EX-99.1 2 f50098exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
 
(EBY LOGO)
 
EBAY INC. REPORTS THIRD QUARTER 2008 RESULTS
 
San Jose, Calif., October 15, 2008 — eBay Inc. (Nasdaq: EBAY) today reported financial results for its third quarter ended September 30, 2008. The ecommerce company posted third quarter revenue of $2.12 billion, up $228 million from the same period last year. Net income on a GAAP basis was $492 million, or $0.38 per diluted share, and non-GAAP net income was $592 million, or $0.46 per diluted share.
 
“Overall, we are pleased with the performance of the portfolio this past quarter,” said eBay Inc. President and CEO John Donahoe. “We took a number of steps during the quarter to further strengthen our business and better align our cost structure to invest and compete. We will continue to stay focused on connecting consumers on our various ecommerce platforms, maintaining financial discipline and capitalizing on new opportunities for growth.”
 
eBay continues to benefit from an increasingly diversified portfolio of businesses. While Marketplaces transaction revenue still represents a majority of revenue for the company, revenue growth rates were helped by growth in PayPal, Skype and global classifieds. The company’s global footprint helped it benefit year over year from strength in other currencies relative to the U.S. dollar.
 
GAAP operating margin increased to 24.7% for the quarter, compared to (49.6%) for the same period last year. Non-GAAP operating margin increased to 31.8% for the quarter, compared to 31.4% for the same period last year. The year over year increase in non-GAAP operating margin is due primarily to higher margins from each of the business units, which more than offset the growth from lower-margin businesses, primarily PayPal and Skype.
 
eBay Inc. generated $693 million of operating cash flow during the third quarter. Free cash flow during the quarter was $543 million.
 
Quarterly Business Highlights
 
  •  eBay Inc. was honored by the White House and U.S. Department of Commerce with the National Medal of Technology for leadership in technology and innovation that has enabled millions of entrepreneurs to participate in the global ecommerce market.
 
  •  Marc Andreessen, founder of Netscape, Loudcloud and Ning, joined the eBay Inc. board of directors.
 
  •  eBay Inc. repurchased approximately 25 million shares of its outstanding common stock at a cost of approximately $623 million. Since the inception of the stock repurchase program in the third quarter of 2006, the company has repurchased approximately $5.3 billion of its common stock.
 
  •  eBay lowered listing fees for the Buy It Now format by more than 70% and extended listing periods to 30 days, up from seven.
 
  •  The company’s global classifieds businesses averaged 84 million unique visitors per month during the quarter, representing an increase of 55% year over year.
 
  •  StubHub entered into a partnership with the NFL’s New York Jets franchise to auction personal seat licenses for the football team’s new stadium.
 
  •  PayPal launched merchant services deals with Walmart.com, William Hill (U.K.), Continental Airlines, American Eagle Outfitters, BagsOK (China), newegg (Canada) and OfficeMax, among others.
 
  •  Payment volume from PayPal’s merchant services business exceeded the volume received from the eBay marketplace for the first time.


 

 
  •  Skype surpassed 13 million concurrent users at certain peak times.
 
  •  Skype-to-Skype minutes reached nearly 16 billion, a 63% increase year over year.
 
Financial Highlights (presented in millions, except per share data and percentages)
 
                                 
    Third Quarter              
    2008     2007     Change  
 
Net revenue
  $ 2,118     $ 1,889     $ 228       12 %
GAAP
                               
Net income (loss)
  $ 492     $ (936 )*   $ 1,428        
Earnings (loss) per diluted share
  $ 0.38     $ (0.69 )*   $ 1.07        
Non-GAAP
                               
Net income
  $ 592     $ 564     $ 28       5 %
Earnings per diluted share
  $ 0.46     $ 0.41     $ 0.05       11 %
 
 
* Includes goodwill impairment charge of $1.39 billion recorded in the third quarter of 2007, which was not deductible for tax purposes.
 
Quarterly Business Unit Discussion
 
Marketplaces
 
The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a solid third quarter, generating $1.38 billion in revenue, representing 4% year over year growth, 53% of which was generated outside the U.S. The business unit saw strong growth in advertising, StubHub and classifieds. Revenue from our text and graphical advertising partnerships grew 127% year over year. Gross merchandise volume was $14.28 billion for the quarter, a decrease of 1% over the third quarter of 2007. Marketplaces continues to focus on customer-facing initiatives designed to make transactions on the eBay platform safer and its various global sites easier to use, while enhancing selection in a uniquely eBay way.
 
