8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 16, 2003

eBay Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-24821	77-0430924
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2145 Hamilton Avenue
San Jose, CA 95125

(Address of principal executive offices)

(408) 376-7400

(Registrant’s telephone number, including area code)

TABLE OF CONTENTS

	Item 7. Financial Statements and Exhibits
	Item 12. Results of Operations and Financial Condition
SIGNATURE
INDEX TO EXHIBITS
EXHIBIT 99.1

Item 7. Financial Statements and Exhibits.

     (c)  Exhibits

     99.1. Press release dated October 16, 2003 containing financial information for eBay Inc. for the quarter ended September 30, 2003 and forward-looking statements relating to eBay’s performance during the fourth quarter of 2003 and fiscal year 2004.

Item 12. Results of Operations and Financial Condition.

     On October 16, 2003, eBay Inc. announced its financial results for the fiscal quarter ended September 30, 2003. A copy of eBay’s press release announcing these financial results and certain other information is attached as Exhibit 99.1 to this Current Report on Form 8-K.

     The attached press release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles. To supplement our consolidated financial statements presented in accordance with GAAP, eBay uses non-GAAP measures of gross profit, operating income, net income, earnings per share, cash flows and its effective tax rate, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance the investors’ overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of our core operating results. In addition, because we have historically reported certain non-GAAP results to investors, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for, or superior to, GAAP results. Consistent with our historical practice, the non-GAAP measures included in the attached press release have been reconciled to the nearest GAAP measure.

     The attached press release also contains forward-looking statements relating to eBay’s performance during the fourth quarter of 2003 and fiscal year 2004. A more thorough discussion of certain factors which may affect the eBay’s operating results is included under the captions “Risk Factors That May Affect Results of Operations and Financial Condition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in eBay’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and Quarterly Reports on Form 10-Q.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 16, 2003	eBay Inc.
	By:	/s/  MICHAEL R. JACOBSON
		Michael R. Jacobson
		Senior Vice President, Legal Affairs,
		General Counsel and Secretary

eBay Inc.

INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press release dated October 16, 2003 containing financial information for eBay Inc. for the quarter ended September 30, 2003 and forward-looking statements relating to eBay’s performance during the fourth quarter of 2003 and fiscal year 2004.

EX-99.1

EXHIBIT 99.1

eBAY INC. ANNOUNCES THIRD QUARTER 2003 FINANCIAL RESULTS

— Company Reports Record Net Revenues of $531 Million, Up 84% Year Over Year —
— Achieves GAAP Diluted EPS of $0.16 and Pro Forma Diluted EPS of $0.18 —
— Raises 2003 Guidance and Issues 2004 Guidance —

San Jose, CA, October 16, 2003 – eBay Inc. (Nasdaq: EBAY; www.ebay.com), the world’s online marketplace, reported financial results for its quarter ended September 30, 2003.

eBay reported record consolidated Q3-03 net revenues of $530.9 million, up 84% year over year; record operating income of $155.9 million, up 73% year over year; and record pro forma operating income of $172.2 million, up 87% year over year. Operating income was 29% of net revenues and pro forma operating income was 32% of net revenues.

Consolidated net income in Q3-03 was $103.3 million, or $0.16 per diluted share. eBay’s pro forma consolidated net income, excluding certain items, was a record $118.3 million, or $0.18 per diluted share.

These results exceeded the company’s guidance of $515 million for net revenues, $0.14 for GAAP earnings per diluted share and $0.17 for pro forma earnings per diluted share. Adjusting for the company’s 2-for-1 stock split effected during the quarter, pro forma earnings per diluted share would be $0.36, $0.02 above the company’s Q3-03 guidance of $0.34.

“Q3 was another very strong quarter for eBay and its community,” said Meg Whitman, President and CEO of eBay. “With record levels of registered users, listings, and gross merchandise sales, along with a strong performance by PayPal, eBay’s business continues to gain momentum going into the holiday season.”

Key Financial and Operating Metrics

Consolidated Net Revenues - Consolidated net revenues totaled a record $530.9 million, which represented an increase of 84% from the $288.8 million reported in Q3-02.

Transaction Revenues - Consolidated net transaction revenues totaled a record $517.1 million, which represented an increase of 96% from the $263.6 million reported in Q3-02.

• eBay U.S. Net Transaction Revenues – eBay U.S. net transaction revenues totaled $256.1 million in Q3-03, reflecting 41% year-over-year growth.

• eBay International Net Transaction Revenues – eBay International net transaction revenues totaled $154.7 million in Q3-03, representing 105% year-over-year growth.

– 1 –

eBay Announces Q3-03 Earnings (cont.)

• Payments Net Transaction Revenues – Payments net transaction revenues totaled $106.4 million in Q3-03.

Confirmed Registered Users – Cumulative confirmed registered users at the end of Q3-03 totaled a record 85.5 million, reflecting the first-time inclusion of 3.2 million users from EachNet, which eBay acquired in July 2003. This was an increase of 10.2 million users sequentially and a 56% increase over the 54.9 million users reported at the end of Q3-02.

Active Users – Active users, the number of users on the eBay platform who bid, bought or listed over the trailing 12 months, increased to 37.4 million, a 55% increase over the 24.2 million active users reported in the same period a year ago.

