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