Payments
 
PayPal had a strong quarter with $597 million in net revenue, an increase of 27% year over year. Net total payment volume (TPV) for the quarter was $14.81 billion, an increase of 28% year over year. The net revenue and net TPV growth was driven primarily by the continued excellent growth of merchant services globally and increased penetration on eBay. Global active registered accounts increased to 65 million, representing 19% year over year growth. Globally, PayPal will continue to focus on greater penetration into the Marketplaces business and the acquisition of new merchants.
 
Communications
 
Skype continued its robust growth trajectory, reporting $143 million in revenue for the quarter, representing 46% year over year growth. Skype added 32 million registered users in the quarter, ending the period with more than 370 million registered users around the world. In addition to growing its user base, Skype is focused on product strategies to enhance customer engagement.
 
Other Selected Financial Results
 
  •  Taxes — The GAAP effective tax rate for the quarter was 13%, compared to (4%) for the third quarter of 2007 and 19% for the second quarter of 2008. The non-GAAP effective tax rate for the quarter was 17% compared to 10% for the third quarter of 2007 and 22% for the second quarter of 2008. The decrease in the sequential non-GAAP effective tax rate is due to changes in the estimated geographic mix of the company’s taxable income for the year.


2


 

 
  •  Cash and cash equivalents — The company’s cash and cash equivalents totaled $3.34 billion at September 30, 2008, compared to $4.22 billion at December 31, 2007.
 
Other Updates
 
  •  On October 6, 2008, the company announced that it had entered into an agreement to acquire Bill Me Later, acquired Danish classifieds sites dba.dk and bilbasen.dk and planned to reduce its global workforce by approximately 10%.
 
Business Outlook
 
The following updated guidance reflects current business trends as well as the impact of the acquisitions and the impact of the reorganization of the company’s workforce noted above. The impact of the approximately $70-80 million restructuring-related charge will be taken primarily in the forth quarter and is included in GAAP guidance but excluded from non-GAAP guidance.
 
  •  Full year 2008 — eBay now expects net revenues in the range of $8.525 to $8.675 billion with GAAP earnings per diluted share in the range of $1.32 to $1.34 and non-GAAP earnings per diluted share in the range of $1.69 to $1.71.
 
  •  Fourth quarter 2008 — eBay expects net revenues in the range of $2.020 to $2.170 billion with GAAP earnings per diluted share in the range of $0.25 to $0.27 and non-GAAP earnings per diluted share in the range of $0.39 to $0.41.
 
Quarterly Conference Call
 
eBay will host a conference call to discuss third quarter results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations web site at http://investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.
 
About eBay Inc.
 
Founded in 1995, eBay Inc. connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay Inc. does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay Inc. has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, StubHub, Shopping.com, and others. eBay Inc. is headquartered in San Jose, California.
 
Non-GAAP Financial Measures
 
This press release includes the following financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission, or SEC: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flow. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see “Non-GAAP Measures of Financial Performance,” “Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin,” “Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income,” “Reconciliation of GAAP to Non-GAAP Effective Tax Rate,” “Reconciliation of Operating Cash Flows to Free Cash Flow” and “Business Outlook” included in this press release.


3


 

Forward-Looking Statements
 
This press release contains forward-looking statements relating to the future performance of eBay and its consolidated subsidiaries that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. The company’s actual results could differ materially from those predicted and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: the impact of the credit crisis, possible economic downturn and other changes in political, business and economic conditions, including conditions that affect consumer confidence or ecommerce growth; fluctuations in foreign exchange rates; the company’s ability to profitably expand its business model to new types of merchandise and sellers; and, the company’s ability to profitably integrate, manage and grow businesses that have been acquired recently or may be acquired in the future; the company’s need to increasingly achieve growth from its existing users, particularly in its more established markets; the company’s ability to deal with the increasingly competitive ecommerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the company’s need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the effect of management changes and business initiatives; the company’s need and ability to manage other regulatory, tax and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive and any changes the company may make to its product offerings in response to such risk; the regulatory, intellectual property, competitive and other risks specific to Skype; the competitive, regulatory, credit card association, and other risks specific to PayPal, especially as it continues to expand geographically; the company’s ability to upgrade and develop its systems, infrastructure and customer service capabilities at reasonable cost; and the company’s ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion. Except as explicitly described, the forward-looking statements in this release do not include the potential impact of any acquisitions that may be announced and/or completed after the date hereof.
 
More information about factors that could affect the company’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s investor relations web site at http://investor.ebay.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.
 
         
Investor Relations Contact:
  Tracey Ford   408-376-7205
Media Relations Contact:
  Jose Mallabo   408-376-7458
Investor Information Request:
  408-376-7493    
Company News:
  http://www.businesswire.com    
Investor Relations Web site:
  http://investor.ebay.com    


4


 

eBay Inc.
 
