EBAY INC. REPORTS FIRST QUARTER 2009 RESULTS
eBAY INC. REPORTS FIRST QUARTER 2009 RESULTS
San Jose, Calif., April 22, 2009 — eBay Inc. (Nasdaq: EBAY) today reported financial results for the first quarter ended
March 31, 2009. The ecommerce company posted first quarter revenue of $2.02 billion, a $171.6 million year-over-year
decrease caused primarily by the impact of the stronger dollar and the decline of the core Marketplaces business in
difficult macroeconomic conditions. PayPal, Classifieds and Skype performed well, delivering year-over-year revenue
growth. Text and graphical advertising revenue was flat as compared to the prior-year quarter. The company recorded net
income on a GAAP basis of $357.1 million or $0.28 per diluted share, and non-GAAP net income of $499.9 million or
$0.39 per diluted share.
GAAP operating margin decreased to 20.9% for the quarter, compared to 25.2% for the same period last year. Non-GAAP
operating margin decreased to 30.7% for the quarter, compared to 32.0% for the same period last year. The decrease in
operating margins was caused primarily by the impact of the stronger dollar and the company’s continuing shift to faster
growing, lower margin revenue businesses.
eBay Inc. generated $668.5 million of operating cash flow during the first quarter. Free cash flow during the quarter was
$577.6 million.
“We delivered solid results in the first quarter and moved aggressively to strengthen our portfolio for longer-term growth,”
said eBay Inc. President and CEO John Donahoe. “With a macroeconomic environment that remains challenging, we are
focused on operating discipline and strong execution of our three-year growth priorities in our core ecommerce and online
payments businesses.”
Financial Highlights (presented in millions, except per share data and percentages)
First
Quarter
2008
2009
Change
Net revenue
$2,192
$2,021
($172)
(8%)
GAAP
Net income
$460
$357
($103)
(22%)
Earnings per diluted share
$0.34
$0.28
($0.06)
(19%)
Non-GAAP
Net income
$562
$500
($62)
(11%)
Earnings per diluted share
$0.42
$0.39
($0.03)
(7%)
Quarterly Business Unit Discussion
Payments
The Payments business unit reported a strong quarter with $643.0 million in revenue, an increase of 11% year-over-year.
Net total payment volume (TPV) for the quarter was $15.86 billion, an increase of 10%. The revenue and net TPV growth
was driven by continued momentum in PayPal Merchant Services and the contribution made by Bill Me Later. Continued
increases in PayPal penetration on eBay helped offset the negative impact of addressable gross merchandise volume
(GMV) on revenue and TPV. Active registered accounts reached 73.1 million, an increase of 22% year-over-year. The
Payments business will continue to focus on the acquisition of new merchants, greater penetration into the Marketplaces
business and the growth of Bill Me Later.
Marketplaces
The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites,
recorded $1.22 billion in revenue, equating to an 18% year-over-year decline. The revenue drop was attributable to the
impact of the strengthening dollar and the decline of the core business in difficult macroeconomic conditions.
Approximately 54% of Marketplaces revenue came from markets outside of the U.S. GMV (excluding vehicles) was
$10.80 billion for the quarter, a decrease of 16%, compared to the first quarter of 2008. Online classifieds revenue
increased 23% year-over-year. eBay Marketplaces continues to focus on stabilizing its core business by improving trust,
value and selection for customers while looking for ways to drive growth through geographic, format and category
expansion.
Communications
Skype contributed $153.2 million in revenue for the quarter, representing 21% year-over-year growth. Skype added
37.9 million new users during the quarter and ended the period with more than 443.2 million registered users. In addition
to growing its user base, Skype is focused on product strategies to enhance customer engagement. On April 14, 2009,
eBay Inc. announced plans to separate Skype into an independent company commencing with an initial public offering
during the first half of 2010.
Other Selected Financial Results
• Taxes — The GAAP effective tax rate for the quarter was 19%, compared to 21% for the first quarter of 2008. The
non-GAAP effective tax rate was 22% for the first quarter of 2009, compared to 23% for the first quarter of 2008.
