eBay Reports Profit on Revenues of $47 Million; Announces 3-to-1 Stock Split

Web auction site eBay Inc. (Nasdaq: EBAY) reported impressive 1998 year-end and fourth-quarter results on Tuesday, along with plans for an upcoming 3-for-1 stock split. In fact, the company’s release was filled with good news for investors.

Revenues are up. Net income is up (though the gross profit margin decreased slightly). And, perhaps most important for e-commerce stock watchers, the company did indeed turn a profit — unlike Amazon.com and many of the other high-profile e-commerce companies.

[Also see today’s story on Amazon’s earnings.]

Year-End Results

1998 net revenues of $47.4 million (US$) represent a 724% increase over last year’s $5.7 million.

1998 net income was $2.4 million, or 6 cents per share on a fully diluted basis.

Net income before the effect of non-cash charges related to stock compensation and acquisition expenses was $7.9 million, or 21 cents per fully diluted share (compared with $899,000 or 3 cents per fully diluted share during fiscal 1997).

1998 gross profit margin was 86% (down from 87% in 1997).

Fourth Quarter Progress and Programs

eBay’s president and CEO Meg Whitman expressed well-deserved satisfaction with the company’s fourth quarter results, and summarized some of the quarter’s accomplishments.

The company launched a national ad campaign mid-October in the U.S., covering all media from TV commercials and print, to online advertising. Though the company’s sales and marketing expenses increased dramatically, so too did their exposure and name recognition.

During the quarter, the total number of registered users increased 72%, rising from about 1.2 million to more than 2.1 million users, as of December 31st.

More than 13.6 million auctions were hosted on the eBay site during the fourth quarter, up from 9.2 million the quarter before.

During the fourth quarter, the company also took steps to increase functionality of its the eBay auction site, including actions to improve the “overall level of trust and safety.”

Fourth Quarter Financials

Q4’98 net revenues were $19.5 million — that’s 642% higher than Q4’97 revenues of $2.6 million.

Gross profit margin decreased slightly to 85% for the quarter, compared to 87% a year ago.

Q4’98 net income was $1.5 million, or 4 cents per share, on a fully diluted basis.

Q4’98 net income before the effect of non-cash charges related to stock compensation and acquisition expenses was $2.8 million (7 cents per fully diluted share), compared with $214,000 (1 cent per fully diluted share) during Q4 ’97.

Increased activity on the site was the primary contributor to the increase in revenues for the quarter, though the company experienced a higher cost of sales during the fourth quarter.

Stock Split

The 3-for-1 common stock split approved by eBay’s Board of Directors will apply to shareholders of record as of February 9, 1999. The split will be effective on March 1, 1999.

Additional Background

Founded in 1995, eBay has developed an auction/trading Web site that is available around the clock, with more than 2.1 million registered users. Currently, there are more than one million items listed for sale.

More than 150,000 items are added daily in more than 1,000 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.

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