Unaudited Condensed Consolidated Balance Sheet
 
                 
    December 31,
    September 30,
 
    2007     2008  
    (In thousands)  
 
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 4,221,191     $ 3,342,717  
Short-term investments
    676,264       301,136  
Accounts receivable, net
    480,557       436,456  
Funds receivable and customer accounts
    1,513,578       1,555,835  
Other current assets
    230,915       372,202  
                 
Total current assets
    7,122,505       6,008,346  
Long-term investments
    138,237       133,629  
Property and equipment, net
    1,120,452       1,215,469  
Goodwill
    6,257,153       6,172,133  
Intangible assets, net
    596,038       467,610  
Other assets
    131,652       242,970  
                 
Total assets
  $ 15,366,037     $ 14,240,157  
                 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
Accounts payable
  $ 156,613     $ 217,272  
Funds payable and amounts due to customers
    1,513,578       1,555,835  
Accrued expenses and other current liabilities
    1,151,139       804,634  
Deferred revenue and customer advances
    166,495       180,777  
Income taxes payable
    111,754       96,215  
                 
Total current liabilities
    3,099,579       2,854,733  
Deferred and other tax liabilities, net
    510,557       639,926  
Other liabilities
    51,299       51,803  
                 
Total liabilities
    3,661,435       3,546,462  
                 
Total stockholders’ equity
    11,704,602       10,693,695  
                 
Total liabilities and stockholders’ equity
  $ 15,366,037     $ 14,240,157  
                 


5


 

eBay Inc.
 
Unaudited Condensed Consolidated Statement of (Loss) Income
 
                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
    2007     2008     2007     2008  
    (In thousands, except per share amounts)  
 
Net revenues(2)
  $ 1,889,220     $ 2,117,531     $ 5,491,723     $ 6,505,415  
Cost of net revenues(1)
    446,521       560,963       1,256,999       1,648,478  
                                 
Gross profit
    1,442,699       1,556,568       4,234,724       4,856,937  
                                 
Operating expenses(1):
                               
Sales and marketing
    485,240       457,216       1,406,260       1,497,181  
Product development
    164,879       190,842       450,411       554,393  
General and administrative
    287,447       331,715       849,284       1,020,672  
Amortization of acquired intangible assets
    51,888       52,720       150,791       162,472  
Impairment of goodwill
    1,390,938             1,390,938        
                                 
Total operating expenses
    2,380,392       1,032,493       4,247,684       3,234,718  
                                 
(Loss) income from operations(3)
    (937,693 )     524,075       (12,960 )     1,622,219  
Interest and other income, net
    38,363       38,556       102,350       91,551  
Interest expense
    (2,728 )     11       (10,004 )     (3,474 )
                                 
(Loss) income before income taxes
    (902,058 )     562,642       79,386       1,710,296  
Provision for income taxes
    (33,577 )     (70,423 )     (262,021 )     (298,014 )
                                 
Net (loss) income
  $ (935,635 )   $ 492,219     $ (182,635 )   $ 1,412,282  
                                 
Net (loss) income per share:
                               
Basic
  $ (0.69 )   $ 0.38     $ (0.13 )   $ 1.08  
                                 
Diluted
  $ (0.69 )   $ 0.38     $ (0.13 )   $ 1.07  
                                 
Weighted average shares:
                               
Basic
    1,354,786       1,288,937       1,360,830       1,311,501  
                                 
Diluted
    1,354,786       1,297,484       1,360,830       1,322,126  
                                 
(1) Includes stock-based compensation as follows:
                                 
                                 
Cost of net revenues
  $ 9,132     $ 10,395     $ 27,543     $ 31,908  
Sales and marketing
    22,192       23,745       64,501       72,096  
Product development
    21,374       23,458       56,751       71,627  
General and administrative
    27,891       32,653       83,365       93,850  
                                 
Total stock-based compensation
  $ 80,589     $ 90,251     $ 232,160     $ 269,481  
                                 
 
(2) Net revenues for the three-month period ended September 30, 2008 were positively impacted by foreign currency translation of approximately $65 million compared to the same period of the prior year. Net revenues for the nine-month period ended September 30, 2008 were positively impacted by foreign currency translation of approximately $296 million compared to the same period of the prior year. On a sequential basis, net revenues for the three-month period ended September 30, 2008 were negatively impacted by foreign currency translation of approximately $36 million.
 
(3) Operating income for the three-month period ended September 30, 2008 was positively impacted by foreign currency translation of approximately $44 million compared to the same period of the prior year. Operating income for the nine-month period ended September 30, 2008 was positively impacted by foreign currency translation of approximately $170 million compared to the same period of the prior year. On a sequential basis, operating income for the three-month period ended September 30, 2008 was negatively impacted by foreign currency translation of approximately $19 million.