• Cash and cash equivalents — The company’s cash and cash equivalents totaled $3.06 billion at March 31, 2009,
compared to $3.19 billion at December 31, 2008.
Business Outlook
• Second quarter 2009 — eBay expects net revenues in the range of $1.850 to $2.050 billion with GAAP earnings per
diluted share in the range of $0.23 to $0.26 and non-GAAP earnings per diluted share in the range of $0.34 to $0.36.
Quarterly Conference Call
eBay will host a conference call to discuss first 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.
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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 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.
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, 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 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; any changes the company may make to its
product offerings in response to slowing growth; 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. 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:
Vandana Hariharan
408-376-5877
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
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eBay Inc.
Unaudited Condensed Consolidated Balance Sheet
December 31,
March 31,
2008
2009
ASSETS
(In thousands)
Current assets:
Cash and cash equivalents
$ 3,
188,928
$ 3
,057,159
Short-term investments
16
3,734
1
80,285
Accounts receivable, net
43
5,197
3
92,049
Loans and interest receivable, net
57
0,071
5
07,568
Funds receivable and customer accounts
1,
467,962
1
,584,759
Other current assets
46
0,698
4
39,214
Total current assets
6,
286,590
6
,161,034
Long-term investments
10
6,178
8
9,361
Property and equipment, net
1,
198,714
1
,197,420
Goodwill
7,
025,398
6
,783,093
Intangible assets, net
73
6,134
6
57,487
Other assets
23
9,425
2
39,392
Total assets
$ 15,
592,439
$ 15
,127,787
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$ 17
0,332
$ 1
60,174
Funds payable and amounts due to customers
1,
467,962
1
,584,759
Accrued expenses and other current liabilities
78
4,774
7
92,188
Deferred revenue and customer advances
18
1,596
1
93,203
Income taxes payable
10
0,423
2
9,600
Borrowings from credit agreement
1,
000,000
4
00,000
Total current liabilities
3,705,087
3,159,924
Deferred and other tax liabilities, net
7
53,965
8
04,317
Other liabilities
4
9,529
4
7,839
Total liabilities
4,508,581
4,012,080
Total stockholders’ equity
11,
083,858
11
,115,707
Total liabilities and stockholders' equity
$ 15,
592,439
$ 15
,127,787
4
eBay Inc.
Unaudited Condensed Consolidated Statement of Income
Three Months Ended March 31,
2008
2009
(In thousands, except per share amounts)
Net revenues (2)
$ 2
,192,223
$ 2,
020,586
Cost of net revenues (1)
5
25,412
5
73,386
Gross profit
1
,666,811
1
,447,200
Operating expenses:
Sales and marketing (1)
5
14,554
4
03,316
Product development (1)
1
76,760
2
01,516
General and administrative (1)
2
81,721
2
68,291
Provision for transaction and loan losses
8
6,165
8
1,234
Amortization of acquired intangible assets
54
,834
6
3,468
Restructuring
-
6
,611
Total operating expenses
1
,114,034
1
,024,436
Income from operations (2)
5
52,777
4
22,764
Interest and other income, net
2
6,744
1
8,092
Income before income taxes
5
79,521
4
40,856
Provision for income taxes
(
119,803) (
83,743)
Net income
$ 459,718
$ 357,113
Net income per share:
Basic
$ 0
.34
$ 0
.28
Diluted
$ 0
.34
$ 0
.28
Weighted average shares:
Basic
1
,333,791
1
,283,810
Diluted
1
,343,989
1
,287,814
(1) Includes stock-based compensation as follows:
Cost of net revenues
$ 10
,525
$ 1
4,784
Sales and marketing
23
,791
3
3,686
Product development
23
,493
3
0,679
General and administrative
29
,572
3
4,697
$ 87
,381
$ 1
13,846
(2) For the three-month period ended March 31, 2009 foreign currency movements against the dollar negatively impacted net
revenues and operating income by approximately $191.6 million and $82.2 million, respectively, compared to the same period of
the prior year. On a sequential basis, foreign currency movements against the dollar negatively impacted net revenues by
approximately $16.2 million; foreign currency movements related to operating income were immaterial for the same period.
