~~eBay Inc.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Note 1416 — Accumulated Other Comprehensive Income

The following tables summarize the changes in AOCI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 (in millions):

Unrealized Gains (Losses) on Derivative Instruments
Unrealized
Gains on
Investments

Foreign
Currency
Translation
Estimated Tax (Expense) Benefit Total
Balance as of June 30, 2017 $ (44 ) $ 2
$ 446
$ 33
$ 437
Other comprehensive income (loss) before reclassifications (31 ) 3
115
3
90
Less: Amount of gain (loss) reclassified from AOCI (7 ) (4 ) —
—
(11 )
Net current period other comprehensive income (24 ) 7
115
3
101
Balance as of September 30, 2017 $ (68 ) $ 9
$ 561
$ 36
$ 538



	Unrealized Gains (Losses) on Derivative Instruments			Unrealized Gains (Losses) on Investments			Foreign Currency Translation			Estimated Tax (Expense) Benefit			Total
Balance as of December 31, 2018	$	68		$	(56	)	$	462		$	24		$	498
Other comprehensive income (loss) before reclassifications	(21		)	40			(32		)	(5		)	(18		)
Less: Amount of gain (loss) reclassified from AOCI	20			—			—			(4		)	16
Net current period other comprehensive income (loss)	(41		)	40			(32		)	(1		)	(34		)
Balance as of March 31, 2019	$	27		$	(16	)	$	430		$	23		$	464

Unrealized Gains (Losses) on Derivative Instruments
Unrealized
Gains on
Investments

Foreign
Currency
Translation
Estimated Tax (Expense) Benefit Total
Balance as of December 31, 2016 $ 54
$ 51
$ (230 ) $ 1
$ (124 )
Other comprehensive income (loss) before reclassifications (94 ) (29 ) 791
35
703
Less: Amount of gain (loss) reclassified from AOCI 28
13
—
—
41
Net current period other comprehensive income (122 ) (42 ) 791
35
662
Balance as of September 30, 2017 $ (68 ) $ 9
$ 561
$ 36
$ 538



	Unrealized Gains (Losses) on Derivative Instruments			Unrealized Gains (Losses) on Investments			Foreign Currency Translation		Estimated Tax (Expense) Benefit		Total
Balance as of December 31, 2017	$	(57	)	$	(15	)	$	748	$	41	$	717
Other comprehensive income (loss) before reclassifications	(57		)	(37		)	132		22		60
Less: Amount of gain (loss) reclassified from AOCI	(28		)	(1		)	—		6		(23		)
Net current period other comprehensive income (loss)	(29		)	(36		)	132		16		83
Balance as of March 31, 2018	$	(86	)	$	(51	)	$	880	$	57	$	800

Unrealized Gains (Losses) on Derivative Instruments Unrealized
Gains on
Investments Foreign
Currency
Translation Estimated Tax (Expense) Benefit Total
Balance as of June 30, 2016 $ 69
$ 1,149
$ 22
$ (411 ) $ 829
Other comprehensive income (loss) before reclassifications 27
350
150
(128 ) 399
Less: Amount of gain (loss) reclassified from AOCI 27
(3 ) —
—
24
Net current period other comprehensive income —
353
150
(128 ) 375
Balance as of September 30, 2016 $ 69
$ 1,502
$ 172
$ (539 ) $ 1,204

Unrealized Gains (Losses) on Derivative Instruments Unrealized
Gains on
Investments Foreign
Currency
Translation Estimated Tax (Expense) Benefit Total
Balance as of December 31, 2015 $ 36
$ 845
$ (45 ) $ (310 ) $ 526
Other comprehensive income (loss) before reclassifications 96
621
217
(229 ) 705
Less: Amount of gain (loss) reclassified from AOCI 63
(36 ) —
—
27
Net current period other comprehensive income 33
657
217
(229 ) 678
Balance as of September 30, 2016 $ 69
$ 1,502
$ 172
$ (539 ) $ 1,204

eBay Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides ~~details about~~a summary of reclassifications out of AOCI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 (in millions):



Details about AOCI Components	Affected Line Item in the Statement of Income	Amount of Gain (Loss) Reclassified From AOCI
		Three Months Ended March 31,
		2019			2018
Gains (losses) on cash flow hedges - foreign exchange contracts	Net Revenues	$	20		$	(28	)
	Total, from continuing operations before income taxes	20			(28		)
	Provision for income taxes	(4		)	6
	Total, net of income taxes	16			(22		)

Unrealized gains (losses) on investments	Interest and other, net	—			(1		)
	Total, net of income taxes	—			(1		)

Total reclassifications for the period	Total, net of income taxes	$	16		$	(23	)

Note 17 — Restructuring

The following table summarizes restructuring reserve activity during the three months ended March 31, 2019 (in millions):



	Employee Severance and Benefits
Accrued liability as of January 1, 2019	$	8
Charges	38
Payments	(29		)
Accrued liability as of March 31, 2019	$	17

In February 2019, management approved a plan to drive operational improvement that included the reduction of workforce, primarily in our Marketplace segment. We incurred pre-tax restructuring charges of approximately $38 million, which were primarily related to employee severance and benefits. The reduction was substantially completed in the first quarter of 2019. Restructuring charges are included in general and administrative expenses in the condensed consolidated statement of income.

Details about AOCI Components Affected Line Item in the Statement of Income Amount of Gain (Loss) Reclassified From AOCI
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Gains (losses) on cash flow hedges - foreign exchange contracts Net Revenues $ (7 ) $ —
$ (7 ) $ —
Cost of net revenues —
—
3
1
Sales and marketing —
—
1
—
Product development —
1
5
3
General and administrative —
1
2
1
Interest and other, net —
25
24
58
Total, from continuing operations before income taxes (7 ) 27
28
63
Provision for income taxes —
—
—
—
Total, net of income taxes (7 ) 27
28
63

Unrealized gains (losses) on investments Interest and other, net (4 ) (3 ) 13
(36 )
Total, before income taxes (4 ) (3 ) 13
(36 )
Provision for income taxes —
—
—
—
Total, net of income taxes (4 ) (3 ) 13
(36 )

Total reclassifications for the period Total, net of income taxes $ (11 ) $ 24
$ 41
$ 27


ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, or management strategies). You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in “Part II - Item ~~1A -~~1A: Risk Factors” of this Quarterly Report on Form 10-Q as well as in our unaudited condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission (“SEC”). We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the unaudited condensed consolidated financial statements and the related notes included in this report.

OVERVIEW

Business

eBay Inc. is a global commerce leader, which includes our Marketplace, StubHub and Classifieds platforms. 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. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity for all. Our ~~Marketplace platforms include our online marketplace located at www.ebay.com, its localized counterparts~~technologies and ~~the eBay mobile apps. Our StubHub platforms include our online ticket platform located at www.stubhub.com, its localized counterparts~~services are designed to give buyers choice and ~~the StubHub mobile apps. Our Classifieds platforms include~~ a ~~collection~~breadth of ~~brands such as Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Kleinanzeigen~~relevant inventory and ~~others.~~to enable sellers worldwide to organize and offer their inventory for sale, virtually anytime and anywhere.

When we refer to “we,” “our,” “us” or “eBay” in this Quarterly Report on Form 10-Q, we mean the current Delaware corporation (eBay Inc.) and its ~~California predecessor, as well as all of our~~ consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.

~~Seasonality~~Presentation

We expect transaction activity patterns on our platforms to mirror general consumer buying patterns and expect that these trends will continue. The following table sets forth, for the periods presented, our total net revenues and the sequential quarterly movements of these net revenues (in millions, except percentages):

Quarter Ended
March 31 June 30 September 30 December 31
2015
Net revenues $ 2,061
$ 2,110
$ 2,099
$ 2,322
Percent change from prior quarter (11 )% 2 % (1 )% 11 %
2016
Net revenues $ 2,137
$ 2,230
$ 2,217
$ 2,395
Percent change from prior quarter (8 )% 4 % (1 )% 8 %
2017
Net revenues $ 2,217
$ 2,328
$ 2,409

Percent change from prior quarter (7 )% 5 % 4 %

~~Impact of Foreign Currency Exchange Rates~~

Our commerce platforms operate globally, resulting in certain revenues that are denominated in foreign currencies, primarily the euro, British pound, Korean won and Australian dollar, subjecting us to foreign currency risk, which may adversely impact our financial results. Because of this and the fact that we generated a majority of our net revenues internationally, including the three and nine months ended September 30, 2017 and 2016, we are subject to the risks related to doing business in foreign countries as discussed under “Part II - Item 1A - Risk Factors.”

In addition to the corresponding measures under generally accepted accounting principles (“GAAP”), management uses non-GAAP measures in reviewing our financial results. The foreign exchange neutral (“FX-Neutral”), or constant currency, ~~(“FX-Neutral”),~~ net revenue amounts discussed below are non-GAAP financial measures and are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Accordingly, the FX-Neutral information appearing in the following discussion of our results of operations should be read in conjunction with the information provided below in ~~“Non-GAAP~~“Non-GAAP Measures of Financial Performance,” which includes reconciliations of FX-Neutral financial measures to the most directly comparable GAAP measures. We calculate the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts.

~~The effect of foreign currency exchange rate movements~~

Quarter Highlights

Net revenues increased 2% to $2.6 billion during the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016 was due to the weakening of the U.S. dollar against other currencies, primarily the euro.~~

~~Quarter Highlights~~

~~Net revenues~~2018. FX-Neutral net revenue increased ~~9% to $2.4 billion~~4% during the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016. FX-Neutral net revenue (as defined below)~~2018. Operating margin increased 8%to 23.0% for the three months ended March 31, 2019 compared to 22.5% for the same period in 2018. Diluted earnings per share increased to $0.57 during the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in 2016. Operating margin was 24% for both the three months ended September 30, 2017 and 2016. Diluted earnings per share from continuing operations increased to $0.48 during the three months ended September 30, 2017 compared to $0.36$0.40 in the same period in ~~2016.~~2018.

We generated cash flow from continuing operating activities of ~~$877~~$550 million during the three months ended ~~September 30, 2017~~March 31, 2019 compared to ~~$802~~$495 million in the same period in ~~2016.~~2018. During the three months ended ~~September 30, 2017, $1.0 billion~~March 31, 2019, we also completed the acquisition of ~~1.350% fixed rate notes due 2017~~the U.K.-based classifieds site, Motors.co.uk for $93 million in cash and ~~$450~~paid $125 million in cash dividends.

In the first quarter of ~~floating rate notes due 2017 matured~~2019, we announced several organizational changes, including bringing our Marketplace geographic regions together under one global leadership team. We changed from one reportable segment to three reportable segments to reflect the way management and ~~were repaid. In addition, we recognized~~our chief operating decision maker (“CODM”) review and assess performance of the business. Our three reportable segments are Marketplace, StubHub and Classifieds. Marketplace includes our online marketplace located at www.ebay.com, its localized counterparts and the eBay suite of mobile apps. StubHub includes our online ticket platform located at www.stubhub.com, its localized counterparts and the StubHub mobile apps. Classifieds includes a ~~gain~~collection of brands such as Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Kleinanzeigen and others. Prior period segment information has been reclassified to conform to the current period segment presentation. Refer to “Note 5 - Segments” for further information on our segments.

We also announced several new initiatives with the ~~disposal~~goal of positioning eBay for ongoing success and value creation. These initiatives include an operating review and the commencement of a strategic review of our ~~eBay India business~~portfolio of ~~$167 million, which was recorded in interest~~assets, including StubHub and ~~other, net on our consolidated statement of income.~~Classifieds.

RESULTS OF OPERATIONS

Net Revenues

Seasonality

We ~~generate two types~~expect transaction activity patterns on our platforms to mirror general consumer buying patterns and expect that these trends will continue. All of ~~net revenues: net transaction~~our segments have seasonal cadences that impact their revenues and ~~marketing services and other (“MS&O”) revenues.~~ margins. The following table sets forth sequential quarterly movements of our total net revenues for the periods presented (in millions, except percentages):



	Quarter Ended
	March 31			June 30			September 30			December 31
2017
Net revenues	$	2,303		$	2,419		$	2,498		$	2,707
% change from prior quarter	(7		)%	5		%	3		%	8		%
2018
Net revenues	$	2,580		$	2,640		$	2,649		$	2,877
% change from prior quarter	(5		)%	2		%	0		%	9		%
2019
Net revenues	$	2,643
% change from prior quarter	(8		)%

Net transaction revenues are derived principally from final value fees (which are fees payable on transactions closed on our Marketplace and StubHub platforms), listing fees and other service fees. MS&O revenues consist of Marketplace, StubHub and Classifieds revenue principally from the sale of advertisements, vehicles classifieds listing on Marketplace platforms, revenue sharing arrangements, classifieds fees, marketing service fees and lead referral fees. Revenues by Geography

Revenues are attributed to U.S. and international geographies primarily based upon the country in which the seller, platform that displays advertising, other service provider or customer, as the case may be, is located. ~~To drive traffic to our platforms, we provide incentives to our users in the form of coupons and buyer and seller rewards. These incentives are generally treated as reductions in revenue.~~

The following table presents net revenues by ~~type and~~ geography for the periods presented (in millions, except percentages):



	Three Months Ended March 31,						% Change
	2019			2018			As Reported
U.S.	$	1,058		$	1,074		(2	)%
Percentage of net revenues	40		%	42		%

International	1,585			1,506			5	%
Percentage of net revenues	60		%	58		%

Total net revenues	$	2,643		$	2,580		2	%

Our commerce platforms operate globally, resulting in certain revenues that are denominated in foreign currencies, including the euro, British pound, Korean won and Australian dollar. In addition, as shown in the table above, we generate a majority of our net revenues internationally. Because of these factors, we are subject to the risks related to doing business in foreign countries as discussed under “Part II - Item 1A: Risk Factors.”

Net revenues included $20 million of hedging gains during the three months ended March 31, 2019 as compared to $28 million of hedging losses during the same period in 2018. The hedging activity in net revenues specifically relates to hedges of net transaction revenues generated by our Marketplace segment. Foreign currency movements relative to the U.S. dollar had an unfavorable impact of $68 million on net revenues during the three months ended March 31, 2019 compared to a favorable impact of $109 million during the same period in 2018. The effect of foreign currency exchange rate movements during the three months ended March 31, 2019 compared to the same period in 2018 was primarily attributable to the strengthening of the U.S. dollar against the euro, British pound and Korean won.

Net Revenues by Type and Segment

We generate two types of net revenues:

Net transaction revenues primarily include final value fees, feature fees, including fees to promote listings, and listing fees from sellers on our Marketplace platforms and final value fees from sellers and buyers on our StubHub platforms. Our net transaction revenues also include store subscription and other fees often from large enterprise sellers. Our net transaction revenues are reduced by incentives, including discounts, coupons and rewards, provided to our customers.