Listings – Listings totaled a record 235 million in Q3-03, 47% higher than the 160 million listings reported in Q3-02.

Gross Merchandise Sales (GMS) – GMS, the total value of items sold, was a record $5.8 billion, representing a 53% year-over-year increase from the $3.8 billion reported in Q3-02.

Total Payment Volume (TPV) – TPV, the total payment volume in the company’s Payments business, was $3.0 billion in Q3-03, up from the $2.8 billion reported in Q2-03.

Gross Profit – Gross profit was a record $421.6 million, or 79% of net revenues, which was down from the 84% level reported in Q3-02, primarily reflecting the lower structural gross margin of the PayPal business and increased investments in technology and customer support.

Operating Income – Operating income was a record $155.9 million, or 29% of net revenues, a 73% increase over the $90.1 million reported in Q3-02. Pro forma operating income increased 87% year-over-year to a record $172.2 million, or 32% of net revenues, consistent with the reported 32% in Q3-02 despite the addition of the PayPal business.

GAAP Net Income – GAAP net income increased 69% year over year to $103.3 million, or $0.16 per diluted share.

Pro Forma Net Income – Pro forma net income increased 89% year over year to a record $118.3 million, or $0.18 per diluted share.

Operating and Free Cash Flows – Operating cash flows totaled $208.0 million, an 86% increase from the $111.9 million reported in Q3-02. Free cash flows, which are operating cash flows less capital expenditures, totaled a record $168.4 million, an 84% increase from $91.7 million reported in Q3-02.

– 2 –

eBay Announces Q3-03 Earnings (cont.)

Key Category Performance – Based on Q3-03 GMS, eBay has nine categories that deliver $1 billion or more in worldwide annualized GMS: eBay Motors at $6.7 billion; Computers at $2.1 billion; Consumer Electronics at $1.9 billion; Books/Movies/Music at $1.7 billion; Sports at $1.5 billion; Clothing and Accessories at $1.3 billion; Collectibles at $1.1 billion; Home & Garden at $1.1 billion; and Toys at $1.0 billion.

Fixed Price Trading – eBay’s fixed price trading contributed approximately $1.6 billion or 28% of total GMS during Q3-03, primarily from eBay’s “Buy It Now” feature.

eBay Stores – eBay hosts approximately 145,000 stores worldwide.

Consolidated Financial and Operating Summary

eBay reported record consolidated net revenues of $530.9 million in Q3-03, representing an 84% year-over-year increase. Excluding PayPal, eBay’s Q3-03 net revenues totaled $422.6 million, representing a 46% year-over-year increase. PayPal’s Q3-03 net revenues totaled $108.4 million, representing an 83% year-over-year increase compared to the $59.3 million PayPal reported in Q3-02. On a year-over-year basis, consolidated net revenues reflected a foreign exchange benefit in Q3-03 of approximately $15 million.

Gross profit as a percentage of net revenues was 79%, which was below the 84% level reported in Q3-02. The year-over-year decline in the gross profit percentage primarily reflects the lower structural gross margin of the PayPal business and increased investment in technology and customer support.

Sales and marketing expenses totaled $136.4 million, or 26% of net revenues, down from the 30% reported in Q3-02. The year-over-year decline as a percentage of net revenues primarily reflects the addition of the PayPal business.

Product development expenses totaled $39.7 million, or approximately 7% of net revenues, down from the 8% of net revenues reported in both Q2-03 and Q3-02. Total product development expenses in Q3-03 do not include $11.4 million of required cost capitalization for major site and other product development efforts.

General and administrative costs totaled $74.2 million, or about 14% of net revenues, consistent with the 14% of net revenues reported in Q3-02. Included in Q3-03 general and administrative costs were PayPal’s transaction losses, which represented approximately 0.22% of PayPal’s total payment volume. The incremental general and administration costs primarily reflect an increase in headcount, legal costs, and insurance.

Income from operations totaled a record $155.9 million during Q3-03, a 73% increase over the $90.1 million reported in Q3-02. On a pro forma basis, income from operations totaled a record $172.2 million, an 87% increase over the $92.2 reported in Q3-02.

– 3 –

eBay Announces Q3-03 Earnings (cont.)

Net interest and other income totaled $5.5 million in Q3-03, down from the $10.9 million reported in Q2-03. On a pro forma basis, net interest and other income decreased to $5.5 million in Q3-03 from $9.9 million in Q2-03. These decreases were primarily the result of interest-only payments of $1.9 million related to the San Jose facilities, which were recorded as a lease-related operating expense in prior periods and eBay’s share of acquisition costs incurred by EachNet.

The GAAP and pro forma effective tax rates for Q3-03 were 32.0% and 32.8% respectively, a decrease from the 36% GAAP and pro forma effective tax rate in Q3-02. The lower rate reflects an increased profit contribution from the company’s international operations.

eBay’s balance sheet remains strong. At the end of Q3-03, the company had $2.6 billion in aggregate cash and investments and more than $5.5 billion in total assets.

The company reported $208.0 million in operating cash flows, 86% higher than the $111.9 million reported in Q3-02, primarily reflecting increased profitability.

