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Oct 18, 2001


eBay Inc. Announces Third Quarter 2001 Financial Results

Record Quarterly Net Revenues of $194.4 Million

Pro Forma EPS of $0.12

SAN JOSE, Calif., Oct. 18 - eBay Inc. (Nasdaq: EBAY) (http://www.ebay.com), the world's online marketplace, reported financial results for its third quarter ended September 30, 2001.

Consolidated net revenues for the quarter ended September 30, 2001, totaled $194.4 million, representing a 71% increase over the $113.4 million generated in the same period last year. Consolidated net income for the quarter was $18.8 million, or $0.07 per diluted share. eBay's pro forma consolidated net income, excluding certain charges was a record $34.9 million, or $0.12 per diluted share.

"In these extraordinary times, we continue to be impressed by the strength and resiliency of our user community," said Meg Whitman, President and CEO of eBay. "We're continuing to see sustained growth across our U.S. and international markets, deeper penetration into many vertical categories and expanded adoption of our fixed price trading formats."

Based on eBay's current outlook, including consideration of the changing economic environment and some diversion of trading activity to its "Auction for America" effort, the company now believes that Q4-01 net revenues could approximate $200-210 million, or about $5 million higher than its previous financial guidance.

Key Financial and Operating Metrics

Online Net Revenues -- eBay reported record online net revenues of $185.4 million, representing 80% year over year growth from the $102.8 million reported in Q3-00.

Gross Profit -- eBay reported gross profit totaling $159.5 million or 82% of net revenues during the quarter, which is a 3% improvement from the 79% gross profit reported in Q3-00.

Pro Forma Net Income -- eBay reported record pro forma net income, which excludes certain charges, totaling $34.9 million, or $0.12 per diluted share. This earnings level represents a 82% increase over Q3-00 pro forma net income of $19.1 million

Operating Cash Flows -- Cash flows generated from operations totaled $61.5 million during the quarter. Of this amount, $19.2 million was derived from tax benefits on certain stock option exercises. Quarterly free cash flows amounted to $46.9 million.

Gross Merchandise Sales -- eBay users transacted a record $2.355 billion in GMS during the third quarter, representing 74% year over year increase from the $1.355 billion reported in Q3-00.

Listings -- eBay hosted a record 108.8 million listings during the quarter, representing 59% year over year growth.

Registered Users -- eBay added about 3.5 million users to end Q3-01 with 37.6 million confirmed registered users. This CRU level represents a 99% increase over the 18.9 million users reported at the end of Q3-00.

Key Execution Highlights

Geographic Expansion

Net revenues from international operations contributed 16% of Q3-01 consolidated net revenues, up from 14% in Q2-01, highlighted by 31% sequential net revenue growth in Germany.

The company successfully integrated the eBay and iBazar trading platforms in Italy, the first of a series of iBazar site integration efforts.

eBay entered into a strategic equity relationship with MercadoLibre.com, a leading online trading site serving Latin America.

Category and Pricing Format Development

Buy It Now, Half.com and eBay Stores trading formats contributed more than 16% of total gross merchandise sales in Q3-01, up sequentially from 11% in Q2-01.

Gross merchandise sales processed using the Billpoint online payment service increased by 16% sequentially and 687% year over year.

eBay acquired HomesDirect, the leading provider of foreclosure-related auction services. In 2000, HomesDirect supported the sale of more than 116,000 homes on its online auction platform.

Revenues from third party advertisers increased to nearly 13% of net revenues from a 10% level in Q2-01.

Technology Infrastructure

eBay achieved 99.9% site availability for first time in company history. This record achievement is due in large part to the outstanding technology and significant, ongoing support contributions from Sun Microsystems.

Community Development

eBay launched "Auction for America" to raise money to help the victims, their families and the communities affected by the terrorist attacks of September 11, raising $5 million to date.

The company signed an agreement with Columbia TriStar Television, a division of Sony Pictures Entertainment, to launch a new television project for Fall 2002.

