eBay Inc. Reports First Quarter 2018 Results

eBay Inc. Reports First Quarter 2018 Results

-- Revenue of $2.6 billion

-- GAAP and Non-GAAP EPS per diluted share of $0.40 and $0.53, respectively, on a continuing operations basis

-- Repurchased $1.0 billion of common stock

SAN JOSE, Calif., April 25, 2018 /PRNewswire/ -- eBay Inc. (NASDAQ: EBAY), a global commerce leader, delivered revenue for the quarter ended March 31, 2018 of $2.6 billion, increasing 12% on an as-reported basis and 7% on a foreign exchange (FX) neutral basis, primarily driven by gross merchandise volume (GMV) of $23.6 billion, up 13% on an as-reported basis and 7% on an FX-Neutral basis.

During the quarter, eBay delivered GAAP net income from continuing operations of $407 million, or $0.40 per diluted share and Non-GAAP net income from continuing operations of $548 million, or $0.53 per diluted share. The company generated $495 million of operating cash flow and $337 million of free cash flow from continuing operations while also repurchasing $1.0 billion of its common stock in the quarter.

"In Q1 we drove good growth and made further progress with our multi-year effort to transform our customer experience and sharpen the eBay brand," said Devin Wenig, President and CEO of eBay Inc.

In the first quarter, eBay grew active buyers by 4% across its platforms, for a total of 171 million global active buyers. Underlying total eBay Inc. performance, the Marketplace platforms delivered $2.1 billion of revenue and $22.5 billion of GMV. Marketplace revenue growth was 11% on an as-reported basis and 7% on an FX-Neutral basis and GMV was up 13% on an as-reported basis and 7% on an FX-Neutral basis, aided by continued expansion of new user experiences. StubHub drove revenue of $232 million, up 9% on both an as-reported basis and FX-Neutral basis, and GMV of $1.0 billion, up 14% on an as-reported basis and 13% on an FX-Neutral basis, driven by a robust sports landscape, including a record Super Bowl, and strong international growth. Classifieds platforms delivered another quarter of double-digit growth with revenue of $246 million, up 24% on an as-reported basis and 10% on an FX-Neutral basis, driven primarily by strength in Germany.

The company continues to innovate and transform the shopping experience for its customers. In the first quarter, eBay launched a new product based commerce experience to a subset of its users, leveraging its structured data foundation. As part of its effort to build immersive and engaging buying and selling experiences, eBay also introduced a new augmented reality shipping tool to help customers find the right box to ship an item that is as easy as holding up a mobile phone. eBay's development teams are using artificial intelligence (AI) to sharpen the overall search experience, leveraging data and AI to improve recall and relevance on the eBay platform. During the quarter, eBay also appointed Jan Pedersen, a proven leader in AI, as Chief Scientist, Artificial Intelligence.

eBay recently released its 2017 Diversity and Inclusion (D&I) Report, which highlights momentum in the company's D&I programs and partnerships across its workforce, workplace and marketplace, along with changes in eBay's people data. The report also discloses the results of eBay's second annual global study of gender pay equity, which found that women earn 100% of what men earn in terms of total compensation in the U.S., and women earn 100.1% of what men earn in terms of total compensation globally.

During the quarter, eBay announced that it will acquire Giosis' Japan business, including the Qoo10.jp platform. This acquisition will significantly expand eBay's footprint in Japan, one of the largest e-commerce markets in the world, and is expected to close in the second quarter of 2018.