6


 

eBay Inc.
 
Unaudited Condensed Consolidated Statement of Cash Flows
 
                                 
    Three Months Ended
    Nine Months Ended
 
    September 30,     September 30,  
    2007     2008     2007     2008  
    (In thousands)  
 
Cash flows from operating activities:
                               
Net (loss) income
  $ (935,635 )   $ 492,219     $ (182,635 )   $ 1,412,282  
Adjustments:
                               
Provision for doubtful accounts and authorized credits
    21,601       31,612       66,848       92,234  
Provision for transaction losses
    31,079       43,631       100,848       118,197  
Depreciation and amortization
    151,720       178,578       441,891       517,917  
Impairment of goodwill
    1,390,938             1,390,938        
Stock-based compensation expense
    80,589       90,251       232,160       269,481  
Deferred income taxes
    (17,757 )     (36,896 )     (68,934 )     (110,947 )
Tax benefit from stock-based compensation
    59,874       8,325       112,883       38,220  
Excess tax benefit from stock-based compensation
    (39,252 )     (846 )     (69,026 )     (4,670 )
Changes in assets and liabilities, net of acquisition effects:
                               
Accounts receivable
    (53,399 )     11,137       (86,316 )     (47,612 )
Funds receivable and customer accounts
    (302,271 )     128,868       (420,817 )     (42,256 )
Other current assets
    (175,163 )     (34,791 )     (179,927 )     (112,098 )
Other non-current assets
    (21,236 )     (41,421 )     (79,069 )     (26,242 )
Accounts payable
    4,147       27,500       12,707       33,300  
Funds payable and amounts due to customers
    302,271       (128,868 )     420,817       42,256  
Accrued expenses and other liabilities
    33,067       (109,606 )     5,642       (105,124 )
Deferred revenue and customer advances
    10,943       (6,035 )     27,477       12,480  
Income taxes payable and other tax liabilities
    87,970       39,745       123,076       110,854  
                                 
Net cash provided by operating activities
    629,486       693,403       1,848,563       2,198,272  
                                 
Cash flows from investing activities:
                               
Purchases of property and equipment, net
    (119,293 )     (150,412 )     (326,035 )     (406,739 )
Purchases of investments
    (45,155 )     (84,062 )     (205,298 )     (107,990 )
Maturities and sales of investments
    158,549       9,541       783,816       42,248  
Acquisitions, net of cash acquired
                (320,195 )     (159,064 )
Other
    3,410       (165 )     5,523       (51,369 )
                                 
Net cash used in investing activities
    (2,489 )     (225,098 )     (62,189 )     (682,914 )
                                 
Cash flows from financing activities:
                               
Proceeds from issuance of common stock, net
    180,758       13,356       365,199       98,727  
Repurchases of common stock, net
    (495,838 )     (624,262 )     (1,170,699 )     (2,179,552 )
Excess tax benefits from stock-based compensation
    39,252       846       69,026       4,670  
Repayment of line of credit
                      (200,220 )
                                 
Net cash used in financing activities
    (275,828 )     (610,060 )     (736,474 )     (2,276,375 )
                                 
Effect of exchange rate changes on cash and cash equivalents
    143,073       (211,556 )     199,899       (117,457 )
                                 
Net increase (decrease) in cash and cash equivalents
    494,242       (353,311 )     1,249,799       (878,474 )
Cash and cash equivalents at beginning of period
    3,418,349       3,696,028       2,662,792       4,221,191  
                                 
Cash and cash equivalents at end of period
  $ 3,912,591     $ 3,342,717     $ 3,912,591     $ 3,342,717  
                                 


7


 

eBay Inc.
 
Unaudited Summary of Consolidated Net Revenues
 
Net Revenues by Type
 
                                         
    Three Months Ended  
    September 30,
    December 31,
    March 31,
    June 30,
    September 30,
 
    2007     2007     2008     2008     2008  
    (In thousands, except percentages)  
 
Net transaction revenues(1)
                                       
Marketplaces
  $ 1,155,886     $ 1,280,302     $ 1,267,633     $ 1,233,307     $ 1,163,890  
Current quarter vs prior quarter
    2 %     11 %     (1 )%     (3 )%     (6 )%
Current quarter vs prior year quarter
    24 %     17 %     14 %     9 %     1 %
Percent of Marketplaces revenue from international
    52 %     54 %     54 %     55 %     52 %
Payments
    447,952       539,301       559,720       580,287       576,302  
Current quarter vs prior quarter
    4 %     20 %     4 %     4 %     (1 )%
Current quarter vs prior year quarter
    32 %     34 %     34 %     34 %     29 %
Percent of Payments revenue from international
    43 %     44 %     43 %     44 %     45 %
Communications
    93,823       110,364       119,791       130,151       137,201  
Current quarter vs prior quarter
    9 %     18 %     9 %     9 %     5 %
Current quarter vs prior year quarter
    91 %     80 %     62 %     51 %     46 %
Percent of Communications revenue from international
    83 %     84 %     83 %     84 %     82 %
                                         
