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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019
or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______
   
Commission file number 001-37713
 
ebaynotma03.jpg
 
 
EBAY INC
 
(Exact name of registrant as specified in its charter)
 
 
 

Delaware
 
77-0430924
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
 
 
 
2025 Hamilton Avenue
 

San Jose
,
California
 
95125
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(408) 376-7008
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of exchange on which registered
Common stock
EBAY
The Nasdaq Global Select Market
6.00% Notes due 2056
EBAYL
The Nasdaq Global Select Market
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  
As of July 15, 2019, there were 838,763,599 shares of the registrant’s common stock, $0.001 par value, outstanding, which is the only class of common or voting stock of the registrant issued.
 



PART I: FINANCIAL INFORMATION
Item 1:
Financial Statements
eBay Inc.
CONDENSED CONSOLIDATED BALANCE SHEET
 
June 30,
2019
 
December 31,
2018
 
(In millions, except par value)
 
(Unaudited)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,508

 
$
2,202

Short-term investments
2,969

 
2,713

Accounts receivable, net
797

 
712

Other current assets
1,570

 
1,499

Total current assets
6,844

 
7,126

Long-term investments
1,936

 
3,778

Property and equipment, net
1,573

 
1,597

Goodwill
5,185

 
5,160

Intangible assets, net
94

 
92

Operating lease right-of-use assets
670

 

Deferred tax assets
4,468

 
4,792

Other assets
399

 
274

Total assets
$
21,169

 
$
22,819

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
2,063

 
$
1,546

Accounts payable
303

 
286

Accrued expenses and other current liabilities
2,515

 
2,335

Deferred revenue
178

 
170

Income taxes payable
150

 
117

Total current liabilities
5,209

 
4,454

Operating lease liabilities
519

 

Deferred tax liabilities
2,684

 
2,925

Long-term debt
7,243

 
7,685

Other liabilities
1,408

 
1,474

Total liabilities
17,063

 
16,538

Commitments and contingencies (Note 12)

 


Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; 3,580 shares authorized; 842 and 915 shares outstanding
2

 
2

Additional paid-in capital
15,911

 
15,716

Treasury stock at cost, 845 and 763 shares
(29,396
)
 
(26,394
)
Retained earnings
17,125

 
16,459

Accumulated other comprehensive income
464

 
498

Total stockholders’ equity
4,106

 
6,281

Total liabilities and stockholders’ equity
$
21,169

 
$
22,819


The accompanying notes are an integral part of these condensed consolidated financial statements.


2


eBay Inc.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
 
(In millions, except per share amounts)
 
(Unaudited)
Net revenues
$
2,687

 
$
2,640

 
$
5,330

 
$
5,220

Cost of net revenues
630

 
597

 
1,231

 
1,156

Gross profit
2,057

 
2,043

 
4,099

 
4,064

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
817

 
838

 
1,559

 
1,594

Product development
322

 
352

 
619

 
686

General and administrative
274

 
368

 
583

 
638

Provision for transaction losses
71

 
66

 
143

 
138

Amortization of acquired intangible assets
12

 
13

 
25

 
23

Total operating expenses
1,496

 
1,637

 
2,929

 
3,079

Income from operations
561

 
406

 
1,170

 
985

Interest and other, net
(51
)
 
301

 
13

 
269

Income before income taxes
510

 
707

 
1,183

 
1,254

Income tax provision
(107
)
 
(69
)
 
(259
)
 
(209
)
Income from continuing operations
403

 
638

 
924

 
1,045

Income (loss) from discontinued operations, net of income taxes
(1
)
 
4

 
(4
)
 
4

Net income
$
402

 
$
642

 
$
920

 
$
1,049

 
 
 
 
 
 
 
 
Income per share - basic:
 
 
 
 
 
 
 
Continuing operations
$
0.47

 
$
0.64

 
$
1.05

 
$
1.04

Discontinued operations

 

 

 

Net income per share - basic
$
0.47

 
$
0.64

 
$
1.05

 
$
1.04

 
 
 
 
 
 
 
 
Income per share - diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.46

 
$
0.64

 
$
1.04

 
$
1.03

Discontinued operations

 

 

 

Net income per share - diluted
$
0.46

 
$
0.64

 
$
1.04

 
$
1.03

 
 
 
 
 
 
 
 
Weighted-average shares:
 
 
 
 
 
 
 
Basic
860

 
992

 
880

 
1,001

Diluted
867

 
1,004

 
887

 
1,016


The accompanying notes are an integral part of these condensed consolidated financial statements.



