Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  
TRANSCRIPT SPONSOR
MF logo

eBay Inc. (EBAY)

Q4 2006 Earnings Call

January 24, 2007 5:00 pm ET

Executives

Meg Whitman - President, CEO

Bob Swan - CFO

Lydia Ventura - Director IR

Analysts

Ben Schachter - UBS

Anthony Noto - Goldman Sachs

Imran Khan – JP Morgan

David Joseph - Morgan Stanley

Safa Rashtchy - Piper Jaffray

Brian Pitz - Banc of America

Mark Rowen - Prudential

Steve Weinstein - Pacific Crest Securities

Heath Terry - Credit Suisse First Boston

Scott Devitt - Stifel Nicolaus

Robert Peck - Bear Stearns

Presentation

Operator

Good day, everyone and welcome to eBay's fourth quarter 2006 earnings results conference call. This call is being recorded. With us today from the company is the President and Chief Executive Officer, Ms. Meg Whitman; the Chief Financial Officer, Bob Swan; and the Investor Relations Director, Ms. Lydia Ventura. At this time, I would like to turn the call over to Ms. Lydia Ventura. Please go ahead, ma'am.

Lydia Ventura

Good afternoon. Thank you and welcome to eBay's earnings release conference call for the fourth quarter and full year results for 2006. Joining me today are Meg Whitman, our President and CEO; and Bob Swan, our Chief Financial Officer.

This quarter, for the first time, we will be providing a slide presentation to accompany Bob Swan's commentary during the call. This conference call is also being broadcast on the Internet and both the presentation and call are available through the Investor Relations section of the eBay website.

Before we begin, I would like to remind you that during the course of this conference call we may discuss some non-GAAP measures in talking about our company's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation accompanying the conference call.

In addition, management may make forward-looking statements regarding matters that involve risks and uncertainties, including those relating to the company's ability to grow its businesses, user base and user activity. Our actual results may differ materially from those discussed in this call for a variety of reasons, including:

Our increasing need in established markets to grow revenues from existing users as well as from new users; an increasingly competitive environment for businesses; the complexity of managing a growing company with a broad range of businesses; regulatory tax and IP and other litigation risks, including risks specific to PayPal and the financial industry and risks specific to Skype's technology and to the VoIP industry; our need to upgrade technology and customer service infrastructure to accommodate growth at reasonable cost while adding new features and maintaining site stability; foreign exchange rate fluctuations; and the impact and integration of recent and future acquisitions.

You can find more information about factors that could affect our results in our annual report on our Form 10-K and our quarterly reports on our Form 10-Q available at investor.ebay.com. You should not unduly rely on any forward-looking statements and we assume the obligation to update them.

Now, over to Meg.

TRANSCRIPT SPONSOR

MF logo

Did the analysts get it right?

Wall Street hires some smart cookies. But is it in their best interest to put the hard questions to management? Are YOU even their top priority?

Motley Fool co-founder David Gardner is still bullish on eBay. It’s up 79% since he recommended it to his Motley Fool Stock Advisor subscribers back in June 2002. Now, discover the companies David and his brother Tom recommend in their free research report “The Motley Fool's 2 Top Picks - Plus Wall Street's Dirtiest Secret.”

Read the complete report courtesy of Seeking Alpha FREE.

* Returns as of 6/12/2007.

To sponsor a Seeking Alpha transcript click here.

Meg Whitman

Thank you, Lydia and welcome everyone to today's conference call. I thought I would start the call by spending a few minutes giving you my perspective on 2006 for both eBay as a company and for each of our three businesses: marketplaces, payments and communications.

Overall, I would characterize 2006 for eBay as a year that had its share of both great successes and a few challenges. We started off the year at a very strong pace, encountered a few hurdles in the middle of the year that we worked to overcome, and then ended the year on a high note. I will spend some time talking about our strong Q4 results shortly, but let me first spend a few minutes on the highlights of 2006.

From a financial perspective, we are very pleased by the results for the full year. eBay Inc. delivered nearly $6 billion of revenue in 2006, representing a 31% year-over-year growth rate. Six in ’06 was an internal goal we set for ourselves three years ago, and we are extremely pleased by the achievement of this milestone. We also delivered nearly $2 billion in non-GAAP operating income and closed out the year with $3.5 billion in cash, even as we repurchased $1.7 billion worth of eBay shares.

During 2006, we focused on effectively integrating the acquisitions we made in 2005 and also wisely used our capital to acquire new companies, allowing us to strengthen our leadership position in each of our three key businesses in the United States and abroad. We expanded our reach even more broadly. We now have nearly 222 million eBay users, 133 million PayPal accounts and 171 million Skype users.

As a result of both strengthening our general business fundamentals and through the acquisitions we made, eBay is exiting the year as the undisputed leader in three of the biggest segments on the Net: commerce, payments and communications. This claim is something that eBay uniquely owns and perfectly illustrates the power of three.

Let me turn to commerce first. The marketplaces business achieved revenue growth of 24%. eBay, our flagship brand, remained strong, adding a total of 41 million new users during the course of the year, and these eBay users actively traded goods worth more than $52 billion.

Importantly in marketplaces, we spent much of last year building a diverse portfolio of brands that can provide anyone with the type of online commerce experience they want, no matter where they live or what kind of format they want to buy or sell in. With Shopping.com, eBay and our collection of classified sites, we're especially well positioned to deliver on this promise.

On the payments side, we substantially grew PayPal's on eBay business around the globe and also made huge strides in expanding PayPal's business off eBay. This year, PayPal processed a record $38 billion in total payment volume, more than doubled its number of available currencies and added close to 37 million accounts. PayPal also extended its global footprint through broad geographic expansion and increased its on eBay penetration rates around the world.

During the course of the year, we added millions of merchants to our growing off eBay business and we successfully integrated PayPal into the payments gateway we acquired from VeriSign, making it easier for merchants to easily include the PayPal button on their websites.

Through product innovations and smart marketing in 2006, we enabled the world's conversations by facilitating more than 32 billion minutes of dialogue between people around the globe on Skype. Perhaps the most important Skype accomplishment in 2006 was the distance we put between Skype and other voice communications competitors. You might recall that at this time last year, there was a whole host of competitors eying Skype's ever-growing network of users. But today, Skype's wide lead is secure, achieved by assembling the largest number of users at 171 million, having the richest products in terms of features and functionality, and delivering truly superior voice quality. In the last 12 months, the size of the business has literally tripled, and in virtually every country in the world, ‘Skype Me’ means, call me over the Internet.