Marketing services and other ("MS&O") revenues consist of Marketplace, StubHub and Classifieds revenues principally from the sale of advertisements, classifieds fees, revenue sharing arrangements and first party inventory programs.

The following table presents type of net revenues by segment for the periods presented (in millions, except percentages):

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 % Change 2017 2016 % Change
Net Revenues by Type:
Net transaction revenues:
Marketplace ⁽¹⁾
$ 1,606
$ 1,484
8 % $ 4,721
$ 4,505
5 %
StubHub 273
261
5 % 704
663
6 %
Total net transaction revenues 1,879
1,745
8 % 5,425
5,168
5 %
Marketing services and other revenues:
Marketplace 293
273
7 % 859
824
4 %
Classifieds 235
197
19 % 653
590
11 %
StubHub, Corporate and other 2
2
16 % 17
2
**
Total marketing services and other revenues 530
472
12 % 1,529
1,416
8 %
Total net revenues $ 2,409

$ 2,217
9 %
$ 6,954
$ 6,584
6 %

Net Revenues by Geography:
U.S. $ 1,030
$ 974
6 % $ 2,971
$ 2,828
5 %
International 1,379
1,243
11 % 3,983
3,756
6 %
Total net revenues $ 2,409
$ 2,217
9 % $ 6,954
$ 6,584
6 %



	Three Months Ended March 31,
	2019			2018		% Change
Net transaction revenues:
Marketplace	$	1,885		$	1,792	5	%
StubHub	223			231		(3	)%
Total	2,108			2,023		4	%
Marketing services and other revenues:
Marketplace	277			310		(11	)%
Classifieds	256			246		4	%
StubHub	7			1		**
Elimination of inter-segment net revenues	(5		)	—		**
Total	535			557		(4	)%
Total net revenues	$	2,643		$	2,580	2	%


**	~~Not meaningful~~

** Not meaningful

Net Transaction Revenues

Key Operating Metrics

Gross Merchandise Volume (“GMV”) and take rate are significant factors that we believe affect our net transaction revenues.

GMV consists of the total value of all successfully closed transactions between users on our Marketplace or StubHub platforms during the applicable 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.

Take rate is defined as net transaction revenues divided by GMV.

The following table presents GMV and take rate by segment for the periods presented (in millions, except percentages):



	Three Months Ended March 31,
	2019			2018			Change
GMV:
Marketplace	$	21,571		$	22,547		(4	)%
StubHub	1,018			1,044			(3	)%
Total	$	22,589		$	23,591		(4	)%

Transaction take rate:
Marketplace	8.74		%	7.95		%	0.79	%
StubHub	21.97		%	22.08		%	(0.11	)%
Total	9.33		%	8.57		%	0.76	%

Marketplace Net Transaction Revenues



	Three Months Ended March 31,						Change
	2019			2018			As Reported		FX-Neutral
	(In millions, except percentages)
Marketplace net transaction revenues ⁽¹⁾	$	1,885		$	1,792		5	%	6	%

Supplemental data:
Marketplace GMV	$	21,571		$	22,547		(4	)%	(1	)%
Marketplace take rate	8.74		%	7.95		%	0.79	%


(1)	Marketplace net transaction revenues were net of $7$20 million and $28 million hedging activity during ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and 2018, respectively. ~~There were no other hedging activities within net revenues during the previous periods.~~

~~The following table presents certain key operating metrics that we believe are significant factors affecting our net transaction revenues (in millions, except percentages):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 % Change 2017 2016 % Change
Supplemental Operating Data:
GMV ⁽¹⁾:

Marketplace $ 20,518
$ 18,905
9 % $ 60,890
$ 58,142
5 %
StubHub 1,162
1,142
2 % 3,088
3,071
1 %
Total GMV $ 21,680
$ 20,047
8 % $ 63,978
$ 61,213
5 %

Transaction take rate:
Marketplace ⁽²⁾
7.83 % 7.85 % (0.02 )% 7.75 % 7.75 % — %
StubHub ⁽³⁾
23.55 % 22.92 % 0.63 % 22.81 % 21.61 % 1.20 %
Total transaction take rate ⁽⁴⁾
8.67 % 8.71 % (0.04 )% 8.48 % 8.44 % 0.04 %

~~(1)~~

We define Gross Merchandise Volume (“GMV”) as the total value of all successfully closed transactions between users on our Marketplace and StubHub platforms during the applicable 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.


~~(2)~~	~~We define Marketplace transaction take rate as Marketplace net transaction revenues divided by Marketplace GMV.~~


~~(3)~~	~~We define StubHub transaction take rate as StubHub net transaction revenues divided by StubHub GMV.~~


~~(4)~~	~~We define total transaction take rate as total net transaction revenues divided by GMV.~~

~~Net Transaction Revenues~~

~~The following table presents total net transaction revenues and supplemental operating data (in millions, except percentages):~~

Three Months Ended
September 30, % Change Nine Months Ended
September 30, % Change
2017 2016 As Reported FX-Neutral 2017 2016 As Reported FX-Neutral
Total net transaction revenues $ 1,879
$ 1,745
8 % 7 % $ 5,425
$ 5,168
5 % 6 %
Percentage of net revenues 78 % 79 % 78 % 78 %

Total GMV $ 21,680
$ 20,047
8 % 7 % $ 63,978
$ 61,213
5 % 6 %
Total transaction take rate 8.67 % 8.71 % (0.04 )% 8.48 % 8.44 % 0.04 %

The increase in net transaction revenues during the three and nine months ended September 30, 2017 compared to the same periods in 2016 was primarily due to an increase in Marketplace GMV. The total transaction take rate was lower during the three months ended September 30, 2017 compared to the same period in 2016 primarily due to a decrease in Marketplace transaction take rate. The total transaction take rate was higher during the nine months ended September 30, 2017 compared to the same period in 2016 primarily due to an increase in StubHub transaction take rate.

Net transaction revenues earned internationally totaled $989 million and $921 million during the three months ended September 30, 2017 and 2016, respectively, representing 53% and 53% of total net transaction revenues for the respective periods. Net transaction revenues earned internationally totaled $2.9 billion and $2.8 billion during the nine months ended September 30, 2017 and 2016, respectively, representing 53% and 54% of total net transaction revenues for the respective periods.

~~Marketplace Net Transaction Revenues~~

~~The following table presents Marketplace net transaction revenues and supplemental operating data (in millions, except percentages):~~

Three Months Ended
September 30, % Change Nine Months Ended
September 30, % Change
2017 2016 As Reported FX-Neutral 2017 2016 As Reported FX-Neutral
Marketplace net transaction revenues $ 1,606
$ 1,484
8 % 8 % $ 4,721
$ 4,505
5 % 7 %

Marketplace GMV $ 20,518
$ 18,905
9 % 7 % $ 60,890
$ 58,142
5 % 6 %
Marketplace take rate 7.83 % 7.85 % (0.02 )% 7.75 % 7.75 % — %

The increase in Marketplace net transaction revenues during the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016~~2018 was primarily due to ~~Marketplace GMV growth.~~growth in promoted listing fees, higher take rate and our acquisition of Giosis in the second quarter of 2018. Marketplace transaction take rate was ~~relatively flat.~~

~~The increase in Marketplace net transaction revenues~~higher during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016 was~~2018, primarily due to category mix, growth in promoted listing fees, which along with final value fees are calculated as a percentage of an items sale price, and a decrease in seller incentives, which are accounted for as a reduction of Marketplace ~~GMV growth, partially offset by an unfavorable impact from foreign currency movements relative to~~net transaction revenues. Marketplace net transaction revenues increased during the ~~U.S. dollar. Marketplace transaction take rate was flat for the nine~~three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016.~~2018, despite the decrease in Marketplace GMV for the same period due to take rate considerations discussed above. We expect that the divergence between Marketplace net transaction revenues and Marketplace GMV to continue throughout 2019.

StubHub Net Transaction Revenues

~~The following table presents StubHub net transaction revenues and supplemental operating data (in millions, except percentages):~~


																					Three Months Ended March 31,						Change
	Three Months Ended September 30,						% Change				Nine Months Ended September 30,						% Change				2019			2018			As Reported		FX-Neutral
	2017			2016			As Reported		FX-Neutral		2017			2016			As Reported		FX-Neutral		(In millions, except percentages)
StubHub net transaction revenues	$	273		$	261		5	%	4	%	$	704		$	663		6	%	6	%	$	223		$	231		(3	)%	(3	)%

Supplemental data:
StubHub GMV	$	1,162		$	1,142		2	%	2	%	$	3,088		$	3,071		1	%	1	%	$	1,018		$	1,044		(3	)%	(2	)%
StubHub take rate	23.55		%	22.92		%	0.63	%			22.81		%	21.61		%	1.20	%			21.97		%	22.08		%	(0.11	)%

Liquidity and Capital Resources

Cash Flows

Nine Months Ended
September 30,
2017 2016
(In millions)
Net cash provided by (used in):
Continuing operating activities $ 2,158
$ 2,207
Continuing investing activities (1,510 ) (2,568 )
Continuing financing activities (888 ) 182
Effect of exchange rates on cash and cash equivalents 184
101
Net decrease in cash and cash equivalents - discontinued operations —
(1 )
Net increase (decrease) in cash and cash equivalents $ (56 )
$ (79 )



	Three Months Ended March 31,
	2019			2018
	(In millions)
Net cash provided by (used in):
Operating activities	$	550		$	495
Investing activities	558			1,698
Financing activities	(1,605		)	(1,825		)
Effect of exchange rates on cash, cash equivalents and restricted cash	(10		)	38
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(507	)	$	406

~~Continuing~~ Operating Activities

~~The net cash~~Cash provided by ~~continuing~~ operating activities of ~~$2.2 billion~~$550 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 was primarily ~~due~~attributable to net income of ~~$1.6 billion~~$518 million with adjustments of ~~$504~~$169 million in depreciation and amortization, ~~$193~~$121 million in stock-based compensation, $72 million in provision for transaction losses, ~~and $356 million in stock-based compensation, partially offset by adjustments of $38~~$36 million for deferred income taxes, ~~and $167 million for the gain on disposal of eBay India, and~~partially offset by a decrease of ~~$275~~$257 million in changes in assets and liabilities, ~~and other,~~ net of acquisition ~~effects.~~

~~The net cash provided by continuing operating activities of $2.2 billion in the nine months ended September 30, 2016 was primarily due~~effects, and an adjustment to net income of ~~$1.3 billion with adjustments of $506~~$113 million ~~in depreciation and amortization,$172 million in provision~~ for ~~transaction losses and $306 million in stock-based compensation, and an increase of $9 million in~~ changes in ~~assets and liabilities, and other, net~~the fair value of ~~acquisition effects, partially offset by an adjustment of $123 million for deferred income taxes.~~the warrant.

~~Continuing~~

Investing Activities

~~The net cash used in continuing~~Cash provided by investing activities of ~~$1.5 billion~~$558 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 was primarily ~~due~~attributable to ~~cash paid for purchases of investments of $11.3 billion, our equity investment in Flipkart of $514 million and property and equipment of $474 million, partially offset by~~ proceeds of ~~$10.8~~$12.7 billion from the maturities and ~~sale~~sales of ~~investments.~~

~~The net cash used in continuing investing activities of $2.6 billion in the nine months ended September 30, 2016 was primarily due to~~investments, partially offset by cash paid for ~~purchases of~~ investments of ~~$7.8~~$11.9 billion, ~~purchases of~~ property and equipment of ~~$490~~$182 million and ~~net cash paid for business~~ acquisitions of ~~$201 million, partially offset by proceeds of $5.9 billion from the maturities and sale of investments.~~$93 million.

~~Continuing~~ Financing Activities

~~The net cash~~Cash used in ~~continuing~~ financing activities of ~~$888 million~~$1.6 billion in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 was primarily ~~due~~attributable to cash ~~used to repay $1.5 billion of our outstanding senior notes and~~paid to repurchase ~~$1.8~~$1.4 billion of common stock ~~partially offset by~~and pay $125 million of cash ~~proceeds of $2.5 billion from the issuance of senior notes.~~dividends.

The net cash provided by continuing financing activities of $182 million in the nine months ended September 30, 2016 was primarily due to cash inflows of $2.2 billion from the issuance of senior notes partially offset by cash outflows of $2.0 billion to repurchase common stock.

~~The positive~~negative effect of exchange rate movements on cash, ~~and~~ cash equivalents and restricted cash was due to the ~~weakening~~strengthening of the U.S. dollar against other currencies, primarily the ~~euro and~~ Korean won and euro during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 compared to ~~2016~~the 2018 year-end rate.

Stock Repurchases

In ~~July 2016,~~January 2018, our Board authorized a ~~$2.5~~$6.0 billion stock repurchase program and in ~~July 2017,~~January 2019, our Board authorized an additional ~~$3.0~~$4.0 billion stock repurchase program. These stock repurchase programs have no expiration from the date of authorization. Our stock repurchase programs are intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of our common stock to reduce our outstanding share count. Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means at times and in such amounts as management deems appropriate and will be funded from our working capital or other financing alternatives.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, we repurchased approximately ~~$1.8~~$1.5 billion of our common stock under our stock repurchase ~~program.~~programs. As of ~~September 30, 2017,~~March 31, 2019, a total of approximately ~~$2.6~~$5.7 billion remained available for future repurchases of our common stock under our stock repurchase ~~program.~~programs.

We expect, subject to market conditions and other uncertainties, to continue making opportunistic and programmatic repurchases of our common stock. However, our stock repurchase ~~program~~programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors, including corporate and regulatory requirements, price and other market conditions and management’s determination as to the appropriate use of our cash.

Dividends

The company paid a total of $125 million in cash dividends during the three months ended March 31, 2019. In April 2019, our Board of Directors declared a cash dividend of $0.14 per share of common stock to be paid on June 20, 2019 to shareholders of record as of June 1, 2019.

Shelf Registration Statement and Debt

Shelf Registration

As of ~~September 30, 2017,~~March 31, 2019, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, as well as common stock, preferred stock, warrants, depositary shares representing fractional interest in shares of preferred stock, purchase contracts and units from time to time in one or more offerings. Each issuance under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors including, in the case of our debt securities, our credit ratings and compliance with the covenants in our credit agreement.

Senior Notes

As of ~~September 30, 2017,~~March 31, 2019, we had floating- and fixed-rate senior notes outstanding for an aggregate principal amount of ~~$10.1~~$9.3 billion. The net proceeds from the issuances of these senior notes are used for general corporate purposes, including, among other things, capital expenditures, share repurchases, repayment of indebtedness and possible acquisitions. The floating rate notes are not redeemable prior to maturity. On and after March 1, 2021, we may redeem some or all of the 6.000% fixed rate notes due 2056 at any time and from time to time prior to their maturity, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may redeem some or all of the other fixed rate notes of each series at any time and from time to time prior to their maturity, generally at a make-whole redemption price plus accrued and unpaid interest. If a change of control triggering event occurs with respect to the ~~2.500% fixed rate notes due 2018, the~~ 2.150% fixed rate notes due 2020, the 3.800% fixed rate notes due 2022, the floating rate notes due 2023, the 2.750% fixed rate notes due 2023, the 3.600% fixed rate notes due 2027 or the 6.000% fixed rate notes due 2056, we must, subject to certain exceptions, offer to repurchase all of the notes of the applicable series at a price equal to 101% of the principal amount plus accrued and unpaid interest. For additional details related to our senior notes, please see “Note 9 – Debt” to the condensed consolidated financial statements included in this report.