3


eBay Inc.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
 
(In millions)
 
(Unaudited)
Net income
$
402

 
$
642

 
$
920

 
$
1,049

Other comprehensive income, net of reclassification adjustments:
 
 
 
 
 
 
 
Foreign currency translation gain (loss)
(20
)
 
(325
)
 
(52
)
 
(193
)
Unrealized gains (losses) on investments, net
16

 
(2
)
 
56

 
(38
)
Tax benefit (expense) on unrealized gains (losses) on investments, net
(5
)
 

 
(15
)
 
10

Unrealized gains (losses) on hedging activities, net
11

 
137

 
(30
)
 
108

Tax benefit (expense) on unrealized gains (losses) on hedging activities, net
(2
)
 
(29
)
 
7

 
(23
)
Other comprehensive income/(loss), net of tax

 
(219
)
 
(34
)
 
(136
)
Comprehensive income
$
402

 
$
423

 
$
886

 
$
913


The accompanying notes are an integral part of these condensed consolidated financial statements.



4


eBay Inc.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
 
(In millions)
 
(Unaudited)
Common stock:
 
 
 
 
 
 
 
Balance, beginning of period
$
2

 
$
2

 
$
2

 
$
2

Common stock issued

 

 

 

Common stock repurchased/forfeited

 

 

 

Balance, end of period
2

 
2

 
2

 
2

Additional paid-in-capital:
 
 
 
 
 
 
 
Balance, beginning of period
15,785

 
15,362

 
15,716

 
15,293

Common stock and stock-based awards issued
52

 
58

 
55

 
67

Tax withholdings related to net share settlements of restricted stock units and awards
(65
)
 
(93
)
 
(119
)
 
(153
)
Stock-based compensation
139

 
151

 
260

 
271

Other

 

 
(1
)
 

Balance, end of period
15,911

 
15,478

 
15,911

 
15,478

Treasury stock at cost:
 
 
 
 
 
 
 
Balance, beginning of period
(27,895
)
 
(22,903
)
 
(26,394
)
 
(21,892
)
Common stock repurchased
(1,501
)
 
(989
)
 
(3,002
)
 
(2,000
)
Balance, end of period
(29,396
)
 
(23,892
)
 
(29,396
)
 
(23,892
)
Retained earnings:
 
 
 
 
 
 
 
Balance, beginning of period
16,847

 
14,335

 
16,459

 
13,929

Net income
402

 
642

 
920

 
1,049

Dividends and dividend equivalents declared
(124
)
 

 
(254
)
 

Other

 

 

 
(1
)
Balance, end of period
17,125

 
14,977

 
17,125

 
14,977

Accumulated other comprehensive income:
 
 
 
 
 
 
 
Balance, beginning of period
464

 
800

 
498

 
717

Foreign currency translation adjustment
(20
)
 
(325
)
 
(52
)
 
(193
)
Change in unrealized gains (losses) on investments
16

 
(2
)
 
56

 
(38
)
Change in unrealized gains (losses) on derivative instruments
11

 
137

 
(30
)
 
108

Tax benefit (provision) on above items
(7
)
 
(29
)
 
(8
)
 
(13
)
Balance, end of period
464

 
581

 
464

 
581

Total stockholders’ equity
$
4,106

 
$
7,146

 
$
4,106

 
$
7,146

 
 
 
 
 
 
 
 
Dividends and dividend equivalents declared per share or restricted stock unit
$
0.14

 
$

 
$
0.28

 
$


The accompanying notes are an integral part of these condensed consolidated financial statements.



