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Jul 26, 1999


eBay Inc. Announces Second Quarter 1999 Financial Results

Registered Users Increased 46% Sequentially to 5.6 Million

SAN JOSE, Calif., July 26 - eBay Inc. (Nasdaq: EBAY) (http://www.ebay.com), the world's largest person-to-person online trading community, today reported financial results for its second quarter ended June 30, 1999.

The Company generated consolidated net revenues of $49.5 million in the second quarter of 1999, a 154 percent increase over the $19.5 million reported for the same period last year. Revenues are net of the $3.9 million in credits given to users for the June 10th site outage. Consolidated net income for the quarter was $816,000, or $0.01 per share on a diluted basis. eBay's consolidated net income excluding the effects of non-cash and one-time merger related charges was $5.1 million, or $0.04 per diluted share, compared with $5.2 million, or $0.05 per diluted share during the second quarter of 1998. These consolidated results include the effects of the acquisitions of Butterfield & Butterfield, Kruse International, Billpoint and Alando.

In addition to the consolidated statement of income, eBay supplementally reported a pro forma statement of income, which excludes one-time merger related costs and the financial results of the recent acquisitions. eBay pro forma net revenues were $38.2 million in the second quarter of 1999, a 327 percent increase over the $8.9 million reported for the same period last year. Pro forma revenues are net of the $3.9 million in credits given to users. eBay pro forma net income for the second quarter of 1999 was $4.3 million, or $0.03 per share on a diluted basis. Net income before the effect of non-cash and one-time merger related charges was $5.1 million, or $0.04 per diluted share, compared with $2.5 million, or $0.02 per diluted share during the second quarter of 1998.

The primary contributor to the increase in eBay pro forma net revenues for the quarter was the increased activity on the site. The number of registered users increased more than 1.7 million to 5.6 million at June 30, 1999, an increase of 46 percent from the more than 3.8 million registered users at March 31, 1999 and an increase of 556 percent from June 30, 1998. eBay hosted 29.4 million auctions during the second quarter of 1999, up from 22.9 million in the first quarter of 1999, representing sequential growth of 28 percent and year over year growth of 346 percent. In addition, eBay's gross merchandise sales (the value of goods traded on the eBay site) for the second quarter of 1999 were $622 million, up 15 percent from the $541 million reported in the first quarter of 1999, and 346 percent over the second quarter of 1998.

In the second quarter, eBay continued to experience rapid growth in its business. In order to support this new level of activity, the Company made significant investments in personnel, infrastructure and marketing programs during the second quarter, which affected costs in all segments of the eBay pro forma income statement.

Pro forma cost of net revenues increased significantly in absolute dollars during the quarter largely due to site operations and customer support. Site operation expenditures included additional labor and related costs, depreciation on new equipment and ISP connectivity fees. Customer support costs included additional personnel and the opening of a new center in Salt Lake City. These investments, combined with the effects of the user credits, caused gross margin to decline during the quarter to 77 percent. Pro forma gross margin excluding the impact of the user credits was 79 percent.

The increase in pro forma sales and marketing expense in the second quarter over the first quarter was primarily due to personnel growth, the expansion of online advertising, product marketing, the continuation of radio advertising and international expansion. Pro forma product development expense increased significantly in the second quarter due to additional labor and related expenses. Pro forma general and administrative expense increased over the previous quarter primarily due to the Company's investment in personnel, including those in its SafeHarbor(TM) program, and increases in professional service fees.

For the second quarter, eBay recorded consolidated non-cash amortization charges of $1.5 million related to stock-based compensation and $327,000 associated with acquired intangibles. eBay also recorded $4.4 million of one-time merger related charges. The Company recorded a consolidated tax provision of $591,000 representing an effective tax rate of 42 percent of second quarter consolidated pretax income.

"We have tremendous momentum in our flagship business," said Meg Whitman, President and CEO of eBay. "Our customers now transact well over $200 million in gross merchandise sales per month, making this the most vibrant consumer e-commerce site on the entire Internet. Our community continues to expand at a rate higher than the Internet in general. During the second quarter, we made unparalleled investments in infrastructure while taking bold moves in several new business areas including international, regional, premium, and person-to-person payments while maintaining profitability in the flagship business."

The Company's overall balance sheet was strengthened in the second quarter primarily from the proceeds of the follow-on offering that was completed in April 1999. Consolidated assets as of June 30, 1999 were over $922 million, which included over $752 million of cash and high quality financial instruments.

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. Currently, there are more than 2.4 million items listed for sale. More than 300,000 items are added daily in more than 1,600 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. eBay is also engaged in the traditional auction business through its subsidiaries, Butterfield & Butterfield and Kruse International.

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 maintain site stability, to successfully manage and integrate its new acquisitions, to manage significant growth in all aspects of its business, to deal with the increasingly competitive environment for online trading. More information about potential factors which could affect the Company's business and financial results is included in the Company's Form 10-K for the period ended December 31, 1998 under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", its Form 10Q for the period ending March 31, 1999 and its Form 8-K/A filed on July 26, 1999. 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,    June 30,
                                                        1998          1999