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


                         First Quarter

                                       2018   2017 Change
                                       ----   ----

    eBay Inc.
    ---------

    Net revenues                     $2,580 $2,303           $277    12%
    ------------                     ------ ------           ----    ---

    GAAP -Continuing
     Operations
    ----------------

    Income from
     continuing
     operations                        $407 $1,035         $(628) (61)%
    -----------                        ---- ------          -----   ----

    Earnings per diluted
     share from
     continuing
     operations                       $0.40  $0.94        $(0.54) (58)%
    --------------------              -----  -----         ------   ----

    Non-GAAP -
     Continuing
     Operations
    -----------

    Net income                         $548   $538            $10     2%
    ----------                         ----   ----            ---    ---

    Earnings per diluted
     share                            $0.53  $0.49          $0.04     9%
    --------------------              -----  -----          -----    ---

Other Selected Financial and Operational Results

    --  Operating margin -- GAAP operating margin decreased to 22.5% for the
        first quarter of 2018, compared to 23.7% for the same period last year.
        Non-GAAP operating margin decreased to 27.9% in the first quarter of
        2018, compared to 28.9% for the same period last year.
    --  Taxes -- The GAAP effective tax rate for continuing operations for the
        first quarter of 2018 was 25.6%, compared to (85.4)% for the first
        quarter of 2017. The non-GAAP effective tax rate for continuing
        operations for the first quarter of 2018 was 20.4%, compared to 18.7%
        for the first quarter of 2017.
    --  Cash flow -- The company generated $495 million of operating cash flow
        from continuing operations and $337 million of free cash flow from
        continuing operations during the first quarter of 2018.
    --  Stock repurchase program -- The company repurchased approximately $1.0
        billion of its common stock, or 24 million shares, in the first quarter
        of 2018. The company's total repurchase authorization remaining as of
        March 31, 2018 was $6.6 billion.
    --  Cash and cash equivalents and non-equity investments -- The company's
        cash and cash equivalents and non-equity investments portfolio totaled
        $9.8 billion as of March 31, 2018.

Business Outlook

    --  Second quarter 2018 -- The company expects net revenue between $2.64
        billion and $2.68 billion, representing FX-Neutral growth of 6% - 8%,
        with GAAP earnings per diluted share from continuing operations in the
        range of $0.33 - $0.37 and non-GAAP earnings per diluted share from
        continuing operations in the range of $0.50 - $0.52.
    --  Full year 2018 -- The company expects net revenue between $10.9 billion
        and $11.1 billion, representing FX-Neutral growth of 7% - 9%, with GAAP
        earnings per diluted share from continuing operations in the range of
        $1.65 - $1.75 and non-GAAP earnings per diluted share from continuing
        operations in the range of $2.25 - $2.30.

Quarterly Conference Call and Webcast

eBay Inc. will host a conference call to discuss first quarter 2018 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 website at https://investors.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.

eBay Inc. uses its Investor Relations website at https://investors.ebayinc.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor, in addition to following press releases, SEC filings, public conference calls and webcasts.

About eBay

eBay Inc. (NASDAQ: EBAY) is a global commerce leader including the Marketplace, StubHub and Classifieds platforms. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity through Connected Commerce. Founded in 1995 in San Jose, Calif., eBay is one of the world's largest and most vibrant marketplaces for discovering great value and unique selection. In 2017, eBay enabled $88 billion of gross merchandise volume. For more information about the company and its global portfolio of online brands, visit www.ebayinc.com.

Presentation

All growth rates represent year over year comparisons, except as otherwise noted. All amounts in tables are presented in U.S. dollars, rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not sum or recalculate using the rounded dollar amounts provided.

New Accounting Standard

Prior period information has been recast to reflect Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, which eBay adopted on January 1, 2018.

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 non-GAAP financial measures are presented on a continuing operations basis. 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 of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see "Business Outlook," "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 and Reconciliation of GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate" and "Reconciliation of Operating Cash Flow to Free Cash Flow" included in this press release.

