SAN JOSE, Calif., Jan. 26 -- eBay Inc. (http://www.ebay.com), the world's
largest person-to-person online trading community, today reported financial
results for its fourth quarter and year ended December 31, 1998.
The Company generated net revenues of $19.5 million in the fourth quarter
of 1998, a 642 percent increase over the $2.6 million reported for the same
period last fiscal year. Gross profit margin decreased to 85 percent for the
quarter from 87 percent a year ago. Net income for the current quarter was
$1.5 million, or $0.04 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 $2.8 million, or $0.07 per fully diluted share,
compared with $214,000 or $0.01 per fully diluted share during the fourth
quarter of fiscal 1997.
For the year, the Company generated net revenues of $47.4 million, a
724 percent increase over the net revenues of $5.7 million in fiscal 1997.
Gross profit margin decreased to 86 percent for the year from 87 percent last
fiscal year. Net income for the current year was $2.4 million, or $0.06 per
share on a fully diluted basis. The Company's net income before the effect of
non-cash charges related to stock compensation and acquisition expenses was
$7.9 million, or $0.21 per fully diluted share, compared with $899,000 or
$0.03 per fully diluted share during the fiscal year 1997.
Increased activity on the site was the primary contributor to the increase
in revenues for the quarter. Gross merchandise sales (the value of goods
traded) for the current quarter were $307 million, up 57 percent from the
$195 million reported in the third quarter of 1998. The number of registered
users increased more than 916,000 to over 2.1 million at December 31, 1998, an
increase of about 72 percent from the more than 1.2 million registered users
at September 30, 1998. In addition, eBay hosted over 13.6 million auctions
during the fourth quarter of 1998, up from 9.2 million in the third quarter.
The Company experienced higher cost of sales during the fourth quarter
largely due to increased spending on customer support personnel, depreciation
of new site equipment, and other volume-driven transactional expenses
including ISP connectivity charges and bank processing charges for customer
fees paid by credit cards. In addition, sales and marketing expenses in the
fourth quarter increased substantially over the prior period primarily due to
the national print, broadcasting and online advertising campaigns that were
announced in an October 13th press release and commenced thereafter. The
increase also reflects a full quarter of expense associated with the AOL
marketing agreement. Product development expenses were relatively unchanged
compared to the third quarter of 1998. The slight increase in general and
administrative expenses was primarily driven by additional personnel-related
costs and incremental costs associated with being a public company.
For the fourth quarter, eBay recorded certain non-cash charges of
$773,000 and $515,000 related to the amortization of stock compensation and
acquisition-related expenses, respectively. For the year ended
December 31, 1998, these non-cash charges were $3.1 million and $1.2 million
for the amortization of stock compensation and acquisition-related expenses,
respectively.
The Company recorded a tax provision of $1.2 million, representing an
effective tax rate of 45 percent of income before taxes for the fourth
quarter. For the year ended December 31, 1998, the Company recorded a tax
provision of $4.6 million, representing an effective tax rate of 66 percent of
income before taxes. The difference between the effective and statutory tax
rates resulted from non-deductible charges for stock-based compensation and
acquisition-related charges.
"We are pleased with our strong fourth quarter results and the returns we
gained from investing our resources in making our core service better for the
community members we serve. In the quarter we implemented new marketing and
public relations initiatives, we improved the functionality of eBay and we
took important steps towards improving the overall level of trust and safety
on the site," stated Meg Whitman, President and CEO of eBay. "A singular
focus on helping buyers and sellers be successful built this Company. As we
grow, we will continue to pursue this vision which has brought us so many
passionate users."
The Company's overall balance sheet is largely unchanged from the third
quarter. Balance sheet highlights included the purchase of $3.0 million in
fixed assets and the repayment of $410,000 of debt.
On a separate note, the Board of Directors of eBay has approved a
3-for-1 Common Stock split for shares of record as of February 9, 1999. The
split will be effective on March 1, 1999.
About eBay
eBay (http://www.ebay.com), the world's personal trading community(TM), pioneered
person-to-person online trading. Founded in 1995, eBay has developed an
efficient and entertaining trading site on the Web that is available 24 hours
a day, seven days a week. eBay has more than 2.1 million registered users.
Currently, there are more than one million items listed for sale. More than
150,000 items are added daily in more than 1,000 categories including:
antiques; books, movies and music; coins and stamps; collectibles; computers;
dolls and figures; jewelry and gemstones; photo and electronics; pottery and
glass; sports memorabilia; and toys.
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 Company's need to manage significant growth in all aspects
of its business, the increasingly competitive environment for online trading,
including the effect of the recent entry of competitors which have
significantly greater financial and marketing resources and, notwithstanding
the Company's trust and safety efforts, the potential adverse effects of
having illegal, fraudulent or infringing items sold by eBay users. In this
context, the Company is having discussions with certain content owners who
believe that the Company's efforts to eliminate infringing items on its site
are inadequate and must be improved. More information about potential factors
which could affect the Company's business and financial results is included in
the Company's Form 10-Q for the period ended September 30, 1998 under the
headings "Risk Factors that may Affect Results of Operations and Financial
Condition" 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; unaudited)
December 31, December 31,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $31,790 $3,723
Short-term investments 40,401 --
Accounts receivable, net 6,369 1,024
Other current assets 4,825 220
Total current assets 83,385 4,967
Property and equipment, net 7,831 652
Intangible and other assets, net 1,267 --
$92,483 $5,619
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Debt and leases, current portion $ -- $258
Accounts payable 1,385 252
Customer advances 727 128
Income taxes payable -- 169
Deferred tax liabilities 1,682 --
Other current liabilities 4,244 317
Total current liabilities 8,038 1,124
Debt and leases, long-term portion -- 305
Deferred tax liabilities -- 157
8,038 1,586
Series B Mandatorily Redeemable
Convertible Preferred Stock
and Series B warrants -- 3,018
Total stockholders' equity 84,445 1,015
$92,483 $5,619
eBAY INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts; unaudited)
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Historical
Net revenues $19,495 $2,627 $47,352 $5,744
Cost of net revenues 3,020 333 6,859 746
Gross profit 16,475 2,294 40,493 4,998
Operating expenses:
Sales and marketing 9,755 1,149 19,841 1,730
Product development 1,544 365 4,606 831
General and administrative 2,778 457 9,080 950
Acquired research and
development and
amortization of
acquired intangibles 328 -- 805 --
Total operating expenses 14,405 1,971 34,332 3,511
Income from operations 2,070 323 6,161 1,487
Interest and other income, net 682 26 869 56
Income before income taxes 2,752 349 7,030 1,543
Provision for income taxes (1,232) (160) (4,632) (669)
Net income $1,520 $189 $2,398 $874
Net income per share:
Basic $0.05 $0.02 $0.14 $0.11
Weighted average shares
-- basic 29,524 9,350 16,632 7,438
Diluted $0.04 $0.01 $0.06 $0.03
Weighted average shares
-- diluted 43,092 29,281 38,196 27,553
Supplemental (A)
Historical net income $1,520 $189 $2,398 $874
Add back certain non-cash
expenses:
Amortization of stock
compensation 773 25 3,090 25
Amortization of
acquisition-related
expenses(B) 515 -- 1,180 --
Charitable contribution
of Common Stock -- -- 1,216 --
Total add back 1,288 25 5,486 25
Supplemental net income
excluding certain
non-cash expenses $2,808 $214 $7,884 $899
Supplemental net income
per share:
Basic $0.10 $0.02 $0.47 $0.12
Diluted $0.07 $0.01 $0.21 $0.03
(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."