Total net transaction revenues
    1,697,661       1,929,967       1,947,144       1,943,745       1,877,393  
Current quarter vs prior quarter
    3 %     14 %     1 %     (0 )%     (3 )%
Current quarter vs prior year quarter
    29 %     24 %     21 %     18 %     11 %
Marketing services and other revenues(1)
                                       
Marketplaces
    164,746       222,205       216,684       224,724       212,963  
Current quarter vs prior quarter
    5 %     35 %     (2 )%     4 %     (5 )%
Current quarter vs prior year quarter
    40 %     51 %     56 %     43 %     29 %
Percent of Marketplaces revenue from international
    48 %     49 %     58 %     61 %     61 %
Payments
    22,444       23,411       21,859       21,508       20,909  
Current quarter vs prior quarter
    3 %     4 %     (7 )%     (2 )%     (3 )%
Current quarter vs prior year quarter
    135 %     69 %     7 %     (2 )%     (7 )%
Percent of Payments revenue from international
    43 %     49 %     50 %     56 %     52 %
Communications
    4,369       5,023       6,536       5,684       6,266  
Current quarter vs prior quarter
    32 %     15 %     30 %     (13 )%     10 %
Current quarter vs prior year quarter
    455 %     14 %     44 %     71 %     43 %
Percent of Communications revenue from international
    62 %     70 %     67 %     66 %     64 %
                                         
Total marketing services and other revenues
    191,559       250,639       245,079       251,916       240,138  
Current quarter vs prior quarter
    5 %     31 %     (2 )%     3 %     (5 )%
Current quarter vs prior year quarter
    50 %     51 %     50 %     38 %     25 %
                                         
Total net revenues
  $ 1,889,220     $ 2,180,606     $ 2,192,223     $ 2,195,661     $ 2,117,531  
                                         
Current quarter vs prior quarter
    3 %     15 %     1 %     0 %     (4 )%
Current quarter vs prior year quarter
    30 %     27 %     24 %     20 %     12 %
 
 
(1) Beginning with the first quarter of 2008, we reclassified revenue generated primarily from our Marketplaces non-gross merchandise volume based businesses (which includes Shopping.com, Rent.com and our classified websites) from “Net Transaction Revenues” to “Marketing Services and Other Revenues” in order to more closely align our net transaction revenue presentation with our key operating metrics. “Marketing Services and Other Revenues” also includes amounts previously reflected under “Advertising and Other Revenue.” Prior period amounts have been reclassified to conform to the current presentation. Consolidated revenues, as well as total segment revenues, are unchanged.


8


 

eBay Inc.
 
Unaudited Summary of Consolidated Net Revenues
 
Net Revenues by Segment
 
                                         
    Three Months Ended  
    September 30,
    December 31,
    March 31,
    June 30,
    September 30,
 
    2007     2007     2008     2008     2008  
    (In thousands, except percentages)  
 
Marketplaces
  $ 1,320,632     $ 1,502,507     $ 1,484,317     $ 1,458,031     $ 1,376,853  
Current quarter vs prior quarter
    2 %     14 %     (1 )%     (2 )%     (6 )%
Current quarter vs prior year quarter
    26 %     21 %     19 %     13 %     4 %
Percent of Marketplaces revenue from international
    51 %     54 %     55 %     56 %     53 %
Payments
    470,396       562,712       581,579       601,795       597,211  
Current quarter vs prior quarter
    4 %     20 %     3 %     3 %     (1 )%
Current quarter vs prior year quarter
    35 %     35 %     32 %     33 %     27 %
Percent of Payments revenue from international
    43 %     44 %     43 %     44 %     45 %
Communications
    98,192       115,387       126,327       135,835       143,467  
Current quarter vs prior quarter
    9 %     18 %     9 %     8 %     6 %
Current quarter vs prior year quarter
    96 %     76 %     61 %     51 %     46 %
Percent of Communications revenue from international
    82 %     83 %     82 %     83 %     82 %
                                         
Total net revenues
  $ 1,889,220     $ 2,180,606     $ 2,192,223     $ 2,195,661     $ 2,117,531  
                                         
Current quarter vs prior quarter
    3 %     15 %     1 %     0 %     (4 )%
Current quarter vs prior year quarter
    30 %     27 %     24 %     20 %     12 %
 
Net Revenues by Geography
 
                                         
    Three Months Ended  
    September 30,
    December 31,
    March 31,
    June 30,
    September 30,
 