Capital expenditures totaled $39.6 million in Q3-03, 96% higher than the $20.2 million reported in Q3-02. Free cash flows, which are operating cash flows less capital expenditures, were a record $168.4 million in Q3-03, 84% higher than $91.7 million reported in Q3-02.

Business Outlook

Fiscal Year 2003

Net Revenues – The company now expects that consolidated net revenues could be as high as $590 million for Q4-03, $15 million higher than the company’s most recent guidance. Full year 2003 net revenues could be as high as $2.1 billion. This higher net revenue outlook derives from the strength of eBay’s US, International and Payments businesses. eBay’s guidance is based on an assumed Q4-03 quarterly weighted average exchange rate of US$1.14 per Euro.

GAAP Diluted EPS – eBay now estimates GAAP earnings per diluted share could be $0.19 in Q4-03. eBay estimates that earnings per diluted share for the full year 2003 could be as high as $0.65, $0.02 higher than the company’s most recent guidance.

Pro Forma Diluted EPS – eBay now estimates pro forma earnings per diluted share to be $0.21 in Q4-03. eBay estimates that pro forma earnings per diluted share for the full year 2003 could be as high as $0.72, $0.01 higher than the company’s most recent guidance. eBay now believes that amortization of intangible assets, stock-based compensation expenses and other pro forma items, primarily related to the company’s acquisitions, will be approximately $12 million, net of tax, during Q4-03.

– 4 –

eBay Announces Q3-03 Earnings (cont.)

Fiscal Year 2004

Net Revenues – The company expects that net revenues for 2004 could be as high as $2.9 billion. On a quarterly basis, eBay expects consolidated net revenues to be approximately $675 million in Q1-04, $695 million in Q2-04, $710 million in Q3-04 and $820 million in Q4-04. eBay’s guidance is based on an assumed 2004 quarterly weighted average exchange rate of US$1.14 per Euro.

GAAP Diluted EPS – eBay estimates that earnings per diluted share for the full year 2004 could be as high as $0.91. From a quarterly perspective, eBay estimates GAAP earnings per diluted share could be as high as $0.22 in Q1-04, $0.21 in Q2-04, $0.22 in Q3-04 and $0.26 in Q4-04.

Pro Forma Diluted EPS – eBay estimates that pro forma earnings per diluted share for the full year 2004 could be as high as $0.98. From a quarterly perspective, eBay estimates pro forma earnings per diluted share could be as high as $0.24 in Q1-04, $0.23 in Q2-04, $0.23 in Q3-04 and $0.28 in Q4-04.

Effective Tax Rate – eBay’s current estimate for its 2004 effective tax rate is 30% on a GAAP basis and 31% on a pro forma basis. This compares to an expected GAAP and pro forma effective tax rate of approximately 32% in 2003. This lower effective tax rate estimate reflects anticipated increased profit contribution from the company’s international operations.

Non-GAAP Measures

To supplement the company’s consolidated financial statements presented in accordance with GAAP, eBay uses non-GAAP measures of certain components of financial performance, including gross profit, operating income, net income, earnings per share, cash flows, and effective tax rate, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. 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 results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. 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. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. Consistent with the company’s historical practice, the non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

– 5 –

eBay Announces Q3-03 Earnings (cont.)

About eBay

eBay is The World’s Online Marketplace™. Founded in 1995, eBay created a powerful platform for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items across thousands of categories for sale on eBay. eBay enables trade on a local, national and international basis with customized sites in markets around the world. Through an array of services, such as its payment solution provider PayPal, eBay is enabling global e-commerce for an ever-growing online community.

Forward-Looking Statements

This press release contains forward-looking statements relating to the future performance of eBay and its consolidated subsidiaries. Those statements involve risks and uncertainties, and the company’s 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 manage an increasingly large company with a broad range of businesses; the company’s ability to deal with the increasingly competitive environment for online trading, including competition for the company’s sellers from other trading sites and other means of selling, and competition for the company’s buyers from other merchants, online and offline; the litigation, regulatory, credit card association, and other risks specific to PayPal; the company’s need to manage other regulatory, tax, and litigation risks even as the company’s product offerings expand and the company’s services are offered in more jurisdictions, including, most recently, China; the company’s ability to upgrade and develop the company’s systems, infrastructure and customer service capabilities to accommodate growth at a reasonable cost; the company’s ability to maintain site stability on all of the company’s sites; the company’s ability to continue to expand the company’s model to new types of merchandise and sellers; the company’s ability to continue to expand outside of the US; fluctuations in foreign exchange rates; and the costs and benefits of announced and prospective acquisitions and other commercial transactions.

