EBay Inc (EBAY) Expects To Close The Year With $4B In Free Cash Flow


EBay Inc (NASDAQ:EBAY) seems to be facing the pressure from every quarter, though its EPS might have topped the Street analysts’ estimations in the first quarter. For instance, its organic revenue growth on a year-over-year basis has been slowing for the second consecutive quarter in the March quarter. It looked volatile in the last six quarters. Another example was the transaction revenue in the payments division, which fell in the first quarter from the December quarter. In the preceding quarters, it was recording continuous growth.

Transaction Revenue

eBay Inc (NASDAQ:EBAY)’s transaction revenue in the payments segment in the first quarter was $1.94 billion, which dipped 2.7%, from $1.99 billion in the fourth quarter. The seasonality factor may not hold well since, in the year-ago quarter, it was able to improve it by 40 basis points. In the last six quarters, it recorded transaction revenue from the payment division as follows: $1.69 billion in the fourth quarter of 2014, $1.7 billion in quarter one, $1.74 billion in quarter two, $1.78 billion in quarter three, $1.99 billion in quarter four and $1.94 billion in the first quarter of 2015. The overall transaction revenue also slipped quarter-over-quarter by 2.5%, to $2.108 billion.

Transaction RevenueOn the organic growth side, the online auctioneer achieved 9% in the first quarter, compared to a 10% uptick in the fourth quarter and 11% in the third quarter of the last year. In the second quarter of 2014, its organic growth was 10%, dropping from 13% recorded in the preceding two quarters. On a reported basis too, the company’s growth has slowed down to 4%, from 9% in the fourth quarter and 14% in the first quarter of the previous year.

Cash Flow

eBay Inc (NASDAQ:EBAY)’s free cash flow has been witnessing a downtick. Its free cash flow witnessed a 14% drop, to $829 million in the March quarter, and represented 19% of revenue. In comparison, the year-ago quarter had a free cash flow of $968 million and accounted for 23% of revenue. In the fourth quarter, its free cash flow was $1.27 billion and represented 26% of revenue.

Ebay FCFThe company’s capital expenditure has also been lower in these periods. For instance, its CAPEX was 7% of revenue in the March quarter of the current year, while it was 5% in the previous year quarter. In the fourth quarter it was 8%.

Earnings & Revenue

eBay Inc (NASDAQ:EBAY) reported net income of $626 million, or earnings of 51 cents a share in the first compared. In comparison, it suffered a net loss of $2.33 billion, or a loss of $1.82 a share in the year-ago quarter. On a non-GAAP basis, its profit would have increased 5%, to $943 million, from $899 million. Similarly, its EPS would have advanced 10%, to 77 cents a share, from 70 cents a share in the same quarter last year.

Ebay RevenueThe company generated net revenue of $4.45 billion, up 4%, from $4.26 billion in the previous year quarter. Its enabled commerce volume jumped 16%, to $67.76 billion, while gross merchandise value dipped 2%, to $20.2 billion in the first quarter. Cash and cash equivalents at the end of the quarter were $5.47 billion.

Outlook

Moving ahead, eBay Inc (NASDAQ:EBAY) guided $4.4 – $4.5 billion of net revenue for the second quarter. It looks to achieve adjusted EPS of 71 – 73 cents a share in the June quarter. Similarly, for the full year, it projects adjusted EPS of $3.05 – $3.15 and revenue of $18.35 – $18.85 billion. The online auctioneer expects to close the year with free cash flow of $4 billion.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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