Financial and Operating Summary

The company reported online net revenues of $185.4 million, representing an 80% year over year increase. The sequential increase was driven largely by better-than-expected performance in the U.S. online business, robust international growth, solid contributions from eBay Motors and Billpoint and continued success in the development of third party advertising revenues. Net revenues from eBay's offline segment contributed $9.0 million in Q3-01 net revenues, as compared to the $10.5 million reported in Q3-00.

Gross profit as a percentage of net revenues held steady with the prior quarter at 82%, as productivity improvements in U.S. customer support and cost management in site operations were offset by increased costs in site operations from eBay's iBazar acquisition without a proportional revenue contribution.

Sales and marketing expenses totaled $66.3 million, or 34% of net revenues, which compares to the 33% of net revenues reported in Q2-01 and 36% reported in Q3-00. The sequential dollar increase of approximately $6.2 million resulted primarily from increases in online marketing campaigns, iBazar integration and staff additions to our category and business development teams.

Product development costs totaled $20.2 million, or approximately 10% of net revenues in Q3-01, consistent with Q2-01, and down from 14% of net revenues in Q3-00. The sequential dollar increase of approximately $2.5 million resulted primarily from site feature and functionality improvements, iBazar integration and V3 architecture research and development.

General and administrative costs totaled $27.6 million, or about 14% of revenues, consistent with Q2-01, and down from 16% in Q3-00. The sequential dollar increase of approximately $2.0 million resulted principally from costs associated with international expansion.

Net interest and other income totaled $8.8 million in Q3-01. In addition, non-operating income included a $6.3 million impairment charge associated with certain of the company's strategic equity investments.

eBay recorded a consolidated tax provision of $19.3 million, representing a 50.6% effective tax rate on Q3-01 consolidated pre-tax income. The increase in the effective rate from the 46.4% reported in Q2-01, results from a combination of increased non-deductible goodwill amortization and losses in certain international jurisdictions. On a pro forma basis, excluding certain charges, the consolidated effective tax rate remained consistent with the prior quarter at 40.0%.

eBay's balance sheet remains very strong as the company ended the quarter with consolidated assets of approximately $1.549 billion, including $1.007 billion in aggregate cash and investments.

Business Outlook

Given eBay's current outlook for Q4-01, including consideration of the changing economic environment and some diversion of trading activity to eBay's "Auction for America" effort, the company now believes that Q4-01 net revenues could approximate $200-$210 million, or about $5 million higher than its previous financial guidance.

eBay continues to execute on a strategy that balances bottom-line returns with investments in long-term growth. These investments include continued international expansion, development of our next generation architecture, continued improvements to our site features and functionality, development and integration of fixed price trading formats, and promoting eBay as a holiday shopping destination.

As a result of a slightly higher net revenue outlook, eBay believes that these incremental investments can be made while delivering improved bottom line profitability. Accordingly, eBay is raising its pro forma EPS expectation for Q4-01 to between $0.11 and $0.12 per diluted share.

About eBay

eBay is The World's Online Marketplace(TM). Founded in 1995, eBay created a powerful platform for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items across thousands of categories for sale on eBay, as well as on Half.com, eBay's site dedicated to fixed price trading. eBay enables trade on a local, national and international basis with customized sites in markets around the world.

Forward-Looking Statements

This announcement contains forward-looking statements that involve risks and uncertainties, including those relating to the company's ability to grow its business and user base. Actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the company's need to manage both an increasingly broad range of businesses and significant growth, to deal with the increasingly competitive environment for online trading, to manage regulatory and litigation risks, to maintain site stability and to continue to expand its model outside of the U.S., as well as the timing and commercial success of new features and functions added to the company's sites, the price and demand for advertising offered by the company, the success of the company's commercial partners and the costs of announced and prospective joint ventures, acquisitions and other commercial transactions. This forward-looking guidance assumes no substantial worsening of the economy from current levels and no terrorist actions making consumers less willing to purchase or receive goods. More information about potential factors which could affect the company's business and financial results is included in the company's Annual Report on Form 10-K for the year ended December 31, 2000, the company's Quarterly Reports on Form 10-Q for the periods ended March 31, 2001 and June 30, 2001, and under the heading "Risk Factors" included in the company's Registration Statement on Form S-3 filed September 6, 2001. All forward-looking statements are based on information available to the company on the date hereof, and the company assumes no obligation to update such statements.
                                  eBAY INC.

