SAN JOSE, Calif., Oct. 27 -- eBay Inc. (http://www.ebay.com), the world's
largest person-to-person online trading community,
today reported financial results for the third quarter ended
September 30, 1998.
The Company generated net revenue of $12.9 million in the third quarter of
1998, a 787 percent increase over the $1.5 million reported for the same
period last fiscal year. Gross profit margin improved to 84 percent for the
quarter from 83 percent a year ago. Net income for the current quarter was
$663,000, or $0.02 per share on a fully diluted basis. eBay's net income
before the effect of non-cash charges related to stock compensation and
acquisition expenses was $2.0 million, or $0.05 per fully diluted share,
compared with net income of $199,000 or $0.01 per fully diluted share during
the third quarter of fiscal 1997.
The Company's strong revenue growth was primarily attributable to
increased activity on the eBay Web site. Gross merchandise sales (the value
of goods traded) for the current quarter were $195 million, up 39 percent from
the $140 million reported in the second quarter of 1998. The number of
registered users increased over 400,000 to more than 1.2 million at
September 30, 1998, an increase of about 49 percent from the
851,000 registered users at June 30, 1998. In addition, eBay hosted over
9.2 million auctions during the third quarter of 1998, up from 6.6 million in
the second quarter.
Sales and marketing expenses in the third quarter increased in part due to
significantly increased marketing expenses and in part to expenses related to
the Company's partnership with AOL. Certain marketing expenses associated
with the Company's national advertising campaign were deferred into the fourth
quarter due to legal restrictions relating to the "quiet period" of the
Company's initial public offering. Such expenses, including those associated
with the national print and broadcast advertising campaign announced on
October 13th, will be recognized in the fourth quarter. In addition, the
Company's continued commitment to building infrastructure in advance of demand
led to increased spending on equipment to support its service and for
personnel in customer support and product development. The decrease in G&A
expense relative to the second quarter of 1998 is largely the result of a
one-time, non-cash charge for the charitable contribution of stock to the eBay
Foundation, which occurred in the second quarter of 1998.
The Company recorded a tax provision of $848,000, or 56 percent of income
before taxes for the quarter ended September 30, 1998. The difference between
the effective and statutory tax rates is the result of certain non-cash
expenses that provide no tax benefit.
During the quarter ended September 30, 1998, eBay recorded certain
non-cash charges of $818,000 and $515,000 related to the amortization of stock
compensation and of acquisition-related expenses, respectively.
In announcing third quarter results, Meg Whitman, President and CEO of
eBay Inc., stated, "We are pleased to issue our first earnings release as a
public company with such positive growth momentum. eBay pioneered online
person-to-person trading in a format that we believe consumers find efficient,
entertaining and fun. As such, we expect that the number of eBay users will
continue to grow as consumers discover that eBay is the place to trade on the
Internet and as we work to build our brand awareness through aggressive
marketing initiatives. In addition, we will continue to invest in capital and
customer support infrastructure in order to provide our community of users the
best possible experience on eBay."
The Company's balance sheet was strengthened by the completion of its
initial public offering of common stock on the Nasdaq National Market. eBay
sold 4.025 million shares, 10,725 of which were sold on behalf of a charitable
foundation established by the Company, resulting in net proceeds to the
Company of $66 million. The Company also added $2.6 million in fixed assets
and $2.7 million in prepaid marketing expenses to the balance sheet in the
quarter.
About eBay
eBay (http://www.ebay.com), the world's personal trading community
™, is
headquartered in San Jose, CA. eBay pioneered person-to-person online trading
by developing an efficient and entertaining auction format trading site that
is available 24 hours a day, seven days a week. Currently, eBay users list
items in more than 1,000 categories, including antiques; books, movies and
music; coins and stamps; electronics; pottery and glass; sports memorabilia;
and toys. There are currently more than 800,000 items listed for sale. eBay
has more than 1.2 million registered users.
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 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 increasingly competitive environment for online trading,
including the effect of the recent entry of competitors which have
significantly greater financial and marketing resources, seasonal factors,
including a possible decrease in activity during holiday periods, and the
Company's need to manage significant growth in all aspects of its business.
More information about potential factors which could affect the Company's
business and financial results is included in the Company's prospectus dated
September 24, 1998 under the headings "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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)
September 30, December 31,
1998 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $74,474 $3,723
Accounts receivable, net 3,994 1,024
Other current assets 3,663 220
Total current assets 82,131 4,967
Property and equipment, net 5,668 652
Intangible assets, net 1,701 --
$89,500 $5,619
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Debt and leases, current portion $316 $258
Accounts payable 3,376 252
Customer advances 506 128
Income taxes payable -- 169
Other current liabilities 3,066 317
Total current liabilities 7,264 1,124
Debt and leases, long-term portion 94 305
Deferred tax liabilities 157 157
7,515 1,586
Series B Mandatorily Redeemable
Convertible Preferred
Stock and Series B warrants -- 3,018
Total stockholders' equity 81,985 1,015
$89,500 $5,619
eBAY INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts; unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Historical
Net revenues $12,935 $1,459 $27,857 $3,117
Cost of net revenues 2,103 253 3,839 413
Gross profit 10,832 1,206 24,018 2,704
Operating expenses:
Sales and marketing 5,476 369 10,086 581
Product development 1,514 257 3,062 466
General and administrative 2,115 260 6,302 493
Acquired research and
development and amortization
of acquired intangibles 327 -- 477 --
Total operating expenses 9,432 886 19,927 1,540
Income from operations 1,400 320 4,091 1,164
Interest and other income, net 111 26 187 30
Income before income taxes 1,511 346 4,278 1,194
Provision for income taxes (848) (147) (3,400) (509)
Net income $663 $199 $878 $685
Net income per share:
Basic $0.04 $0.02 $0.07 $0.10
Weighted average shares
-- basic 15,423 8,075 12,296 6,800
Diluted $0.02 $0.01 $0.02 $0.02
Weighted average shares
-- diluted 37,168 29,784 35,837 27,984
Supplemental (A)
Historical net income $663 $199 $878 $685
Add back certain non-cash
charges:
Amortization of stock
compensation 818 -- 2,317 --
Amortization of acquisition
related charges (B) 515 -- 66 5 --
Charitable contribution
of Common Stock -- -- 1,216 --
Total add back 1,333 -- 4,198 --
Supplemental net income
excluding certain non-cash
charges $1,996 $199 $5,076 $685
Supplemental net income
per share:
Basic $0.13 $0.02 $0.41 $0.10
Diluted $0.05 $0.01 $0.14 $0.02
(A) The accompanying supplemental 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.
(B) Expenses associated with the amortization of acquisition related
charges are included within cost of net revenues as well as operating expenses
under the heading "acquired research and development and amortization of
acquired intangibles."