Forward-Looking Statements

This press release contains forward-looking statements relating to, among other things, the future performance of eBay Inc. and its consolidated subsidiaries that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of eBay Inc. and its consolidated subsidiaries, including expected financial results for the second quarter and full year 2018 and the future growth in its business. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other factors that could cause or contribute to such differences include, but are not limited to: changes in political, business and economic conditions, any regional or general economic downturn or crisis and any conditions that affect ecommerce growth or cross-border trade; fluctuations in foreign currency exchange rates; the company's need to successfully react to the increasing importance of mobile commerce and the increasing social aspect of commerce; an increasingly competitive environment for its business; changes to the company's capital allocation or management of operating cash; the company's ability to manage its indebtedness, including managing exposure to interest rates and maintaining its credit ratings; 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 company's need and ability to manage regulatory, tax, data security and litigation risks; whether the operational, marketing and strategic benefits of the separation of the eBay and PayPal businesses can be achieved; the company's ability to timely upgrade and develop its technology systems, infrastructure and customer service capabilities at reasonable cost while maintaining site stability and performance and adding new products and features; and the company's ability to integrate, manage and grow businesses that have been acquired or may be acquired in the future.

The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures 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 website at https://investors.ebayinc.com or the SEC's website at www.sec.gov. All information in this release is as of April 25, 2018. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the company on the date hereof. The company assumes no obligation to update such statements.



                                                  eBay Inc.

                                Unaudited Condensed Consolidated Balance Sheet


                                                         March 31,              December 31,
                                                              2018                       2017
                                                              ----                       ----

                                                                   (In millions)


                              ASSETS

    Current assets:

    Cash and cash equivalents                                          $2,527                         $2,120

    Short-term investments                                   2,279                             3,743

    Accounts receivable, net                                   683                               696

    Other current assets                                     1,274                             1,185

    Total current assets                                     6,763                             7,744

    Long-term investments                                    5,919                             6,331

    Property and equipment, net                              1,548                             1,597

    Goodwill                                                 4,815                             4,773

    Intangible assets, net                                      53                                69

    Deferred tax assets                                      5,166                             5,199

    Other assets                                               291                               273

    Total assets                                                      $24,555                        $25,986
                                                                      =======                        =======

               LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Short-term debt                                                       $20                           $781

    Accounts payable                                           252                               330

    Accrued expenses and other current
     liabilities                                             1,918                             2,134

    Deferred revenue                                           142                               137

    Income taxes payable                                       236                               177

    Total current liabilities                                2,568                             3,559

    Deferred tax liabilities                                 3,314                             3,424

    Long-term debt                                           9,208                             9,234

    Other liabilities                                        1,869                             1,720

    Total liabilities                                       16,959                            17,937
                                                            ------                            ------


    Total stockholders' equity                               7,596                             8,049
                                                             -----

    Total liabilities and
     stockholders' equity                                             $24,555                        $25,986
                                                                      =======                        =======




                                                   eBay Inc.

                              Unaudited Condensed Consolidated Statement of Income


                                                         Three Months Ended
                                                              March 31,

                                                        2018                   2017
                                                        ----                   ----

                                                   (In millions, except per share
                                                             amounts)

    Net revenues                                                $2,580                    $2,303

    Cost of net
     revenues (1)                                        559                          514

    Gross profit                                       2,021                        1,789
                                                       -----                        -----

    Operating expenses:

    Sales and marketing
     (1)                                                756                          648

    Product development
     (1)                                                334                          278

    General and
     administrative (1)                                  270                          245

    Provision for
     transaction losses                                   72                           62

    Amortization of
     acquired
     intangible assets                                    10                            9

    Total operating
     expenses                                          1,442                        1,242
                                                       -----                        -----

    Income from
     operations                                          579                          547

    Interest and other,
     net                                                (32)                          11
                                                         ---                          ---

    Income from
     continuing
     operations before
     income taxes                                        547                          558

    Income tax benefit
     (provision)                                       (140)                         477
                                                        ----                          ---

    Net income                                                    $407                    $1,035
                                                                  ====                    ======


    Net income per share:

    Basic                                                        $0.40                     $0.96
                                                                 =====                     =====

    Diluted                                                      $0.40                     $0.94
                                                                 =====                     =====


    Weighted average shares:

    Basic                                              1,010                        1,083
                                                       =====                        =====

    Diluted                                            1,029                        1,102
                                                       =====                        =====


    (1) Includes stock-based
     compensation as follows:

    Cost of net
     revenues                                                      $13                       $11

    Sales and marketing                                   25                           21

    Product development                                   45                           36

    General and
     administrative                                       37                           33

                                                                  $120                      $101
                                                                  ====                      ====




                                                     eBay Inc.