Another area of focus was building the power of three and exploring the different ways our three businesses could enable each other's growth. As evidenced by the PayPal and eBay results for the year, the success of both businesses help reinforce each other. Closing out the year, PayPal's global on eBay TPV was up 28% from the previous year, and PayPal processed more than 465 million eBay transactions.

Adding Skype to eBay is beginning to do what we hoped it would: helping buyers establish more trust with sellers to complete more transactions for items that offer Skype Me buttons in their listings. The combination of PayPal and Skype has also proved to be a valuable one. Through a series of site promotions and tighter product integrations, people are increasingly using PayPal as a way to pay for Skype credits. In December, PayPal processed nearly 25% of Skype's global payment volume, and we see a lot more room for growth here.

However as I also said, 2006 was not without its challenges. As we talked about at the end of the first quarter, we saw an imbalance in the eBay marketplace that was beginning to have a negative impact on buyer experience. This was a challenge we quickly addressed by increasing fees for store inventory listings and implementing a number of initiatives to promote core listings in eBay and eBay Express among both buyers and sellers. We are beginning to see the positive impact of these efforts, particularly around the improved conversion rates across the board, but especially on store inventory format listings.

Another challenge worth noting is that while Skype continues to experience stellar growth in terms of its user and adoption rates, the monetization efforts we outlined at the time of the acquisition are not developing as quickly as we had hoped. However, we are working to develop new ways to monetize Skype, including launching new products, like turning on text messaging capabilities through Skype and subscription-based pricing internationally, similar to what we have done here in North America.

Like any business, we face competitive pressures. The Internet continues to amaze and delight users with innovative technologies and many of these compete for the time that people spend on the Internet, including time spent on eBay, PayPal and Skype. Responding to a changing competitive landscape is part of this company's DNA, and I believe we have a great set of assets, the right strategies and the right people in place to maintain our sizable lead in all of our business units. Even with these challenges, we still delivered strong results for the full year and are extremely well positioned for continued success into 2007.

Now let me spend a few minutes talking about the results from the fourth quarter. In summary, Q4 was a very good quarter. Buoyed by an overall active ecommerce market, the company delivered excellent results on many fronts, including turning in record net revenues of $1.72 billion. The marketplaces delivered net revenues of $1.24 billion and saw record amount of traffic to its network of sites.

On eBay, we benefited from good conversion rates and higher ASPs. In fact, on a sequential basis, we saw marked improvements in total conversion rates across virtually all countries and all categories.

PayPal continued its fantastic run by processing $11 billion of total payment volume and adding hundreds of thousands of merchants to our merchant services business in the U.S. alone.

Skype also experienced record growth, with triple-digit increases in both the total number of users and the amount of SkypeOut Minutes. The strength of these combined metrics in Q4 helped us bring 2006 to a very good close.

Let me touch on the key Q4 achievements of the three businesses, starting with marketplaces. With e-commerce even more popular this year in the U.S., people turned to eBay this holiday season more than ever when they wanted to shop. The vibrant trading activity drove eBay GMV growth up14%. Reinforced by our creative advertising, online shoppers did indeed prove that whatever it was you were looking for, eBay was the place to get it.

The consumer electronics category showed particular strength due to the feverish pitch surrounding Sony's PlayStation and the Nintendo Wii. The motors business also had a very good quarter, delivering $2.1 billion in GMV, representing accelerating year-over-year growth of 16%.

We saw similar trends on eBay sites around the world this quarter. Germany experienced accelerating GMV growth rates and the UK enjoyed an increase in its visitor traffic, peaking at an all-time high of 6.7 million shoppers in the first week of December. In Australia, we recently acquired our 5 millionth eBay user. Given that just 5.9 million Australians are online shoppers, this is a milestone we are proud of.

While online holiday shopping is not as prevalent in Asia Pacific as it is in the U.S., Europe and Australia, our marketplaces there also showed solid growth in Q4 and while we continue to faced competition in Korea, our strategy to grow our local business there is on track.

As for China, I know many of you saw last month's announcement about our new partnership with TOM Online. Like many U.S. companies doing business in China, there have been many lessons to learn and this year we came to understand that a local partner was a critical factor to our long-term success. TOM Online has been an outstanding partner to Skype in China and I believe they're also the right partner for eBay. By leveraging their extensive local market knowledge and keen understanding of the lifestyle aspirations of Chinese consumers, along with their 75 million active wireless users, we can create enhanced online and mobile trading platforms for both buyers and sellers. We are committed to the Chinese market and remain excited about the future.

Across eBay sites around the globe, we implemented some initiatives specifically designed to protect our buyers from fraudulent activity and hold our sellers to a higher standard. As bad guys and the techniques they use to defraud consumers are becoming more sophisticated, we need to ensure we are staying a step ahead of them. In November, we introduced a feature on some of our sites called Safeguarding Member IDs, which obscures the member IDs of non-winning bidders from bid history and view item pages. This was developed in order to prevent bad guys from targeting users with emails that purport to be from eBay, but in fact are not. Because of the initial positive feedback we heard about this feature, it was rolled out to the entire eBay.com site last week.

Also late last year, we began to require most sellers who wanted to list outside their site of registration to be PayPal verified. This feature was a result of the realization that users that are PayPal verified are suspended much less often than those who are not. We're already hearing encouraging responses about this new requirement from community members around the world.

These changes are just two examples of our commitment to invest more heavily in trust and safety. It is clear to us that as the Internet and therefore the eBay marketplace has evolved, our philosophy and strategy around trust and safety must evolve as well.

Now moving from eBay to the other sites in the marketplaces network, Shopping.com also had a record quarter, driven by the strong growth in leads to our merchants, as well as the expansion of Shopping's international footprint. According to Comscore data from December, Shopping.com is the leading network of online comparison shopping sites in the United States, with 24.3 million unique visitors, and it's also the number one shopping comparison site in Australia. We're also excited about the potential of our new online comparison shopping sites in the UK, Germany and France.

Also included in the Marketplaces group is our classified business, represented by our network of brands, including Kijiji, Gumtree, Intoko, LoQUo and Marktplaats. Although still relatively small, this portfolio of businesses gained real traction this quarter with monthly unique visitors in November totaling 26 million. To give you some perspective on this, this number is greater than the number of monthly visitors to The New York Times and the USA Today news sites combined.

Now let me switch gears and talk a little bit about payments. Because of a determined focus on execution, PayPal had an excellent Q4. If you look at our two main revenue drivers for PayPal, there is the worldwide on eBay business and there is the merchant services business. During the quarter, PayPal's global on eBay business showed healthy TPV growth rates of 26% and users closed more than 129 million eBay transactions with PayPal.

