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EBay Tops Expectations All Around in 2021

·4 min read

E-commerce platform eBay Inc. (NASDAQ:EBAY) reported its latest round of earnings results on Wednesday. The company booked better-than-expected results for its fourth quarter and full year ended Dec. 31, 2021. While there were gains, shares dropped in the wake of disappointing guidance; eBay expects flat revenue growth for both the March quarter and the remainder of 2022.

For the fourth quarter, revenue was $2.6 billion, up 5% on an as-reported basis and up 5% on a foreign exchange neutral basis. Gross merchandise volume was $20.7 billion, down 10% on an as-reported basis and down 11% on a foreign exchanged neutral basis. The GAAP net loss from continuing operations was $893 million, or $1.47 per diluted share. Non-GAAP net income from continuing operations was $647 million, or $1.05 per diluted share. The GAAP and non-GAAP operating margins were 26.3% and 31.6%, respectively.

In addition, the online global marketplace generated $475 million of operating cash flow and $372 million of free cash flow from continuing operations. It also returned $3.1 billion to shareholders, consisting of $3.0 billion of share repurchases and $107 million paid in cash dividends.

Annual active buyers declined by 9%, for a total of 147 million global active buyers. Annual active sellers declined by 8%, for a total of 17 million global active sellers.

Top-line guidance is what concerns Wall Street. For the March quarter, the company is forecasting that revenue will be between $2.43 billion and $2.48 billion, a drop of 5% to 7% once adjusted for currency, and non-GAAP earnings of $1.01 to $1.05 per share. Analysts had predicted $2.62 billion in revenue and $1.10 in earnings per share.

The share price finished Wednesday at $54.59, a dip of 1.02%, or 56 cents per share. After hours, the stock price fell to $50.35, a loss of 7.77%.

Over the past few years, eBay has been systematically selling off non-core operations, Barrons reported. In the latest quarter, eBay completed the sale of its Korean business to eMart for $3 billion, while retaining a 20% stake, and closed the sale of its online classified ads business Adevinta ADE-3.70% for over $2.3 billion to investment firm Permira, trimming its stake to 33%. Those and other transactions have refocused the company on its core Marketplace business, which isnt growing the way investors would like.

For all of 2021, revenue was $10.4 billion, up 17% on an as-reported basis and up 15% on a foreign exchanged neutral basis, the company said in the release. Gross monthly volume (GMV) was $87.4 billion, flat on an as-reported basis and down 3% on a foreign exchanged neutral basis. GAAP net income from continuing operations was $252 million, or $0.38 per diluted share. Non-GAAP net income from continuing operations was $2.7 billion, or $4.02 per diluted share. The GAAP and non-GAAP operating margins were 28.1% and 33.4%, respectively.

The San Jose, California-based company generated $3.1 billion in operating cash flow and $2.6 billion of free cash flow from continuing operations. Management also repurchased approximately $7.0 billion of common stock and paid $466 million in cash dividends for the full year.

"Rounding out a very strong year, I'm proud of our team for delivering yet another solid quarter. By investing in our strategy to drive sustainable growth, we increased customer satisfaction, improved the seller and buyer experience, and returned value to our shareholders," said Jamie Iannone, CEO of eBay, in a statement. "During the quarter, we completed our multi-year payments transition, and generated growth in both our advertising business and focus categories. As we continue to accelerate our strategy, we are well positioned for future growth."

Following the completion of the payments migration, eBay updated its definition of GMV to align with customer money flows on its platform. GMV now includes all paid transactions on its platforms inclusive of shipping fees and taxes. The company also restated its historical metrics to reflect the updated definition.

Also during 2021, the company completed the sale of 80.01% of eBay Korea to eMart for approximately $3.0 billion and retained 19.99% interest, valued at approximately $725 million as of the end of the quarter. It also completed the sale of approximately 135 million shares of its Adevinta stock to Permira for over $2.3 billion, reducing eBay's ownership of Adevinta to 33%.

EBay also acquired Sneaker Con's authentication business, Sneaker Con Digital, with operations in the U.S., U.K., Canada, Australia and Germany. With the acquisition, the company has increased the scale and flexibility of its operations while further empowering its community to buy and sell footwear with total confidence.

This article first appeared on GuruFocus.