More information about factors that could affect the company’s operating results is included under the captions “Risk Factors That May Affect Results of Operations and Financial Condition” 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 quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s investor relations site at http://investor.ebay.com. 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 Contacts:	David Joseph             408-376-7057
	Tracey Ford               408-376-7205
Media Relations Contact:	Chris Donlay             408-376-7458
Investor Information Request:	408-376-7493
Company News:	http://www.businesswire.com
Investor Relations Website:	http://investor.ebay.com

– 6 –

eBay Inc.
Unaudited Condensed Consolidated Balance Sheet
(U.S. Dollars In Thousands)

			December 31,		September 30,
			2002		2003
ASSETS
Current assets:
	Cash and cash equivalents		$	1,109,313	$	1,583,875
	Short-term investments			89,690		163,765
	Accounts receivable, net			131,453		169,050
	Funds receivable			41,014		84,659
	Other current assets			96,988		109,657
		Total current assets		1,468,458		2,111,006
Long-term investments				470,227		730,155
Restricted cash and investments				134,644		127,083
Property and equipment, net				218,028		534,624
Goodwill				1,456,024		1,643,120
Intangible assets, net				279,465		271,578
Deferred tax assets				84,218		63,547
Other assets				13,380		19,581
			$	4,124,444	$	5,500,694
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	47,424	$	54,584
	Funds payable and amounts due to customers			50,396		110,071
	Accrued expenses and other current liabilities			199,323		335,987
	Deferred revenue and customer advances			18,846		25,246
	Short-term debt			2,970		3,586
	Income taxes payable			67,265		78,352
		Total current liabilities		386,224		607,826
Long-term debt				13,798		11,456
Long-term lease liability				—		122,498
Deferred tax liabilities				111,843		101,169
Other liabilities				22,874		15,862
Minority interests				33,232		49,526
		Total liabilities		567,971		908,337
Total stockholders’ equity				3,556,473		4,592,357
			$	4,124,444	$	5,500,694

– 7 –

eBay Inc.
Unaudited Condensed Consolidated Statement of Income
(U.S. Dollars In Thousands, Except Per Share Amounts)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2002			2003			2002			2003
Net revenues			$	288,779		$	530,942		$	800,172		$	1,516,703
Cost of net revenues				45,374			109,353			131,212			300,601
		Gross profit		243,405			421,589			668,960			1,216,102
Operating expenses:
	Sales and marketing			88,008			136,408			240,916			394,784
	Product development			24,163			39,737			72,816			112,888
	General and administrative			39,352			74,238			108,441			206,714
	Patent litigation expense			—			—			—			29,965
	Payroll tax on employee stock options			526			1,510			2,636			7,984
	Amortization of acquired intangible assets			1,239			13,824			3,877			37,668
		Total operating expenses		153,288			265,717			428,686			790,003
Income from operations				90,117			155,872			240,274			426,099
Interest and other income (expense), net				8,729			7,806			25,117			26,419
Interest expense				(50	)		(2,267	)		(1,433	)		(2,335	)
Impairment of certain equity investments				(2,600	)		—			(3,781	)		(230	)
Income before cumulative effect of accounting change, income taxes and minority interests				96,196			161,411			260,177			449,953
Provision for income taxes				(34,314	)		(51,137	)		(97,011	)		(139,698	)
Minority interests				(879	)		(1,611	)		(271	)		(5,533	)
Net income before cumulative effect of accounting change				61,003			108,663			162,895			304,722
Cumulative effect of accounting change, net of tax				—			(5,413	)		—			(5,413	)
Net income			$	61,003		$	103,250		$	162,895		$	299,309
Net income per basic share:
	Net income before cumulative effect of accounting change		$	0.11		$	0.17		$	0.29		$	0.48
	Cumulative effect of accounting change			—			(0.01	)		—			(0.01	)
	Net income per basic share		$	0.11		$	0.16		$	0.29		$	0.47
Net income per diluted share:
	Net income before cumulative effect of accounting change		$	0.11		$	0.17		$	0.29		$	0.47
	Cumulative effect of accounting change			—			(0.01	)		—			(0.01	)
	Net income per diluted share		$	0.11		$	0.16		$	0.29		$	0.46
Weighted average shares:
	Basic			564,534			642,729			560,896			635,484
	Diluted			573,182			662,231			571,274			653,325

– 8 –

eBay Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
(U.S. Dollars In Thousands, Except Per Share Amounts)

			Three Months Ended											Three Months Ended
			September 30, 2002											September 30, 2003
			Reported			Pro Forma Entries					Pro Forma			Reported			Pro Forma Entries					Pro Forma
Net revenues			$	288,779		$	—				$	288,779		$	530,942		$	—				$	530,942
Cost of net revenues				45,374			(3	)	(a	)		45,371			109,353			(48	)	(a	)		109,305
		Gross profit		243,405			3					243,408			421,589			48					421,637
Operating expenses:
	Sales and marketing			88,008			(12	)	(a	)		87,996			136,408			(169	)	(a	)		136,239
	Product development			24,163			(74	)	(a	)		24,089			39,737			(220	)	(a	)		39,517
	General and administrative			39,352			(240	)	(a	)		39,112			74,238			(524	)	(a	)		73,714
	Patent litigation expense			—			—					—			—			—					—
	Payroll tax on employee stock options			526			(526	)	(b	)		—			1,510			(1,510	)	(b	)		—
	Amortization of acquired intangible assets			1,239			(1,239	)	(c	)		—			13,824			(13,824	)	(c	)		—
		Total operating expenses		153,288			(2,091	)				151,197			265,717			(16,247	)				249,470
Income from operations				90,117			2,094					92,211			155,872			16,295					172,167
Interest and other income (expense), net				8,729			(2,201	)	(d	)		6,528			7,806			—					7,806
Interest expense				(50	)		—					(50	)		(2,267	)		—					(2,267	)
Impairment of certain equity investments				(2,600	)		2,600		(e	)		—			—			—					—
Income before cumulative effect of accounting change, income taxes and minority interests				96,196			2,493					98,689			161,411			16,295					177,706
Provision for income taxes				(34,314	)		(779	)	(f	)		(35,093	)		(51,137	)		(6,629	)	(f	)		(57,766	)
Minority interests				(879	)		—					(879	)		(1,611	)		—					(1,611	)
Net income before cumulative effect of accounting change				61,003			1,714					62,717			108,663			9,666					118,329
Cumulative effect of accounting change, net of tax				—			—					—			(5,413	)		5,413		(g	)		—
Net income			$	61,003		$	1,714				$	62,717		$	103,250		$	15,079				$	118,329
Net income per share:
	Basic		$	0.11							$	0.11		$	0.16							$	0.18
	Diluted		$	0.11							$	0.11		$	0.16							$	0.18
Weighted average shares:
	Basic			564,534								564,534			642,729								642,729
	Diluted			573,182								573,182			662,231								662,231
Operating margin				31	%		1	%				32	%		29	%		3	%				32	%