PayPal's merchant services business had an incredibly strong quarter. In Q4, revenue from merchant services, which includes VeriSign's payment gateway revenue, grew 70% year over year. The total payment volume off eBay grew 57%, which as you know does not reflect the payment volume generated by the VeriSign gateway business. The primary reason for this growth is that the continued adoption of PayPal by merchants of all size is all over the world. In Q4, a number of new brand name merchants added PayPal to their sites, including Toys R Us, Sierra Trading Post, eHarmony, Monster.com and Xpansys, a major specialty electronics retailer in Europe.

Merchants tell us that they see an immediate sales lift when they add PayPal as a payment option, so we know PayPal delivers more shoppers and sales to merchants. The reason for this is our enormous amount of buyers, coupled with the intense loyalty they have for PayPal. Quite simply, our customers prefer to use PayPal wherever they shop on the Web. And in Q4, these buyers purchased more than $11 billion in products and services. All in all, this holiday season was a winning one for PayPal.

I now want to spend a few minutes on Skype. During the quarter, Skype continued to make great strides in product innovations, which helped it achieve a triple-digit increase in the number of users. With regard to SkypeOut Minutes, we have seen strong growth here as well, primarily driven by try before you buy promotions that experienced high adoption rates, especially in China. Skype's growth and relevance continues to be powered by the active and expanding ecosystem of now more than 4,000 developers, about 50 hardware partners and more than 160 Skype-certified products.

Late last year, we welcomed partner Hutchison 3, a leading UK mobile service provider, to launch the world's first mobile broadband package with free Skype to Skype calls on select handsets and we hope to have more Skype-related applications and products from new partners this year.

We've also worked hard to improve the voice quality of Skype. Through our acquisition of Sonart, experts in voice compression, and the efforts of Skype's engineers, the product strongly benefits from our deep knowledge and expertise in the area of speech over the Internet. There's an enormous amount of innovation and momentum going on at Skype and with a laser-like focus on attracting new users, expanding the ecosystem more widely and enhancing the product even further, I believe these efforts will pay off significantly.

Overall, I would say that 2006 was a pivotal year for eBay, and we are emerging as a stronger company because of the challenges we faced and the lessons we learned. We were able to deliver great full year results due to the strengthening of our core businesses and focused execution. We are extremely well positioned to capitalize on our many assets, but there are also areas which will require time and attention in order to accelerate the business.

To make this happen, our key corporate priorities for 2007 are simple. Improving the user experience across all our businesses is a top objective this year. By generally providing a better integrated experience for people using eBay, PayPal and Skype, we are confident that we can continue to build our leadership positions. Special attention will be paid to simplifying the site for buyers on eBay and making it easier for them to find what they are looking for.

We're also doubling down on trust and safety at both eBay and PayPal. We're making substantial investments in initiatives that will keep illegal activity away from our sites, particularly around enhancing eBay's feedback system and working to prevent phishing and spoof emails from being sent to eBay and PayPal users. Despite incredible user growth at Skype, there are still opportunities to improve the ease of use and the voice quality of the product, making it easier for everyone to Skype.

Extending our leadership position across all three of our business units is another key priority for 2007. Each of our businesses have experienced phenomenal growth in the last several years, and we believe there are even more opportunities to increase our reach and presence on the web. Reigniting the core of the eBay auction experience is a key area of focus for us, and growing both PayPal's off and on eBay businesses remains a top priority. With regards to Skype, we plan to extend our competitive position through increasing user acquisition and activity, further development of Skype's ecosystem, and by exploring ways to fuel monetization.

Continuing to effectively manage the financial architecture of this company is another one of our key priorities. With an eye on delivering value to our shareholders and to our worldwide community of users, we'll stay focused on investing heavily in the areas that will allow us to maintain and extend our lead. We'll also continue to innovate to ensure we are delivering the very best products and services, and we will continue to apply the same financial discipline that we have consistently practiced for the last decade.

As we head into 2007 with a clear strategy and a focus on results, I'm very excited about the tremendous opportunities that lie ahead of us. With leadership positions in three of the largest segments of activity on the Internet and a management team stronger than it has ever been, I believe that we can continue to deliver both on our financial commitments and provide our hundreds of millions of global users with an unparalleled experience, whether they want to buy, sell, pay or communicate.

Our level of success is due to this community of users: buyers looking for practically anything, small and large merchants expanding their businesses through the ease of PayPal, and people embracing the Internet to call friends and family. I'm extremely proud of the achievements of our community. By working hand-in-hand with our more than 13,000 employees, including those we will soon welcome from StubHub, our global community of users are helping us strengthen the company quarter after quarter, year after year.

In closing, we are very pleased by the strength of our business across all segments and the great momentum we have as we enter the new year. I'm very confident that 2007 holds a lot of promise for our business.

Now I'll turn it over to Bob for a closer look at our financials.

Bob Swan

Thanks, Meg. Today, I will discuss our Q4 and full year financial performance, an update on our share repurchase program and our outlook for Q1 and 2007.

First, our financial results. Overall, Q4 was a great quarter for our business. We delivered very strong revenue, earnings and free cash flow based on good GMV and TPV growth and strong growth from our non-GMV driven businesses, aided by a successful online holiday shopping season. Additionally, we leveraged our balance sheet to repurchase nearly 31 million shares worth $1 billion during the quarter.

In total, our business generated record net revenues of $1.72 billion, representing 29% year-over-year growth. Organic revenue, excluding acquisitions and FX, was up 21% versus last year, an acceleration of growth versus the prior quarter. Acquisitions we made over the last 12 months contributed 3 points to our top line growth, and FX, due to a weaker dollar, contributed an additional 5 points of growth.

On a non-GAAP basis, operating income was $575 million for the quarter, up 28% over the year-ago period and representing an operating margin of 33.4%. EPS was $0.31, a 29% increase from last year and $0.03 higher than the top end of our guidance range. Our EPS strength relative to the guidance was driven primarily by strong revenue performance, efficient marketing spend and the benefit of a weaker U.S. dollar.

Our business model continued to deliver excellent cash flows as well, generating $529 million of free cash flow, 24% growth versus the year-ago period, including capital expenditures of 5.6% of revenue in the quarter. Now let's take a closer look at our segment results for the quarter.

In Q4, the marketplaces business achieved record net revenues of $1.24 billion, up 24% versus the year-ago period. In the U.S., revenue was $614 million, up 17% over last year, while international revenue was up 32% to $624 million. eBay global GMV for the quarter was $14.4 billion, a 20% increase over last year. Excluding the impact of foreign exchange, GMV grew 16%, a 1 point acceleration of growth versus Q3.

