CHICAGO, IL (Jan. 25, 2000) -- eBay, The Rule Breaker portfolio's consumer-to-consumer e-commerce titan, reported its fourth quarter and full 1999 earnings after the close of trading today. Before getting to the actual numbers, here are some of the things Jeff Fischer wrote yesterday that he expected from eBay:
  • $70 million in revenue
  • 9 million unique users
  • Earnings per share of $0.02
  • Gross margins leveling
The only reason I'm quoting Jeff here is because he is the one at the Fool that follows eBay the closest. Not only did Jeff spotlight eBay in a recent Internet Report about online auctions (the current issue is about the online music revolution), but Jeff is also the analyst who will be covering eBay when The Motley Fool's new company-specific research reports begin to be published in about three weeks.

So, how did eBay fare in the fourth quarter? Drum roll please...

($ millions, except EPS)
                  Q4 1999     Q3 1999    Q4 1998
Sales             $73.9        $58.5       $30.9
Gross Profit      $52.3        $41.4       $25.0
Operating Profit   $0.5        ($4.7)       $3.6
Net Income         $4.9         $1.4        $2.6
EPS               $0.04         0.01       $0.01

Gross Margin       70.8%        70.8%       80.9%
Operating Margin    0.6%        (8.1%)      11.7%
Net Margin          6.6%         2.3%        8.4%
Then taking a step back and looking at the entire year...

(millions, except EPS)
                   1999        1998       1997
Sales             $224.7       $86.1     $41.4              
Gross Profit      $167.1       $70.0     $33.0
Operating Profit   ($1.1)      $12.8     $10.0
Net Income         $10.8        $7.3      $7.1 
EPS                $0.08       $0.04     $0.05

Gross Margin        74.4%      81.3%      88.9%
Operating Margin    (0.5%)     15.0%      24.1%
Net Margin           4.8%       8.4%      17.1%
To be concise, eBay has easily bested our expectations in the fourth quarter. Sales were $4.9 million higher than we expected, which is always a welcome sight. Earnings per share were also double our estimates, which is yet another thing to be impressed with.

An additional place where eBay far surpassed our expectations is in the number of unique users it was able to attract to its service. We were expecting 9 million uniques, and eBay said that at the end of the quarter they had 10 million. Outstanding! This is especially impressive when you see that eBay started the year with only 2.2 million unique users. That's phenomenal growth any way you slice it.

On the margin front, things were not that much different from what we expected. Gross margin versus the third quarter was relatively flat, which is not necessarily a bad thing when you've got margins above 70%. Operating and net margins improved, which was a happy surprise and undoubtedly had a part in the improving overall bottom line.

Some other quick highlights include the fact that eBay hosted 41 million auctions in the fourth quarter, more than triple the 13.6 million it did in the same period last year. Another amazing factoid is that eBay's site hosted $113 in gross merchandise sales per second for 1999. Just think about that for a moment. In the time it takes to read this recap, eBay has hosted several thousand dollars worth of e-commerce. Amazing.

In the company's post-earnings conference call, eBay gave the following profit guidance for the coming year:
  • eBay's revenue in 2000 should be somewhere near $380 million to $390 million.
  • The company is comfortable with consensus profit estimates.
  • Margins should be relatively flat in next couple quarters, but should rise towards the end of the coming year.
  • Barring unforeseen events (such as acquisitions), eBay expects positive earnings in each and every quarter in 2000.

In summary, you can keep eBay on the very short list of Internet-focused companies that have black bottom lines. (Rule Breaker America Online (NYSE: AOL) and Rule Maker Yahoo! (Nasdaq: YHOO) are about the only other two that come immediately to mind.) We're as excited as we've ever been to have eBay part of the Rule Breaker portfolio.

Well, I best submit this now, lest the Foolish editors and production folk get stuck at work thanks to the snowfall out on the East Coast. Being long-term investors, we always have plenty of time to think about and discuss things down the road. Of course, there's always the eBay message board available where you can read the opinions of thousands of other Fools.

Fool on!