5
eBay Inc.
Unaudited Condensed Consolidated Statement of Cash Flows
Three Months Ended
March 31,
2008
2009
Cash flows from operating activities:
(In thousands)
Net income
$ 4
59,718
$ 3
57,113
Adjustments:
Provision for transaction and loan losses
86,1
65
8
1,234
Depreciation and amortization
1
65,980
1
97,289
Stock-based compensation expense
87,3
81
1
13,846
Changes in assets and liabilities
(33,0
02) (
80,955)
Net cash provided by operating activities
7
66,242
6
68,527
Cash flows from investing activities:
Purchases of property and equipment, net
(1
34,644) (
90,934)
Principal loans receivable, net of collections
-
4
6,204
Purchases of investments
(
9
,310) (
13,594)
Maturities and sales of investments
4,
017
5
,944
Acquisitions, net of cash acquired
(1
48,964) -
Other
(45,4
62) 32
1
Net cash used in investing activities
(
334,363) (
52,059)
Cash flows from financing activities:
Proceeds from issuance of common stock
19,9
92
2
,826
Repurchases of common stock
(9
92,561) -
Excess tax benefits from stock-based compensation
1,
013
2
Tax withholdings related to net share settlements of restricted stock awards and units
(11,3
24) (
17,348)
Net proceeds from borrowings under the line of credit
(2
00,000) (6
00,000)
Net cash used in financing activities
(
1,182,880) (6
14,520)
Effect of exchange rate changes on cash and cash equivalents
94,9
92
(1
33,717)
Net increase (decrease) in cash and cash equivalents
(
656,009) (1
31,769)
Cash and cash equivalents at beginning of period
4,2
21,191
3
,188,928
Cash and cash equivalents at end of period
$ 3,5
65,182
$ 3,
057,159
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eBay Inc.
Unaudited Summary of Consolidated Net Revenues
Net Revenues by Type
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
2008
2008
2008
2008
2009
Net transaction revenues
(In thousands, except percentages)
Marketplaces
$ 1,
267,633
$ 1,
233,307
$ 1,163,890
$ 1,
046,227
$ 1,033,827
Current quarter vs prior quarter
(1%)
(3%)
(6%)
(10%)
(1%)
Current quarter vs prior year quarter
14%
9%
1%
(18%)
(18%)
Percent of Marketplaces revenue from international
54%
55%
52%
54%
51%
Payments
559,720
580,287
576,302
604,186
604,833
Current quarter vs prior quarter
4%
4%
(1%)
5%
0%
Current quarter vs prior year quarter
34%
34%
29%
12%
8%
Percent of Payments revenue from international
43%
44%
45%
45%
44%
Communications
119,791
130,151
137,201
138,660
143,238
Current quarter vs prior quarter
9%
9%
5%
1%
3%
Current quarter vs prior year quarter
62%
51%
46%
26%
20%
Percent of Communications revenue from international
83%
84%
82%
81%
82%
Total net transaction revenues
1,947,144
1,943,745
1,877,393
1,789,073
1,781,898
Current quarter vs prior quarter
1%
(0%)
(3%)
(5%)
(0%)
Current quarter vs prior year quarter
21%
18%
11%
(7%)
(8%)
Marketing services and other revenues
Marketplaces
216,684
224,724
212,963
221,323 190,622
Current quarter vs prior quarter
(2%)
4%
(5%)
4%
(14%)
Current quarter vs prior year quarter
56%
43%
29%
(0%)
(12%)
Percent of Marketplaces revenue from international
58%
61%
61%
62%
68%
Payments
21,859
21,508
20,909
18,898 38,125
Current quarter vs prior quarter
(7%)
(2%)
(3%)
(10%)
102%
Current quarter vs prior year quarter
7%
(2%)
(7%)
(19%)
74%
Percent of Payments revenue from international
50%
56%
52%
33%
6%
Communications
6,536
5,684
6,266
6,552 9,941
Current quarter vs prior quarter
30%
(13%)
10%
5%
52%
Current quarter vs prior year quarter
44%
71%
43%
30%
52%
Percent of Communications revenue from international
67%
66%
64%
61%
65%
Total marketing services and other revenues
245,079
251,916
240,138
246,773
238,688
Current quarter vs prior quarter
(2%)
3%
(5%)
3%
(3%)
Current quarter vs prior year quarter
50%
38%
25%
(2%)
(3%)
Total net revenues
$ 2,
192,223
$ 2,
195,661
$ 2,
117,531
$ 2,
035,846
$ 2,
020,586
Current quarter vs prior quarter
1%
0%
(4%)
(4%)
(1%)
Current quarter vs prior year quarter
24%
20%
12%
(7%)
(8%)
7
eBay Inc.