Take a closer look at some of our key operating metrics, we added nearly 10 million new users in the quarter, bringing the total registered user base to almost 222 million users. eBay new listings in the quarter were 610 million, representing year-over-year growth of 12%. Core listings were up 10% and store inventory listings grew by 27% to 84 million new listings in the quarter. Store listings growth continues to slow, a result of our efforts to rebalance the marketplace in the third quarter. The deceleration in growth has improved the mix between core and store listings, while store listing conversion rates have increased as well.

In the U.S., we acquired 3.6 million new users, reaching a total of 97 million registered users. New listings grew by 4% compared to Q4 '05, as core listings grew by 5% and store listings declined by 2%. GMV grew 14% to $6.8 billion, a slight acceleration versus Q3. GMV growth was particularly strong in our consumer electronics category, driven by the launch of the Sony PlayStation 3 and Nintendo Wii, which drove better than expected volumes and helped increase overall ASP.

In our international eBay business, the user base grew by 6 million, bringing the total to 124 million users. New listings grew by 19% year over year, with strong growth coming from the UK, France, Italy and Australia. GMV reached a record $7.7 billion, growing at 26% versus the same period last year and representing 53% of global GMV. Excluding the impact of foreign exchange, GMV grew 17% versus Q4 '05.

In Europe, performance was driven by good GMV growth in several of our markets. In Germany, growth rates accelerated compared to last quarter, driven in part by a successful holiday marketing campaign. The UK saw a robust holiday shopping season as well, and growth was aided by strong user acquisition, good visitor traffic and a unique marketing campaign. France and Italy also had very good quarters and continue to fuel our growth in Europe.

Turning to Asia, we continue to take steps to improve our position in a difficult competitive environment. In Korea, actions we have taken over the course of the year have resulted in a stabilizing GMV growth rate, and we believe we are maintaining market share. We continue to enhance our offering, recently launching a new program to offer 100% return guarantee and free return shipping to enhance buyers' confidence in our marketplace. Cross-border trade continues to be a driver of growth in our smaller Asia Pac markets. We saw accelerating cross-border GMV growth in Q4, driven by the strong buyer demand during the holiday shopping season.

Our newest shopping destination, eBay Express, showed good progress in the quarter. While the business is still small, GMV transactions transacted through Express more than doubled versus the prior quarter. Growth was driven by strong activity levels, measured in GMV per cart, exceeded our internal expectations. We look forward to building on our early successes and making eBay Express a larger part of our business over time.

On the advertising front, we continue to make progress on our Yahoo! relationship, increasing the number of text ads served on most search results throughout the quarter. For graphical advertising, Yahoo! began selling our inventory in the fourth quarter on a limited basis. We're pleased with the initial results from our partnership and are pursuing a considered rollout over the course of the year.

We continue to diversify our revenue stream with our non-GMV-driven businesses. Shopping.com continues to grow at healthy rates and drove record levels to our merchants on several days during the holiday shopping season. While our classifieds business is still small, we are seeing triple-digit year-on-year revenue growth, driven by strong visitor traffic across our portfolio.

Overall, we're pleased with our Q4 marketplaces performance, which benefited from a strong online holiday shopping season, several hot products and effective marketing campaigns. We look forward to continued success in 2007.

Now let's turn to our payments business. PayPal had another excellent quarter, posting record total revenue of $417 million, a 37% increase versus the same period last year. Revenue was driven by record TPV of $11 billion, representing 36% year-over-year growth. In the U.S., TPV grew by 26% in the quarter, while international TPV grew by 60% year on year. Our TPV growth was driven by continued strength in merchant services and record eBay penetration levels in our international markets.

In terms of key operating metrics, PayPal added over 10 million new accounts and the global account base surpassed 133 million. Global TPV for PayPal's on eBay business grew by 26%. Growth was paced by 58.3% global penetration of addressable GMV, up over 4 points from last year. In the U.S., the penetration rate of 79% is up 1 point from the prior year, while UK penetration grew 4 points to 73%. In Germany, we reached double-digit penetration for the first time.

We continue to expand PayPal presence across the web with our global merchant services business. Merchant services comprises 36% of our total payment volume and posted another quarter of impressive growth, generating $3.9 billion of TPV, up 57% year over year. Our recent international expansion of countries and currencies, as well as further penetration of top online merchants around the world, continue to be key drivers of PayPal's growth.

The PayPal Q4 transaction expense rate was 1.08%, relatively consistent with both the year-ago period and the third quarter. The transaction loss rate increased to 41 basis points this quarter, up 8 basis points from the year-ago period and 6 basis points from Q3. These increases were driven by both seasonality and growth in newer products and markets where we continue to optimize between increasing volume and managing our losses. In summary, PayPal had another excellent quarter and continues to be a key driver of our overall growth.

Looking at our communications business, Skype once again grew at a healthy pace this quarter, posting total revenue of $66 million, a sequential increase of 31%. Skype's user base grew to 171 million, representing a sequential increase of 26% and an increase of 129% from a year ago. Global promotions drove significant increases in new users this quarter, particularly in Asia, where we added 19 million new users in Q4.

Skype-to Skype minutes in Q4 were approximately 7.6 billion minutes, up 16% sequentially and 46% on a year-over-year basis, while SkypeOut minutes grew to 1.5 billion, representing 34% sequential growth and 189% growth versus the prior year. The strong growth of SkypeOut minutes is the result of our rapid user expansion and global promotions. We're pleased with our progress with Skype, highlighted by rapid user acquisition and growth in user activity.

Let's now take a look at how our business unit performance translated into non-GAAP financial results. As I indicated earlier, eBay delivered record revenues of $1.72 billion, up 29% year over year. This top line growth, coupled with operating leverage, a lower share count and weaker U.S. dollar, partially offset by a higher tax rate, drove EPS expansion from $0.24 to $0.31, a 29% increase versus Q4 '05.

While our operating margin of 33.4% declined by 2.4 points, primarily due to mix changes coming from our lower gross margin businesses -- PayPal and Skype -- we partially offset this decline by operating leverage and the benefit of a weaker dollar. Let's look at where the operating expense leverage came from in a bit more detail.

First, sales and marketing expenses were 25.6% of revenue in Q4, down 1.4 points from the year-ago period. The decline from a year ago is driven by more efficient marketing spend and the fact that our faster growing businesses, PayPal and Skype, have lower marketing expense as a percent of their revenue.