To help achieve our interest rate risk management objectives, in connection with the previous issuance of certain senior notes, we entered into interest rate swap agreements that effectively converted $2.4 billion of the fixed rate notes to floating rate debt based on the London InterBank Offered Rate (“LIBOR”) plus a spread. These swaps were designated as fair value hedges against changes in the fair value of certain fixed rate senior notes resulting from changes in interest rates.

The indenture pursuant to which the senior notes were issued includes customary covenants that, among other things and subject to exceptions, limit our ability to incur, assume or guarantee debt secured by liens on specified

assets or enter into sale and lease-back transactions with respect to specified properties, and also includes customary events of default.

Commercial Paper

We have a commercial paper program pursuant to which we may issue commercial paper notes in an aggregate principal amount at maturity of up to $1.5 billion outstanding at any time with maturities of up to 397 days from the date of issue. As of ~~September 30, 2017,~~March 31, 2019, there were no commercial paper notes outstanding.

Credit Agreement

As of ~~September 30, 2017,~~March 31, 2019, no borrowings were outstanding under our $2 billion credit agreement. However, as described above, we have an up to $1.5 billion commercial paper program and therefore maintain $1.5 billion of available borrowing capacity under our credit agreement in order to repay commercial paper borrowings in the event we are unable to repay those borrowings from other sources when they become due. As a result, $500 million of borrowing capacity was available as of ~~September 30, 2017~~March 31, 2019 for other purposes permitted by the credit agreement. The credit agreement includes customary representations, warranties, affirmative and negative covenants, including financial covenants, events of default and indemnification provisions in favor of the banks. The negative covenants include restrictions regarding the incurrence of liens and subsidiary indebtedness, in each case, subject to certain exceptions. The financial covenants require us to meet a quarterly financial test with respect to a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio. The events of default include the occurrence of a change of control (as defined in the credit agreement) with respect to us.

We were in compliance with all covenants in our outstanding debt instruments for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2019.

Credit Ratings

As of ~~September 30, 2017,~~March 31, 2019, we were rated investment grade by Standard and Poor’s Financial Services, LLC (long-term rated BBB+, short-term rated A-2, with a stable outlook), Moody’s Investor Service (long-term rated Baa1, short-term rated P-2, with a stable outlook), and Fitch Ratings, Inc. (long-term rated BBB, short-term rated F-2, with a stable outlook). We disclose these ratings to enhance the understanding of our sources of liquidity and the effects of our ratings on our costs of funds. Our borrowing costs depend, in part, on our credit ratings and any further actions taken by these credit rating agencies to lower our credit ratings, as described above, will likely increase our borrowing costs.

Liquidity and Capital Resource Requirements

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, we had assets classified as cash and cash equivalents, as well as short-term and long-term non-equity investments, in an aggregate amount of ~~$11.4~~$7.3 billion and ~~$11.0~~$8.6 billion, respectively. As of ~~September 30, 2017,~~March 31, 2019, this amount included assets held in certain of our foreign operations totaling approximately ~~$8.7~~$6.7 billion. Of the $8.7 billion held by our non-U.S. subsidiaries, approximately $5.3 billion was available for use in the U.S. without incurring additional U.S. income taxes in excess of the amounts already accrued in our condensed consolidated financial statements as of September 30, 2017. As ~~of September 30, 2017, we had not repatriated any of these funds to the U.S. and, as a result, we have not yet paid U.S. tax on any portion of these funds. However, to the extent~~ we repatriate these funds to the U.S., we will be required to pay income taxes in certain U.S. ~~income~~states and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs. ~~The remaining amount of non-U.S. cash and cash equivalents, as well as short-term and long-term non-equity investments,~~We have ~~been indefinitely reinvested and, therefore, no U.S. current or~~accrued deferred taxes ~~have been accrued as this amount is necessary to support our planned ongoing investments in our foreign operations. We believe our U.S. sources~~for the tax effect of ~~cash and liquidity are sufficient to meet our business needs in the U.S., and we do not expect that we will need to repatriate~~repatriating the funds ~~we have designated as indefinitely reinvested outside~~to the U.S. Under current tax laws, should our plans change and we were to choose to repatriate some or all of the funds we have designated as indefinitely reinvested outside the U.S., such amounts would be subject to U.S. income taxes and applicable non-U.S. income and withholding taxes.

We actively monitor all counterparties that hold our cash and cash equivalents and non-equity investments, focusing primarily on the safety of principal and secondarily on improving yield on these assets. We diversify our cash and cash equivalents and investments among various counterparties in order to reduce our exposure should any one of these counterparties fail or encounter difficulties. To date, we have not experienced any material loss or lack of

access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets. At any point in time we have funds in our operating accounts and customer accounts that are deposited and invested with third party financial institutions.

We believe that our existing cash, cash equivalents and short-term and long-term investments, together with cash expected to be generated from operations, borrowings available under our credit agreement and commercial paper program, and our access to capital markets, will be sufficient to fund our operating activities, anticipated capital expenditures, repayment of debt and stock repurchases for the foreseeable future.

Off-Balance Sheet Arrangements

As of ~~September 30, 2017,~~March 31, 2019, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

We have a cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals from the financial institution based upon our aggregate operating cash balances held within the same financial institution (“Aggregate Cash Deposits”). This arrangement also allows us to withdraw amounts exceeding the Aggregate Cash Deposits up to an agreed-upon limit. The net balance of the withdrawals and the Aggregate Cash Deposits are used by the financial institution as a basis for calculating our net interest expense or income under the arrangement. As of ~~September 30, 2017,~~March 31, 2019, we had a total of ~~$1.3~~$3.2 billion in aggregate cash deposits, partially offset by $3.1 billion in cash withdrawals, ~~offsetting our $1.3 billion in Aggregate Cash Deposits~~ held within the financial institution under the cash pooling arrangement.

Indemnification Provisions

We entered into a separation and distribution agreement and various other agreements with PayPal to govern the separation and relationship of the two ~~companies going forward.~~companies. These agreements provide for specific indemnity and liability obligations and could lead to disputes between us and PayPal, which may be significant. In addition, the indemnity rights we have against PayPal under the agreements may not be sufficient to protect us and our indemnity obligations to PayPal may be significant.

In addition, we have entered into indemnification agreements with each of our directors, executive officers and certain other officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.

In the ordinary course of business, we have included limited indemnification provisions in certain of our agreements with parties with which we have commercial relations, including our standard marketing, promotions and ~~application-programming-interface~~application programming interface license agreements. Under these contracts, we generally indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with claims by a third party with respect to our domain names, trademarks, logos and other branding elements to the extent that such marks are applicable to our performance under the subject agreement. In certain cases, we have agreed to provide indemnification for intellectual property infringement. It is not possible to determine the maximum potential loss under these indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in our condensed

consolidated statement of income in connection with our indemnification provisions have not been significant, either individually or collectively.


Item 3:	Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to interest rate risk relating to our investments and outstanding debt. In addition, adverse economic conditions and events (including volatility or distress in the equity and/or debt or credit markets) may impact regional and global financial markets. These events and conditions, including uncertainties and instability in economic and market conditions caused by the United Kingdom’s vote to exit the European Union and any outcomes resulting from that vote, could cause us to write down our assets or investments. We seek to reduce earnings volatility that may result from adverse economic conditions and events or changes in interest rates.

As of ~~September 30, 2017,~~March 31, 2019, approximately ~~14%~~23% of our total cash and investments was held in cash and cash equivalents. As such, changes in interest rates will impact interest income. As discussed below, the fair market values of our fixed rate securities may ~~have their fair market value~~be adversely affected due to a rise in interest rates, and we may suffer losses in principal if we are forced to sell securities that have declined in market value due to changes in interest rates.

As of ~~September 30, 2017,~~March 31, 2019, the balance of our corporate debt and government bond ~~and corporate debt~~ securities was ~~$9.7~~$5.5 billion, which represented approximately ~~78%~~75% of our total cash and investments. Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of interest rate risk. The fair market value of our fixed-rate investment securities may be adversely impacted due to a rise in interest rates. In general, fixed-rate securities with longer maturities are subject to greater ~~interest-rate~~interest rate risk than those with shorter maturities. While floating rate securities generally are subject to less ~~interest-rate~~interest rate risk than fixed-rate securities, floating-rate securities may produce less income than expected if interest rates decrease and may also suffer a decline in market value if interest rates increase. Due in part to these factors, our investment income may fall short of expectations or we may suffer losses in principal if we sell securities that have declined in market value due to changes in interest rates. A hypothetical 100 basis point increase ~~or decrease~~ in interest rates would ~~not~~ have resulted in a ~~material impact on~~decrease in the fair value of our ~~financial assets or liabilities~~investments of $35 million and $44 million as of ~~September 30, 2017.~~March 31, 2019 and December 31, 2018, respectively.

As of ~~September 30, 2017,~~March 31, 2019, we ~~have~~had an aggregate principal amount of ~~$10.1~~$9.3 billion of outstanding senior notes, of which ~~92%~~91% bore interest at fixed rates. We entered into $2.4 billion of interest rate swap agreements that have the economic effect of modifying the fixed interest obligations associated with $1.15 billion of our 2.200% senior notes due July 2019, $750 million of our 2.875% senior notes due July 2021, and $500 million of our 3.450% senior notes due July 2024 so that the interest payable on those notes effectively became variable based on LIBOR plus a spread. Further changes in interest rates will impact interest expense on any borrowings under our revolving credit facility, which bear interest at floating rates, and the interest rate on any commercial paper borrowings we make and any debt securities we may issue in the future and, accordingly, will impact interest expense. For additional details related to our debt, ~~please~~ see “Note 9 – Debt” to the condensed consolidated financial statements included in this report.

~~Investment~~Equity Price Risk

Investments

The primary objective of our investment activities is to preserve principal while at the same time improving yields without significantly increasing risk. To achieve this objective, we maintain our cash equivalents and short-term and long-term investments in a variety of asset types, including bank deposits, government bonds and corporate debt securities.

As of ~~September 30, 2017,~~March 31, 2019, our ~~cost and~~ equity ~~method~~ investments totaled ~~$885~~$154 million, which represented approximately 7%2% of our total cash and investments, and were primarily related to equity ~~method~~ investments ~~in privately held companies.~~without readily determinable fair values. We review our equity investments for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value ~~is other-than-temporary.~~and for observable transactions for identical or similar investments issued by the same investee. We account for these investments at cost, less impairment and adjusted for subsequent observable price changes obtained from orderly transactions for identical or similar investments issued by the same investee. Our analysis includes a review of recent operating results and trends, recent sales/acquisitions of the securities in which we have invested and other publicly available data.

Warrant

We entered into a warrant agreement in conjunction with a commercial agreement with a service provider that, subject to meeting certain conditions, entitles us to acquire a fixed number of shares up to 5% of the service provider’s fully diluted issued and outstanding share capital at a specific date. The warrant is accounted for as a derivative instrument under ASC Topic 815, Derivatives and Hedging. Changes in the service provider’s common stock price and equity volatility may have a significant impact on the value of the warrant. As of March 31, 2019, a one dollar change in the service provider’s common stock, holding other factors constant, would increase or decrease the fair value of the warrant by approximately $1 million. For additional details related to the warrant, please see “Note 7 – Derivative Instruments” to our condensed consolidated financial statements included in this report.

Foreign Currency Risk

Our commerce platforms operate globally, resulting in certain revenues and costs that are denominated in foreign currencies, primarily the euro, British pound, Korean won and Australian dollar, subjecting us to foreign currency risk, which may adversely impact our financial results. We transact business in various foreign currencies and have significant international revenues as well as costs. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services we provide. Our cash flow, results of operations and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.

We have a foreign exchange exposure management program designed to identify material foreign currency exposures, manage these exposures and reduce the potential effects of currency fluctuations on our reported condensed consolidated cash flows and results of operations through the purchase of foreign currency exchange contracts. The effectiveness of the program and resulting usage of foreign exchange derivative contracts is at times limited by our ability to achieve cash flow hedge accounting. For additional details related to our derivative instruments, please see “Note 87 – Derivative Instruments” to our condensed consolidated financial statements included in this report.

We use foreign exchange derivative contracts to help protect our forecasted U.S. dollar-equivalent earnings from adverse changes in foreign currency exchange rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse currency exchange rate movements. Most of these contracts are designated as cash flow hedges for accounting purposes. For qualifying cash flow hedges, the ~~effective portion of the~~ derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income ~~(“AOCI”)~~ and subsequently reclassified into earnings in the same period the forecasted transaction affects ~~earnings. The ineffective portion of the unrealized gains and losses on these contracts, if any, is recorded immediately in~~ earnings. For contracts not designated as cash flow hedges for accounting purposes, the derivative’s gain or loss is recognized immediately in earnings in our condensed consolidated statement of income. However, only certain revenue and costs are eligible for cash flow hedge accounting.

The following table illustrates the fair values of outstanding foreign exchange contracts designated as cash flow hedges and net investment hedges, and the before-tax effect on fair values of a hypothetical adverse change in the foreign exchange rates that existed as of ~~September 30, 2017.~~March 31, 2019. The sensitivity for foreign currency contracts is based on a 20% adverse change in foreign exchange rates, against relevant functional currencies.

Fair Value Asset/(Liability) Fair Value Sensitivity
(In millions)
Foreign exchange contracts - Cash flow hedges $ (14 ) $ (287 )



	Fair Value Asset/(Liability)		Fair Value Sensitivity
	(In millions)
Foreign exchange contracts - Cash flow hedges	$	44	$	(122	)
Foreign exchange contracts - Net investment hedges	$	5	$	(58	)

Since our risk management programs are highly effective, the potential loss in value described above would be largely offset by changes in the value of the underlying exposure.

Subsequent to the distribution of 100% of the outstanding common stock of PayPal to our stockholders (the “Distribution”), fewer of our currency flows met the U.S. GAAP criteria for cash flow hedge accounting, thus requiring us to use a combination of foreign exchange derivative contracts and investing non-U.S. cash in U.S. denominated investments to help protect our forecasted U.S. dollar-equivalent earnings from adverse changes in foreign currency exchange rates. The recent realignment of our legal structure has resulted in an increase in currency flows that meet the U.S. GAAP criteria for cash flow hedge accounting, thus minimizing the need to invest non-U.S. cash in U.S. denominated investments to protect both our forecasted revenue flows and U.S. dollar equivalent earnings from adverse changes in foreign currency exchange rates.

