Q4’s result. Second, a stronger dollar impacted eBay’s fast-forward trade, depressing US experts and affecting Q4 results for North America.

In total, we simply underestimated the combined effect of these events on eBay’s ecosystem. And these events occurred in a more competitive environment where e-commerce and omni-channel players are upping their game. But these are not excuses and this is not business as usual. In this environment, we need to sharpen our strategic focus and execute better.

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