eBay posted its third-quarter 2008 earnings after market close today. Here's an excerpt of its press release, full release on its website here (in PDF format). Conference call with analysts commences at 5 pm Eastern.
SAN JOSE, Calif.--(BUSINESS WIRE) - eBay Inc. (Nasdaq:EBAY) today reported financial results for its third quarter ended September 30, 2008. The ecommerce company posted third quarter revenue of $2.12 billion, up $228 million from the same period last year. Net income on a GAAP basis was $492 million, or $0.38 per diluted share, and non-GAAP net income was $592 million, or $0.46 per diluted share.
"Overall, we are pleased with the performance of the portfolio this past quarter," said eBay Inc. President and CEO John Donahoe. "We took a number of steps during the quarter to further strengthen our business and better align our cost structure to invest and compete. We will continue to stay focused on connecting consumers on our various ecommerce platforms, maintaining financial discipline and capitalizing on new opportunities for growth."
eBay continues to benefit from an increasingly diversified portfolio of businesses. While Marketplaces transaction revenue still represents a majority of revenue for the company, revenue growth rates were helped by growth in PayPal, Skype and global classifieds. The company's global footprint helped it benefit year over year from strength in other currencies relative to the U.S. dollar.
GAAP operating margin increased to 24.7% for the quarter, compared to (49.6%) for the same period last year. Non-GAAP operating margin increased to 31.8% for the quarter, compared to 31.4% for the same period last year. The year-over-year increase in non-GAAP operating margin is due primarily to higher margins from each of the business units, which more than offset the growth from lower-margin businesses, primarily PayPal and Skype.
eBay Inc. generated $693 million of operating cash flow during the third quarter. Free cash flow during the quarter was $543 million.
Quarterly Business Unit Discussion
Marketplaces
The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a solid third quarter, generating $1.38 billion in revenue, representing 4% year-over-year growth, 53% of which was generated outside the U.S. The business unit saw strong growth in advertising, StubHub and classifieds. Revenue from our text and graphical advertising partnerships grew 127% year over year. Gross merchandise volume was $14.28 billion for the quarter, a decrease of 1% over the third quarter of 2007. Marketplaces continues to focus on customer-facing initiatives designed to make transactions on the eBay platform safer and its various global sites easier to use, while enhancing selection in a uniquely eBay way.
Payments
PayPal had a strong quarter with $597 million in net revenue, an increase of 27% year-over-year. Net total payment volume (TPV) for the quarter was $14.81 billion, an increase of 28% year over year. The net revenue and net TPV growth was driven primarily by the continued excellent growth of merchant services globally and increased penetration on eBay. Global active registered accounts increased to 65.3 million, representing 19% year over year growth. Globally, PayPal will continue to focus on greater penetration into the Marketplaces business and the acquisition of new merchants.
Communications
Skype continued its robust growth trajectory, reporting $143 million in revenue for the quarter, representing 46% year-over-year growth. Skype added 32 million registered users in the quarter, ending the period with more than 370 million registered users around the world. In addition to growing its user base, Skype is focused on product strategies to enhance customer engagement.
