eBay Earnings Call Nuggets: PayPal Analysis and External Environment
eBay Inc (NASDAQ:EBAY) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Colin Sebastian – Robert W. Baird: Obviously, PayPal generated very solid growth in transaction volume, but one follow-up on the segment margin and the sequential decline from Q1, is this reflective of the offline payment service kicking in, and I’m wondering how you’re tracking towards the year-end goals in terms of adding merchant acquirers and retail locations for this initiative?
Bob Swan – SVP, Finance and CFO: Yes, the PayPal segment margins are consistent with our historical trends, where first quarter and fourth quarter tend to be the higher segment margin rates and Q2 and Q3 tend to be lower. And it’s more a function of the investments that we are making around ubiquity in the online and omnichannel world on investments we’re making in the consumer product more than anything. The second thing is as you see on a year-on-year basis, transaction margins were down, and that is more a function of a higher take rate last year versus this year as our off eBay growth accelerated, our large merchant expansion is improving. And then as you know, Colin, the impact of hedges flowed through the PayPal revenue line in our gains this year – this quarter were a little less than last year.
John Donahoe – President and CEO: And then on point-of-sale progress, it’s marching along pretty much as we outlined in March with PayPal here at the smallest merchant and continuing to grow and now the chip and PIN being released in the U.K. and soon to the other countries. Our Discover partnership is now live and I think we have roughly a 0.25 million location. And we continue to sign direct point-of-sale sell merchants; as I mentioned earlier, RadioShack being the latest. So, we’re going to continue to march our way out to build over the next two and a half years build our ubiquity.
Douglas Anmuth – JPMorgan: I just wanted to ask if you think that anything fundamental has changed in your business since the Investor Day four months ago. And how do you get comfortable with the international softness in Korea and Europe in particular being macro rather than competitive or something more fundamental?
John Donahoe – President and CEO: Doug, we don’t really see anything fundamental in the last 90 days other than what both Bob and I commented on, which is, the external environment is a little bit softer in a couple of geographies versus what we anticipated at the beginning of the year. We came into the year feeling like the U.S. economy and ecommerce market was going to be solid; and I’d say it’s performing probably at or maybe even a little bit better than we would’ve guessed. We came into the year thinking Europe was going to be – while it was going to be weak; it was going to be kind of stable. What’s happened in the first six months of the year, you read the same things we do that the Eurozone may actually contract this year. Retail is down in both Germany and the U.K. And what’s a little different this year than the past couple of years is ecommerce growth rates are also coming down in the U.K. and in Germany. Last year, ecommerce held up even and in spite of a challenging market. So it’s not massive, but it’s just on the margin. It’s softer than we thought. Then in, Korea. Korea, the ecommerce growth rates have dropped by more than 50% year-over-year. They were almost 9%, 10% a year ago. They are at 4% now. So as you know, we are reasonably weighted toward Europe, Germany, in U.K. and Korea; and so those things are impacting our businesses in the area. But we are executing on all the initiatives, and all the plans that we discussed at our Investor Day and as we said earlier, in spite of those headwinds, we still feel good about how we’re executing and performing and expect to come in within our full annual guidance range.
Bob Swan – SVP, Finance and CFO: Doug, the only thing that I would add, which is a fundamental change not in our business per se but in the environment which we’re operating, obviously, we’re a very global business and international currencies relative to the dollar from beginning of the year are weaker by a little over 4%, and from the March-April timeframe, weaker by a little over 3%. So, obviously, that’s not a fundamental dynamic of the business that we operate; it is a dynamic of being a global business exposed to global currencies, and that clearly has an impact on us.