Next, product development expenses were 6.5% of revenue, down nearly a point from a year ago. We continue to leverage our product spend more effectively to enable continued growth. In the fourth quarter, we launched several product and trust and safety enhancements to the eBay site, including a number of search improvements and our Safeguarding Member IDs initiative. At PayPal, we rolled out our integrated VeriSign merchant solution and an expansion of our available countries and currencies. Lastly, general and administrative expense at 14.4% is up nearly half a point from the year-ago period, driven primarily by increased transaction losses at PayPal.

Let me take a minute to provide some context on the full year 2006. As Meg indicated, we got off to a great start this year, encountered some challenges along the way, and ended the year strong. We delivered full year revenue of $5.97 billion, up 31% versus 2005, a 32.8% operating margin and $1.05 of EPS, up 21%. Our top line growth was impacted by the imbalance in our U.S. marketplace, highly competitive markets in China and Korea, and lower than expected monetization at Skype, yet we still delivered good results. Our PayPal merchant services business consistently exceeded our expectations, and we successfully integrated several acquisitions from 2005.

In addition, we strengthened our competitive position via acquisitions and investments, including Sonart, Tradera and our partnerships with TOM Online in China and PC Home in Taiwan. In July, we announced our first ever share repurchase program.

Let me give you some more detail on our full year cash flows and share repurchase program. We began 2006 with $2.9 billion in cash and generated over $1.7 billion in free cash flow, with an additional $600 million coming primarily from stock option exercises. We leveraged this cash to repurchase 1.7 billion worth of eBay shares over a five-month period, as we believed the long-term value of the company was not reflected in the share price at the time. Despite this significant repurchase activity, we end 2006 with nearly $3.5 billion in cash and marketable securities, nearly $600 million higher than where we entered the year.

Today, we announced that our Board has authorized an additional $2 billion repurchase over the next 24 months, in addition to the $300 million of remaining capacity under our existing program, further underscoring our confidence in the company's long-term value. While we will continue to be opportunistic at current price levels, we expect to execute the program at a more balanced pace going forward. Overall, we exit 2006 with a stronger and more diverse portfolio of businesses and an excellent balance sheet.

With that, let me turn to our non-GAAP guidance. Last October, we indicated that our Q4 performance, in addition to a few factors we're monitoring, would provide more clarity for our outlook on 2007. Let me give you a brief update on a couple of these areas and a few recent announcements and how they impact our 2007 guidance.

First, our Q4 results demonstrate an impressive seasonal quarter, highlighted by good conversion rates and increasing ASPs, and we're increasing our 2007 revenue guidance to reflect this strong seasonal performance. Two of our newer initiatives, eBay Express and our Yahoo! advertising partnership, showed good promise in Q4, but they're still in early stages and are not expected to have a material impact on our 2007 growth rates beyond what was assumed in our October guidance.

Second, we strengthened our geographic position via our joint venture partnership with TOM Online in China. We expect this partnership to have a marginally negative impact on our revenue and a slightly positive impact to operating margin and GPS.

Third, we recently announced our intention to acquire StubHub, a leading secondary ticket marketplace, further strengthening our core marketplace business. We expect this acquisition to generate $105 million to $120 million of revenue 2007 while being slightly dilutive to our full year operating margin and slightly accretive to full year EPS, assuming a close in mid-quarter Q1.

Finally, the expansion of our share repurchase program will have a slightly accretive impact on full year EPS.

Based on these factors, we now expect full year '07 revenue in the range of $7.05 billion to $7.3 billion, which implies an 18% to 22% year-over-year growth. We expect to deliver full year operating margin of approximately 33% and EPS in the range of $1.25 to $1.29. This guidance assumes a U.S. dollar to euro exchange rate of $1.25 and a full year tax rate of 28% to 28.5%. We also expect full year free cash flow in the amount of $1.85 billion, assuming capital expenditures between 8% and 9% of revenue and increased cash tax payments compared to 2006. Looking to Q1, we expect revenue to be in the range of $1.67 billion to $1.72 billion and EPS of $0.28 to $0.30.

In summary, we are pleased with our strong Q4 results, and while we faced challenges in 2006, we delivered record revenues and exceeded our EPS goals for the full year. 2007 will be another exciting year for eBay as we continue to focus on top line growth in each of our business units while delivering increasing profitability and cash flow for our shareholders.

Now we would be happy to answer your questions. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Ben Schachter - UBS.

Ben Schachter - UBS

I was wondering if you could just talk about the organic growth rate and remind us what was pulled out of that in terms of acquisitions? Also, if you could discuss how classifieds is moving ahead internationally, and any talk of bringing that over to the U.S.? Thanks.

Bob Swan

I will take the first; Meg, if you could take the second. Total growth in the quarter was up 29%, and 21% was FX neutral and organic. Acquisitions added 3 points of growth and on a year-over-year basis, you will remember that Skype was completed in the fourth quarter of 2005 and the VeriSign gateway acquisition was completed in the fourth quarter as well. So 21% organic FX neutral and the acquisitions added 3 points in the quarter.

Meg Whitman

With regard to classifieds, we continue to extend our classified reach through a combination of building our own sites under the Kijiji banner and acquiring strong local brands like LoQUo, Marktplaats and others. I think the current count is we're in about 400 cities and 33 countries around the world and we will continue to opportunistically expand that. At the moment, we don't have a plan to enter the U.S. business. As you recall, we own 25% of craigslist here in the U.S., but are focused on growing the international business very aggressively. As we reported, we really had a very nice Q4, with classifieds actually beginning to get to critical mass. Next question.

Operator

Your next question comes from Anthony Noto - Goldman Sachs.

Anthony Noto - Goldman Sachs

Thank you very much. Have you considered a more significant recapitalization of the company and some type of leveraged buyback? If you look at the amount of EBITDA you will be generating in 2007, you could easily lever up two times, still be investment grade, still have capital on the balance sheet to invest in the business and do acquisitions; as opposed to doing $2 billion every six to 12 months, doing it in one fell swoop, given the change in your business, and still a discount multiple to the sector.

Meg, there continues to be quite a divergence between revenue growth, GMV growth and listings. In the first half of 2006, listings outperformed significantly, but revenue and GMV growth disappointed on a quarterly basis. In the back half of the year we've now seen the inverse. I'm just wondering, as you think about your focus of improving successful listings as opposed to listings at any cost, do you see a point in time when listings more correlate with the revenue again? Could you talk about how much more deterioration you could see in listings growth while still seeing strong GMV and revenue growth? Thanks.