~~In addition, we~~We also use foreign exchange contracts to offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. These contracts reduce, but do not entirely eliminate, the impact of currency exchange rate movements on our assets and liabilities. The foreign currency gains and losses on the assets and liabilities are recorded in interest and other, net, which are offset by the gains and losses on the foreign exchange contracts.

We considered the historical trends in currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 20% for all currencies could be experienced in the near term. These changes would have resulted in an adverse impact on income before income taxes of approximately ~~$18~~$31 million as of ~~September 30, 2017~~March 31, 2019 taking into consideration the offsetting effect of foreign exchange forwards in place as of ~~September 30, 2017.~~March 31, 2019.


Item 4:	Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)~~) under the Securities Exchange Act of 1934) required by Rules 13a-15(b) or 15d-15(b)~~ under the Securities Exchange Act of 1934, as amended, or the Exchange Act) required by Exchange Act Rules 13a-15(b) or 15d-15(b), our ~~Chief Executive Officer~~principal executive officer and our ~~Chief Financial Officer~~principal financial officer have concluded that ~~due to a material weakness in internal control over financial reporting described in Part II, Item 9A of our 2016 Form 10-K,~~ our disclosure controls and procedures were ~~not~~ effective as of ~~September 30, 2017.~~March 31, 2019.

(b) Changes in internal controls. There were no changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) ~~and 15d-15(f)~~ that occurred during ~~the third~~our most recently completed fiscal quarter ~~of 2017~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting, other than as described below under the caption “Remediation Plan.”~~

~~(c) Remediation Plan.~~ ~~As previously described in Part II, Item 9A of our 2016 Form 10-K,~~reporting. On January 1, 2019, we ~~began implementing a remediation plan to address the control deficiency that led to the material weakness mentioned above. The remediation plan includes the following:~~

~~Implementing specific review procedures, including the added involvement of our chief tax officer in the review of tax accounting, designed to enhance our income tax control; and~~

~~Strengthening our income tax control with improved documentation standards, technical oversight and training~~

~~Our enhanced review procedures and documentation standards were in place and operating during the first nine months of 2017.~~adopted Accounting Standards Codification 842, Leases. We ~~are in the process of testing the newly~~ implemented internal controls and ~~related procedures. The material weakness cannot be considered remediated until~~a new lease accounting information system to enable the preparation of financial information as part of the adoption. There were no significant changes to our internal control ~~has operated for a sufficient period~~over financial reporting due to the adoption of ~~time and until management has concluded, through testing, that~~ the ~~control is operating effectively. Our goal is to remediate this material weakness by the end of 2017.~~new standard.

PART II: OTHER INFORMATION


Item 1:	Legal Proceedings

The information set forth under ~~“Note 10~~“Note 12 — Commitments and Contingencies — Litigation and Other Legal ~~Matters”~~Matters” to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.


Item 1A:	Risk Factors

You should carefully review the following discussion of the risks that may affect our business, results of operations and financial condition, as well as our condensed consolidated financial statements and notes thereto and the other information appearing in this report, for important information regarding risks that affect us.

Risk Factors That May Affect our Business, Results of Operations and Financial Condition

Our operating and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations and cash flows, as well as the trading price of our common stock and debt securities.

Our operating and financial results have varied on a quarterly basis during our operating history and may continue to fluctuate significantly as a result of a variety of factors, including as a result of the risks set forth in this “Risk Factors” section. It is difficult for us to forecast the level or source of our revenues or earnings (loss) accurately. In view of the rapidly evolving nature of our business, period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. We do not have backlog, and substantially all of our net revenues each quarter come from transactions involving sales during that quarter. Due to the inherent difficulty in forecasting revenues, it is also difficult to forecast expenses as a percentage of net revenues. Quarterly and annual expenses as a percentage of net revenues reflected in our condensed consolidated financial statements may be significantly different from historical or projected ~~rates.~~percentages. Our operating results in one or more future quarters may fall below the expectations of securities analysts and investors. The trading price of our common stock and debt securities could decline, perhaps substantially, as a result of the factors described in this paragraph.

Substantial and increasingly intense competition worldwide in ecommerce may harm our business.

The businesses and markets in which we operate are intensely competitive. We currently and potentially compete with a wide variety of online and offline companies providing goods and services to consumers and merchants. The Internet and mobile networks provide new, rapidly evolving and intensely competitive channels for the sale of all types of goods and services. We compete in two-sided markets, and must attract both buyers and sellers to use our platforms. Consumers who purchase or sell goods and services through us have more and more alternatives, and merchants have more channels to reach consumers. We expect competition to continue to intensify. Online and offline businesses increasingly are competing with each other and our competitors include a number of online and offline retailers with significant resources, large user communities and well-established brands. Moreover, the barriers to entry into these channels can be low, and businesses easily can launch online sites or mobile platforms and applications at nominal cost by using commercially available software or partnering with any of a number of successful ecommerce companies. As we respond to changes in the competitive environment, we may, from time to time, make pricing, service or marketing decisions or acquisitions that may be controversial with and lead to dissatisfaction among sellers, which could reduce activity on our platform and harm our profitability.

We face increased competitive pressure online and offline. In particular, the competitive norm for, and the expected level of service from, ecommerce and mobile commerce has significantly increased, due to, among other factors, improved user experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times and more favorable return policies. ~~Also,~~In addition, certain platform businesses, such as Alibaba, Amazon, Apple, ~~Google~~Facebook and ~~Facebook,~~Google, many of whom are larger than us or have greater capitalization, have a dominant and secure position in other industries or certain significant markets, and offer other goods and services to consumers and merchants that we do not offer. If we are unable to change our products, offerings and services in ways that reflect the changing demands of ecommerce and mobile commerce marketplaces, particularly the higher growth of sales of fixed-price items and higher expected

service levels (some of which depend on services provided by sellers on our platforms), or compete effectively with and adapt to changes in larger platform businesses, our business will suffer.

Competitors with other revenue sources may also be able to devote more resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote more resources to website, mobile platforms and applications and systems development than we can. Other competitors may offer or continue to offer faster and/or free shipping, delivery on Sunday, same-day delivery, favorable return policies or other transaction-related services which improve the user experience on their sites and which could be impractical or inefficient for our sellers to match. Competitors may be able to innovate faster and more efficiently, and new technologies may increase the competitive pressures by enabling competitors to offer more efficient or lower-cost services.

Some of our competitors control other products and services that are important to our success, including credit card interchange, Internet search, and mobile operating systems. Such competitors could manipulate pricing, availability, terms or operation of service related to their products and services in a manner that impacts our competitive offerings. For example, Google, which operates a shopping platform service, has from time to time made changes to its search algorithms that reduced the amount of search traffic directed to us from searches on Google. If we are unable to use or adapt to operational changes in such services, we may face higher costs for such services, face integration or technological barriers or lose customers, which could cause our business to suffer.

Consumers who might use our sites to buy goods have a wide variety of alternatives, including traditional department, warehouse, boutique, discount and general merchandise stores (as well as the online and mobile operations of these traditional retailers), online retailers and their related mobile offerings, online and offline classified services and other shopping channels, such as offline and online home shopping networks. In the United States, these include Amazon.com, Facebook, Google, Wal-Mart, Target, Macy’s, JC Penney, Costco, Office ~~Depot,~~Depot/OfficeMax, Staples, ~~OfficeMax,~~ Sam’s Club, Rakuten, ~~Yahoo! Shopping,~~ MSN, QVC and Home Shopping Network, among others. In addition, consumers have a large number of online and offline channels focused on one or more of the categories of products offered on our site.

Consumers also can turn to many companies that offer a variety of services that provide other channels for buyers to find and buy items from sellers of all sizes, including social media, online aggregation and classifieds platforms, such as craigslist, Oodle.com and a number of international websites operated by Schibsted ASA or Naspers Limited. Consumers also can turn to shopping-comparison sites, such as Google Shopping. In certain markets, our fixed-price listing and traditional auction-style listing formats increasingly are being challenged by other formats, such as classifieds.

Our Classifieds platforms offer classifieds listings in ~~the United States and~~ a variety of international markets. In many markets in which they operate, our Classifieds platforms compete for customers and for advertisers against more established online and offline classifieds platforms or other competing websites.

Our online shopping comparison websites (Shopping.com) compete with sites such as Google Shopping, Rakuten, Nextag.com, Pricegrabber.com, Shopzilla, Buscapé in Latin America (owned by Naspers) and Yahoo! Product Search, which offer shopping search engines that allow consumers to search the Internet for specified products. In addition, sellers are increasingly utilizing multiple sales channels, including the acquisition of new customers by paying for search-related advertisements on horizontal search engine sites, such as Google, Yahoo!, Naver and Baidu. We use product search engines and paid search advertising to help users find our sites, but these services also have the potential to divert users to other online shopping destinations. Consumers may choose to search for products and services with a horizontal search engine or shopping comparison website, and such sites may also send users to other shopping destinations. In addition, sellers are increasingly utilizing multiple sales channels, including the acquisition of new customers by paying for search-related advertisements on horizontal search engine sites, such as Google, Naver and Baidu.

Consumers and merchants who might use our sites to sell goods also have many alternatives, including general ecommerce sites, such as Amazon, Alibaba and ~~Alibaba,~~11Street, and more specialized sites, such as Etsy. Our international sites also compete for sellers with general and specialized ecommerce sites. Sellers may also choose to sell their goods through other channels, such as classifieds platforms. Consumers and merchants also can create and sell through their own sites, and may choose to purchase online advertising instead of using our services. In some countries, there are online sites that have larger customer bases and greater brand recognition, as well as competitors that may have a better understanding of local culture and commerce. We increasingly may compete with local competitors in developing countries that have unique advantages, such as a greater ability to operate under local regulatory authorities.

In addition, certain manufacturers may limit or cease distribution of their products through online channels, such as our sites. Manufacturers may attempt to use contractual obligations or existing or future government regulation to prohibit or limit ecommerce in certain categories of goods or services. Manufacturers may also attempt to enforce minimum resale price maintenance or minimum advertised price arrangements to prevent distributors from selling on our platforms or on the Internet generally, or drive distributors to sell at prices that would make us less attractive relative to other alternatives. The adoption by manufacturers of policies, or their use of laws or regulations, in each case discouraging or restricting the sales of goods or services over the Internet, could force our users to stop selling certain products on our platforms, which could adversely affect our results of operations and result in ~~reduced operating margins,~~ loss of market share and diminished value of our brands.

The principal competitive factors for us include the following:

ability to attract, retain and engage buyers and sellers;

volume of transactions and price and selection of goods;

trust in the seller and the transaction;

customer service;

brand recognition;

community cohesion, interaction and size;

website, mobile platform and application ease-of-use and accessibility;

system reliability and security;

reliability of delivery and payment, including customer preference for fast delivery and free shipping and returns;

level of service fees; and

quality of search tools.

We may be unable to compete successfully against current and future competitors. Some current and potential competitors have longer operating histories, larger customer bases and greater brand recognition in other business and Internet sectors than we do.

Global and regional economic conditions could harm our business.

Our operations and performance depend significantly on global and regional economic conditions. Adverse economic conditions and events (including volatility or distress in the equity and/or debt or credit markets) have in the past negatively impacted regional and global financial markets and will likely continue to do so from time to time in the future. These events and conditions, including uncertainties and instability in economic and market conditions caused by the United Kingdom’s vote to exit the European Union ~~or geopolitical uncertainty on the Korean peninsula,~~and any outcomes resulting from that vote, could have a negative and adverse impact on companies and customers with which we do business or cause us to write down our assets or investments. In addition, financial turmoil affecting the banking system or financial markets could cause additional consolidation of the financial services industry, or significant financial service institution failures, new or incremental tightening in the credit markets, low liquidity, and extreme volatility in fixed income, credit, currency, and equity markets. Adverse impacts to the companies and customers with which we do business, the banking system, or financial markets could have a material adverse effect on our business, including a reduction in the volume and prices of transactions on our commerce platforms.

We are exposed to fluctuations in foreign currency exchange rates.

Because we generate the majority of our revenues outside the United States but report our financial results in U.S. dollars, our financial results are impacted by fluctuations in foreign currency exchange rates, or foreign exchange rates. The results of operations of many of our internationally focused platforms are exposed to foreign exchange rate fluctuations as the financial results of the applicable subsidiaries are translated from the local currency into U.S. dollars for financial reporting purposes. If the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated revenues or expenses will result in increased U.S. dollar denominated revenues and expenses. Similarly, if the U.S. dollar strengthens against foreign currencies, particularly the euro, British pound, Korean won or Australian dollar, our translation of foreign currency denominated revenues or expenses will result in lower U.S. dollar denominated net revenues and expenses. In addition to this translation effect, a strengthening U.S. dollar will typically adversely affect the volume of goods being sold by U.S. sellers to Europe and Australia more than it positively affects the volume of goods being sold by sellers in those geographies to buyers in the United States, thereby further negatively impacting our financial results.

While from time to time we enter into transactions to hedge portions of our foreign currency translation exposure, it is impossible to predict or eliminate the effects of this exposure. Fluctuations in foreign exchange rates could significantly impact our financial results, which may have a significant impact on the trading price of our common stock and debt securities.

Our international operations are subject to increased risks, which could harm our business.

Our international businesses, especially in the United Kingdom, Germany, Australia and ~~South~~ Korea, and cross-border business from greater China, have generated a majority of our net revenues in recent years. In addition to uncertainty about our ability to generate revenues from our foreign operations and expand into international markets, there are risks inherent in doing business internationally, including:

uncertainties and instability in economic and market conditions caused by the United Kingdom’s vote to exit the European ~~Union;~~Union and any outcomes resulting from that vote;

uncertainty regarding how the United Kingdom’s access to the European Union Single Market and the wider trading, legal, regulatory and labor environments, especially in the United Kingdom and European Union, will be impacted by the United Kingdom’s vote to exit the European Union and any outcomes resulting from that vote, including the resulting impact on our business and that of our clients;

expenses associated with localizing our products and services and customer data, including offering customers the ability to transact business in the local currency and adapting our products and services to local preferences (e.g., payment methods) with which we may have limited or no experience;

trade barriers and changes in trade regulations;

difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;

stringent local labor laws and regulations;

credit risk and higher levels of payment fraud;

profit repatriation restrictions, foreign currency exchange restrictions or extreme fluctuations in foreign currency exchange rates for a particular currency;

political or social unrest, economic instability, repression, or human rights issues;

geopolitical events, including natural disasters, public health issues, acts of war, and terrorism;

import or export regulations;

compliance with U.S. laws such as the Foreign Corrupt Practices Act, and foreign laws prohibiting corrupt payments to government officials, as well as U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities;

antitrust and competition regulations;

potentially adverse tax developments and consequences;

economic uncertainties relating to sovereign and other debt;

different, uncertain, or more stringent user protection, data protection, privacy, and other laws;

risks related to other government regulation or required compliance with local laws;

national or regional differences in macroeconomic growth rates;

local licensing and reporting obligations; and

increased difficulties in collecting accounts receivable.