                       ASSETS
    Current assets:
     Cash and cash equivalents                         $37,285    $347,553
     Short-term investments                             40,401      76,771
     Accounts receivable, net                           12,425      23,908
     Other current assets                                7,479      24,623
      Total current assets                              97,590     472,855
    Property and equipment, net                         44,062      72,319
    Investments                                             --     358,724
    Deferred tax asset                                      --      11,231
    Intangible and other assets, net                     7,884       7,080
                                                      $149,536    $922,209
                       LIABILITIES AND
                      STOCKHOLDERS' EQUITY
    Current liabilities:
     Accounts payable                                   $9,997     $31,578
     Accrued expenses and other current liabilities      6,577      16,124
     Customer advances and deferred revenue                973       2,109
     Debt and leases, current portion                    4,047      13,305
     Income taxes payable                                1,380       7,570
     Deferred tax liabilities                            1,682       1,682
      Total current liabilities                         24,656      72,368
    Debt and leases, long-term portion                  18,361       5,521
    Other liabilities                                    5,981       6,108
                                                        48,998      83,997
    Total stockholders' equity                         100,538     838,212
                                                      $149,536    $922,209


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

                                      Three Months Ended    Six Months Ended
                                            June 30,              June 30,
                                         1998      1999       1998      1999

    Net revenues                      $19,480   $49,479    $33,468   $92,280
    Cost of net revenues                3,286    10,945      5,777    18,922
        Gross profit                   16,194    38,534     27,691    73,358
    Operating expenses:
      Sales and marketing               6,324    22,916     11,903    39,874
      Product development               1,030     5,476      1,548     7,639
      General and administrative        4,492    10,088      6,800    17,702
      Amortization
        of acquired intangibles           150       327        150       655
      Merger related costs                 --     4,359         --     4,359
        Total operating expenses       11,996    43,166     20,401    70,229
    Income (loss) from operations       4,198   (4,632)      7,290     3,129
    Interest and
      other income (expense), net       (432)     6,039      (432)     6,314
    Income before income taxes         3,766     1,407       6,858     9,443
    Provision for income taxes        (1,037)     (591)    (2,685)   (4,862)
    Net income                         $2,729      $816     $4,173    $4,581
    Net income per share:
      Basic                             $0.07     $0.01      $0.12     $0.04
      Weighted average
        shares -- basic                39,447   106,855     34,248   102,343
      Diluted                           $0.02     $0.01      $0.04     $0.03
      Weighted average
        shares -- diluted             109,929   136,614    104,808   134,525

    Supplemental (A)

    Historical net income (loss)       $2,729      $816     $4,173    $4,581
    Add back certain
     non-cash and merger costs:
      Amortization
        of stock-based compensation     1,078     1,457      1,499     2,275
      Amortization
        of acquired intangibles (B)       150       327        150       780
      Merger related costs (C)             --     2,528         --     2,528
      Charitable contribution
        of Common Stock                 1,216        --      1,216        --
        Total add back                  2,444     4,312      2,865     5,583
    Supplemental net income excluding
      certain non-cash and merger
      related charges                  $5,173    $5,128     $7,038   $10,164
    Supplemental net income per share:
      Basic                             $0.13     $0.05      $0.21     $0.10
      Diluted                           $0.05     $0.04      $0.07     $0.08


    (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 "amortization of acquired intangibles."
    (C) Supplemental information on merger related costs reflects a 42 percent
    tax benefit when compared to the operating expenses under the heading
    "merger related costs."

                                    eBAY INC.
               PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
               (in thousands, except per share amounts; unaudited)

                                      Three Months Ended    Six Months Ended
                                           June 30,              June 30,
                                         1998      1999       1998      1999
    Historical (A)

    Net revenues                       $8,941   $38,183    $14,922   $72,193
    Cost of net revenues                1,106     8,722      1,736    13,843
        Gross profit                    7,835    29,461     13,186    58,350
    Operating expenses:
      Sales and marketing               2,504    17,061      4,610    29,128
      Product development               1,030     4,153      1,548     6,077
      General and administrative        3,159     7,094      4,187    12,137
      Amortization
        of acquired intangibles           150       327        150       655
        Total operating expenses        6,843    28,635     10,495    47,997
    Income from operations                992       826      2,691    10,353
    Interest and other income, net         54     6,570         76     7,209
    Income before income taxes         1,046     7,396      2,767     17,562
    Provision for income taxes          (979)   (3,106)    (2,552)   (7,376)
    Net income                            $67    $4,290       $215   $10,186
    Net income per share:
      Basic                             $0.00     $0.04      $0.01     $0.10
      Weighted average
       shares -- basic                 37,332   106,855     32,133   102,343
      Diluted                           $0.00     $0.03      $0.00     $0.08
      Weighted average
       shares -- diluted              107,814   136,614    102,693   134,525

    Supplemental (B)

    Historical net income                 $67    $4,290       $215   $10,186
    Add back certain
      non-cash and merger costs:
       Amortization of
        stock-based compensation        1,078       501      1,499     1,167
       Amortization
        of acquired intangibles (C)       150       327        150       780
       Charitable contribution
        of Common Stock                 1,216        --      1,216        --
        Total add back                  2,444       828      2,865     1,947
    Supplemental net income
      excluding certain non-cash
      and one time charges             $2,511    $5,118     $3,080   $12,133
    Supplemental net income per share:
      Basic                             $0.07     $0.05      $0.10     $0.12
      Diluted                           $0.02     $0.04      $0.03     $0.09


    (A) Represents the historical financial information of eBay Inc.,
    excluding non-recurring merger related costs and the effect of the mergers
    with Butterfield and Butterfield, Kruse International, Billpoint, Inc.,
    and alando.de AG.
    (B) 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.
    (C) Expenses associated with the amortization of acquisition related
    charges are included within cost of net revenues as well as operating
    expenses under the heading "amortization of acquired intangibles."

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