Bob Swan

Anthony, on the first one, we have a great business model that generates excellent cash flows and gives us an extremely strong balance sheet so we always look at how to effectively optimize that balance sheet. Our primary focus is maintaining the financial flexibility to invest and grow in the business, but also to capitalize on opportunities and in effect, repurchase stock when we believe it does not reflect the near-term value of the company.

The repurchase program we announced in July, we've been very opportunistic. We have in essence almost completed it in five months' time. This increased size of the program that we announced today is further evidence that we can maintain financial flexibility to invest and growth and capitalize on the trading value of our stock. We will continue to evaluate ways to do that as we go forward. But we think this is the right step.

Meg Whitman

Anthony, let me try to take your next question and let me focus on the brand eBay for a minute, then I will come back to talk about marketplaces in general. With regard to eBay, what you saw over the last 12 months was quite an imbalance in the marketplace. I think you accurately described that. The actions that we took in Q3 and Q2 began to bring balance back in. So listings now I think are at a better balance. Frankly, I think we may still see a change in the ratio between core listings and store inventory format listings, where store inventory and format listings continue to decline as a total overall percentage. But we are really now focused on successful items. And what you saw across the board was a better conversion rate, not only in SIF, but also in core. What that net-net is, is a better buyer experience, because buyers are finding higher quality listings at better prices. That is exactly what got out of balance in Q1. So the actions we took had exactly the desired effect.

I would expect on a go-forward basis, it may take two or three more quarters, but you'll begin to see revenue and GMV and listings more back in line. That would be on the eBay side of things. So I think we are moving towards a healthier marketplace. I think we've got a little bit more work to do. We are focused on the user experience in 2007. You still may see some change in ratios.

If I step all the way back to marketplaces, you will continue to see a disconnect between revenue and GMV because an increasing percentage of our marketplaces business is actually non-GMV driven. In other words, we can't calculate the GMV on C2C classifieds, nor do we calculate the GMV on Shopping.com.

So I hope that gives you a sense. But I think net-net-net, the buyer experience improved and the marketplace is in better balance.

Operator

Your next question comes from Imran Khan – JP Morgan.

Imran Khan – JP Morgan

Hi, Meg and Bob. You tried to rebalance the site, and I was wondering if you can give us some sense, how does current conversion rate compare with eBay's conversion rate, say, a year ago, a year-and-a-half ago, before the store became a bigger part of the listing growth? How much can conversion improve from current levels?

Secondly, I think you integrated Skype Me buttons on the eBay platform globally, and can you tell us what kind of impact you saw on conversion from that? Thank you.

Bob Swan

Imran, how are you doing? I will take the rebalance effort. As you know, in the first quarter of '06, our conversion rates dropped quite a bit. The efforts that we have talked about in terms of rebalancing were really designed to reaccelerate GMV, primarily by improving conversion rates. The acceleration of GMV from Q3 to Q4 and the acceleration of revenue per listing was primarily driven by a fairly dramatic improvement in conversion rates across virtually all countries and all categories in which we operate. We're not quite back to end of '05, early Q1 of '06 levels so we still have some work to do. But in terms of progress, the efforts are really what drove a lot of the out-performance that you saw in the fourth quarter.

Meg Whitman

Let me take the question about Skype Me buttons. Let me give you an update. On the eBay platform, we now have Skype Me buttons in 150 categories in 20 markets, including 25 categories on eBay.com, which is up from about 14 categories a quarter ago. The early indications continue to be positive on conversion rates with Skype usage. The conversion rates with those listings that people utilize the Skype buttons are positive.

So we are going to continue to make those available to our users in a very typical eBay way. When users want to adopt them, they do, and when users don't want to adopt them, they don't. What we now is that when people see their business increase because of Skype Me buttons, they use them more. So I think we will continue to make slow and steady progress here, but it is doing what we hoped it would do.

Operator

Your next question comes from David Joseph - Morgan Stanley.

David Joseph - Morgan Stanley

Hi everyone. Just a quick question related to the core platform. It seems like you are seeing improved health across platforms, and I assume in the U.S. and in Germany. And I'm wondering what you are doing to really capitalize on that. I know you talked a little bit about the user experience and some improvements that you want to make in 2007 and you did bring Philip over to really focus on the core platform. What are his priorities in 2007 and where are you really trying to improve the user experience? Are you pulling in Skype a little bit more into the platform? What are you doing with My World or are you trying to really develop a more social experience there?

Secondly, in terms of PayPal and Google Checkout, are you seeing Google Checkout on your radar at all or any kind of impact whatsoever? If so, or even if not, what do think you need to do to compete more effectively in that area?

Meg Whitman

I will take both of those, David. So first of all, you are right, we brought one of our most talented managers from Germany and from Europe to run our core auction business here in the United States. His mission is to accelerate the growth rate of the auction business over time. We are going to do that in a couple of ways. The first is to focus on the user experience as it relates to the auction business. That is going to mean, I think, simplifying the site in some ways, making it easier to find items that a buyer wants. As the eBay platform has grown so enormous, finding has become more of a challenge, and we see that in the user data.

Then, looking at other ways to actually continue to increase the fun and excitement of the auction business, which of course is our original business and the business that brought us to the party. So we think we're just at the beginning of seeing some of the really creative ideas that can be brought to bear against that business.

We will experiment with Skype. And we will see other ideas that come on that make that auction business really fun. And what works in the United States, we will take immediately, obviously, overseas.

David Joseph - Morgan Stanley

Meg, does that include also maybe pulling eBay Express a little further away from the core platform?

Meg Whitman

Not necessarily. eBay Express is targeted for our existing eBay users who on occasion want a new in-season product or only a fixed price, in and out experience. We think that the two are not actually at odds with one another; that one can grow eBay Express, at the same time accelerate growth in the core auction business.

So let me talk about little bit about Google. And it's interesting, we have obviously been monitoring this quite closely. Interestingly, we have really had a great quarter at PayPal: $417 million in revenue, 37% year-over-year growth, 133 million accounts, $11 billion in total payment volume; it was a remarkable quarter.

What we have seen and this is very interesting and you probably have seen this when you look at other industries, is that when a new entrant comes into a category and creates a lot of interest and news, the market leader is typically the beneficiary. That actually we believe is evidenced by our results in the quarter.

That we have an incredible value proposition for both consumers and merchants. PayPal gives consumers all the flexibility of an online wallet. Think about it: when you go to a store, you pull out your wallet. You can pay with cash, you can pay with checks, you can pay with a debit card or you can pay with a credit card. Compared to Google Checkout, actually Google Checkout is a wrapper for Visa and MasterCard, but doesn't give you the payment flexibility.