Violations of the complex foreign and U.S. laws and regulations that apply to our international operations may result in fines, criminal actions, or sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. Although we have implemented policies and procedures designed to promote compliance with these laws, there can be no assurance that our employees, contractors, or agents will not violate our policies. These risks inherent in our international operations and expansion increase our costs of doing business internationally and could harm our business.

Any factors that reduce cross-border trade or make such trade more difficult could harm our business.

Cross-border trade is an important source of both revenue and profits for us. Cross-border trade also represents our primary (or in some cases, only) presence in certain important markets, such as Brazil/Latin America, China, and various other countries. In addition, our cross-border trade is also subject to, and may be impacted by, foreign exchange rate fluctuations.

The interpretation and application of specific national or regional laws, such as those related to intellectual property rights of authentic products, selective distribution networks, and sellers in other countries listing items on the Internet, and the potential interpretation and application of laws of multiple jurisdictions (e.g., the jurisdiction of the buyer, the seller, and/or the location of the item being sold) are often extremely complicated in the context of cross-border trade. The interpretation and/or application of such laws could impose restrictions on, or increase the costs of, purchasing, selling, shipping, or returning goods across national borders.

The shipping of goods across national borders is often more expensive and complicated than domestic shipping. Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the interaction of national postal systems, and security related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties. Any factors that increase the costs of cross-border trade or restrict, delay, or make cross-border trade more difficult or impractical would lower our revenues and profits and could harm our business.

Our business may be adversely affected by geopolitical events, natural disasters, seasonal factors and other factors that cause our users to spend less time on our websites or mobile platforms and applications, including increased usage of other websites.

Our users may spend less time on our websites and our applications for mobile devices as a result of a variety of diversions, including: geopolitical events, such as war, the threat of war, or terrorist activity; natural disasters; power shortages or outages, major public health issues, including pandemics; social networking or other entertainment websites or mobile applications; significant local, national or global events capturing the attention of a large part of the population; and seasonal fluctuations due to a variety of factors. If any of these, or any other factors, divert our users from using of our websites or mobile applications, our business could be materially adversely affected.

Our success depends to a large degree on our ability to successfully address the rapidly evolving market for transactions on mobile devices.

Mobile devices are increasingly used for ecommerce transactions. A significant and growing portion of our users access our platforms through mobile devices. We may lose users if we are not able to continue to meet our users’ mobile and multi-screen experience expectations. The variety of technical and other configurations across different mobile devices and platforms increases the challenges associated with this environment. In addition, a number of other companies with significant resources and a number of innovative startups have introduced products and services focusing on mobile markets.

Our ability to successfully address the challenges posed by the rapidly evolving market for mobile transactions is crucial to our continued success, and any failure to continuously increase the volume of mobile transactions effected through our platforms could harm our business.

If we cannot keep pace with rapid technological developments or continue to innovate and create new initiatives to provide new ~~and innovative~~ programs, products and services, the use of our products and our revenues could decline.

Rapid, significant technological changes continue to confront the industries in which we ~~operate. We~~operate and we cannot predict the effect of technological changes on our business. We also continuously strive to create new initiatives and innovations that offer growth opportunities, such as our new payments and advertising offerings. In addition to our own initiatives and innovations, we rely in part on third parties, including some of our competitors, for the development of and access to new technologies. We expect that new services and technologies applicable to the industries in which we operate will continue to emerge. These new services and technologies may be superior to, or render obsolete, the technologies we currently use in our products and services. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time, and ultimately may not be successful. In addition, our ability to adopt new services and develop new technologies may be inhibited by industry-wide standards, new laws and regulations, resistance to change from our users, clients or merchants, or third parties’ intellectual property rights. Our success ~~will depend~~depends on our ability to develop new technologies and adapt to technological changes and evolving industry standards.

Our business is subject to extensive government regulation and oversight.

We are subject to laws and regulations affecting our domestic and international operations in a number of areas, including consumer protection, data privacy requirements, intellectual property ownership and infringement, prohibited

items and stolen goods, resale of event tickets, tax, antitrust and anti-competition, export requirements, anti-corruption, labor, advertising, digital content, real estate, billing, ecommerce, promotions, quality of services, telecommunications, mobile communications and media, environmental, and health and safety regulations, as well as laws and regulations intended to combat money laundering and the financing of terrorist activities. In addition, we are, or may become, subject to further regulation in some of the above-mentioned areas or new areas as a result of our new payments capabilities.

Compliance with these laws, regulations, and similar requirements may be onerous and expensive, and variances and inconsistencies from jurisdiction to jurisdiction may further increase the cost of compliance and doing business. Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make our products and services less attractive to our customers, delay the introduction of new products or services in one or more regions, or cause us to change or limit our business practices. We have implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance that our employees, contractors, or agents will not violate such laws and regulations or our policies and procedures.

Regulation in the areas of privacy and protection of user data could harm our business.

We are subject to laws relating to the collection, use, retention, security, and transfer of personally identifiable information about our users around the world. Much of the personal information that we collect, especially financial information, is regulated by multiple laws. User data protection laws may be interpreted and applied inconsistently from country to country. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among ourselves, our subsidiaries, and other parties with which we have commercial relations. These laws continue to develop in ways we cannot predict and that may harm our business.

Regulatory scrutiny of privacy, user data protection, use of data and data collection is increasing on a global basis. We are subject to a number of privacy and similar laws and regulations in the countries in which we operate and these laws and regulations will likely continue to evolve over time, both through regulatory and legislative action and judicial decisions. For example, the General Data Protection Regulation (“GDPR”) was approved by the European Union Parliament in April 2016 and became effective in May 2018. The GDPR was designed to harmonize and enhance data privacy laws across Europe. Some of these laws impose requirements that are inconsistent with one another, yet regulators may claim that both apply. Complying with these varying national requirements could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business and violations of privacy-related laws can result in significant penalties. In addition, compliance with these laws may restrict our ability to provide services to our customers that they may find to be valuable. A determination that there have been violations of laws relating to our practices under communications-based laws could expose us to significant damage awards, fines and other penalties that could, individually or in the aggregate, materially harm our business. In particular, because

of the enormous number of texts, emails and other communications we send to our users, communications laws that provide a specified monetary damage award or fine for each violation (such as those described below) could result in particularly large awards or fines.

For example, the Federal Communications Commission amended certain of its regulations under the Telephone Consumer Protection Act, ~~(“TCPA”),~~or TCPA, in 2012 and 2013 in a manner that could increase our exposure to liability for certain types of telephonic communication with customers, including but not limited to text messages to mobile phones. Under the TCPA, plaintiffs may seek actual monetary loss or statutory damages of $500 per violation, whichever is greater, and courts may treble the damage award for willful or knowing violations. We are regularly subject to class-action lawsuits, as well as individual lawsuits, containing allegations that our businesses violated the TCPA. These lawsuits, and other private lawsuits not currently alleged as class actions, seek damages (including statutory damages) and injunctive relief, among other remedies. Given the enormous number of communications we send to our users, a determination that there have been violations of the TCPA or other communications-based statutes could expose us to significant damage awards that could, individually or in the aggregate, materially harm our business.

We post on our websites our privacy policies and practices concerning the collection, use and disclosure of user data. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any regulatory requirements or orders or other federal, state or international privacy or consumer protection-related laws and regulations could result in proceedings or actions against us by governmental entities or others (e.g., class action privacy litigation), subject us to significant penalties and negative publicity, require us to change our business practices, increase our costs and adversely affect our business. Data collection, privacy and security have become the subject of increasing public concern. If Internet and mobile users were to reduce their use of our websites, mobile platforms, products, and services as a result of these concerns, our business could be harmed. As noted above, we are also subject to the possibility of security breaches, which themselves may result in a violation of these laws.

Other laws and regulations could harm our business.

It is not always clear how laws and regulations governing matters relevant to our business, such as property ownership, copyrights, trademarks, and other intellectual property issues, parallel imports and distribution controls, taxation, libel and defamation, and obscenity apply to our businesses. Many of these laws were adopted prior to the advent of the Internet, mobile, and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. Many of these laws, including some of those that do reference the Internet are subject to interpretation by the courts on an ongoing basis and the resulting uncertainty in the scope and application of these laws and regulations increases the risk that we will be subject to private claims and governmental actions alleging violations of those laws and regulations.

As our activities, the products and services we offer, and our geographical scope continue to expand, regulatory agencies or courts may claim or hold that we or our users are subject to additional requirements (including licensure) or prohibited from conducting our business in their jurisdiction, either generally or with respect to certain actions. Financial and political events have increased the level of regulatory scrutiny on large companies, and regulatory agencies may view matters or interpret laws and regulations differently than they have in the past and in a manner adverse to our businesses. Our success and increased visibility have driven some existing businesses that perceive us to be a threat to their businesses to raise concerns about our business models to policymakers and regulators. These businesses and their trade association groups employ significant resources in their efforts to shape the legal and regulatory regimes in countries where we have significant operations. They may employ these resources in an effort to change the legal and regulatory regimes in ways intended to reduce the effectiveness of our businesses and the ability of users to use our products and services. These established businesses have raised concerns relating to pricing, parallel imports, professional seller obligations, selective distribution networks, stolen goods, copyrights, trademarks and other intellectual property rights and the liability of the provider of an Internet marketplace for the conduct of its users related to those and other issues. Any changes to the legal or regulatory regimes in a manner that would increase our liability for third-party listings could negatively impact our business.

Numerous U.S. states and foreign jurisdictions, including the State of California, have regulations regarding “auctions” and the handling of property by “secondhand dealers” or “pawnbrokers.” Several states and some foreign jurisdictions have attempted to impose such regulations upon us or our users, and others may attempt to do so in the future. Attempted enforcement of these laws against some of our users appears to be increasing and we could be required to change the way we or our users do business in ways that increase costs or reduce revenues, such as

forcing us to prohibit listings of certain items or restrict certain listing formats in some locations. We could also be subject to fines or other penalties, and any of these outcomes could harm our business.

A number of the lawsuits against us relating to trademark issues seek to have our platforms subject to unfavorable local laws. For example, “trademark exhaustion” principles provide trademark owners with certain rights to control the sale of a branded authentic product until it has been placed on the market by the trademark holder or with the holder’s consent. The application of “trademark exhaustion” principles is largely unsettled in the context of the Internet, and if trademark owners are able to force us to prohibit listings of certain items in one or more locations, our business could be harmed.

As we expand and localize our international activities, we are increasingly becoming obligated to comply with the laws of the countries or markets in which we operate. In addition, because our services are accessible worldwide and we facilitate sales of goods and provide services to users worldwide, one or more jurisdictions may claim that we or our users are required to comply with their laws based on the location of our servers or one or more of our users, or the location of the product or service being sold or provided in an ecommerce transaction. For example, we were found liable in France, under French law, for transactions on some of our websites worldwide that did not involve French buyers or sellers. Laws regulating Internet, mobile and ecommerce technologies outside of the United States are generally less favorable to us than those in the United States. Compliance may be more costly or may require us to change our business practices or restrict our service offerings, and the imposition of any regulations on us or our users may harm our business. In addition, we may be subject to multiple overlapping legal or regulatory regimes that impose conflicting requirements on us (e.g., in cross-border trade). Our alleged failure to comply with foreign laws could subject us to penalties ranging from criminal prosecution to significant fines to bans on our services, in addition to the significant costs we may incur in defending against such actions.

We are regularly subject to general litigation, regulatory disputes, and government inquiries.

We are regularly subject to claims, lawsuits (including class actions and individual lawsuits), government investigations, and other proceedings involving competition and antitrust, intellectual property, privacy, consumer protection, accessibility claims, securities, tax, labor and employment, commercial disputes, content generated by our users, services and other matters. The number and significance of these disputes and inquiries have increased as ~~the political and regulatory landscape changes; and as~~ our company has grown larger, our businesses have expanded in scope and geographic reach, and our products and services have increased in complexity.

The outcome and impact of such claims, lawsuits, government investigations, and proceedings cannot be predicted with certainty. Regardless of the outcome, such investigations and proceedings can have an adverse impact on us because of legal costs, diversion of management resources, and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that is subject to judgment calls. It is possible that a resolution of one or more such proceedings could require us to make substantial payments to satisfy judgments, fines or penalties or to settle claims or proceedings, any of which could harm our business. These proceedings could also result in reputational harm, criminal sanctions, consent decrees, or orders preventing us from offering certain products, or services, or requiring a change in our business practices in costly ways, or requiring development of non-infringing or otherwise altered products or technologies. Any of these consequences could harm our business.

We are subject to regulatory activity and antitrust litigation under competition laws.

We are subject to scrutiny by various government agencies under U.S. and foreign laws and regulations, including antitrust and competition laws. Some jurisdictions also provide private rights of action for competitors or consumers to assert claims of anti-competitive conduct. Other companies and government agencies have in the past and may in the future allege that our actions violate the antitrust or competition laws of the United States, individual states, the European Commission or other countries, or otherwise constitute unfair competition. An increasing number of governments are regulating competition law activities, including increased scrutiny in large markets such as China. Our business partnerships or agreements or arrangements with customers or other companies could give rise to regulatory action or antitrust litigation. Some regulators, particularly those outside of the United States, may perceive our business to be used so broadly that otherwise uncontroversial business practices could be deemed anticompetitive. Certain competition authorities have conducted market studies of our industries. Such claims and investigations, even if without foundation, may be very expensive to defend, involve negative publicity and substantial diversion of

management time and effort and could result in significant judgments against us or require us to change our business practices.

We are subject to patent litigation.

We have repeatedly been sued for allegedly infringing other parties’ patents. We are a defendant in a number of patent suits and have been notified of several other potential patent disputes. We expect that we will increasingly be subject to patent infringement claims because, among other reasons:

our products and services continue to expand in scope and complexity;

we continue to expand into new businesses, including through acquisitions; and

the universe of patent owners who may claim that we, any of the companies that we have acquired, or our customers infringe their patents, and the aggregate number of patents controlled by such patent owners, continues to increase.

Such claims may be brought directly against us and/or against our customers whom we may indemnify either because we are contractually obligated to do so or we choose to do so as a business matter. We believe that an increasing number of these claims against us and other technology companies have been, and continue to be, initiated by third parties whose sole or primary business is to assert such claims. In addition, we have seen significant patent disputes between operating companies in some technology industries. Patent claims, whether meritorious or not, are time-consuming and costly to defend and resolve, and could require us to make expensive changes in our methods of doing business, enter into costly royalty or licensing agreements, make substantial payments to satisfy adverse judgments or settle claims or proceedings, or cease conducting certain operations, which would harm our business.