                              Unaudited Condensed Consolidated Statement of Cash Flows


                                                           Three Months Ended
                                                                March 31,

                                                          2018                   2017
                                                          ----                   ----

                                                            (In millions)

    Cash flows from operating
     activities:

    Net income
     (loss)                                                         $407                        $1,035

    Adjustments:

    Provision for
     transaction
     losses                                                 72                               62

    Depreciation
     and
     amortization                                          179                              163

    Stock-based
     compensation                                          120                              101

    Deferred income
     taxes                                                (29)                           (565)

    Changes in
     assets and
     liabilities,
     and other, net
     of acquisition
     effects                                             (254)                           (214)
                                                          ----                             ----

    Net cash
     provided by
     operating
     activities                                            495                              582
                                                           ---                              ---

    Cash flows from investing
     activities:

    Purchases of
     property and
     equipment                                           (158)                           (135)

    Purchases of
     investments                                       (4,794)                         (2,750)

    Maturities and
     sales of
     investments                                         6,650                            2,770

    Other                                                    -                               1
                                                           ---                             ---

    Net cash
     provided by
     (used in)
     investing
     activities                                          1,698                            (114)
                                                         -----                             ----

    Cash flows from financing
     activities:

    Proceeds from
     issuance of
     common stock                                            9                               11

    Repurchases of
     common stock                                      (1,009)                           (410)

    Tax
     withholdings
     related to net
     share
     settlements of
     restricted
     stock units
     and awards                                           (60)                            (29)

    Repayment of
     debt                                                (750)                               -

    Other                                                 (15)                              10
                                                           ---

    Net cash used
     in financing
     activities                                        (1,825)                           (418)
                                                        ------                             ----

    Effect of
     exchange rate
     changes on
     cash, cash
     equivalents
     and restricted
     cash                                                   38                              114
                                                           ---                              ---

    Net increase in
     cash, cash
     equivalents
     and restricted
     cash                                                  406                              164
                                                           ---                              ---

    Cash, cash
     equivalents
     and restricted
     cash at
     beginning of
     period                                              2,140                            1,835

    Cash, cash
     equivalents
     and restricted
     cash at end of
     period                                                       $2,546                        $1,999
                                                                  ======                        ======




                                                                                                     eBay Inc.

                                                                                   Unaudited Summary of Consolidated Net Revenues


                                                                                 Three Months Ended

                                           March 31,        December 31,             September 30,               June 30,         March 31,
                                                2018                 2017                       2017                     2017              2017
                                                ----                 ----                       ----                     ----              ----

                                                                       (In millions, except percentages)

    Net Revenues by Type:

    Net transaction revenues:

    Marketplace                                      $1,792                                            $1,823                                   $1,698           $1,679 $1,609

    Current quarter vs prior year
     quarter                                     11%                            8%                                      8%                        5%      2%

    Percent from international                   61%                           62%                                     62%                       61%     60%

    StubHub                                      231                            306                                      270                        229      206

    Current quarter vs prior year
     quarter                                     12%                           12%                                      4%                        1%     16%

    Percent from international                    8%                            6%                                      4%                        5%      4%
                                                 ---

    Total net transaction revenues             2,023                          2,129                                    1,968                      1,908    1,815

    Current quarter vs prior year
     quarter                                     11%                            9%                                      8%                        4%      3%

    Percent from international                   55%                           54%                                     54%                       55%     54%


    Marketing services and other revenues:

    Marketplace                                  310                            333                                      293                        283      283

    Current quarter vs prior year
     quarter                                      9%                            6%                                      7%                        2%      4%

