EBay's Q1 revenue grows, but earnings fall

EBay's revenue grew in its first quarter, ended March 31, but net income fell slightly, the company announced this week.

Revenue in the first quarter of 2006 reached US$1.39 billion, an increase of 35 percent over 2005's first quarter, thanks to continued growth in the company's core online marketplace business and PayPal payment unit, eBay said.

However, net income fell to US$248.3 million, or US$0.17 per share, from US$256.3 million, or US$0.19 per share. On a pro forma basis, net income grew 24 percent to US$342.9 million, or US$0.24 per share.

Hurting eBay's bottom line in the first quarter was its adoption of accounting standard FAS 123(R) for stock-based compensation expenses, which reduced net income by US$58.3 million, or US$0.04 per share. This is the first quarter eBay used this accounting standard. EBay also had higher sales and marketing, product development and general and administrative expenses than in 2005's first quarter.

EBay matched the consensus expectation of financial analysts polled by Thomson Financial for both revenue and pro forma earnings per share.

The eagerly awaited eBay Express, a specialty site announced in January and meant to a offer shopping experience that is much simpler and quicker than on eBay.com's main marketplace, will be launched next week, Meg Whitman, the company's president and chief executive officer, said during a conference call.

Sellers have indicated in prior interviews that they are excited about eBay Express, because they see it as a potentially significant new channel that could attract buyers who either shop little or not at all on the main site. EBay Express will feature only fixed-price items, most of them new, from experienced sellers with outstanding track records. "It will give shoppers a quick and easy way to find items at a fixed priced for convenience-oriented buyers. EBay Express is generating a lot of excitement among our sellers," Whitman said.

EBay also plans to roll out new features and programs in the second quarter to increase the security of the shopping experience on its platform, Whitman said.

Revenue in eBay's marketplaces, where buyers purchase merchandise from sellers via auctions and fixed-price listings, grew 30 percent in the U.S. and 25 percent internationally for a combined US$1.02 billion. Meanwhile, PayPal revenue rose 44 percent to US$335.1 million, and revenue in the Skype VOIP communications unit increased 42 percent to US$35.2 million.

Confirmed registered users in eBay marketplaces increased 31 percent to 192.9 million, while active users, who are those who have bid, bought or listed an item in the previous 12-month period, increased 25 percent to 75.4 million. Listings rose 33 percent to 575.4 million. Meanwhile, gross merchandise volume, the total value of all sold items on eBay's trading platforms, increased 18 percent to US$12.5 billion.

On the PayPal front, accounts increased 47 percent to 105 million and total payment volume grew 41 percent to US$8.8 billion. Meanwhile, Skype closed the quarter with 94.6 million registered users.

Looking ahead, eBay expects net revenue to be in the range of US$1.37 billion to US$1.41 billion in the second quarter, and in the range of US$5.7 billion to US$5.9 billion for the whole year. The company expects earnings per share in the range of US$0.14 to US$0.16 in the second quarter, and in the range of US$0.65 to US$0.71 for the whole year.