5


eBay Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 
Six Months Ended
June 30,
 
2019
 
2018
 
(In millions)
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
920

 
$
1,049

(Income) loss from discontinued operations, net of income taxes
4

 
(4
)
Adjustments:

 
 
Provision for transaction losses
143

 
138

Depreciation and amortization
344

 
349

Stock-based compensation
260

 
271

(Gain) loss on investments, net
1

 
(260
)
Deferred income taxes
71

 
(17
)
Change in fair value of warrant
(105
)
 
(106
)
Changes in assets and liabilities, net of acquisition effects
(344
)
 
(553
)
Net cash provided by operating activities
1,294

 
867

Cash flows from investing activities:
 

 
 

Purchases of property and equipment
(319
)
 
(342
)
Purchases of investments
(24,178
)
 
(10,365
)
Maturities and sales of investments
25,827

 
12,555

Acquisitions, net of cash acquired
(93
)
 
(302
)
Other
49

 
1

Net cash provided by investing activities
1,286

 
1,547

Cash flows from financing activities:
 

 
 

Proceeds from issuance of common stock
55

 
67

Repurchases of common stock
(2,949
)
 
(2,000
)
Payments for taxes related to net share settlements of restricted stock units and awards
(119
)
 
(153
)
Payments for dividends
(245
)
 

Repayment of debt

 
(750
)
Other

 
(31
)
Net cash used in financing activities
(3,258
)
 
(2,867
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(20
)
 
(51
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(698
)
 
(504
)
Cash, cash equivalents and restricted cash at beginning of period
2,219

 
2,140

Cash, cash equivalents and restricted cash at end of period
$
1,521

 
$
1,636

 
 
 
 
Supplemental cash flow disclosures:
 
 
 
Cash paid for:
 
 
 
Interest
$
154

 
$
162

Income taxes
$
221

 
$
454

Noncash investing activities:
 
 
 
Relinquishment of equity method investment
$

 
$
266


The accompanying notes are an integral part of these condensed consolidated financial statements.


6


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — The Company and Summary of Significant Accounting Policies

The Company

eBay Inc. is a global commerce leader, which includes our Marketplace, StubHub and Classifieds platforms. Founded in 1995 in San Jose, Calif., eBay is one of the world’s largest and most vibrant marketplaces for discovering great value and unique selection. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity for all. Our technologies and services are designed to give buyers choice and a breadth of relevant inventory and to enable sellers worldwide to organize and offer their inventory for sale, virtually anytime and anywhere. 

When we refer to “we,” “our,” “us” or “eBay” in this Quarterly Report on Form 10-Q, we mean the current Delaware corporation (eBay Inc.) and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.

In the first quarter of 2019, we announced several organizational changes, including bringing our Marketplace geographic regions together under one global leadership team. We changed from one reportable segment to three reportable segments to reflect the way management and our chief operating decision maker (“CODM”) review and assess performance of the business. Our three reportable segments are Marketplace, StubHub and Classifieds. Marketplace includes our online marketplace located at www.ebay.com, its localized counterparts and the eBay suite of mobile apps. StubHub includes our online ticket platform located at www.stubhub.com, its localized counterparts and the StubHub mobile apps. Classifieds includes a collection of brands such as Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Kleinanzeigen and others. Prior period information has been reclassified to conform to the current period segment presentation. For further information on our segments, refer to “Note 5 - Segments” to our condensed consolidated financial statements included in this report.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction losses, legal contingencies, income taxes, revenue recognition, stock-based compensation, investments, goodwill and the recoverability of intangible assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