~~We have identified a material weakness in our internal control over financial reporting which, if not remediated, could adversely affect our reputation, business or stock price.~~

In reviewing the accounting for certain transactions we completed in December 2016, as part of the realignment of our legal structure, as described above under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Provision for Income Taxes,” our management identified a deficiency in the effectiveness of a control intended to properly document and review relevant facts and apply the appropriate tax accounting under standards generally accepted in the United States of America, which impacted the Deferred tax asset and Income tax benefit accounts and related disclosures. As described under “Part 1, Item 4 - Controls and Procedures,” our management has concluded that the deficiency constitutes a material weakness in our internal control over financial reporting and, as a result, internal control over financial reporting was not effective as of September 30, 2017.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Although we have developed and are implementing a plan to remediate this material weakness and believe, based on our evaluation to date, that this material weakness will be remediated during 2017, we cannot assure you that this will occur within the contemplated timeframe. Moreover, we cannot assure you that we will not identify additional material weaknesses in our internal control over financial reporting in the future. If we are unable to remediate the material weakness, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the Securities and Exchange Commission, could be adversely affected. The occurrence of, or failure to remediate the material weakness may adversely affect our reputation and business and the market price of our common stock and any other securities we may issue.

We are exposed to fluctuations in interest rates.

Some of our borrowings bear interest at floating rates and we have entered into agreements intended to convert the interest rate on some of our fixed rate debt instruments to floating rates. To the extent that prevailing rates increase, our interest expense under these debt instruments will increase.

Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of interest rate risk. The fair market value of our fixed-rate investment securities may be adversely impacted due to a rise in interest rates. In general, fixed-rate securities with longer maturities are subject to greater interest-rate risk than those with shorter maturities. While floating rate securities generally are subject to less interest-rate risk than fixed-rate securities, floating-rate securities may produce less income than expected if interest rates decrease and may also suffer a decline in market value if interest rates increase. Due in part to these factors, our investment income may decline or we may suffer losses in principal if securities are sold that have declined in market value due to changes in interest rates. In addition, relatively low interest rates limit our investment income. Fluctuations in interest rates that increase the cost of our current or future indebtedness, cause the market value of our assets to decline or reduce our investment income could adversely affect our financial results.

Our tickets business is subject to regulatory, competitive and other risks that could harm this business.

Our tickets business, which includes StubHub, is subject to numerous risks, including:

Some jurisdictions, in particular jurisdictions outside the United States, prohibit the resale of event tickets (anti-scalping laws) at prices above the face value of the tickets or at all, or highly regulate the resale of tickets, and new laws and regulations or changes to existing laws and regulations imposing these or other restrictions could limit or inhibit our ability to operate, or our users’ ability to continue to use, our tickets business.

Regulatory agencies or courts may claim or hold that we are responsible for ensuring that our users comply with these laws and regulations.

In many jurisdictions, our tickets business depends on commercial partnerships with event organizers or licensed ticket vendors, which we must develop and maintain on acceptable terms for our tickets business to be successful.

Our tickets business is subject to seasonal fluctuations and the general economic and business conditions that impact the sporting events and live entertainment industries.

A portion of the tickets inventory sold by sellers on the StubHub platform is processed by StubHub in digital form. Systems failures, security breaches, theft or other disruptions that result in the loss of such sellers’ tickets inventory, could result in significant costs and a loss of consumer confidence in our tickets business.

Lawsuits alleging a variety of causes of actions have in the past, and may in the future, be filed against StubHub and eBay by venue owners, competitors, ticket buyers, and unsuccessful ticket buyers. Such lawsuits could result in significant costs and require us to change our business practices in ways that negatively affect our tickets business.

Our tickets business also faces significant competition from a number of sources, including ticketing service companies, event organizers, ticket brokers, and online and offline ticket resellers. Some ticketing service companies, event organizers, and professional sports teams have begun to issue event tickets through various forms of electronic ticketing systems that are designed to restrict or prohibit the transferability (and by extension, the resale) of such event tickets either to favor their own resale affiliates or to discourage resale or restrict resale of season tickets to a preferred, designated website. Ticketing service companies have also begun to use market-based pricing strategies or dynamic pricing to charge much higher prices, and impose additional restrictions on transferability, for premium tickets.

Some sports teams have threatened to revoke the privileges of season ticket owners if they resell their tickets through a platform that is not affiliated with, or approved by, such sports teams.

To the extent that StubHub holds ticket inventory, we may be exposed to losses associated with such inventory.

The listing or sale by our users of items that allegedly infringe the intellectual property rights of rights owners, including pirated or counterfeit items, may harm our business.

The listing or sale by our users of unlawful, counterfeit or stolen goods or unlawful services, or sale of goods or services in an unlawful manner, has resulted and may continue to result in allegations of civil or criminal liability for unlawful activities against us (including the employees and directors of our various entities) involving activities carried out by users through our services. In a number of circumstances, third parties, including government regulators and law enforcement officials, have alleged that our services aid and abet violations of certain laws, including laws regarding the sale of counterfeit items, laws restricting or prohibiting the transferability (and by extension, the resale) of digital goods (e.g., event tickets, books, music and software), the fencing of stolen goods, selective distribution channel laws, customs laws, distance selling laws, anti-scalping laws with respect to the resale of tickets, and the sale of items outside of the United States that are regulated by U.S. export controls. ~~For example:~~

In Turkey, local prosecutors and courts are investigating our liability for allegedly illegal actions by users of our Turkish Marketplace business (GittiGidiyor). In accordance with local law and custom, they have indicted one or more members of the board of directors of our local Turkish subsidiary. We intend to defend vigorously against any such actions and a growing number of these cases have been dismissed by the relevant courts.

In August 2012, we were informed that U.S. listings of footwear with religious imagery were visible on our local Indian site and we immediately removed these listings. In September 2012, a criminal case was registered against us in India in regard to these listings, and we are challenging the prosecution of this case.

In addition, allegations of infringement of intellectual property rights, including but not limited to counterfeit items, have resulted in threatened and actual litigation from time to time by rights owners, including the following luxury brand owners: Tiffany & Co. in the United States; Rolex S.A. and Coty Prestige Lancaster Group GmbH in Germany; Louis Vuitton Malletier and Christian Dior Couture in France; and L’Oréal SA, Lancôme Parfums et Beauté & Cie, and Laboratoire Garnier & Cie in several European countries. Plaintiffs in these and similar suits seek, among other remedies, injunctive relief and damages. Statutory damages for copyright or trademark violations could range up to $150,000 per copyright violation and $2,000,000 per trademark violation in the United States, and may be even higher in other jurisdictions. In the past, we have paid substantial amounts in connection with resolving certain trademark and copyright suits. These and similar suits may also force us to modify our business practices in a manner that increases costs, lowers revenue, makes our websites and mobile platforms less convenient to customers, and requires us to spend substantial resources to take additional protective measures or discontinue certain service offerings in order to combat these practices. In addition, we have received significant media attention relating to the listing or sale of illegal or counterfeit goods, which could damage our reputation, diminish the value of our brand names, and make users reluctant to use our products and services.

We are subject to risks associated with information disseminated through our services.

Online services companies may be subject to claims relating to information disseminated through their services, including claims alleging defamation, libel, breach of contract, invasion of privacy, negligence, copyright or trademark infringement, among other things. The laws relating to the liability of online services companies for information disseminated through their services are subject to frequent challenges both in the United States and foreign jurisdictions. Any liabilities incurred as a result of these matters could require us to incur additional costs and harm our reputation and our business.

Our potential liability to third parties for the user-provided content on our sites, particularly in jurisdictions outside the United States where laws governing Internet transactions are unsettled, may increase. If we become liable for information provided by our users and carried on our service in any jurisdiction in which we operate, we could be directly harmed and we may be forced to implement new measures to reduce our exposure to this liability, including expending substantial resources or discontinuing certain service offerings, which could harm our business.

Changes to our programs to protect buyers and sellers could increase our costs and loss rate.

Our eBay Money Back Guarantee program represents the means by which we compensate users who believe that they have been defrauded, have not received the item that they purchased or have received an item different from what was described. In addition, as we roll out our new payments capabilities, we may be exposed to losses associated with compensating our sellers for fraudulent payments. We expect to continue to receive communications from users requesting reimbursement or threatening or commencing legal action against us if no reimbursement is made. Our liability for these sort of claims is slowly beginning to be clarified in some jurisdictions and may be higher in some non-U.S. jurisdictions than it is in the United States. Litigation involving liability for any such third-party actions could be costly and time consuming for us, divert management attention, result in increased costs of doing business, lead to adverse judgments or settlements or otherwise harm our business. In addition, affected users will likely complain to regulatory agencies that could take action against us, including imposing fines or seeking injunctions.

We may be unable to adequately protect or enforce our intellectual property rights, or third parties may allege that we are infringing their intellectual property rights.

We believe the protection of our intellectual property, including our trademarks, patents, copyrights, domain names, trade dress, and trade secrets, is critical to our success. We seek to protect our intellectual property rights by relying on applicable laws and regulations in the United States and internationally, as well as a variety of administrative procedures. We also rely on contractual restrictions to protect our proprietary rights when offering or procuring products and services, including confidentiality and invention assignment agreements entered into with our employees and contractors and confidentiality agreements with parties with whom we conduct business.

However, effective intellectual property protection may not be available in every country in which our products and services are made available, and contractual arrangements and other steps we have taken to protect our intellectual property may not prevent third parties from infringing or misappropriating our intellectual property or deter independent development of equivalent or superior intellectual property rights by others. Trademark, copyright, patent, domain name, trade dress and trade secret protection is very expensive to maintain and may require litigation. We must protect our intellectual property rights and other proprietary rights in an increasing number of jurisdictions, a process that is expensive and time consuming and may not be successful in every jurisdiction. Also, we may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to others. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation. Any failure to adequately protect or enforce our intellectual property rights, or significant costs incurred in doing so, could materially harm our business.

As the number of products in the software industry increases and the functionality of these products further overlap, and as we acquire technology through acquisitions or licenses, we may become increasingly subject to infringement claims, including patent, copyright, and trademark infringement claims. Litigation may be necessary to determine the validity and scope of the patent and other intellectual property rights of others. The ultimate outcome of any allegation is uncertain and, regardless of the outcome, any such claim, with or without merit, may be time-consuming, result in costly litigation, divert management’s time and attention from our business, require us to stop selling, delay roll-out, or redesign our products, or require us to pay substantial amounts to satisfy judgments or settle claims or lawsuits or to

pay substantial royalty or licensing fees, or to satisfy indemnification obligations that we have with some of our customers. Our failure to obtain necessary license or other rights, or litigation or claims arising out of intellectual property matters, may harm our business.

Failure to deal effectively with fraudulent activities on our platforms would increase our loss rate and harm our business, and could severely diminish merchant and consumer confidence in and use of our services.

We face risks with respect to fraudulent activities on our platforms and periodically receive complaints from buyers and sellers who may not have received the goods that they had contracted to purchase or payment for the goods that a buyer had contracted to purchase. In some European and Asian jurisdictions, buyers may also have the right to withdraw from a sale made by a professional seller within a specified time period. While we can, in some cases, suspend the accounts of users who fail to fulfill their payment or delivery obligations to other users, we do not have the ability to require users to make payment or deliver goods, or otherwise make users whole other than through ~~its~~our buyer protection program, which in the United States we refer to as the eBay Money Back ~~Guarantee.~~Guarantee, or as we roll out our new payments capabilities, by compensating our sellers for fraudulent payments. Although we have implemented measures to detect and reduce the occurrence of fraudulent activities, combat bad buyer experiences and increase buyer satisfaction, including evaluating sellers on the basis of their transaction history and restricting or suspending their activity, there can be no assurance that these measures will be effective in combating fraudulent transactions or improving overall satisfaction among sellers, buyers, and other participants. Additional measures to address fraud could negatively affect the attractiveness of our services to buyers or sellers, resulting in a reduction in the ability to attract new users or retain current users, damage to our reputation, or a diminution in the value of our brand names.

We have substantial indebtedness, and we may incur substantial additional indebtedness in the future, and we may not generate sufficient cash flow from our business to service our indebtedness. Failure to comply with the terms of our indebtedness could result in the acceleration of our indebtedness, which could have an adverse effect on our cash flow and liquidity.

We have a substantial amount of outstanding indebtedness and we may incur substantial additional indebtedness in the future, including under our commercial paper program and revolving credit facility or through public or private offerings of debt securities. Our outstanding indebtedness and any additional indebtedness we incur may have significant consequences, including, without limitation, any of the following:

requiring us to use a significant portion of our cash flow from operations and other available cash to service our indebtedness, thereby reducing the amount of cash available for other purposes, including capital expenditures and acquisitions;

our indebtedness and leverage may increase our vulnerability to downturns in our business, to competitive pressures, and to adverse changes in general economic and industry conditions;

adverse changes in the ratings assigned to our debt securities by credit rating agencies will likely increase our borrowing costs;

our ability to obtain additional financing for working capital, capital expenditures, acquisitions, share repurchases, dividends or other general corporate and other purposes may be limited; and

our flexibility in planning for, or reacting to, changes in our business and our industry may be limited.

Our ability to make payments of principal of and interest on our indebtedness depends upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our ~~consolidated~~ results of operations and financial condition, many of which are beyond our control. If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to, among other things:

~~repatriate~~incur the tax cost of repatriating funds to the United ~~States at substantial tax cost;~~States;

seek additional financing in the debt or equity markets;

refinance or restructure all or a portion of our indebtedness;

sell selected assets; or

reduce or delay planned capital or operating expenditures.

Such measures might not be sufficient to enable us to service our debt. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms or at all.

Our revolving credit facility and the indenture pursuant to which certain of our outstanding debt securities were issued contain, and any debt instruments we enter into in the future may contain, financial and other covenants that restrict or could restrict, among other things, our business and operations. If we fail to pay amounts due under, or breach any of the covenants in, a debt instrument, then the lenders would typically have the right to demand immediate repayment of all borrowings thereunder (subject in certain cases to grace or cure period). Moreover, any such acceleration and required repayment of or default in respect of any of our indebtedness could, in turn, constitute an

event of default under other debt instruments, thereby resulting in the acceleration and required repayment of that other indebtedness. Any of these events could materially adversely affect our liquidity and financial condition.

A downgrade in our credit ratings could materially adversely affect our business.

Some of our outstanding indebtedness has received credit ratings from certain rating agencies. Such ratings are limited in scope and do not purport to address all risks relating to an investment in those debt securities, but rather reflect only the view of each rating agency at the time the rating was issued. The credit ratings assigned to our debt securities could change based upon, among other things, our results of operations and financial condition. These ratings are subject to ongoing evaluation by credit rating agencies, and there can be no assurance that such ratings will not be lowered, suspended or withdrawn entirely by a rating agency or placed on a so-called “watch list” for a possible downgrade or assigned a negative ratings outlook if, in any rating agency’s judgment, circumstances so warrant. Moreover, these credit ratings are not recommendations to buy, sell or hold any of our debt securities. Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade or have been assigned a negative outlook, would likely increase our borrowing costs, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and could harm our business.

