SAN JOSE, Calif.--(BUSINESS WIRE)--eBay Inc. (Nasdaq:EBAY - News) today reported financial results for its first quarter ended March 31, 2008. The ecommerce company posted first quarter revenue of $2.19 billion, up $424 million from the same period last year. Revenue growth was driven primarily by Marketplaces net transaction revenues, the ongoing expansion at PayPal, Skype and the company’s global classifieds business. The company’s global footprint helped it benefit from strength in other currencies, relative to the U.S. dollar. The company recorded net income on a GAAP basis of $460 million or $0.34 per diluted share, and non-GAAP net income of $562 million or $0.42 per diluted share.

GAAP operating margin decreased to 25.2% for the quarter, compared to 26.5% for the same period last year. Non-GAAP operating margin decreased to 32.0% for the quarter, compared to 33.6% for the same period last year. The decrease in operating margins was caused primarily by our faster growing lower-margin businesses, such as PayPal and Skype.

eBay Inc. generated $766 million of operating cash flow during the first quarter. Free cash flow during the quarter was $632 million.

“This was a very strong financial quarter for the company,” said eBay Inc. President and CEO John Donahoe. “The results reflect the strength provided by our diverse portfolio of businesses. Our stability and growth continues to give us the confidence to make innovative changes to our products to keep customers engaged for years to come.”

Quarterly Business Highlights

• John Donahoe assumed the role of chief executive officer on March 31.
• eBay rolled out several initiatives in an effort to enhance user experience on the site -- primarily by re-structuring fees for sellers and introducing a default search order based on relevance and seller quality.
• The company repurchased approximately 37 million shares of its outstanding common stock at a cost of approximately $1 billion.
• eBay Motors reached a milestone with its 3 millionth vehicle sold on the site.
• PayPal signed Merchant Service account deals with JetBlue Airlines, Ferrari Store (Italy), CompUSA and Office Depot (U.K.), among others.
• PayPal completed the acquisition of Fraud Sciences to accelerate the development of its fraud detection tools.
• PayPal expanded its seller protection plan for eBay Power Sellers.
• Skype named Josh Silverman as its chief executive officer on February 25.
• Skype achieved 100 billion cumulative Skype-to-Skype minutes.
• The company’s global portfolio of classifieds businesses reported a 101% increase in unique visitors year over year, with an average of 70 million monthly unique visitors.
• StubHub announced a deal making it the online ticket marketplace for the Daytona 500.
• The company completed the reorganization of select North American and European functional groups to align more closely with strategic priorities.

“We are pleased with our first quarter results. We generated strong revenue growth, even stronger earnings growth and excellent free cash flow. During the quarter, we opportunistically repurchased approximately 3% of eBay shares outstanding," said Bob Swan, eBay Inc. CFO. "We are seeing some positive early indicators based on our key initiatives, but there is still much work to be done. For the remainder of 2008, we'll continue to focus on the strategies we've put into motion, and we believe our guidance will allow us to invest in, and make the necessary changes to, our business while still delivering on our financial commitments."

Financial Highlights (presented in millions, except per share data and percentages)

		First Quarter
		2008		2007		Change
Net revenue		$2,192		$1,768		$424		24%
GAAP
Net income		$460		$377		$83		22%
Earnings per share (diluted)		$0.34		$0.27		$0.07		26%
Non-GAAP
Net income		$562		$460		$102		22%
Earnings per share (diluted)		$0.42		$0.33		$0.09		26%

Quarterly Business Unit Discussion

Marketplaces

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a strong quarter with a $1.48 billion in revenue, equating to 19% year-over-year growth. Revenue growth was driven primarily by advertising, classifieds and StubHub. Net revenues generated outside the U.S. were 55% of total Marketplaces net revenues for the quarter. Gross merchandise volume was $16.04 billion for the quarter, an increase of 12% over the first 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 $582 million in net revenue, an increase of 32% year-over-year. Net total payment volume (TPV) for the quarter was $14.42 billion, an increase of 34% year-over-year. The net revenue and net TPV growth was driven primarily by the continued strong growth of Merchant Services globally and increased penetration on eBay internationally. Growth in global active accounts increased to 60.2 million, representing 17% 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 strong growth trajectory, reporting $126 million in revenue for the quarter, representing 61% year-over-year growth. Skype added 33 million registered users in the quarter, ending the period with more than 309 million registered users around the world. Skype now has the largest registered user base within eBay Inc.’s portfolio of businesses.

Other Selected Financial Results

• Taxes — The GAAP effective tax rate for the quarter was 21%, compared to 24% for the first quarter of 2007. The non-GAAP effective tax rate for the quarter was 23% compared to 26% for the first quarter of 2007.
• Cash, cash equivalents and investments — The company’s cash, cash equivalents and investments totaled $4.11 billion at March 31, 2008, compared to $5.04 billion at December 31, 2007.

Business Outlook

• Full year 2008 – eBay now expects net revenues in the range of $8.700 to $9.000 billion with GAAP earnings per diluted share in the range of $1.35 to $1.40 and non-GAAP earnings per diluted share in the range of $1.70 to $1.75.
• Second quarter 2008 – eBay now expects net revenues in the range of $2.100 to $2.150 billion with GAAP earnings per diluted share in the range of $0.30 to $0.32 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 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.