Principles of Consolidation and Basis of Presentation

The accompanying condensed financial statements are consolidated and include the financial statements of eBay Inc., our wholly and majority-owned subsidiaries and variable interest entities (“VIE”) where we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. Minority interests are recorded as a noncontrolling interest. A qualitative approach is applied to assess the consolidation requirement for VIEs. Investments in entities where we hold at least a 20% ownership interest and have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investees’ results of operations is included in interest and other, net and our investment balance is included in long-term investments. Investments in entities where we hold less than a 20% ownership interest are generally accounted for as equity investments to be measured at fair value or, under an election, at cost if it does not have readily determinable fair value, in which case the carrying value would be adjusted upon the occurrence of an observable price change in an orderly transaction for identical or similar instruments or impairment.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. We have evaluated all subsequent events through the date these condensed consolidated financial statements were issued. In the opinion of management, these condensed


7


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the condensed consolidated financial position, results of operations and cash flows for these interim periods.

Significant Accounting Policies

Notwithstanding the additions of policies below for leases, there were no significant changes to our significant accounting policies disclosed in “Note 1 – The Company and Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2018.

Leases

We determine if an arrangement is a lease or contains a lease at inception. Operating and finance lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for our operating leases, we generally use an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating right-of-use (“ROU”) assets and finance lease assets are generally recognized based on the amount of the initial measurement of the lease liability. Our leases have remaining lease terms of up to ten years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. Lease expense is recognized on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component for our data center leases. Lease and non-lease components for all other leases are accounted for separately.

Operating leases are included in operating lease right-of-use assets, other current liabilities and operating lease liabilities on our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, short-term debt, and long-term debt on our condensed consolidated balance sheet.  

Recently Adopted Accounting Pronouncements

In 2016, the FASB issued new guidance related to accounting for leases. The new guidance requires the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. We adopted this guidance in the first quarter of 2019 using the modified retrospective approach, electing the package of practical expedients, and the practical expedient to not separate lease and nonlease components for data center operating leases. We also elected the optional transition method that permits adoption of the new standard prospectively, as of the effective date, without adjusting comparative periods presented. Adoption of the standard resulted in the recognition of $728 million of ROU assets and $744 million of lease liabilities on our consolidated balance sheet at adoption related to office space, data and fulfillment centers, and other corporate assets. The difference of $16 million represented deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of right-of-use assets. The adoption of the standard on January 1, 2019 did not have a material impact on our consolidated statements of income, stockholders’ equity and cash flows.

In 2017, the FASB issued new guidance that will shorten the amortization period for certain callable debt securities held at a premium to the earliest call date to more closely align with expectations incorporated in market pricing. The new guidance will not impact debt securities held at a discount. Adoption of this standard was made on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption of the standard in the first quarter of 2019 did not have a material impact on our consolidated financial statements at adoption.

In 2018, the FASB issued new guidance to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption of the standard in the first quarter of 2019 did not have an impact on our consolidated financial statements.



8


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In 2018, the FASB issued guidance to permit use of the Overnight Index Swap (“OIS”) rate as a U.S. benchmark interest rate for hedge accounting purposes in addition to the UST, the London InterBank Offered Rate (“LIBOR”) swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Market Association Municipal Swap Rate. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption of the standard in the first quarter of 2019 did not have a material impact on our consolidated financial statements at adoption.

Recent Accounting Pronouncements Not Yet Adopted

In 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company expects this standard to impact its accounting for allowances for doubtful accounts, available for sale securities and other assets subject to credit risk and is currently evaluating the extent of the impact that the adoption of this standard will have on its condensed consolidated financial statements.

In 2017, the FASB issued new guidance to simplify the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. We are evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.

In 2018, the FASB issued new guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. This standard will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those fiscal years. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In 2018, the FASB issued new guidance to clarify the interaction between Collaborative Arrangements and Revenue from Contracts with Customers standards. The guidance (1) clarifies that certain transactions between collaborative arrangement participants should be accounted under revenue guidance; (2) adds unit of account guidance to the collaborative arrangement guidance to align with the revenue standard; and (3) clarifies presentation guidance for transactions with a collaborative arrangement participant that is not accounted for under the revenue standard. The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.