Notes:

(a)	Non-cash stock-based compensation expense
(b)	Employer payroll taxes on employee non-qualified stock option gains
(c)	Amortization of acquired intangible assets
(d)	Gain on sale of certain real estate properties and recovery of fully reserved receivables
(e)	Impairment of certain equity investments
(f)	Income taxes associated with certain pro forma entries
(g)	Cumulative effect of accounting changes, net of tax

– 9 –

eBay Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
(U.S. Dollars In Thousands, Except Per Share Amounts)

			Nine Months Ended											Nine Months Ended
			September 30, 2002											September 30, 2003
						Pro Forma											Pro Forma
			Reported			Entries					Pro Forma			Reported			Entries					Pro Forma
Net revenues			$	800,172		$	—				$	800,172		$	1,516,703		$	—				$	1,516,703
Cost of net revenues				131,212			267		(a	)		131,479			300,601			(196	)	(a	)		300,405
		Gross profit		668,960			(267	)				668,693			1,216,102			196					1,216,298
Operating expenses:
	Sales and marketing			240,916			55		(a	)		240,971			394,784			(867	)	(a	)		393,917
	Product development			72,816			(103	)	(a	)		72,713			112,888			(1,095	)	(a	)		111,793
	General and administrative			108,441			(682	)	(a	)		107,759			206,714			(2,574	)	(a	)		204,140
	Patent litigation expense			—			—					—			29,965			—					29,965
	Payroll tax on employee stock options			2,636			(2,636	)	(b	)		—			7,984			(7,984	)	(b	)		—
	Amortization of acquired intangible assets			3,877			(3,877	)	(c	)		—			37,668			(37,668	)	(c	)		—
		Total operating expenses		428,686			(7,243	)				421,443			790,003			(50,188	)				739,815
Income from operations				240,274			6,976					247,250			426,099			50,384					476,483
Interest and other income (expense), net				25,117			(3,785	)	(d	)		21,332			26,419			(979	)	(d	)		25,440
Interest expense				(1,433	)		—					(1,433	)		(2,335	)		—					(2,335	)
Impairment of certain equity investments				(3,781	)		3,781		(e	)		—			(230	)		230		(e	)		—
Income before cumulative effect of accounting change, income taxes and minority interests				260,177			6,972					267,149			449,953			49,635					499,588
Provision for income taxes				(97,011	)		(2,053	)	(f	)		(99,064	)		(139,698	)		(16,759	)	(f	)		(156,457	)
Minority interests				(271	)		(590	)	(g	)		(861	)		(5,533	)		—					(5,533	)
Net income before cumulative effect of accounting change				162,895			4,329					167,224			304,722			32,876					337,598
Cumulative effect of accounting change, net of tax				—			—					—			(5,413	)		5,413		(h	)		—
Net income			$	162,895		$	4,329				$	167,224		$	299,309		$	38,289				$	337,598
Net income per share:
	Basic		$	0.29							$	0.30		$	0.47							$	0.53
	Diluted		$	0.29							$	0.29		$	0.46							$	0.52
Weighted average shares:
	Basic			560,896								560,896			635,484								635,484
	Diluted			571,274								571,274			653,324								653,324
Operating margin				30	%		1	%				31	%		28	%		3	%				31	%

Notes:

(a)	Non-cash stock-based compensation expense
(b)	Employer payroll taxes on employee non-qualified stock option gains
(c)	Amortization of acquired intangible assets
(d)	Gain on sale of certain real estate properties and recovery of fully reserved receivables
(e)	Impairment of certain equity investments
(f)	Income taxes associated with certain pro forma entries
(g)	Minority shareholders’ portion of impairment of certain equity investments
(h)	Cumulative effect of accounting change, net of tax

– 10 –

eBay Inc.

