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eBAY INC. ANNOUNCES SECOND QUARTER 1999
FINANCIAL RESULTS
Registered Users Increased 46% Sequentially to 5.6 Million
San Jose, CA, July 26, 1999 - eBay Inc. (NASDAQ: EBAY; 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 SafeHarborTM 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 (www.ebay.com), the world's personal trading communityTM, 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.
Investor Information Request: 408-558-7493 or email to investor_relations@ebay.com
Company News On Call: http://www.prnewswire.com
Press Release fax-on-demand service: 800-758-5804, ext. 132637
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 June 30, |
|
Six Months Ended 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 (1)
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
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 (2)
|
150 |
|
327 |
|
150 |
|
780 |
|
Merger related costs (3)
|
— |
|
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 |
- 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.
- 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."
- 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 June 30, |
|
Six Months Ended June 30, |
| |
1998 |
|
1999 |
|
1998 |
|
1999 |
|
Historical (1)
|
|
|
|
|
|
| |
|
|
|
|
|
|
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 (2)
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
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 (3)
|
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 |
- 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.
- 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.
- 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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