9


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 2 — Net Income Per Share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and equity incentive awards is reflected in diluted net income (loss) per share by application of the treasury stock method. The calculation of diluted net income (loss) per share excludes all anti-dilutive common shares. The following table sets forth the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2019 and 2018 (in millions, except per share amounts):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
Income from continuing operations
$
403

 
$
638

 
$
924

 
$
1,045

Income (loss) from discontinued operations, net of income taxes
(1
)
 
4

 
(4
)
 
4

Net income
$
402

 
$
642

 
$
920

 
$
1,049

Denominator:
 
 
 
 
 
 
 
Weighted average shares of common stock - basic
860

 
992

 
880

 
1,001

Dilutive effect of equity incentive awards
7

 
12

 
7

 
15

Weighted average shares of common stock - diluted
867

 
1,004

 
887

 
1,016

 
 
 
 
 
 
 
 
Income per share - basic:
 
 
 
 
 
 
 
Continuing operations
$
0.47

 
$
0.64

 
$
1.05

 
$
1.04

Discontinued operations

 

 

 

Net income per share - basic
$
0.47

 
$
0.64

 
$
1.05

 
$
1.04

Income per share - diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.46

 
$
0.64

 
$
1.04

 
$
1.03

Discontinued operations

 

 

 

Net income per share - diluted
$
0.46

 
$
0.64

 
$
1.04

 
$
1.03

Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive
20

 
15

 
23

 
13





10


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3 – Business Combinations

Motors.co.uk

In February 2019, we completed our acquisition of the U.K.-based classifieds site, Motors.co.uk for $93 million in cash. We believe the acquisition will increase our international presence and give buyers access to more listings.

The aggregate purchase consideration was allocated as follows (in millions):
 
Motors.co.uk
Goodwill
$
65

Purchased intangible assets
30

Net liabilities
(2
)
Total
$
93



These allocations were prepared on a preliminary basis and changes to these allocations may occur as additional information becomes available. We assigned the goodwill to our Classifieds segment. The goodwill recognized is primarily attributable to expected synergies and the assembled workforce of Motors.co.uk. We generally do not expect goodwill to be deductible for income tax purposes.

Our condensed consolidated financial statements include the operating results of Motors.co.uk from the date of acquisition. Separate post acquisition operating results and pro forma results of operations for this acquisition have not been presented as the effect of the acquisition is not material to our financial results.

Giosis Pte. Ltd.

In May 2018, we completed the acquisition of 100% of Giosis Pte. Ltd.’s (“Giosis”) Japan business, including the Qoo10.jp platform, in exchange for $306 million in cash and the relinquishment of our existing equity method investment in Giosis. We believe the acquisition will allow us to offer Japanese consumers more inventory and grow our international presence. Refer to “Note 6 - Investments” for further details on the relinquishment of our equity method investment in Giosis’ non-Japanese business.

The aggregate purchase consideration was allocated as follows (in millions):
 
Giosis
Purchased intangible assets
$
91

Goodwill
532

Net liabilities
(50
)
Total
$
573



The goodwill recognized is primarily attributable to expected synergies and the assembled workforce of Giosis. We assigned the goodwill to our Marketplace segment. We generally do not expect goodwill to be deductible for income tax purposes.

Our condensed consolidated financial statements include the operating results of Giosis from the date of acquisition. Separate operating results and pro forma results of operations for this acquisition have not been presented as the effect of the acquisition is not material to our financial results.



11


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4 — Goodwill and Intangible Assets

Goodwill

The following table presents goodwill activity by reportable segment during the six months ended June 30, 2019 (in millions):
 
December 31,
2018
 
Goodwill
Acquired
 
Adjustments
 
June 30,
2019
Marketplace
$
4,594

 
$

 
$
(38
)
 
$
4,556

StubHub
227

 

 

 
227

Classifieds
339

 
65

 
(2
)
 
402

Total
$
5,160

 
$
65

 
$
(40
)
 
$
5,185



The adjustments to goodwill during the six months ended June 30, 2019 were primarily due to foreign currency translation.