                     CONDENSED CONSOLIDATED BALANCE SHEET
                          (in thousands; unaudited)

                                                   Dec. 31,        Sept. 30,
                                                     2000            2001
                            ASSETS
    Current assets:
      Cash and cash equivalents                     $201,873       $423,729
      Short-term investments                         354,166        227,324
      Accounts receivable, net                        67,163         97,931
      Other current assets                            52,262         61,494
        Total current assets                         675,464        810,478

    Long-term investments                            218,197        225,997
    Restricted cash and investments                  126,390        129,690
    Property and equipment, net                      125,161        142,845
    Intangible assets, net                            13,063        212,929
    Deferred tax asset                                13,892         10,572
    Other assets                                      10,236         16,096
                                                  $1,182,403     $1,548,607

                    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                               $31,725        $30,739
      Accrued expenses and other current liabilities  66,697         94,890
      Deferred revenue and customer advances          12,656         15,535
      Short-term debt                                 15,272         15,958
      Income taxes payable                            11,092         10,981
        Total current liabilities                    137,442        168,103

    Long term debt                                    11,404         12,046
    Other liabilities                                  6,549         17,966
    Minority interests                                13,248         39,715
        Total liabilities                            168,643        237,830
    Total stockholders' equity                     1,013,760      1,310,777
                                                  $1,182,403     $1,548,607


                                  eBAY INC.

                  CONDENSED CONSOLIDATED STATEMENT OF INCOME
             (in thousands, except per share amounts; unaudited)

                                 Three Months Ended       Nine Months Ended
                                   September 30,            September 30,
                                  2000        2001        2000        2001

    Net revenues                $113,377   $194,425     $297,416   $529,420
      Cost of net revenues        23,912     34,953       71,499     94,827
        Gross profit              89,465    159,472      225,917    434,593
    Operating expenses:
      Sales and marketing         41,137     66,267      117,728    181,920
      Product development         15,783     20,177       41,721     53,565
      General and administrative  17,948     27,606       55,574     74,538
      Payroll expense on
       employee stock options         17        749        1,752      1,561
      Amortization of acquired
       intangible assets             264     12,024          879     24,201
        Total operating expenses  75,149    126,823      217,654    335,785
    Income from operations        14,316     32,649        8,263     98,808
    Interest and other income
     (expense), net               11,674      9,302       34,223     34,427
    Interest expense               (958)      (458)      (2,836)    (2,129)
    Impairment of certain
     equity investments               --    (6,324)           --   (16,245)
    Income before income taxes
     and minority interests       25,032     35,169       39,650    114,861
    Provision for income taxes  (10,141)   (19,268)     (16,815)   (55,971)
    Minority interests in
     consolidated companies          320      2,937        1,594      5,623
    Net income                   $15,211    $18,838      $24,429    $64,513

    Net income per share:
      Basic                        $0.06      $0.07        $0.10      $0.24
      Diluted                      $0.05      $0.07        $0.09      $0.23
    Weighted average shares:
      Basic                      255,741    271,236      249,070    267,116
      Diluted                    280,297    282,317      280,567    279,614


                                  eBAY INC.

                 SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION
                  CONDENSED CONSOLIDATED STATEMENT OF INCOME
             (in thousands, except per share amounts; unaudited)

    The accompanying supplemental pro forma financial information is presented
for informational purposes only and should not be considered as a substitute
for the historical financial information presented in accordance with
generally accepted accounting principles.