    Percent from international                   50%                           53%                                     52%                       51%     47%

    Classifieds                                  246                            244                                      235                        219      199

    Current quarter vs prior year
     quarter                                     24%                           21%                                     19%                        6%      7%

    Percent from international                  100%                          100%                                    100%                      100%    100%

    StubHub, Corporate and other                   1                              1                                        2                          9        6

    Total marketing services and
     other revenues                              557                            578                                      530                        511      488

    Current quarter vs prior year
     quarter                                     14%                           11%                                     12%                        6%      6%

    Percent from international                   72%                           73%                                     73%                       73%     69%


    Total net revenues                               $2,580                                            $2,707                                   $2,498           $2,419 $2,303
                                                     ======                                            ======                                   ======           ====== ======

    Current quarter vs prior year
     quarter                                     12%                            9%                                      9%                        5%      4%




                                                                                                            eBay Inc.

                                                                                              Unaudited Supplemental Operating Data


                                                                            Three Months Ended

                                 March 31,          December 31,               September 30,                June 30,                March 31,
                                       2018                  2017                         2017                      2017                      2017
                                       ----                  ----                         ----                      ----                      ----

                                                                  (In millions, except percentages)

    Active Buyers (1)                   171                               170                                       168                                 167    165

    Current quarter vs
     prior year quarter                  4%                               5%                                       5%                                 5%    5%


    Gross Merchandise Volume (2)

    Marketplace                             $22,547                                              $22,993                                           $20,518         $20,392 $19,980

    Current quarter vs
     prior year quarter                 13%                               9%                                       9%                                 3%    2%

    StubHub                                  $1,044                                               $1,432                                            $1,162          $1,009    $917

    Current quarter vs
     prior year quarter                 14%                              16%                                       2%                               (5)%    6%
                                        ---                               ---                                       ---                                 ---    ---

    Total GMV                               $23,591                                              $24,425                                           $21,680         $21,401 $20,897
                                            =======                                              =======                                           =======         ======= =======

    Current quarter vs
     prior year quarter                 13%                              10%                                       8%                                 3%    3%


    (1)              All buyers who successfully closed a
                     transaction on our Marketplace and
                     StubHub platforms within the previous
                     12-month period. Buyers may register
                     more than once, and as a result, may
                     have more than one account.

    (2)              Total value of all successfully closed
                     transactions between users on our
                     Marketplace and StubHub platforms
                     during the period regardless of
                     whether the buyer and seller actually
                     consummated the transaction. We
                     believe that GMV provides a useful
                     measure of the overall volume of
                     closed transactions that flow through
                     our platforms in a given period,
                     notwithstanding the inclusion in GMV
                     of closed transactions that are not
                     ultimately consummated.


    In the third quarter of 2017, prior period Active
     Buyers and GMV were adjusted and related growth
     rates recalculated to exclude the impact of the
     sale of our eBay India business.

eBay Inc.
Business Outlook

The guidance figures provided below and elsewhere in this press release are forward-looking statements, reflect a number of estimates, assumptions and other uncertainties, and are approximate in nature because the company's future performance is difficult to predict. Such guidance is based on information available on the date of this press release, and the company assumes no obligation to update it.

The company's future performance involves risks and uncertainties, and the company's actual results could differ materially from the information below and elsewhere in this press release. 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 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 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 eBay's investor relations website at https://investors.ebayinc.com or the SEC's website at www.sec.gov.



                         eBay Inc.