Unaudited Condensed Consolidated Statement of Cash Flows
(U.S. Dollars In Thousands)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2002			2003			2002			2003
Cash flows from operating activities:
	Net income			$	61,003		$	103,250		$	162,895		$	299,309
	Adjustments:
		Cumulative effect of accounting change			—			5,413			—			5,413
		Provision for doubtful accounts and authorized credits			6,696			12,331			18,917			31,964
		Provision for transaction losses			—			6,818			—			24,891
		Depreciation and amortization			17,172			43,358			48,560			113,885
		Stock-based compensation			590			961			727			4,732
		Tax benefit on the exercise of employee stock options			34,164			42,710			96,586			105,647
		Impairment of certain equity investments			2,600			—			3,781			230
		Minority interests and other			(660	)		(175	)		(4,572	)		3,982
		Changes in assets and liabilities:
			Accounts receivable		(19,798	)		(15,574	)		(54,021	)		(70,650	)
			Funds receivable		—			(1,596	)		—			(43,645	)
			Other current assets		5,675			(12,176	)		(6,936	)		(9,298	)
			Other non-current assets		(2,039	)		(1,821	)		(4,062	)		(6,424	)
			Deferred tax assets, net		4,271			13,457			3,418			12,598
			Accounts payable		(549	)		(10,680	)		1,960			6,553
			Due to customers and funds payable		—			9,878			—			59,674
			Accrued expenses and other liabilities		14,057			18,383			32,153			49,724
			Deferred revenue and customer advances		(5,646	)		3,631			653			6,238
			Income taxes payable		(5,608	)		(10,155	)		(3,018	)		11,878
Net cash provided by operating activities					111,928			208,013			297,041			606,701
Cash flows from investing activities:
	Purchases of property and equipment				(20,202	)		(39,629	)		(94,420	)		(269,616	)
	Purchases of investments				(269,687	)		(618,503	)		(578,082	)		(1,481,047	)
	Maturities and sales of investments				269,509			642,624			536,467			1,131,998
	Proceeds from sale of subsidiary and property and equipment				6,646			—			9,529			—
	Acquisitions, net of cash acquired				—			(102,772	)		(54,610	)		(107,161	)
Net cash provided by (used in) investing activities					(13,734	)		(118,280	)		(181,116	)		(725,826	)
Cash flows from financing activities:
	Proceeds from issuance of common stock, net				35,682			97,216			104,126			570,189
	Principal payments on long-term debt				(386	)		(929	)		(3,793	)		(1,727	)
Net cash provided by financing activities					35,296			96,287			100,333			568,462
Effect of exchange rate changes on cash and cash equivalents					(1,734	)		6,298			8,396			25,225
Net increase in cash and cash equivalents					131,756			192,318			224,654			474,562
Cash and cash equivalents at beginning of period					616,867			1,391,557			523,969			1,109,313
Cash and cash equivalents at end of period				$	748,623		$	1,583,875		$	748,623		$	1,583,875
Net cash provided by operating activities				$	111,928		$	208,013		$	297,041		$	606,701
Less: Purchases of property and equipment					(20,202	)		(39,629	)		(94,420	)		(269,616	)
Free cash flow				$	91,726		$	168,384		$	202,621		$	337,085

– 11 –

eBay Inc.

Unaudited Summary of Consolidated Net Revenues
(U.S. Dollars In Thousands, Except Percentages)

			Three Months Ended
			September 30,			December 31,			March 31,			June 30,			September 30,
Net Revenues by Type			2002			2002			2003			2003			2003
Transaction
	U.S		$	182,209		$	211,388		$	234,876		$	242,385		$	256,076
		Current quarter vs prior quarter		9	%		16	%		11	%		3	%		6	%
		Current quarter vs prior year quarter		53	%		58	%		49	%		45	%		41	%
	International			75,296			107,366			137,504			155,155			154,715
		Current quarter vs prior quarter		19	%		43	%		28	%		13	%		(0	%)
		Current quarter vs prior year quarter		163	%		173	%		166	%		146	%		105	%
	Payments			6,094			77,703			93,179			99,363			106,350
		Current quarter vs prior quarter		29	%		1175	%		20	%		7	%		7	%
		Current quarter vs prior year quarter		26	%		1281	%		1847	%		2006	%		1645	%
	Total transaction			263,599			396,457			465,559			496,903			517,141
		Current quarter vs prior quarter		12	%		50	%		17	%		7	%		4	%
		Current quarter vs prior year quarter		73	%		122	%		118	%		111	%		96	%
3rd party advertising
	U.S			14,148			7,062			5,492			6,848			8,291
		Current quarter vs prior quarter		(9	%)		(50	%)		(22	%)		25	%		21	%
		Current quarter vs prior year quarter		(40	%)		(74	%)		(70	%)		(56	%)		(41	%)
	International			898			1,716			1,313			1,432			1,760
		Current quarter vs prior quarter		(26	%)		91	%		(23	%)		9	%		23	%
		Current quarter vs prior year quarter		(42	%)		110	%		59	%		18	%		96	%
	Payments			—			1,478			2,027			2,160			2,029
		Current quarter vs prior quarter		N/A			N/A			37	%		7	%		(6	%)
		Current quarter vs prior year quarter		N/A			N/A			N/A			N/A			N/A
	Total 3rd party advertising			15,046			10,256			8,832			10,440			12,080
		Current quarter vs prior quarter		(10	%)		(32	%)		(14	%)		18	%		16	%
		Current quarter vs prior year quarter		(40	%)		(64	%)		(54	%)		(37	%)		(20	%)
End-to-end services
	U.S			6,096			5,591			2,101			1,926			1,721
		Current quarter vs prior quarter		20	%		(8	%)		(62	%)		(8	%)		(11	%)
		Current quarter vs prior year quarter		(22	%)		27	%		(57	%)		(62	%)		(72	%)
	Payments			—			587			—			—			—
		Current quarter vs prior quarter		N/A			N/A			(100	%)		N/A			N/A
		Current quarter vs prior year quarter		(100	%)		607	%		N/A			N/A			N/A
	Total end-to-end services			6,096			6,178			2,101			1,926			1,721
		Current quarter vs prior quarter		20	%		1	%		(66	%)		(8	%)		(11	%)
		Current quarter vs prior year quarter		(25	%)		38	%		(57	%)		(62	%)		(72	%)
Offline net revenues				4,038			1,037			—			—			—
		Current quarter vs prior quarter		(56	%)		(74	%)		(100	%)		0	%		0	%
		Current quarter vs prior year quarter		(55	%)		(87	%)		(100	%)		(100	%)		(100	%)
Total net revenues			$	288,779		$	413,928		$	476,492		$	509,269		$	530,942
		Current quarter vs prior quarter		8	%		43	%		15	%		7	%		4	%
		Current quarter vs prior year quarter		49	%		89	%		94	%		91	%		84	%

