eBay 2003 Annual Report Download - page 23

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This report contains statements that involve expectations, plans or intentions (such as those relating to
future business or Ñnancial results, new features or services, or management strategies). These statements
are forward-looking and are subject to risks and uncertainties, so actual results may vary materially. You
can identify these forward-looking statements by words such as ""may,'' ""will,'' ""should,'' ""expect,''
""anticipate,'' ""believe,'' ""estimate,'' ""intend,'' ""plan'' and other similar expressions. You should consider
our forward-looking statements in light of the risks discussed under the heading ""Risk Factors That May
AÅect Results of Operations and Financial Condition" below, as well as our consolidated Ñnancial
statements, related notes, and the other Ñnancial information appearing elsewhere in this report and our
other Ñlings with the Securities and Exchange Commission. We assume no obligation to update any
forward-looking statements.
You should read the following Management's Discussion and Analysis of Financial Condition and
Results of Operations in conjunction with the Consolidated Financial Statements and the related notes that
appear elsewhere in this document.
Overview
About eBay
We pioneered online trading by developing an Internet-based marketplace in which a community of
buyers and sellers are brought together in an entertaining, intuitive, easy-to-use environment to browse,
buy and sell an enormous variety of items. Through our PayPal service, we enable any business or
consumer with email to send and receive online payments securely, conveniently and cost-eÅectively.
Executive Operating and Financial Summary
Members of our senior management team regularly review key operating metrics such as new users,
active users, listings and gross merchandise sales transacted on our global marketplace as well as new user
accounts, total payment volume and oÅ-eBay transactions processed by our wholly-owned PayPal
subsidiary. This information allows us to monitor marketplace trends and anticipate new features and
functionality that may be required to serve the needs of our users. We believe that an understanding of the
key operating metrics and how they change over time is important to investors, analysts and other parties
analyzing our market opportunities and business results.
Members of our senior management also regularly review key Ñnancial information including net
revenues, operating income margins, earnings per share, cash Öows from operations and free cash Öows,
which we deÑne as operating cash Öows less purchases of property and equipment. This information allows
us to monitor the proÑtability of our business and evaluate the eÅectiveness of investments that we have
made and continue to make in the areas of international expansion, customer support, product
development, marketing and site operations. We believe that an understanding of key Ñnancial information
and how it changes over time is important to investors, analysts and other parties analyzing our business
results and future market opportunities.
We expect that our growth in net revenues during 2004 will result primarily from transaction net
revenues across our U.S., International, and Payments segments, with a potentially more signiÑcant eÅect
of seasonality during the second and third quarters. The expected future growth in our Payments segment
net revenues will also cause downward pressure on our gross margin and operating proÑt margin. We
continue to make investments in our business and infrastructure to help us achieve our long-term growth
objectives. We expect to continue our investments in the areas of international expansion, product
development, site operations and various corporate infrastructure areas. We believe these investments are
necessary to support the long-term demands of our growing business. In addition, to the extent that the
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