eBay Earnings Show Cross-Currents Of Its Business

As it is with most things surrounding eBay these days, its first quarter earnings announced late Wednesday (April 29) were complicated. The firm’s analyst call started with its new CEO who has been on the job for three days after being placed under pressure from an activist investor group. It then detailed a series of cross-currents in its various businesses, all adding up to some modest gains for the first three months of the year.

Top line results made Wall Street happy with the company’s adjusted earnings per share of 77 cents, which was better than the estimate of 72 cents. eBay’s revenue of $2.37 billion was below analysts’ estimates of $2.38 billion. Adjusted per-share earnings came in 19 percent higher than the 65 cents in the first quarter of 2019. Revenue for the quarter was 2 percent lower compared to last year; operating income, at $485 million, is a 6 percent drop year over year from $516 million.

“As we look at Q1, I am pleased that we delivered on all of our commitments for the quarter, with key metrics such as Buyers, GMV and Revenue performing at or better than our expectations,” said interim CEO Scott Schenkel. “Over the past several months, we have remained focused and clear-eyed about the strategic direction of the company and have driven substantial changes to position the business for sustainable and profitable long-term growth.”

Schenkel was referring to the activist investor spat that has the company’s board of directors at odds over stripping the company down from its hydra head of advertising, classifieds and its core marketplace to just the latter. That core business was actually down in the U.S. by 4 percent year-over-year, with a rise coming during the last two weeks of the quarter as shelter-in-place orders took effect across the globe. The company indicated that it has seen a surge of marketplace activity during April, which it expects to show up in its second quarter earnings.

“We saw an immediate change in the growth trajectory in marketplace as there was an initial surge in home confinement categories in late March which then expanded in April across all verticals,” said Schenkel, who added that since the start of April the eBay marketplace has been growing over 20 percent in our major on platform markets every week.

However, the area that eBay is trying to get out of — classifieds — weighed on the first quarter results. Just as the marketplace rose with the early stages of the coronavirus pandemic, its classified business sunk 3 percent from 2019 as several categories including automotive, dropped. The company expects that business to put pressure on its Q2 earnings as well. Advertising from third parties dropped, although that is expected to rebound by year’s end.

The company also spend a substantial amount of capital on what it called COVID-19 related expenses. The eBay Foundation has donated over $3 million in grants to nonprofits around the world, along with $500,000 in support to Silicon Valley Strong. Through eBay for Charity, it matched up to $1 million in contributions made by U.S. customers who donated a portion of sales to Feeding America, Direct Relief and Opportunity Fund. It also offered to defer fees for “hundreds of thousands” of eBay sellers and provided eBay Store subscribers with up to 100,000 extra listings for free. The company also removed or blocked over 15 million listings to date globally for false health claims or price gouging.

The earnings announcement was the first for new CEO Jamie Iannone, who was most recently operating chief of Walmart eCommerce. He made a brief statement but nothing consequential. Iannone worked at eBay as a vice president and in other roles from 2001 to 2009.

During the quarter, the company closed a sale of its StubHub ticket marketplace to Viagogo, which brought net proceeds of $3.1 billion. Activist investor Elliot Management had pushed for its sale, along with other restructuring measures. Devin Wenig stepped down as chief executive in September, citing friction between him and the board of directors.