Unaudited Summary of Consolidated Net Revenues
Net Revenues by Segment
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
2008
2008
2008
2008
2009
(In thousands, except percentages)
Marketplaces
$ 1,484,317 $ 1,458,031 $ 1,376,853 $ 1,267,550 $ 1,224,449
Current quarter vs prior quarter
(1%)
(2%)
(6%)
(8%)
(3%)
Current quarter vs prior year quarter
19%
13%
4%
(16%)
(18%)
Percent of Marketplaces revenue from international
55%
56%
53%
55%
54%
Payments
581,579 601,795 597,211 623,084 642,958
Current quarter vs prior quarter
3%
3%
(1%)
4%
3%
Current quarter vs prior year quarter
32%
33%
27%
11%
11%
Percent of Payments revenue from international
43%
44%
45%
45%
42%
Communications
126,327 135,835 143,467 145,212 153,179
Current quarter vs prior quarter
9%
8%
6%
1%
5%
Current quarter vs prior year quarter
61%
51%
46%
26%
21%
Percent of Communications revenue from international
82%
83%
82%
80%
80%
Total net revenues
$ 2,192,223 $ 2,195,661 $ 2,117,531 $ 2,035,846 $ 2,020,586
Current quarter vs prior quarter
1%
0%
(4%)
(4%)
(1%)
Current quarter vs prior year quarter
24%
20%
12%
(7%)
(8%)
Net Revenues by Geography
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
2008
2008
2008
2008
2009
(In thousands, except percentages)
U.S. net revenues
$ 1,024,272 $ 1,002,189 $ 1,001,637 $ 941,368 $ 968,584
Current quarter vs prior quarter
(1%)
(2%)
(0%)
(6%)
3%
Current quarter vs prior year quarter
16%
12%
8%
(9%)
(5%)
Percent of total
47%
46%
47%
46%
48%
International net revenues
1,167,951 1,193,472 1,115,894 1,094,478 1,052,002
Current quarter vs prior quarter
2%
2%
(7%)
(2%)
(4%)
Current quarter vs prior year quarter
32%
27%
16%
(5%)
(10%)
Percent of total
53%
54%
53%
54%
52%
Total net revenues
$ 2,192,223 $ 2,195,661 $ 2,117,531 $ 2,035,846 $ 2,020,586
Current quarter vs prior quarter
1%
0%
(4%)
(4%)
(1%)
Current quarter vs prior year quarter
24%
20%
12%
(7%)
(8%)
8
eBay Inc.