Likewise for merchants, it gives merchants much more ability to decide how to integrate in a way that allows them to maintain their direct customer relationships and also helps them fight fraud. So interestingly, I think we have disproportionately benefited from the news in this category. So we're actually really pleased with our PayPal business. The merchant service team continues to outperform and delight and we're really delighted with where we are.

Operator

Your next question comes from Safa Rashtchy - Piper Jaffray.

Safa Rashtchy - Piper Jaffray

Thank you. Can you give us a sense of growth in the eBay component of marketplace revenue, and also how it trended compared to previous quarters? Also, can you give us some color on how much PS and Nintendo contributed in the quarter?

Finally, I think I missed the contribution on forex, I believe you said 5% on total revenue. Can you clarify that and can you give us color on how much was that on the marketplace? Thank you.

Bob Swan

I'm sure if I don't cover them all that you will come back to me, so I'll thank you in advance. First, I will go at the end. FX was 5 points of growth on a year-over-year basis in the quarter. In terms of the consumer electronics, both Nintendo and Sony PlayStation, we disproportionately benefited from those hard to find, hard to get items on our site. So clearly, it helped our GMV and helped our ASPs as well. We obviously don't break it out, but we clearly benefited from the activity around those products.

On your first question, on our eBay business I think excluding the non-GMV based business or using the GMV platform, I guess, we saw accelerated growth from Q3 to Q4, essentially up a point in the U.S. and up a point internationally. And as Meg said, we kind of attributed that to a strong online shopping season, a couple hot products in consumer electronics, what we believe was a very effective marketing campaign, and then lastly, our efforts to rebalance the marketplace really accelerated conversion rates off of the third quarter. So the combination of those things had us accelerating our eBay platform or GMV-based businesses from Q3 to Q4.

Meg Whitman

Let me add one point on the consumer electronics. We see this every quarter; this is actually not a new phenomenon, but people come to see what is going on with the Wii and the Sony PlayStation. They hear about it in the press, they come to see what's going on and they often end up buying something in another category. Or they bid and they're not the winning bidder, and they move on to another category or another consumer electronic. So it benefits us in two ways: one is sort of the traffic and the PR, as well as the actual GMV related to Nintendo or to Sony and Wii. Next question.

Operator

Your next question comes from Brian Pitz - Banc of America.

Brian Pitz - Banc of America

Thank you very much. On your recent StubHub announcement, can you talk about your plan to integrate listings into your site? If you have any thoughts on what Ticketmaster is doing in terms of stepping up efforts to invalidate ticket barcodes? Secondly, any update on eMedia Exchange and maybe you can talk about the progress in signing up additional publishers? Thank you.

Meg Whitman

Let me elevate the conversation a little bit here. So we see a tremendous opportunity in the online tickets business. It is a business that is very well suited for eBay. In fact, eBay's GMV in this business is actually higher than StubHub's GMV. Not monetized at the same rate, but we have a very strong business here so we are excited about the potential to combine them. It is a passionate user base and an incredibly inefficient market for the most part.

With regard to eMedia and Ticketmaster and a number of areas, we are in the early days. We are in a number of discussions with industry leaders and industry players to actually figure out what the right way is to work with those players in the industry. So we will be able to give you an update on that at the end of the second quarter, maybe the end of the third quarter. We recognize the issues you have described and we are taking steps to figure out what the best way to deal with those issues are and leverage partnerships in the industry.

Operator

Your next question comes from Mark Rowen - Prudential.

Mark Rowen - Prudential

Your advertising revenue was up almost 50% year over year. Was that pretty much all attributable to the new things that you're doing with Yahoo! in the U.S.? Would you expect those growth rates to accelerate as you implement it further into the sites?

Second, in China, given that you have the JV now, are you going to be spending less on marketing in China in total or do you still spend the same thing and just move it down below operating profit?

Bob Swan

On the first question, the ad revenue growth is primarily associated with the strong performance of Shopping.com in the quarter. While we are rolling out Yahoo! a bit more in the fourth quarter, relatively little impact. So that growth is primarily driven by Shopping.

In terms of China and the joint venture, as Meg indicated we think this is the best long-term play for us in China. We will own 49% of that venture. As a result, the operating profits or the costs that they incur will be borne by us below the operating margin line.

Mark Rowen - Prudential

Do you expect the marketing spend there to sort of remain constant where it has been or do you plan to increase that or pull it back?

Bob Swan

I think during the course of 2006, we took a lot of steps ourselves to pull it back quite a bit and try to measure the marketing spend more in line with our ability to more effectively monetize that market. So I think we'll see how we, collectively with our JV partner, will manage the marketing spend on a go-forward basis. But clearly down off of '05 and first half of '06 levels.

Mark Rowen - Prudential

Just a clarification: I thought most of Shopping.com's revenues were in transaction revenues, not advertising. Is that not the case?

Bob Swan

Shopping is broken out both between transaction revenue and ad. The growth in the advertising bucket comes from really a variety of stuff. But clearly, the Yahoo! relationship is still in its early stages and they are not driving a whole lot of that.

Operator

Your next question comes from Steve Weinstein - Pacific Crest Securities.

Steve Weinstein - Pacific Crest Securities

Thank you. I was hoping to get a little better understanding of StubHub and if your guidance reflects a change you'll be making in the business or if we can find out what it did in 2006 in terms of revenue.

As it relates to Skype, you said it's not monetizing quite as quickly as you thought. I'm wondering if that is going to impact any sort of earn outs or total purchase price for the company?

Meg Whitman

Let me take the Skype question and Bob, you can talk about the financials, which I think are outlined nicely in your slides. With regard to Skype, you might recall that the earn out is a three-year bullet. So there are no earn out metrics in year one, year two. It is all dependent on three metrics: revenues, active users and gross profit, and have they met the targets in year 3, and then there's a six-month period if they haven't met it at year 3, that they can continue to meet it. So there isn't an issue around the earn out in anything other than in the final period. Nicholas and Janice are very engaged in Skype. They continue to be very creative in terms of product ideas, as well as thinking about ways to monetize the site.

What I am very pleased about in terms of Skype is the lead that we put between Skype and the other VoIP competitors. You remember from our road show, this was a very crowded field. I think we have really secured the lead. The belief is that with this level of network, the reinforcing nature of the network of users, that we will be able to monetize that in quite a nice way.

Bob Swan

In terms of the StubHub question, we think this combination is going to work exceptionally well for our buyers and sellers. StubHub brings a best in class buying and selling experience to a dedicated user base, where we are going to bring a large number of buyers to enable StubHub to keep growing. We obviously haven't closed this transaction yet, so that is what we are focused on in the near term.