                                        Three Months
                                           Ending

                                       June 30, 2018

    (In billions, except per share
     amounts)                           GAAP           Non-GAAP (a)
                                        ----           -----------

    Net Revenue                    $2.64 - $2.68         $2.64 - $2.68

    Diluted EPS from continuing
     operations                    $0.33 - $0.37         $0.50 - $0.52


                                       Twelve Months
                                           Ending

                                     December 31, 2018

    (In billions, except per share
     amounts)                           GAAP           Non-GAAP (b)
                                        ----           -----------

    Net Revenue                    $10.9 - $11.1         $10.9 - $11.1

    Diluted EPS from continuing
     operations                    $1.65 - $1.75         $2.25 - $2.30


    (a) Estimated non-GAAP amounts
     above for the three months ending
     June 30, 2018 reflect adjustments
     that exclude the estimated
     amortization of acquired
     intangible assets of approximately
     $10 - $15 million and estimated
     stock-based compensation expense
     and associated employer payroll
     tax expense of approximately $160
     - $170 million, as well as the
     related income tax impact.
     Estimated non-GAAP amounts above
     for the three months ending June
     30, 2018, reflect adjustments that
     exclude tax impacts of the
     company's legal entity
     realignment, which are not reduced
     by the effects of the global
     minimum tax associated with the
     Tax Cuts and Jobs Act, of
     approximately $30 - $40 million.


    (b) Estimated non-GAAP amounts
     above for the twelve months ending
     December 31, 2018 reflect
     adjustments that exclude the
     estimated amortization of acquired
     intangible assets of approximately
     $40 - $50 million and estimated
     stock-based compensation expense
     and associated employer payroll
     tax expense of approximately $560
     - $580 million, as well as the
     related income tax impact.
     Estimated non-GAAP amounts above
     for the twelve months ending
     December 31, 2018, reflect
     adjustments that exclude tax
     impacts of the company's legal
     entity realignment, which are not
     reduced by the effects of the
     global minimum tax associated with
     the Tax Cuts and Jobs Act, of
     approximately $130 - $150
     million.

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, the company 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 financial measures are presented on a continuing operations basis.

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 the company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the company'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 in this press release.

These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and its 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, or net purchases of property and equipment, as the case may be, that may not be indicative of its core operating results and business outlook. In addition, because the company has historically reported certain non-GAAP results to investors, the company believes that the inclusion of non-GAAP measures provides consistency in the company's financial reporting.

For its internal budgeting process, and as discussed further below, the company's management uses financial measures 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, amortization of deferred tax assets associated with the realignment of its legal structure and related foreign exchange effects, significant gains or losses from the disposal/acquisition of a business, certain gains and losses on investments, restructuring-related charges and the income taxes associated with the foregoing. In addition to the corresponding GAAP measures, the company's management also uses the foregoing non-GAAP measures in reviewing the financial results of the company.

The company 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 and related employer payroll taxes. This expense consists of expenses for stock options, restricted stock and employee stock purchases. The company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that management does not believe are reflective of ongoing operating results. The related employer payroll taxes are dependent on the company'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 management does not believe it correlates to the company's operation of the business.

Amortization or impairment of acquired intangible assets, impairment of goodwill, certain amortization of deferred tax assets and related foreign exchange effects, significant gains or losses and transaction expenses from the acquisition or disposal of a business and certain gains or losses on investments. The company incurs amortization or impairment of acquired intangible assets and goodwill in connection with acquisitions and may incur significant gains or losses from the acquisition or disposal of a business and therefore excludes these amounts from its non-GAAP measures. The company also excludes certain gains and losses on investments. The company excludes the non-cash amortization of deferred tax assets associated with the realignment of its legal structure, which is not reduced by the effects of the Tax Cuts and Jobs Act, and related foreign exchange effects. The company excludes these items because management does not believe they correlate to the ongoing operating results of the company's business.

Restructuring. These charges consist of expenses for employee severance and other exit and disposal costs. The company excludes significant restructuring charges primarily because management does not believe they are reflective of ongoing operating results.

Other certain significant gains, losses, or charges that are not indicative of the company's core operating results. These are significant gains, losses, or charges during a period that are the result of isolated events or transactions which have not occurred frequently in the past and are not expected to occur regularly or be repeated in the future. The company excludes these amounts from its results primarily because management does not believe they are indicative of its current or ongoing operating results.