Unaudited Payments Supplemental Operating Data
March 31,
June 30,
September 30,
December 31,
March 31,
2008
2008
2008
2008
2009
(In millions, except percentages)
Active registered accounts (1)
60.2 62.6 65.3 70.4 73.1
Current quarter vs prior quarter
5%
4%
4%
8%
4%
Current quarter vs prior year quarter
17%
19%
19%
23%
22%
Net number of payments (2)
211.0 210.9 214.5 252.2 254.1
Current quarter vs prior quarter
3%
(0%)
2%
18%
1%
Current quarter vs prior year quarter
23%
26%
25%
24%
20%
Net total payment volume (3)
$ 14,417 $ 14,930 $ 14,812 $ 15,988 $ 15,859
Current quarter vs prior quarter
3%
4%
(1%)
8%
(1%)
Current quarter vs prior year quarter
34%
35%
28%
14%
10%
Merchant Services net total payment volume as % of net
total payment volume
46%
49%
51%
50%
53%
Bill Me Later net total payment volume as % of net total
payment volume
- - -
1%
1%
Transaction rates (4)
Transaction revenue rate
3.88%
3.89%
3.89%
3.78%
3.81%
Transaction processing expense rate
1.18%
1.23%
1.20%
1.16%
1.16%
Transaction loss rate
0.24%
0.27%
0.29%
0.33%
0.28%
Loan portfolio rates
Risk adjusted margin (5)
- - -
13.37%
11.36%
Net charge-off rate (6)
- - -
8.75%
8.95%
90-day delinquency rate (7)
- - -
3.94%
4.57%
____________
(1) All registered accounts that successfully sent or received at least one payment or payment reversal through the
PayPal system or Bill Me Later accounts that are currently able to transact and that received a statement within the
last 12 months.
(2) Number of payments, net of payment reversals, successfully completed through our payments network or on Bill Me
Later accounts during the period, excluding the payment gateway business.
(3) Total dollar volume of payments, net of payment reversals, successfully completed through our payments network or
on Bill Me Later accounts during the quarter, excluding the payment gateway business.
(4) Transaction rates represent the ratio of Payments net transaction revenues (including the payment gateway business
and Bill Me Later), Payments third-party processing expenses, and Payments fraud and protection program losses
relative to net total payment volume.
(5) Risk adjusted margin represents the annualized ratio of Bill Me Later total revenue less cost of funds less net credit
and fraud losses relative to average loans receivable for the 3-month period.
(6) Net charge-off rate represents the annualized ratio of Bill Me Later net credit losses relative to average loans
receivable for the 3-month period.
(7) 90-day delinquency rate is the ratio of Bill Me Later end of period account balances that have missed 3 or more
consecutive payments relative to total ending loan receivables.
9
eBay Inc.
Unaudited eBay Marketplaces Supplemental Operating Data
March 31,
June 30,
September 30,
December 31,
March 31,
2008
2008
2008
2008
2009
(In millions, except percentages)
Active Users (1)
86.2
86.3
87.2
87.7
88.3
Current quarter vs prior quarter
1%
0%
1%
1%
1%
Current quarter vs prior year quarter
1%
1%
3%
3%
2%
Gross Merchandise Volume (excluding vehicles) (2)
$ 12,868 $ 12,301 $ 11,361 $ 11,470 $ 10,797
Current quarter vs prior quarter
(2%)
(4%)
(8%)
1%
(6%)
Current quarter vs prior year quarter
14%
11%
3%
(12%)
(16%)
Vehicles Gross Merchandise Volume (3)
$ 3,168 $ 3,383 $ 2,922 $ 2,176 $ 2,074
Current quarter vs prior quarter
2%
7%
(14%)
(26%)
(5%)
Current quarter vs prior year quarter
7%
(0%)
(12%)
(30%)
(35%)
Fixed Price Trading (4) as % of total gross merchandise volume
42%
43%
46%
49%
49%
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,
listed or sold 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) 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, excluding vehicles gross
merchandise volume.
(3) Total value of all successfully closed vehicle transactions between users on eBay Marketplaces trading platforms
during the quarter, regardless of whether the buyer and seller actually consummated the transaction.
(4) Primarily, total GMV related to eBay’s “Buy It Now” feature on eBay Marketplaces trading platforms during the
quarter.
10
eBay Inc.