Intangible Assets

The components of identifiable intangible assets as of June 30, 2019 and December 31, 2018 are as follows (in millions, except years): 
 
June 30, 2019
 
December 31, 2018
 
Gross Carrying Amount  
 
Accumulated Amortization 
 
Net Carrying Amount
 
Weighted Average Useful Life (Years)
 
Gross Carrying Amount
 
Accumulated Amortization 
 
Net Carrying Amount
 
Weighted Average Useful Life (Years)
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer lists and user base
$
536

 
$
(460
)
 
$
76

 
5
 
$
519

 
$
(445
)
 
$
74

 
5
Marketing related
578

 
(572
)
 
6

 
5
 
584

 
(578
)
 
6

 
5
Developed technologies
280

 
(272
)
 
8

 
3
 
278

 
(269
)
 
9

 
3
All other
161

 
(157
)
 
4

 
4
 
160

 
(157
)
 
3

 
4
Total
$
1,555

 
$
(1,461
)
 
$
94

 
 
 
$
1,541

 
$
(1,449
)
 
$
92

 
 


Amortization expense for intangible assets was $14 million and $18 million for the three months ended June 30, 2019 and 2018, respectively and $29 million and $34 million for the six months ended June 30, 2019 and 2018, respectively.

Expected future intangible asset amortization as of June 30, 2019 is as follows (in millions):
 
 
 
Remaining 2019
 
$
29

2020
 
44

2021
 
18

2022
 
2

2023
 
1

Total
 
$
94



Note 5 — Segments

In the first quarter of 2019, we announced several organizational changes, including bringing our Marketplace geographic regions together under one global leadership team. We changed from one reportable segment to three reportable segments to reflect the way management and our chief operating decision maker (“CODM”) review and assess performance of the business. Our three reportable segments are Marketplace, StubHub and Classifieds.


12


eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Marketplace includes our online marketplace located at www.ebay.com, its localized counterparts and the eBay suite of mobile apps. StubHub includes our online ticket platform located at www.stubhub.com, its localized counterparts and the StubHub mobile apps. Classifieds includes a collection of brands such as mobile.de, Kijiji, Gumtree, Marktplaats, eBay Kleinanzeigen and others. The accounting policies of our segments are the same as those described in Note 1. The Company and Summary of Significant Accounting Policies. Prior period segment information has been reclassified to conform to the current period segment presentation.

Our reportable segments reflect the way management and our CODM review and assess performance of the business. Our CODM reviews revenue and operating income (loss) for each reportable segment. Our CODM does not evaluate reportable segments using asset information. Corporate and other costs includes: (i) corporate management costs, such as human resources, finance and legal, that are not allocated to our segments; (ii) amortization of intangible assets; (iii) restructuring charges; (iv) stock-based compensation; and (v) results of operations of various initiatives that support all of our reportable segments.

Segment net revenue and operating income for the three and six months ended June 30, 2019 and 2018 were as follows (in millions):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net Revenues
 
 
 
 
 
 
 
Marketplace
 
 
 
 
 
 
 
Net transaction revenues
$
1,887

 
$
1,837

 
$
3,772

 
$
3,629

Marketing services and other revenues
270

 
298

 
547

 
608

Total Marketplace
2,157

 
2,135

 
4,319

 
4,237

 
 
 
 
 
 
 
 
StubHub
 
 
 
 
 
 
 
Net transaction revenues
243

 
240

 
466

 
471

Marketing services and other revenues
21

 
6

 
28

 
7

Total StubHub
264

 
246

 
494

 
478

 
 
 
 
 
 
 
 
Classifieds (1)
271

 
259

 
527

 
505

 
 
 
 
 
 
 
 
Elimination of inter-segment net revenue (2)
(5
)
 

 
(10
)
 

Total consolidated net revenue
$
2,687

 
$
2,640

 
$
5,330

 
$
5,220

 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
Marketplace
$
691

 
$
639

 
$
1,463

 
$
1,327

StubHub
11

 
5

 
37

 
36

Classifieds
102

 
98