    2007     2007     2008     2008     2008  
    (In thousands, except percentages)  
 
U.S. net revenues
  $ 929,605     $ 1,032,336     $ 1,024,272     $ 1,002,189     $ 1,001,637  
Current quarter vs prior quarter
    4 %     11 %     (1 )%     (2 )%     (0 )%
Current quarter vs prior year quarter
    22 %     18 %     16 %     12 %     8 %
Percent of total
    49 %     47 %     47 %     46 %     47 %
International net revenues
    959,615       1,148,270       1,167,951       1,193,472       1,115,894  
Current quarter vs prior quarter
    2 %     20 %     2 %     2 %     (7 )%
Current quarter vs prior year quarter
    40 %     35 %     32 %     27 %     16 %
Percent of total
    51 %     53 %     53 %     54 %     53 %
                                         
Total net revenues
  $ 1,889,220     $ 2,180,606     $ 2,192,223     $ 2,195,661     $ 2,117,531  
                                         
Current quarter vs prior quarter
    3 %     15 %     1 %     0 %     (4 )%
Current quarter vs prior year quarter
    30 %     27 %     24 %     20 %     12 %


9


 

eBay Inc.
 
Unaudited eBay Marketplaces Supplemental Operating Data
 
                                         
    September 30,
    December 31,
    March 31,
    June 30,
    September 30,
 
    2007     2007     2008     2008     2008  
    (In millions, except percentages)  
 
Active Users(1)
    83.0       83.2       83.9       84.5       85.7  
Current quarter vs prior quarter
    (0 )%     0 %     1 %     1 %     1 %
Current quarter vs prior year quarter
    4 %     2 %     1 %     1 %     3 %
Number of New Listings(2)
    555.6       637.2       647.4       666.9       700.2  
Current quarter vs prior quarter
    (1 )%     15 %     2 %     3 %     5 %
Current quarter vs prior year quarter
    (5 )%     4 %     10 %     19 %     26 %
Gross Merchandise Volume(3)
  $ 14,395     $ 16,213     $ 16,036     $ 15,684     $ 14,284  
Current quarter vs prior quarter
    (0 )%     13 %     (1 )%     (2 )%     (9 )%
Current quarter vs prior year quarter
    14 %     12 %     12 %     8 %     (1 )%
Fixed Price Trading (4) as % of gross merchandise volume
    41 %     42 %     42 %     43 %     46 %
eBay Stores(5) (in thousands)
    520       532       547       552       534  
Current quarter vs prior quarter
    (20 )%     2 %     3 %     1 %     (3 )%
Current quarter vs prior year quarter
    (9 )%     (10 )%     (13 )%     (15 )%     3 %
Percent of eBay Stores hosted internationally
    46 %     46 %     46 %     45 %     43 %
 
Rent.com, Shopping.com and eBay’s classifieds websites are not included in these metrics.
 
 
(1) All users, excluding users of Half.com, StubHub and Internet Auction Co., our Korean subsidiary, who bid on, bought, or listed an item within the previous 12-month period. Users may register more than once, and as a result, may have more than one account.
 
(2) Listings on eBay Marketplaces trading platforms during the quarter, regardless of whether the listing subsequently closed successfully.
 
(3) Total value of all successfully closed items between users on eBay Marketplaces trading platforms during the quarter, regardless of whether the buyer and seller actually consummated the transaction.
 
(4) Primarily, GMV related to eBay’s “Buy It Now” feature on eBay Marketplaces trading platforms during the quarter.
 
(5) Total number of eBay Stores worldwide, hosted on eBay’s Marketplaces trading platforms as of each respective quarter end. Beginning in Q3-07, eBay China stores were excluded.


10


 

eBay Inc.
 
Unaudited Payments Supplemental Operating Data
 
                                         
    September 30,
    December 31,
    March 31,
    June 30,
    September 30,
 
    2007     2007     2008     2008     2008  
    (In millions, except percentages)  
 
Active registered accounts(1)
    54.8       57.3       60.2       62.6       65.3  
Current quarter vs prior quarter
    4 %     5 %     5 %     4 %     4 %
Current quarter vs prior year quarter
    16 %     16 %     17 %     19 %     19 %
Net number of payments(2)
    172.2       203.9       211.0       210.9       214.5  
Current quarter vs prior quarter
    3 %     18 %     3 %     (0 )%     2 %
Current quarter vs prior year quarter
    21 %     22 %     23 %     26 %     25 %
Net total payment volume(3)
  $ 11,569     $ 14,044     $ 14,417     $ 14,930     $ 14,812  
Current quarter vs prior quarter
    4 %     21 %     3 %     4 %     (1 )%
Current quarter vs prior year quarter
    34 %     35 %     34 %     35 %     28 %
Merchant Services net total payment volume as % of net total payment volume
    44 %     44 %     46 %     49 %     51 %
Transaction rates(4)
                                       
Transaction revenue rate
    3.87 %     3.84 %     3.88 %     3.89 %     3.89 %
Transaction processing expense rate
    1.21 %     1.18 %     1.18 %     1.23 %     1.20 %
Transaction loss rate
    0.27 %     0.27 %     0.24 %     0.27 %     0.29 %
 
 
(1) All registered accounts that successfully sent or received at least one payment or payment reversal through the PayPal system within the previous 12-month period.
 