Unaudited Communications Supplemental Operating Data
March 31,
June 30,
September 30,
December 31,
March 31,
2008
2008
2008
2008
2009
(In mil ions, except percentages)
Registered users (1)
309.3
338.2
370.2
405.3
443.2
Current quarter vs prior quarter
12%
9%
9%
9%
9%
Current quarter vs prior year quarter
58%
54%
51%
47%
43%
__________
(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.
11
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 June 30, 2009
GAAP Non-GAAP(a)
Net revenues
$1,850 - $2,050
$1,850 - $2,050
Diluted EPS
$0.23 - $0.26
$0.34 - $0.36
____________
(a) Estimated non-GAAP amounts and percentages above for the three months ending June 30, 2009, reflects the
estimated quarterly adjustments that exclude the amortization of acquired intangible assets of approximately $80.0-
$90.0 million, stock-based compensation expense and employer payroll taxes on stock-based compensation of
approximately $95.0-$110.0 million and restructuring charges of approximately $3.0-$7.0 million. See further
discussion regarding non-GAAP measures of financial performance on the following pages.
12
eBay Inc.
Non-GAAP Measures of Financial Performance
To supplement the company’s condensed 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 12, 14 and 15 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, impairment of goodwill, 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. 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.
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.
13
eBay Inc.
Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
Three Months Ended
March 31,
March 31,
2008
2009
(In thousands, except percentages)
GAAP operating income
$ 552,
777
$ 4
22,764
Stock-based compensation expense
87,
381
1
13,846
Employer payroll taxes on stock-based compensation
307
2
,546
Amortization of acquired intangible assets within cost of net revenues
6,
065
11
,112
Amortization of acquired intangible assets within operating expenses
54,
834
63
,468
Restructuring
-
6
,611
Non-GAAP operating income
$ 701,
364
$ 6
20,347
Non-GAAP operating margin
32.0%
30.7%
Reconciliation of GAAP Net Income to Non-GAAP Net Income
Three Months Ended
March 31,
March 31,
2008
2009
(In thousands, except per share amounts)
GAAP net income
$ 459,
718
$ 35
7,113
Stock-based compensation expense
87,
381
1
13,846
Employer payroll taxes on stock-based compensation
307
2
,546
Amortization of acquired intangible assets within cost of net revenues
6,
065
11
,112
Amortization of acquired intangible assets within operating expenses
54,
834
63
,468
Restructuring
-
6
,611
Income taxes associated with certain non-GAAP entries
(
46,788)
(
54,798)
Non-GAAP net income
$ 561,
517
$ 49
9,898
Diluted net income per share:
GAAP
$ 0.
34
$ 0
.28
Non-GAAP
$ 0.
42
$ 0
.39
Shares used in GAAP and non-GAAP diluted net income per share calculation
1
,343,989
1,
287,814
14
eBay Inc.
Reconciliation of GAAP to Non-GAAP Effective Tax Rate
Three Months Ended
March 31,
March 31,
2008
2009
(In thousands, except percentages)
GAAP provision for income taxes (a)
$ 119,
803
$ 83,743
Income taxes associated with certain non-GAAP entries
46,
788
54
,798
Non-GAAP provision for income taxes (b)
$ 166,
591
$ 13
8,541
GAAP income before income taxes (c)
$ 579,
521
$ 44
0,856
Stock-based compensation expense
87,
381
1
13,846
Employer payroll taxes on stock-based compensation
307
2
,546
Amortization of acquired intangible assets within cost of net revenues
6,
065
11
,112
Amortization of acquired intangible assets within operating expenses
54,
834
63
,468
Restructuring
-
6
,611
Non-GAAP income before income taxes (d)
$ 728,
108
$ 63
8,439
GAAP effective tax rate (a/c)
21%
19%
Non-GAAP effective tax rate (b/d)
23%
22%
Reconciliation of Operating Cash Flow to Free Cash Flow
Three Months Ended
March 31,
March 31,
2008
2009
(In thousands)
Net cash provided by operating activities
$ 766,
242
$ 66
8,527
Less: Purchases of property and equipment, net
( 134,644)
(
90,934)
Free cash flow
$ 631,
598
$ 57
7,593
15