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 (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 company’s need to increasingly achieve growth from its existing users, particularly in its more established markets, as well as the need to acquire new users; 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 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 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 need to manage other regulatory, tax, and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; the company’s ability to upgrade and develop its systems, infrastructure and customer service capabilities at reasonable cost; 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; 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 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 any 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.

eBay Inc. Unaudited Condensed Consolidated Balance Sheet (In Thousands)
				December 31, 2007			March 31, 2008
		ASSETS
Current assets:
	Cash and cash equivalents			$	4,221,191		$	3,565,182
	Short-term investments				676,264			422,696
	Accounts receivable, net				480,557			496,942
	Funds receivable and customer accounts				1,513,578			1,730,898
	Other current assets				230,915			242,276
		Total current assets			7,122,505			6,457,994
Long-term investments					138,237			120,263
Property and equipment, net					1,120,452			1,135,765
Goodwill					6,257,153			6,544,948
Intangible assets, net					596,038			615,253
Other assets					131,652			172,082
				$	15,366,037		$	15,046,305
		LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	156,613		$	169,169
	Funds payable and amounts due to customers				1,513,578			1,730,898
	Accrued expenses and other current liabilities				1,151,139			863,882
	Deferred revenue and customer advances				166,495			182,346
	Income taxes payable				111,754			134,137
		Total current liabilities			3,099,579			3,080,432
Deferred and other tax liabilities, net					510,557			551,830
Other liabilities					51,299			52,841
		Total liabilities			3,661,435			3,685,103
Total stockholders’ equity					11,704,602			11,361,202
				$	15,366,037		$	15,046,305

eBay Inc. Unaudited Condensed Consolidated Statement of Income (In Thousands, Except Per Share Amounts)
				Three Months Ended March 31,
					2007				2008
Net revenues (2)				$	1,768,074			$	2,192,223
Cost of net revenues (1)					393,689				525,412
		Gross profit			1,374,385				1,666,811
Operating expenses (1):
	Sales and marketing				443,252				527,178
	Product development				137,598				176,760
	General and administrative				278,359				355,262
	Amortization of acquired intangible assets				47,349				54,834
		Total operating expenses			906,558				1,114,034
Income from operations (3)					467,827				552,777
Interest and other income, net					30,020				29,610
Interest expense					(4,542	)			(2,866	)
Income before income taxes					493,305				579,521
Provision for income taxes					(116,129	)			(119,803	)
Net income				$	377,176			$	459,718
Net income per share:
	Basic			$	0.28			$	0.34
	Diluted			$	0.27			$	0.34
Weighted average shares:
	Basic				1,366,915				1,333,791
	Diluted				1,384,287				1,343,989
(1) Includes stock-based compensation as follows:
	Cost of net revenues			$	8,773			$	10,525
	Sales and marketing				19,223				23,791
	Product development				15,957				23,493
	General and administrative				27,997				29,572
	Total stock-based compensation			$	71,950			$	87,381

(2)		Net revenues for the three-month period ended March 31, 2008 were positively impacted by foreign currency translation of approximately $110 million compared to the same period of the prior year. On a sequential period, net revenues for the three-month period ended March 31, 2008 were positively impacted by foreign currency translation of approximately $27 million.
(3)		Operating income for the three-month period ended March 31, 2008 was positively impacted by foreign currency translation of approximately $57 million compared to the same period of the prior year. On a sequential period, operating income for the three-month period ended March 31, 2008 was positively impacted by foreign currency translation of approximately $17 million.

eBay Inc. Unaudited Condensed Consolidated Statement of Cash Flows (In Thousands)
						Three Months Ended March 31,
							2007				2008
Cash flows from operating activities:
Net income						$	377,176			$	459,718
Adjustments:
Provision for doubtful accounts and authorized credits							24,795				36,125
Provision for transaction losses							35,937				33,933
Depreciation and amortization							143,449				165,980
Stock-based compensation expense							71,950				87,381
Deferred income taxes							(42,032	)			(32,034	)
Tax benefit from stock-based compensation							22,995				14,799
Excess tax benefit from stock-based compensation							(13,773	)			(1,013	)
Changes in assets and liabilities, net of acquisition effects:
Accounts receivable							(12,676	)			(52,300	)
Funds receivable and amounts due to customers							(24,974	)			(217,319	)
Other current assets							(16,825	)			(13,466	)
Other non-current assets							(22,364	)			12,346
Accounts payable							8,407				38,561
Funds payable and amounts due to customers							24,974				217,319
Accrued expenses and other liabilities							(40,503	)			(25,979	)
Deferred revenue and customer advances							14,176				15,870
Income taxes payable and other tax liabilities							13,780				26,349
Net cash provided by operating activities							564,492				766,270
Cash flows from investing activities:
Purchases of property and equipment, net							(85,413	)			(134,644	)
Purchases of investments							(112,527	)			(9,310	)
Maturities and sales of investments							392,696				4,017
Acquisitions, net of cash acquired							(258,559	)			(148,772	)
Other							1,153				(45,462	)
Net cash used in investing activities							(62,650	)			(334,171	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net							92,155				8,881
Repurchases of common stock, net							(331,085	)			(992,774	)
Excess tax benefits from stock-based compensation							13,773				1,013
Repayment of line of credit							-				(200,220	)
Net cash used in financing activities							(225,157	)			(1,183,100	)
Effect of exchange rate changes on cash and cash equivalents							27,532				94,992
Net increase (decrease) in cash and cash equivalents							304,217				(656,009	)
Cash and cash equivalents at beginning of period							2,662,792				4,221,191
Cash and cash equivalents at end of period						$	2,967,009			$	3,565,182

eBay Inc. Unaudited Summary of Consolidated Net Revenues (In Thousands, Except Percentages)
Net Revenues by Type
		Three Months Ended
		March 31,			June 30,			September 30,			December 31,			March 31,
			2007			2007			2007			2007			2008
Net transaction revenues (1)
Marketplaces		$	1,111,361		$	1,133,288		$	1,155,886		$	1,280,302		$	1,267,633
Current quarter vs prior quarter			2%			2%			2%