(2) Number of payments, net of payment reversals, successfully completed through the PayPal system during the quarter, excluding the payment gateway business.
 
(3) Total dollar volume of payments, net of payment reversals, successfully completed through the PayPal system during the quarter, excluding the payment gateway business.
 
(4) Transaction rates represent the ratio of PayPal net transaction revenues (including the payment gateway business), PayPal third-party processing expenses, and PayPal fraud and protection program losses relative to net total payment volume.


11


 

eBay Inc.
 
Unaudited Communications Supplemental Operating Data
 
                                         
    September 30,
    December 31,
    March 31,
    June 30,
    September 30,
 
    2007     2007     2008     2008     2008  
    (In millions, except percentages)  
 
Registered users(1)
    245.7       276.3       309.3       338.2       370.2  
Current quarter vs prior quarter
    12 %     12 %     12 %     9 %     9 %
Current quarter vs prior year quarter
    81 %     61 %     58 %     54 %     51 %
 
 
(1) Cumulative number of unique user accounts, which includes users who may have registered via non-Skype based websites. Users may register more than once, and as a result, may have more than one account.


12


 

eBay Inc.
 
Business Outlook
(In Millions, Except Per Share Amounts and Percentages)
 
The guidance figures provided below and elsewhere in this press release are forward-looking statements and are approximate in nature because eBay’s future performance is difficult to predict. Such guidance is based on information available on the date of this press release, and eBay assumes no obligation to update it.
 
eBay’s future performance involves risks and uncertainties, and the company’s actual results could differ materially from the information below. Some of the factors that could affect the company’s operating results are set forth under the caption “Forward-Looking Statements” above in this press release. More information about factors that could affect eBay’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s investor relations web site at http://investor.ebay.com or the SEC’s web site at www.sec.gov.
 
                 
    Three Months Ending December 31, 2008
    GAAP   Non-GAAP(a)
 
Net revenues
  $ 2,020 - $2,170     $ 2,020 - $2,170  
Diluted EPS
  $ 0.25 - $ 0.27     $ 0.39 - $ 0.41  
 
         
    Year Ending December 31, 2008
    GAAP   Non-GAAP(a)
 
Net revenues
  $8,525 - $8,675   $8,525 - $8,675
Operating margin
  ~24%   ~32%
Diluted EPS
  $ 1.32 - $ 1.34   $ 1.69 - $ 1.71
Effective tax rate
  18.0% - 19.0%   21.0% - 22.0%
 
 
(a) Estimated non-GAAP amounts and percentages above for the three months and year ending December 31, 2008 reflect estimated quarterly adjustments that exclude the amortization of acquired intangible assets of approximately $85-$95 million per quarter, stock-based compensation expense and employer payroll taxes on stock-based compensation of approximately $90-$105 million per quarter and restructuring-related charges of approximately $60-$70 million. See further discussion regarding non-GAAP measures of financial performance on the following pages.


13


 

eBay Inc.
 
Non-GAAP Measures of Financial Performance
 
To supplement the company’s consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, eBay uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flow.
 
These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with eBay’s results of operations as determined in accordance with GAAP. These measures should only be used to evaluate eBay’s results of operations in conjunction with the corresponding GAAP measures.
 
Reconciliation to the nearest GAAP measure of all non-GAAP measures included in this press release can be found in the tables included on pages 13, 15 and 16 of this press release.
 
These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and the company’s prospects for the future. Specifically, the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses, and net purchases of property and equipment that may not be indicative of its core operating results and business outlook. In addition, because eBay has historically reported certain non-GAAP results to investors, the company believes the inclusion of non-GAAP measures provides consistency in the company’s financial reporting.
 
For its internal budgeting process, and as discussed further below, eBay’s management uses financial statements that do not include stock-based compensation expense, employer payroll taxes on stock-based compensation, amortization or impairment of acquired intangible assets, restructuring-related charges and the income taxes associated with the foregoing. In addition to the corresponding GAAP measures, eBay’s management also uses the foregoing non-GAAP measures in reviewing the financial results of eBay.
 
eBay excludes the following items from non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin and non-GAAP effective tax rate:
 
Stock-based compensation expense.  This expense consists of expenses for stock options, restricted stock and employee stock purchases under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” eBay excludes stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that eBay does not believe are reflective of ongoing operating results.
 