                         Three Months Ended           Three Months Ended
                         September 30, 2000           September 30, 2001
                               Pro                             Pro
                              Forma       Pro                 Forma     Pro
                   Reported  Entries     Forma    Reported   Entries   Forma

    Net
     revenues   $113,377        $--  $113,377   $194,425        $--  $194,425
    Cost of net
     revenues     23,912    (31)(A)    23,881     34,953    (13)(A)    34,940
      Gross
       profit     89,465         31    89,496    159,472         13   159,485
    Operating
     expenses:
     Sales and
      marketing   41,137   (121)(A)    41,016     66,267    (54)(A)    66,213
     Product
      development 15,783 (2,311)(A)    13,472     20,177   (107)(A)    20,070
     General and
      admini-
      strative   17,948  (1,504)(A, F)  16,444    27,606   (362)(A)    27,244
     Payroll expense
      on employee
      stock options   17    (17)(B)        --        749   (749)(B)        --
     Amortization of
      acquired
      intangible
      assets         264   (264)(C)        --     12,024  (12,024)(C)      --
      Total
        operating
        expenses  75,149    (4,217)    70,932    126,823   (13,296)   113,527
    Income from
     operations   14,316      4,248    18,564     32,649     13,309    45,958
    Interest and
     other income
     (expense),
     net          11,674         --    11,674      9,302         --     9,302
    Interest
     expense       (958)         --     (958)      (458)         --     (458)
    Impairment of
     certain equity
     investments      --         --        --    (6,324)   6,324(D)        --
    Income before
     income taxes and
     minority
     interests    25,032      4,248    29,280     35,169     19,633    54,802
    Provision for
     income
     taxes      (10,141)   (355)(E)  (10,496)   (19,268)  (3,615)(E)  (22,883)
    Minority
     interests in
     consolidated
     companies       320         --       320      2,937         --     2,937
    Net income   $15,211     $3,893   $19,104    $18,838    $16,018   $34,856

    Net income
     per share:
      Basic        $0.06                $0.07      $0.07                $0.13
      Diluted      $0.05                $0.07      $0.07                $0.12
    Weighted
     average
     shares:
      Basic      255,741              255,741    271,236              271,236
      Diluted    280,297              280,297    282,317              282,317

    Notes:

     (A) Non-cash stock based compensation expense.
     (B) Employer payroll taxes on employee exercises of non-qualified stock
         options.
     (C) Amortization of acquired intangible assets.
     (D) Impairment of certain equity investments.
     (E) Incremental income taxes associated with certain pro forma entries.
     (F) Merger related costs.

                                  eBAY INC.

                 SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION
                  CONDENSED CONSOLIDATED STATEMENT OF INCOME
             (in thousands, except per share amounts; unaudited)

     The accompanying supplemental pro forma financial information is
     presented for informational purposes only and should not be considered as
     a substitute for the historical financial information presented in
     accordance with generally accepted accounting principles.

                         Nine Months Ended           Nine Months Ended
                         September 30, 2000         September 30, 2001
                            Pro Forma                    Pro Forma
                 Reported    Entries   Pro Forma  Reported Entries  Pro Forma

    Net revenues   $297,416     $--    $297,416 $529,420     $--   $529,420
    Cost of net
     revenues        71,499   (72)(A)    71,427   94,827  (34)(A)    94,793
        Gross
         profit     225,917        72   225,989  434,593       34   434,627
    Operating
     expenses:
      Sales and
       marketing    117,728  (699)(A)   117,029  181,920  (161)(A)   181,759
      Product
       development   41,721  (3,990)(A)    37,731   53,565  (356)(A)    53,209
      General and
       admini-
       strative      55,574  (3,390)(A,F)  52,184   74,538  (928)(A)    73,610
      Payroll
       expense
       on employee
       stock options  1,752  (1,752)(B)        --    1,561  (1,561)(B)       -
-
      Amortization
       of acquired
       intangible
       assets           879  (879)(C)        --   24,201  (24,201)(C)      --
        Total
         operating
         expenses   217,654  (10,710)   206,944  335,785  (27,207)   308,578
    Income from
     operations       8,263    10,782    19,045   98,808   27,241   126,049
    Interest
     and other
     income
     (expense), net  34,223        --    34,223   34,427       --    34,427
    Interest
     expense        (2,836)        --   (2,836)  (2,129)       --   (2,129)
    Impairment
     of certain
     equity
     investments         --        --        -- (16,245)  16,245(D)       --
    Income before
     income taxes
     and minority
     interests       39,650    10,782    50,432  114,861   43,486   158,347
    Provision
     for income
     taxes      (16,815)  (1,688)(E)  (18,503)  (55,971)  (9,019)(E)  (64,990)
    Minority
     interests in
     consolidated
     companies        1,594        --     1,594    5,623       --     5,623
    Net income      $24,429    $9,094   $33,523  $64,513  $34,467   $98,980