– 12 –

eBay Inc.
Unaudited Summary of Consolidated Net Revenues
(U.S. Dollars In Thousands, Except Percentages)

		Three Months Ended
		September 30,			December 31,			March 31,			June 30,			September 30,
Net Revenues by Segment		2002			2002			2003			2003			2003
U.S		$	206,491		$	225,078		$	242,469		$	251,159		$	266,088
	Current quarter vs prior quarter		5	%		9	%		8	%		4	%		6	%
	Current quarter vs prior year quarter		30	%		30	%		29	%		27	%		29	%
International			76,194			109,082			138,817			156,587			156,475
	Current quarter vs prior quarter		18	%		43	%		27	%		13	%		(0	%)
	Current quarter vs prior year quarter		152	%		172	%		164	%		143	%		105	%
Payments			6,094			79,768			95,206			101,523			108,379
	Current quarter vs prior quarter		29	%		1209	%		19	%		7	%		7	%
	Current quarter vs prior year quarter		18	%		1297	%		1889	%		2051	%		1678	%
Total net revenues		$	288,779		$	413,928		$	476,492		$	509,269		$	530,942
	Current quarter vs prior quarter		8	%		43	%		15	%		7	%		4	%
	Current quarter vs prior year quarter		49	%		89	%		94	%		91	%		84	%

		Three Months Ended
		September 30,			December 31,			March 31,			June 30,			September 30,
Net Revenues by Geography		2002			2002			2003			2003			2003
U.S. net revenues		$	212,585		$	290,583		$	319,170		$	331,322		$	351,187
	Current quarter vs prior quarter		5	%		37	%		10	%		4	%		6	%
	Current quarter vs prior year quarter		29	%		62	%		66	%		64	%		65	%
	% of total		74	%		70	%		67	%		65	%		66	%
International net revenues			76,194			123,345			157,322			177,947			179,755
	Current quarter vs prior quarter		18	%		62	%		28	%		13	%		1	%
	Current quarter vs prior year quarter		152	%		208	%		199	%		177	%		136	%
	% of total		26	%		30	%		33	%		35	%		34	%
Total net revenues		$	288,779		$	413,928		$	476,492		$	509,269		$	530,942
	Current quarter vs prior quarter		8	%		43	%		15	%		7	%		4	%
	Current quarter vs prior year quarter		49	%		49	%		94	%		91	%		84	%

– 13 –

eBay Inc.
eBay Unaudited Supplemental Operating Data
(In Millions, Except Percentages)

		September 30,			December 31,			March 31,			June 30,			September 30,
		2002			2002			2003			2003			2003
Confirmed Registered Users			54.9			61.7			68.8			75.3			85.5
	Current quarter vs prior quarter		10	%		12	%		12	%		9	%		14	%
	Current quarter vs prior year quarter		46	%		46	%		49	%		51	%		56	%
Active Users (1)			24.2			27.7			31.1			34.1			37.4
	Current quarter vs prior quarter		11	%		14	%		12	%		10	%		10	%
	Current quarter vs prior year quarter		52	%		56	%		57	%		57	%		55	%
Number of Listings			159.6			195.5			219.7			225.0			234.6
	Current quarter vs prior quarter		10	%		22	%		12	%		2	%		4	%
	Current quarter vs prior year quarter		47	%		55	%		59	%		55	%		47	%
Gross Merchandise Sales		$	3,766		$	4,600		$	5,317		$	5,635		$	5,775
	Current quarter vs prior quarter		11	%		22	%		16	%		6	%		2	%
	Current quarter vs prior year quarter		60	%		68	%		71	%		66	%		53	%

(1)  Defined as all users, excluding Half.com and Internet Auction, who bid, bought, or listed an item within the previous 12-month period.