Our credit ratings were downgraded as a result of the distribution of 100% of the outstanding common stock of PayPal to our stockholders (the “Distribution”), pursuant to which PayPal became an independent company. As of January 1, 2014, our long-term debt and short-term funding were rated investment grade by Standard and Poor’s Financial Services, LLC (long-term rated A, short-term rated A-1, with a stable outlook), Moody’s Investor Service (long-term rated A2, short-term rated P-1, with a stable outlook), and Fitch Ratings, Inc. (long-term rated A, short-term rated F-1, with a stable outlook). All of these credit rating agencies lowered their ratings in connection with the Distribution, which occurred on July 17, 2015. Since July 20, 2015, we have been rated investment grade by Standard and Poor’s Financial Services, LLC (long-term rated BBB+, short-term rated A-2, with a stable outlook), Moody’s Investor Service (long-term rated Baa1, short-term rated P-2, with a stable outlook), and Fitch Ratings, Inc. (long-term rated BBB, short-term rated F-2, with a stable outlook). We disclose these ratings to enhance the understanding of our sources of liquidity and the effects of these ratings on our costs of funds. Our borrowing costs depend, in part, on our credit ratings and any further actions taken by these credit rating agencies to lower our credit ratings, as described above, will likely increase our borrowing costs.

Our business ~~and users~~ may be subject to sales ~~tax~~ and other taxes.

The application of indirect taxes (such as sales and use tax, value-added tax (“VAT”), goods and services tax (including the “digital services tax”), business tax and gross receipt tax) to ecommerce businesses ~~and to our users~~ is a complex and evolving issue. Many of the fundamental statutes and regulations that impose these taxes were established before the adoption and growth of the Internet and ecommerce. In many cases, it is not clear how existing statutes apply to ~~the Internet or ecommerce.~~ecommerce services. In addition, many state and foreign governments are increasingly looking for ways to increase revenues, which has resulted in ~~discussions about tax reform and other~~ legislative action, ~~to increase tax~~including new taxes on services and gross revenues ~~including~~and through other indirect taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.

We do not collect taxes on the goods or services sold by users of our services. However, some jurisdictions have implemented, or may implement, laws that require remote sellers of goods and services to collect and remit taxes on sales to customers located within the jurisdiction. In particular, the Streamlined Sales Tax Project (an ongoing, multi-year effort by U.S. state and local governments to pursue federal legislation that would require collection and remittance of sales tax by out-of-state sellers) could allow states that meet certain simplification and other criteria to require out-of-state sellers to collect and remit sales taxes on goods purchased by in-state residents. The adoption of such legislation could result in a use tax collection responsibility for certain of our sellers. This collection responsibility and the additional costs associated with complex use tax collection, remittance and audit requirements would make selling on our websites

and mobile platforms less attractive for small business retailers and would harm our business, and the proliferation of state legislation to expand sales and use tax collection on Internet sales could adversely affect some of our sellers and indirectly harm our business.

Several proposals have been made at the U.S. state and local levels that would impose additional taxes on the sale of goods and services over the Internet. These proposals, if adopted, could substantially impair the growth of ecommerce and our brands, and could diminish our opportunity to derive financial benefit from our activities. While the U.S. federal government’s moratorium on state and local taxation of Internet access or multiple or discriminatory taxes on ecommerce has been temporarily extended, this moratorium does not prohibit federal, state or local authorities from collecting taxes on our income or from collecting certain taxes that were in effect prior to the enactment of the moratorium and/or one of its extensions.

From time to time, some taxing authorities in the United States have notified us that they believe we owe them certain taxes imposed on our services. These notifications have not resulted in any significant tax liabilities to date, but there is a risk that some jurisdiction may be successful in the future, which would harm our business.

Similar issues exist outside of the United States, where the application of VAT or other indirect taxes on ecommerce providers is complex and evolving. While we attempt to comply in those jurisdictions where it is clear that a tax is due, some of our subsidiaries have, from time to time, received claims relating to the applicability of indirect taxes to our fees. We have been paying VAT on fees charged to certain of our users in the European Union based on the service provider’s location. On January 1, 2015, changes to the rules determining the place of supply (and thus the country of taxation) for all European Union based providers of electronically supplied services were implemented that require that we pay VAT based on the residence or normal place of business of our customers. These changes may result in our paying a higher rate of VAT on such fees. Additionally, we pay input VAT on applicable taxable purchases within the various countries in which we operate. In most cases, we are entitled to reclaim this input VAT from the various countries. However, because of our unique business model, the application of the laws and rules that allow such reclamation is sometimes uncertain. A successful assertion by one or more countries that we are not entitled to reclaim VAT could harm our business.

In certain jurisdictions, we collect and remit indirect taxes on our fees and pay taxes on our purchases of goods and services. However, tax authorities may raise questions about our calculation, reporting and collection of these

taxes and may ask us to remit additional ~~taxes, as well as the proper calculation of such~~ taxes. Should any new taxes become applicable to our services or if the taxes we pay are found to be deficient, our business could be harmed.

A taxing authority may seek to impose a tax collection, reporting or record-keeping obligation on companies that engage in or facilitate ecommerce. For example, the U.S. Internal Revenue Service (“IRS”) now requires that certain payments to sellers be reported to the sellers and the IRS on an annual basis. Any failure by us to meet these requirements could result in substantial monetary penalties and other sanctions and could harm our business. Taxing authorities may also seek to impose tax collection or reporting obligations based on the location of the product or service being sold or provided in an ecommerce transaction, regardless of where the respective users are located. Some jurisdictions could assert that we are responsible for tax on the underlying goods or services sold on our sites. Imposition of a record keeping or tax collecting requirement could decrease seller activity on our sites and would harm our business. Tax authorities may also require us to help ensure compliance by our users by promulgating legislation regulating professional sellers, including tax reporting and collection requirements. In addition, we have periodically received requests from tax authorities in many jurisdictions for information regarding the transactions of large classes of sellers on our sites, and in some cases we have been legally obligated to provide this data. The imposition of any requirements on us to disclose transaction records for all or a class of sellers to tax or other regulatory authorities or to file tax forms on behalf of any sellers, especially requirements that are imposed on us but not on alternative means of ecommerce, and any use of those records to investigate, collect taxes from or prosecute sellers, could decrease seller activity on our sites and harm our business.

We may have exposure to greater than anticipated tax liabilities.

The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain. Like many other multinational corporations, we are subject to tax in multiple U.S. and foreign ~~tax~~ jurisdictions and have structured our operations to reduce our effective tax rate. Our determination of our tax liability is always subject to audit and review by applicable domestic and foreign tax authorities, and we are currently undergoing a number of investigations, audits and reviews by taxing authorities throughout the world, including with respect to our business structure. Any adverse outcome of any such audit or review could harm our business, and the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made. While we have established reserves based on assumptions and estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient.

In addition, our future income taxes could be adversely affected by a shift in our jurisdictional earning mix, by changes in the valuation of our deferred tax assets and liabilities, as a result of gains on our foreign exchange risk management program, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.

In light of continuing fiscal challenges in certain U.S. states and in many countries in Europe, various levels of government are increasingly focused on tax reform and other legislative action to increase tax revenue, including corporate income taxes. For example, the economic downturn reduced tax revenues for United States federal and state governments, and a number of proposals to increase taxes from corporate entities have been implemented or are being considered at various levels of government. These include a number of proposals to modify the U.S. federal income tax laws applicable to companies, like ours, operating in multiple U.S. and foreign jurisdictions which, if enacted, could materially increase our effective tax rate. A number of U.S. states have attempted to increase corporate tax revenues by taking an expansive view of corporate presence to attempt to impose corporate income taxes and other direct business taxes on companies that have no physical presence in their state, and taxing authorities in foreign jurisdictions may take similar actions. Many U.S. states are also altering their apportionment formulas to increase the amount of taxable income or loss attributable to their state from certain out-of-state businesses. Similarly, in Europe, and elsewhere in the world, there are various tax reform efforts underway designed to ensure that corporate entities are taxed on a larger percentage of their earnings. Companies that operate over the Internet, such as eBay, are a target of some of these efforts. If more taxing authorities are successful in applying direct taxes to Internet companies that do not have a physical presence in their respective jurisdictions, this could increase our effective tax rate.

~~We may be~~Our business and its users are subject to Internet sales tax and sales reporting and record-keeping obligations.

The application of sales tax and other indirect taxes on cross border sales by remote sellers is continuing to change and evolve. On June 21, 2018, the U.S. Supreme Court decided South Dakota v. Wayfair, Inc. et al, a case challenging the current law under which online retailers are not required to collect sales and use tax unless they have a physical presence in the buyer’s state. This decision will now allow states to adopt new or enforce existing laws requiring sellers to collect and remit sales and use tax, even in states in which the seller has no presence. The adoption or enforcement of any such legislation could result in a sales and use tax collection responsibility for certain of our sellers. This collection responsibility and the additional costs associated with complex sales and use tax collection, remittance and audit requirements could create additional burdens for buyers and sellers on our websites and mobile platforms and could harm our business. Similar laws imposing tax collection responsibility on foreign sellers are being consider in other countries as well. We are now jointly liable for U.K. VAT for certain non-U.K. sellers who fail to fulfill their U.K. VAT obligations unless we suspend their eBay activity until the seller resolves the matter with the U.K. VAT authority. Other jurisdictions are considering similar legislation.

Multiple jurisdictions have enacted laws which require marketplaces to report user activity or collect and remit taxes on certain items sold on the marketplace. For example, we are collecting Australian GST on certain imports into Australia and remitting the GST to the Australian Tax Office. Increasingly, U.S. states have enacted laws or have pending legislation that require marketplace facilitators to collect and remit sales tax for some or all sellers using these marketplaces. The cost of complying with these new rules and the addition of taxes on certain items may harm our business.

One or more states, the U.S. federal government or foreign countries may seek to impose reporting or record-keeping obligations on companies that engage in or facilitate ecommerce. Such an obligation could be imposed by legislation intended to improve tax compliance ~~(and legislation to such effect has been contemplated by several states and a number of foreign jurisdictions)~~ or if one of our companies was ever deemed to be the legal agent of

the users of our services by a jurisdiction in which it operates. Certain of our companies are required to report to the ~~IRS~~Internal Revenue Service (the “IRS”) and most states on customers subject to U.S. income tax ~~who receive more than $20,000 in payments and more than 200 payments in a calendar year.~~if they reach certain payment thresholds. As a result, we are required to request tax identification numbers from certain payees, track payments by tax identification number and, under certain conditions, withhold a portion of payments and forward such withholding to the IRS. ~~We have modified our~~Our systems are able to meet these ~~requirements and expect increased~~requirements. These obligations can increase operational costs and ~~changes to~~change our user ~~experience in connection with complying with these reporting obligations.~~experience. Any failure by us to meet these requirements could result in substantial monetary penalties and other sanctions and could harm our business. Imposition of an information reporting requirement could decrease seller or buyer activity on our sites and would harm our business.

We have periodically received requests from tax authorities for information regarding the transactions of large classes of sellers on our sites, and in some cases we have been legally obligated to provide this data. The imposition of any requirements on us to disclose transaction records for all or a class of sellers to tax or other regulatory authorities or to file tax forms on behalf of any sellers, especially requirements that are imposed on us but not on alternative means of ecommerce, and any use of those records to investigate, collect taxes from or prosecute sellers or buyers, could decrease activity on our sites and harm our business.

Our business is subject to online security risks, including security breaches and cyberattacks.

Our businesses involve the storage and transmission of users’ personal financial information. In addition, a significant number of our users authorize us to bill their payment card accounts directly for all transaction and other fees charged by us. An increasing number of websites, including those owned by several other large Internet and offline companies, have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their websites or infrastructure. The techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems, change frequently, may be difficult to detect for a long time, and often are not recognized until launched against a target. Certain efforts may be state sponsored and supported by significant financial and technological resources and therefore may be even more difficult to detect. As a result, we

may be unable to anticipate these techniques or to implement adequate preventative measures. Unauthorized parties may also attempt to gain access to our systems or facilities through various means, including hacking into our systems or facilities, fraud, trickery or other means of deceiving our employees, contractors and temporary staff. A party that is able to circumvent our security measures could misappropriate our or our users’ personal information, cause interruption or degradations in our operations, damage our computers or those of our users, or otherwise damage our reputation. In addition, our users have been and likely will continue to be targeted by parties using fraudulent “spoof” and “phishing” emails to misappropriate user names, passwords, payment card numbers, or other personal information or to introduce viruses or other malware through “trojan horse” programs to our users’ computers. Our information technology and infrastructure may be vulnerable to cyberattacks or security incidents and third parties may be able to access our users’ proprietary information and payment card data that are stored on or accessible through our systems. Any security breach at a company providing services to us or our users could have similar effects.

In May 2014, we publicly announced that criminals were able to penetrate and steal certain data, including user names, encrypted user passwords and other non-financial user data. Upon making this announcement, we required all buyers and sellers on our platform to reset their passwords in order to log into their account. The breach and subsequent password reset have negatively impacted the business. In July 2014, a putative class action lawsuit was filed against us for alleged violations and harm resulting from the breach. The lawsuit was recently dismissed with leave to amend. In addition, we have received requests for information and are subject to investigations regarding this incident from numerous regulatory and other government agencies across the world.

We may also need to expend significant additional resources to protect against security breaches or to redress problems caused by breaches. These issues are likely to become more difficult and costly as we expand the number of markets where we operate. Additionally, our insurance policies carry low coverage limits, which may not be adequate to reimburse us for losses caused by security breaches and we may not be able to fully collect, if at all, under these insurance policies.

Systems failures or cyberattacks and resulting interruptions in the availability of or degradation in the performance of our websites, applications, products or services could harm our business.

Our systems may experience service interruptions or degradation due to of hardware and software defects or malfunctions, computer denial-of-service and other cyberattacks, human error, earthquakes, hurricanes, floods, fires,

natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, or other events. Our systems are also subject to break-ins, sabotage and intentional acts of vandalism. Some of our systems are not fully redundant and our disaster recovery planning is not sufficient for all eventualities.