Employer payroll taxes on stock-based compensation.  This amount is dependent on eBay’s stock price and the timing and size of exercises by employees of their stock options and the vesting of their restricted stock, over which management has limited to no control, and as such does not correlate to eBay’s operation of the business.
 
Amortization or impairment of acquired intangible assets and impairment of goodwill.  eBay incurs amortization or impairments of acquired intangible assets and goodwill in connection with acquisitions. eBay excludes these items because they arise from eBay’s prior acquisitions and have no direct correlation to the current operating results of eBay’s business.
 
Restructuring charges.  These charges consist of expenses for employee severance and other exit and disposal costs. eBay excludes restructuring charges primarily because eBay does not believe they are reflective of ongoing operating results.


14


 

Income taxes associated with certain non-GAAP entries.  This amount is used to present stock-based compensation and the other amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.
 
In addition to the non-GAAP measures discussed above, eBay also uses free cash flow. Free cash flow represents operating cash flows less net purchases of property and equipment. eBay considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property, buildings, and equipment, which can then be used to, among other things, invest in eBay’s business, make strategic acquisitions, strengthen the balance sheet and repurchase stock. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company’s cash balance for the period.


15


 

eBay Inc.
 
Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2008  
    (In thousands, except percentages)  
 
GAAP operating (loss) income
  $ (937,693 )   $ 524,075  
Stock-based compensation expense
    80,589       90,251  
Employer payroll taxes on stock-based compensation
    2,281       530  
Amortization of acquired intangible assets within cost of net revenues
    5,441       6,743  
Amortization of acquired intangible assets within operating expenses
    51,888       52,720  
Impairment of goodwill
    1,390,938        
                 
Non-GAAP operating income
  $ 593,444     $ 674,319  
                 
Non-GAAP operating margin
    31.4 %     31.8 %
                 
 
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2008  
    (In thousands, except per share amounts)  
 
GAAP net (loss) income
  $ (935,635 )   $ 492,219  
Stock-based compensation expense
    80,589       90,251  
Employer payroll taxes on stock-based compensation
    2,281       530  
Amortization of acquired intangible assets within cost of net revenues
    5,441       6,743  
Amortization of acquired intangible assets within operating expenses
    51,888       52,720  
Impairment of goodwill
    1,390,938        
Income taxes associated with certain non-GAAP entries
    (31,721 )     (50,340 )
                 
Non-GAAP net income
  $ 563,781     $ 592,123  
                 
Diluted net (loss) income per share:
               
GAAP
  $ (0.69 )   $ 0.38  
                 
Non-GAAP
  $ 0.41     $ 0.46  
                 
Shares used in GAAP diluted net income per-share calculation
    1,354,786       1,297,484  
                 
Shares used in non-GAAP diluted net income per-share calculation
    1,373,284       1,297,484  
                 


16


 

eBay Inc.
 
Reconciliation of GAAP to Non-GAAP Effective Tax Rate
 
                         
    Three Months Ended  
    September 30,
    June 30,
    September 30,
 
    2007     2008     2008  
    (In thousands, except percentages)  
 
GAAP provision for income taxes(a)
  $ 33,577     $ 107,788     $ 70,423  
Income taxes associated with certain non-GAAP entries
    31,721       47,928       50,340  
                         
Non-GAAP provision for income taxes(b)
  $ 65,298     $ 155,716     $ 120,763  
                         
GAAP (loss) income before income taxes(c)
  $ (902,058 )   $ 568,133     $ 562,642  
Stock-based compensation expense
    80,589       91,849       90,251  
Employer payroll taxes on stock-based compensation
    2,281       1,746       530  
Amortization of acquired intangible assets within cost of net revenues
    5,441       6,607       6,743  
Amortization of acquired intangible assets within operating expenses
    51,888       54,918       52,720  
Impairment of goodwill
    1,390,938              
                         
Non-GAAP income before income taxes(d)
  $ 629,079     $ 723,253     $ 712,886  
                         
GAAP effective tax rate (a/c)
    (4 )%     19 %     13 %
                         
Non-GAAP effective tax rate (b/d)
    10 %     22 %     17 %
                         
 
Reconciliation of Operating Cash Flows to Free Cash Flow
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2008  
    (In thousands)  
 
Net cash provided by operating activities
  $ 629,486     $ 693,403  
Less: Purchases of property and equipment, net
    (119,293 )     (150,412 )
                 
Free cash flow
  $ 510,193     $ 542,991  
                 


17