Tax effect of non-GAAP adjustments. 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, the company also uses free cash flow. Free cash flow represents operating cash flows less purchases of property and equipment. The company 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 the company's business, make strategic acquisitions, 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.



                                                  eBay Inc.

                     Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin


                                                        Three Months Ended
                                                             March 31,

                                                       2018                  2017
                                                       ----                  ----

                                                      (In millions, except
                                                          percentages)

    GAAP operating
     income                                                    $579                         $547

    Stock-based
     compensation
     expense and
     related employer
     payroll taxes                                      126                             103

    Amortization of
     acquired
     intangible assets
     within cost of net
     revenues                                             6                               7

    Amortization of
     acquired
     intangible assets
     within operating
     expenses                                            10                               9

    Total non-GAAP
     operating income
     adjustments                                        142                             119
                                                        ---                             ---

    Non-GAAP operating
     income                                                    $721                         $666
                                                               ----                         ----

    Non-GAAP operating
     margin                                           27.9%                          28.9%
                                                       ----                            ----




                         Reconciliation of GAAP Net Income to Non-GAAP Net Income and

                            GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate*


                                                   Three Months Ended
                                                        March 31,

                                                  2018                   2017
                                                  ----                   ----

                                            (In millions, except per share
                                              amounts and percentages)

    GAAP income
     from
     continuing
     operations
     before
     income taxes                                          $547                             $558

    GAAP
     provision
     for income
     taxes                                       (140)                               477
                                                  ----                                ---

    GAAP net
     income from
     continuing
     operations                                            $407                           $1,035

    Non-GAAP adjustments to net
     income from continuing
     operations:

    Non-GAAP
     operating
     income from
     continuing
     operations
     adjustments
     (see table
     above)                                        142                                119

    Gains or
     losses on
     investments                                     -                              (16)

    Tax effect of
     step-up of
     intangible
     assets basis                                    -                             (695)

    Foreign
     exchange
     effect of
     step-up of
     intangible
     assets basis                                    -                                65

    Tax effect of
     non-GAAP
     adjustments                                   (1)                                30
                                                   ---                                ---

    Non-GAAP net
     income from
     continuing
     operations                                            $548                             $538


    Diluted net income from
     continuing operations per
     share:

    GAAP                                                  $0.40                            $0.94
                                                          -----                            -----

    Non-GAAP                                              $0.53                            $0.49
                                                          -----                            -----

    Shares used
     in GAAP and
     non-GAAP
     diluted net
     income
     (loss) per-
     share
     calculation                                 1,029                              1,102
                                                 -----                              -----


    GAAP
     effective
     tax rate -
     Continuing
     operations                                  25.6%                           (85.4)%
                                                  ----                             ------

    Tax effect of
     non-GAAP
     adjustments
     to net
     income from
     continuing
     operations                                 (5.2)%                            104.1%
                                                 -----                              -----

    Non-GAAP
     effective
     tax rate -
     Continuing
     operations                                  20.4%                             18.7%
                                                  ----                               ----


    *Presented on a continuing
     operations basis




                      Reconciliation of Operating Cash Flow to Free Cash Flow*


                                           Three Months Ended
                                               March 31,

                                          2018                  2017
                                          ----                  ----

                                           (In millions)

    Net cash provided
     by continuing
     operating
     activities                                    $495                         $582

    Less: Purchases
     of property and
     equipment                           (158)                            (135)
                                          ----

    Free cash flow
     from continuing
     operations                                    $337                         $447
                                                   ====                         ====


    *Presented on a continuing
     operations basis

CONTACT: Investor Relations, Selim Freiha, ir@ebay.com; or Media Relations, Abby Smith, press@ebay.com; Company News: https://www.ebayinc.com/stories/news/, Investor Relations website: https://investors.ebayinc.com

View original content with multimedia:http://www.prnewswire.com/news-releases/ebay-inc-reports-first-quarter-2018-results-300636638.html

SOURCE eBay Inc.