In terms of what we expect in the 2007 guidance, we told you about $105 million to $120 million of revenue. Our expectation is that the transaction would close by the end of the first quarter, hopefully sometime in February.

Meg Whitman

Well great --

Operator

My apologies. Heath Terry from Credit Suisse First Boston.

Heath Terry - Credit Suisse

Just in under the wire. I was wondering if you could just talk a little bit about what you are seeing from initial buyer and seller reaction to the advertising that you're doing on the site and the places that you are you using null results or are using the complementary search results, what kind of click-through rates are you seeing? Any anecdotal feedback that you can provide would be really appreciated.

Meg Whitman

We look at the total user experience. And interestingly, on null search results, the early data suggests that no one is bothered by it, either buyer or seller, and in fact actually may increase or improve the buyer experience, because if they get a null search result on eBay, they are actually quite delighted to be shown other results. So this was of course the easiest thing to do and we are moving quite aggressively on that.

As we moved into complementary searches, we're going to see what the reaction is. We have actually quite a constructive partnership with Yahoo! to walk our way into this in a considered way, making sure that we are first and foremost focused on the buyer experience and then the selling experience. So we will know more; we are in the early days of testing on that but I would say green light on null search results.

I think we have time for two more questions.

Operator

Your next question comes from Scott Devitt - Stifel Nicolaus.

Scott Devitt - Stifel Nicolaus

First, from looking at the marketplace revenue growth and the GMV growth, it seems like the non-motors GMV accelerated again this quarter, which is positive. I was wondering if you could give us the motors GMV growth in the quarter globally?

Bob Swan

Motors GMV was up 16% year over year in Q4 to about $2.1 billion.

Scott Devitt - Stifel Nicolaus

Could you talk about the integration of Skype into Google Pack? I don't believe that was part of your broad international agreement and was wondering how you were able to attain access to that platform, given that Google does have a product called Google Talk.

Similarly, could you talk about the value that you find in areas such as your feedback system, the ACH transfer system at PayPal, the balance feature at PayPal and the customer service at PayPal, and whether you would be open to opening those respective platforms for the appropriate economics? Thanks.

Meg Whitman

With regard to Google Pack, actually you are right, Skype was integrated into Google Pack I think late last year. Google Pack, and you should ask Google about it, but my understanding is this is an agnostic view of the very best features on the web pulled together that is not actually driven by Google's revenue or interest in promoting their own products.

So I think it is actually a testament to Skype that the internal team who makes the decisions about Google Pack thought Skype was deserving about being in this basket of items that you kind of need when you start on the web. So we were excited by that and appreciate their doing that.

With regard to feedback and ACH and balance and the customer support levels, let me come back to the buyer and seller value proposition. What these do is give both buyers and sellers more choice on how they utilize PayPal. With regard to feedback, this helps us actually reduce fraud losses across the system because what we learned is with eBay, we knew the front end of the transaction, but with PayPal, we know the back end of the transaction. When you know both aspects of the transaction, you can actually manage your fraud losses in a much better way. So the ability to combine eBay feedback with other elements of our risk model has actually proven to be quite effective over the last three or four years.

Customer support levels, we can always get better but we are very proud of our customer support levels at PayPal. The folks in Omaha and John Linden do a really bang-up job and we know that handling customer support for payments is not easy, because when you handle people's money, their level of customer service requirement is very, very high, as it should be. So whether we would give others access to our customer support or our feedback system or, frankly, the crown jewel of PayPal, which is our fraud models, I think that is premature.

Okay, thank you for joining us today. We appreciate it.

Bob Swan

One more.

Meg Whitman

Oh, we have one more question? Sorry, I think he asked two, which is why -- I didn't mean two from one person. We have one more, sorry about that.

Operator

Your final question comes from Robert Peck - Bear, Stearns.

Robert Peck - Bear Stearns

Thank you, I appreciate it. I wanted to ask a couple quick questions here. The first is, Meg, as you think about eBay as a platform, one of the great things about it for your marketing campaign is whatever it is you are looking for, you can find it on eBay. So therefore as you think about it, is there any sort of optimal mix you have for store and core in your listings versus any sort of blanket price increases on the store side? That is one.

Number two is it looks like the user activity metrics declined again since last quarter. Could you tell us when you think you start to see that stabilize and when you start to see some of the changes you have done in 2H '06 and 1H '07 will start to affect some of those metrics and reinvigorate some of the user activity?

Meg Whitman

Sure. With regard to the store and core mix, or frankly, auction versus auction, BIN versus BIN, we actually experiment with that over time. If we get the incentives right and we get the pricing right, this market does self-regulate. That is what we need to continue to have happen. We've got this thing out of balance. I think we've now brought it back into balance. The mix will be what it will be once we get all the incentives lined up correctly for both buyers and sellers.

With regard to user metrics, actually, what are you referring to? Because most of the user metrics that we look at actually improved in the quarter.

Robert Peck - Bear Stearns

We're just looking at active users over CRUs.

Meg Whitman

Active users over CRUs, okay. That actually has been going on for quite some time, with a 14% year-over-year growth versus 17% year-over-year growth in Q3. So we're actually seeing it move in a decent direction here. But as that base goes up over time, active users I think it has been true for almost five years that that number has actually been declining. I am not sure, given how fast we add new users and the fact that people come in and reregister over time if they have forgotten their password or user ID, I'm not sure we actually ever see an increase in active users as a percentage of the total.

So the things that I look for are GMV per listing, GMV per CRU, trailing 12-month GMV divided by active CRUs, active CRUs in absolute and the growth rate quarter over quarter. So I wouldn't overly focus on active users as a percentage of the total base.

Great. Okay, thank you very much. Thanks for listening in. Appreciate it.

Bob Swan

Thank you.

Operator

Once again, thank you all for joining us today. That does conclude the presentation.

TRANSCRIPT SPONSOR

MF logo

Did the analysts get it right?

Wall Street hires some smart cookies. But is it in their best interest to put the hard questions to management? Are YOU even their top priority?

Motley Fool co-founder David Gardner is still bullish on eBay. It’s up 79% since he recommended it to his Motley Fool Stock Advisor subscribers back in June 2002. Now, discover the companies David and his brother Tom recommend in their free research report “The Motley Fool's 2 Top Picks - Plus Wall Street's Dirtiest Secret.”

Read the complete report courtesy of Seeking Alpha FREE.

* Returns as of 6/12/2007.

To sponsor a Seeking Alpha transcript click here.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: eBay Q4 2006 Earnings Call Transcript
This Transcript
All Transcripts