    Net income per share:
      Basic           $0.10               $0.13    $0.24              $0.37
      Diluted         $0.09               $0.12    $0.23              $0.35
    Weighted average
     shares:
      Basic         249,070             249,070  267,116            267,116
      Diluted       280,567             280,567  279,614            279,614


     Notes:

      (A) Non-cash stock based compensation expense.
      (B) Employer payroll taxes on employee exercises of non-qualified stock
          options.
      (C) Amortization of acquired intangible assets.
      (D) Impairment of certain equity investments.
      (E) Incremental income taxes associated with certain pro forma entries.
      (F) Merger related costs.



                                  eBAY INC.

                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                          (in thousands; unaudited)

                             Three months ended          Nine months ended
                               September 30,               September 30,
                             2000          2001         2000          2001
    Cash flows from
     operating activities:
    Net income             $15,211       $18,838      $24,429       $64,513
    Adjustments:
      Provision for
       doubtful accounts
       and authorized
       credits               4,861         6,256       12,866        18,830
      Depreciation and
       amortization          9,689        22,884       27,207        59,916
      Amortization of
       unearned stock-based
       compensation          3,425           676        6,784         2,184
      Tax benefit on the
       exercise of employee
       stock options         7,997        19,184       20,943        53,822
      Impairment of certain
       equity investments       --         6,324           --        16,245
      Minority interests
       and other              (51)       (3,063)        (806)       (7,730)
      Changes in assets
       and liabilities:
      Accounts receivable (12,569)            62     (25,218)      (39,680)
      Other current
       assets              (3,168)         1,582     (12,744)         1,889
      Intangible and other
       assets                   --       (1,117)      (3,050)       (5,214)
      Deferred tax assets       --            --      (5,248)         2,041
      Accounts payable    (10,569)       (9,555)     (13,337)       (6,689)
      Accrued expenses
       and other
       liabilities          14,793         2,220       31,519         7,010
      Deferred revenue
       and customer
       advances            (1,211)       (2,820)          827         1,436
      Income taxes payable   1,888             3        1,511         (144)
    Net cash provided by
     operating activities   30,296        61,474       65,683       168,429

    Cash flows from
     investing activities:
      Purchases of property
       and equipment       (6,186)      (14,616)     (36,224)      (43,677)
      Purchases of
       investments        (78,897)     (181,812)    (383,080)     (350,292)
      Maturities and
       sales of investments 37,897        84,915      184,945       522,431
      Purchases of other
       non-current assets       --            --           --       (2,065)
      Proceeds from sale
       of property and
       equipment                --            --            -         4,560
      Acquisitions, net
       of cash acquired         --         (718)           --     (111,730)
      Net cash provided
       by (used in) in
       investing
       activities         (47,186)     (112,231)    (234,359)        19,227

    Cash flows from financing activities:
      Proceeds from
       issuance of common
       stock, net            (254)        34,003       39,215        56,869
      Proceeds from
       issuance of
       common stock by
       subsidiaries             --            --       37,736            --
      Principal payments
       on long-term debt     3,350          (59)        (506)      (21,839)
      Net cash provided by
       financing activities  3,096        33,944       76,445        35,030
      Effect of exchange
       rate changes on
       cash and cash
       equivalents           1,428           777          988         (830)
      Net increase
       (decrease) in
       cash and cash
       equivalents        (12,366)      (16,036)     (91,243)       221,856
      Cash and cash
       equivalents at
       beginning of
       period              142,924       439,765      221,801       201,873
      Cash and cash
       equivalents at
       end of period      $130,558      $423,729     $130,558      $423,729
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