– 14 –

eBay Inc.
PayPal Unaudited Supplemental Operating Data
(In Millions, Except Percentages)

eBay completed its acquisition of PayPal on October 3, 2002. PayPal’s financial statements and supplemental operating data have been included in eBay’s consolidated financial statements beginning October 4, 2002. The following table presents PayPal financial information for the full quarter ended September 30, 2002, for the period from October 4, 2002 through December 31, 2002, and for the full quarters ended March 31, 2003, June 30, 2003 and September 30, 2003.

	September 30,			December 31,			March 31,			June 30,			September 30,
	2002			2002			2003			2003			2003
Revenue
Transaction	$	58.1		$	72.6		$	92.2		$	99.4		$	106.4
Current quarter vs prior quarter		11	%		25	%		27	%		8	%		7	%
Current quarter vs prior year quarter		104	%		87	%		92	%		90	%		83	%
Non- transaction	$	1.2		$	2.1		$	2.0		$	2.1		$	2.0
Current quarter vs prior quarter		(8	%)		75	%		(5	%)		7	%		(5	%)
Current quarter vs prior year quarter		(18	%)		75	%		150	%		69	%		67	%
Total revenues	$	59.3		$	74.7		$	94.2		$	101.5		$	108.4
Percent of revenue which is international		20.2	%		19.1	%		19.6	%		21.0	%		21.4	%
Metrics
Total accounts (1)		19.7			23.3			27.2			31.1			35.2
Current quarter vs prior quarter		11	%		18	%		17	%		14	%		13	%
Current quarter vs prior year quarter		86	%		82	%		77	%		75	%		79	%
Active accounts (2)		6.3			7.9			9.4			10.2			11.2
Total number of payments		31.3			39.2			50.5			53.7			57.4
Current quarter vs prior quarter		9	%		25	%		29	%		6	%		7	%
Current quarter vs prior year quarter		74	%		76	%		90	%		86	%		83	%
Total payment volume	$	1,787		$	2,138		$	2,628		$	2,843		$	3,044
Current quarter vs prior quarter		11	%		20	%		23	%		8	%		7	%
Current quarter vs prior year quarter		93	%		77	%		80	%		76	%		70	%
Auction as % of total payment volume		58	%		69	%		67	%		66	%		67	%
Transaction rates
Transaction revenue rate		3.25	%		3.40	%		3.51	%		3.50	%		3.49	%
Transaction processing expense rate		1.19	%		1.29	%		1.27	%		1.30	%		1.25	%
Transaction loss rate		0.42	%		0.37	%		0.34	%		0.32	%		0.22	%

(1)  Excludes closed and locked accounts

(2)  Users that sent or received at least one payment during the quarter

– 15 –

eBay Inc.
Guidance Summary
(In Millions, Except Per Share Amounts And Percentages)

The guidance figures provided below and elsewhere in this press release are approximate in nature because eBay’s future performance is difficult to predict. Such guidance is based on information available on the date hereof, 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 such guidance. 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 That May Affect Results of Operations and Financial Condition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its most recent annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s investor relations site at http://investor.ebay.com.

	Three months ending December 31, 2003
	GAAP			Adjustments					Pro Forma
Net revenue	$	590			—				$	590
Operating margin		31	%		3	%	(a	)		34	%
Diluted EPS	$	0.19		$	0.02		(b	)	$	0.21
Effective Tax Rate		32	%		1	%	(c	)		33	%

	Three months ending March 31, 2004
	GAAP		Adjustments				Pro Forma
Net revenue	$	675		—			$	675
Diluted EPS	$	0.22	$	0.02	(b	)	$	0.24

	Three months ending June 30, 2004
	GAAP		Adjustments				Pro Forma
Net revenue	$	695		—			$	695
Diluted EPS	$	0.21	$	0.02	(b	)	$	0.23

	Three months ending September 30, 2004
	GAAP		Adjustments				Pro Forma
Net revenue	$	710		—			$	710
Diluted EPS	$	0.22	$	0.01	(b	)	$	0.23

	Three months ending December 31, 2004
	GAAP		Adjustments				Pro Forma
Net revenue	$	820		—			$	820
Diluted EPS	$	0.26	$	0.02	(b	)	$	0.28

	Year ending December 31, 2004
	GAAP			Adjustments					Pro Forma
Net revenue	$	2,900			—				$	2,900
Diluted EPS	$	0.91		$	0.07		(b	)	$	0.98
Effective Tax Rate		30	%		1	%	(c	)		31	%

– 16 –

(a)	Pro forma guidance reflects estimated quarterly adjustments for amortization of acquired intangible assets of approximately $16-$18 million, payroll taxes on employee stock options of approximately $2 million, stock based compensation of approximately $1-$2 million and other adjustments estimated to result in an operating margin adjustment of 3% for the three months ending December 31, 2003 and for each of the quarters in the year ending December 31, 2004.
(b)	Net of tax, the above pro forma items are estimated to result in a $0.02 per diluted share adjustment for the three months ending December 31, 2003 and for each of the quarters in the year ending December 31, 2004.
(c)	Adjustments to the pro forma effective tax rate reflect the impact on the effective tax rate of the pro forma adjustments.

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