We have experienced and will likely continue to experience system failures, denial of service attacks and other events or conditions from time to time that interrupt the availability or reduce the speed or functionality of our websites and mobile applications. These events have resulted and likely will result in loss of revenue. A prolonged interruption in the availability or reduction in the speed or other functionality of our websites and mobile applications could materially harm our business. Frequent or persistent interruptions in our services could cause current or potential users to believe that our systems are unreliable, leading them to switch to our competitors or to avoid our sites, and could permanently harm our reputation and brands. Moreover, to the extent that any system failure or similar event results in damages to our customers or their businesses, these customers could seek significant compensation from us for their losses and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address. We also rely on facilities, components and services supplied by third parties and our business may be materially adversely affected to the extent these components or services do not meet our expectations or these third parties cease to provide the services or facilities. In particular, a decision by any of our third party hosting providers to close a facility that we use could cause system interruptions and delays, result in loss of critical data and cause lengthy interruptions in our services. We do not carry business interruption insurance sufficient to compensate us for losses that may result from interruptions in our service as a result of systems failures and similar events.

Acquisitions, dispositions, joint ventures, strategic partnerships and strategic investments could result in operating difficulties and could harm our ~~business.~~business or impact our financial results.

We have acquired a significant number of businesses of varying size and scope, technologies, services, and products and have in July 2015 distributed 100% of the outstanding common stock of PayPal to our stockholders, pursuant to which PayPal became an independent company, and sold our Enterprise business in November 2015. We also expect to continue to evaluate and consider a wide array of potential strategic transactions as part of our overall business strategy, including business combinations, acquisitions, and dispositions of businesses, technologies, services, products, and other assets, as well as strategic investments and joint ventures.

These transactions may involve significant challenges and risks, including:

the potential loss of key customers, merchants, vendors and other key business partners of the companies we acquire, or dispose of, following and continuing after announcement of our transaction plans;

declining employee morale and retention issues affecting employees of companies that we acquire or dispose of, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired or disposed business;

difficulty making new and strategic hires of new employees;

diversion of management time and a shift of focus from operating the businesses to the transaction, and in the case of an acquisition, integration and administration;

the need to provide transition services to a disposed of company, which may result in the diversion of resources and focus;

the need to integrate the operations, systems (including accounting, management, information, human resource and other administrative systems), technologies, products and personnel of each acquired company, which is an inherently risky and potentially lengthy and costly process;

the inefficiencies and lack of control that may result if such integration is delayed or not implemented, and unforeseen difficulties and expenditures that may arise as a result;

the need to implement or improve controls, procedures and policies appropriate for a larger public company at companies that prior to acquisition may have lacked such controls, procedures and policies or whose controls, procedures and policies did not meet applicable legal and other standards;

risks associated with our expansion into new international markets;

derivative lawsuits resulting from the acquisition or disposition;

liability for activities of the acquired or disposed of company before the transaction, including intellectual property and other litigation claims or disputes, violations of laws, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities and, in the case of dispositions, liabilities to the acquirors of those businesses under contractual provisions such as representations, warranties and indemnities;

the potential loss of key employees following the transaction;

the acquisition of new customer and employee personal information by us or a third party acquiring assets or businesses from us, which in and of itself may require regulatory approval and or additional controls, policies and procedures and subject us to additional exposure; and

our dependence on the acquired business’ accounting, financial reporting, operating metrics and similar systems, controls and processes and the risk that errors or irregularities in those systems, controls and processes will lead to errors in our condensed consolidated financial statements or make it more difficult to manage the acquired business.

At any given time, we may be engaged in discussions or negotiations with respect to one or more of these types of transactions and any of these transactions could be material to our financial condition and results of operations. In addition, it may take us longer than expected to fully realize the anticipated benefits of these transactions, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results. Any acquisitions or dispositions may also require us to issue additional equity securities, spend our cash, or incur debt (and increased interest expense), liabilities, and amortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders.

We have made certain investments, including through joint ventures, in which we have a minority equity interest and/or lack management and operational control. The controlling joint venture partner in a joint venture may have business interests, strategies, or goals that are inconsistent with ours, and business decisions or other actions or

omissions of the controlling joint venture partner or the joint venture company may result in harm to our reputation or adversely affect the value of our investment in the joint venture. Our strategic investments may also expose us to additional risks. Any circumstances, which may be out of our control, that adversely affect the value of our investments, or cost resulting from regulatory action or lawsuits in connection with our investments, could harm our business or negatively impact our financial results.

We entered into a warrant agreement in conjunction with a commercial agreement with a service provider that entitles us to acquire a fixed number of shares of the service provider’s common stock subject to certain milestones being met. This warrant is accounted for as a derivative instrument under ASC Topic 815, Derivatives and Hedging. Changes in the service provider’s common stock price and equity volatility may have a significant impact on the value of this warrant. We report this warrant on a quarterly basis at fair value in our condensed consolidated balance sheets, and changes in the fair value of this warrant are recognized in our condensed consolidated statement of income. Fluctuations in the service provider’s common stock or other changes in assumptions could result in material changes in the fair value that we report in our condensed consolidated balance sheets and our condensed consolidated statement of income, which could have a material impact on our financial results.

We are subject to risks and uncertainties related to the strategic review of our asset portfolio, as well as our operating review.

In March 2019, we announced that we initiated, with the assistance of external financial advisors, a strategic review of our asset portfolio, including but not limited to StubHub and eBay Classifieds Group. There can be no assurance that the strategic review will result in a sale, spin-off or other business combination involving our assets. We also announced the initiation of an operating review to target operational excellence and build upon the recently announced reorganization and restructuring measures. We will incur expenses in connection with the reviews and our future results may be affected by the pursuit or consummation of any specific transaction or other strategic alternative resulting from the strategic review. While these reviews are ongoing, we are exposed to certain risks and uncertainties, including potential risks and uncertainties in retaining and attracting employees during the review process; the diversion of management’s time to the reviews; and exposure to potential litigation in connection with the review process or any specific transaction or other strategic alternative resulting therefrom, all of which could disrupt and negatively affect our business. Speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of the Company could cause our stock price to fluctuate significantly. There is no finite timetable for completion of the strategic review or the operating review, and we can provide no assurance that any transaction or other strategic alternative we pursue will have a positive impact on our results of operations or financial condition. Furthermore, the operating review may not be successful in driving enhanced revenue and operating income growth.

Our success largely depends on key personnel. Because competition for our key employees is intense, we may not be able to attract, retain, and develop the highly skilled employees we need to support our business. The loss of senior management or other key personnel could harm our business.

Our future performance depends substantially on the continued services of our senior management and other key personnel, including key engineering and product development personnel, and our ability to attract, retain, and motivate key personnel. Competition for key personnel is intense, especially in the Silicon Valley where our corporate headquarters are located, and we may be unable to successfully attract, integrate, or retain sufficiently qualified key personnel. In making employment decisions, particularly in the Internet and high-technology industries, job candidates often consider the value of the equity awards they would receive in connection with their employment and fluctuations in our stock price may make it more difficult to attract, retain, and motivate employees. In addition, we do not have long-term employment agreements with any of our key personnel and do not maintain any “key person” life insurance policies. The loss of the services of any of our senior management or other key personnel, or our inability to attract highly qualified senior management and other key personnel, could harm our business.

Problems with or price increases by third parties who provide services to us or to our sellers could harm our business.

A number of third parties provide services to us or to our sellers. Such services include seller tools that automate and manage listings, merchant tools that manage listings and interface with inventory management software, storefronts that help our sellers list items and shipping providers that deliver goods sold on our platform, among others. Financial or regulatory issues, labor issues (e.g., strikes, lockouts, or work stoppages), or other problems that prevent these companies from providing services to us or our sellers could harm our business.

Price increases by, or service terminations, disruptions or interruptions at, companies that provide services to us and our sellers and clients could also reduce the number of listings on our platforms or make it more difficult for our sellers to complete transactions, thereby harming our business. Some third parties who provide services to us or our sellers may have or gain market power and be able to increase their prices to us without competitive constraint. In addition, the U.S. Postal Service, which is facing ongoing fiscal challenges, has instituted postal rate increases and announced that it is considering closing thousands of local post offices and ending Saturday mail delivery. While we continue to work with global carriers to offer our sellers a variety of shipping options and to enhance their shipping experience, postal rate increases may reduce the competitiveness of certain sellers’ offerings, and postal service changes could require certain sellers to utilize alternatives which could be more expensive or inconvenient, which could in turn decrease the number of transactions on our sites, thereby harming our business.

We have outsourced certain functions to third-party providers, including some customer support and product development functions, which are critical to our operations. If our service providers do not perform satisfactorily, our operations could be disrupted, which could result in user dissatisfaction and could harm our business.

There can be no assurance that third parties who provide services directly to us or our sellers will continue to do so on acceptable terms, or at all. If any third parties were to stop providing services to us or our sellers on acceptable terms, including as a result of bankruptcy, we may be unable to procure alternatives from other third parties in a timely and efficient manner and on acceptable terms, or at all.

Our developer platforms, which are open to merchants and third-party developers, subject us to additional risks.

We provide third-party developers with access to application programming interfaces, software development kits and other tools designed to allow them to produce applications for use, with a particular focus on mobile applications. There can be no assurance that merchants or third-party developers will develop and maintain applications and services on our open platforms on a timely basis or at all, and a number of factors could cause such third-party developers to curtail or stop development for our platforms. In addition, our business is subject to many regulatory restrictions. It is possible that merchants and third-party developers who utilize our development platforms or tools could violate these regulatory restrictions and we may be held responsible for such violations, which could harm our business.

We cannot assure that we will continue to pay dividends on our common stock.

In January 2019, we initiated a quarterly cash dividend on our common stock. The ~~Distribution~~timing, declaration, amount and payment of any future dividends fall within the discretion of our Board of Directors and will depend on many factors, including our available cash, working capital, financial condition, results of operations, capital requirements, covenants

in our debt instruments, applicable law and other considerations that our Board of Directors considers relevant. A reduction in the amount of cash dividends on our common stock, the suspension of those dividends or a failure to meet market expectations regarding potential dividend increases could have a material adverse effect on the market price of our common stock. If we do not pay cash dividends on our common stock in the future, realization of a gain on an investment in our common stock will depend entirely on the appreciation of the price of our common stock, which may not ~~achieve some or all of the anticipated benefits and may adversely affect our business.~~occur.

We may not realize some or all of the anticipated benefits from the Distribution and the Distribution may in fact adversely affect our business. As an independent, publicly traded company, we will be a smaller, less diversified company with a narrower business focus and may be more vulnerable to changing market conditions, which could materially and adversely affect our business, financial condition and results of operations. Separating the businesses may also eliminate or reduce synergies or economies of scale that existed prior to the Distribution, which could harm our business.

We could incur significant liability if the Distribution is determined to be a taxable transaction.

We have received an opinion from outside tax counsel to the effect that our Distribution of 100% of the ~~Distribution~~outstanding common stock of PayPal to our stockholders on July 17, 2015 (the “Distribution”) qualifies as a transaction that is described in Sections 355 and 368(a)(1)(D) of the Internal Revenue Code. The opinion relies on certain facts, assumptions, representations and undertakings from PayPal and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, our shareholders and we may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that the Distribution is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. If the Distribution is determined to be taxable for U.S. federal income tax purposes, our shareholders that are subject to U.S. federal income tax and we could incur significant U.S. federal income tax liabilities.

We may be exposed to claims and liabilities as a result of the Distribution.

We entered into a separation and distribution agreement and various other agreements with PayPal to govern the Distribution and the relationship of the two ~~companies going forward.~~companies. These agreements provide for specific indemnity and liability obligations and could lead to disputes between us and PayPal. The indemnity rights we have against PayPal under the agreements may not be sufficient to protect us. In addition, our indemnity obligations to PayPal may be significant and these risks could negatively affect our results of operations and financial condition.


Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds

Stock repurchase activity during the three months ended ~~September 30, 2017~~March 31, 2019 was as follows:

Period Ended Total Number of
Shares
Purchased
Average Price Paid
per Share ⁽²⁾
Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs
Maximum Dollar
Value that May Yet
be Purchased Under
the Programs ⁽¹⁾
July 31, 2017 4,325,864
$ 35.67
4,325,864

August 31, 2017 12,945,100
$ 35.29
12,945,100

September 30, 2017 7,816,358
$ 37.80
7,816,358
$ 2,572,407,007
25,087,322
25,087,322



Period Ended	Total Number of Shares Purchased	Average Price Paid per Share ⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Dollar Value that May Yet be Purchased Under the Programs ⁽¹⁾
January 31, 2019	3,893,605	$	30.13	3,893,605	$	3,033,785,018
February 28, 2019	18,321,566	$	36.26	18,321,566	$	6,369,485,791
March 31, 2019	19,567,294	$	36.72	19,567,294	$	5,650,977,425
	41,782,465			41,782,465


(1)	In ~~July 2016,~~January 2018 our Board authorized a ~~$2.5~~$6.0 billion stock repurchase program and in ~~July 2017,~~January 2019 our Board authorized an additional ~~$3.0~~$4.0 billion stock repurchase program. These stock repurchase programs have no expiration from the date of authorization.

Our stock repurchase ~~program is~~programs are intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of our common stock to reduce our outstanding share count. Any share repurchases under our stock repurchase ~~program~~programs may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means at times and in such amounts as management deems appropriate and will be funded from our working capital or other financing alternatives.

During the three months ended ~~September 30, 2017,~~March 31, 2019, we repurchased approximately ~~$907 million~~$1.5 billion of our common stock under our stock repurchase program. As of ~~September 30, 2017,~~March 31, 2019, a total of approximately ~~$2.6~~$5.7 billion remained available for future repurchases of our common stock under our stock repurchase program.


(2)	Excludes broker commissions.


Item 3:	Defaults Upon Senior Securities

Not applicable.


Item 4:	Mine Safety Disclosures

Not applicable.


Item 5:	Other Information

Not applicable.


Item 6:	Exhibits

The information required by this Item is set forth in the Index ofto Exhibits of this Quarterly Report.

INDEX TO EXHIBITS



Exhibit Number	Filed or furnished with this 10-Q	Description
10.01⁺	X	~~12.01~~Offer Letter, dated November 5, 2018, between Registrant and Steve Fisher.
10.03*		~~Statement regarding computation of ratio of earnings to fixed charges.~~Cooperation Agreement, dated February 28, 2019, by and among Elliott Associates, L.P., Elliott International, L.P., Elliott International Capital Advisors Inc. and Registrant.
~~31.01~~ 10.04*		Agreement, dated February 28, 2019, by and among Starboard Value LP and affiliates and Registrant.
31.01	X	Certification of Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	X	Certification of Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.01	X	Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.02	X	Certification of Registrant’s Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	X	XBRL Instance Document
101.SCH	X	XBRL Taxonomy Extension Schema Document
101.CAL	X	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	X	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	X	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	X	XBRL Taxonomy Extension Presentation Linkbase Document

~~(1)~~

+ Indicates a management contract or compensatory plan or arrangement.

* Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~June 6, 2017 and incorporated herein by reference.~~March 1, 2019.

SIGNATURES

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 thereunto duly authorized.



		eBay Inc.
		Principal Executive Officer:

		By:	/s/ Devin N. Wenig
			Devin N. Wenig
			President and Chief Executive Officer
Date:	~~October 20, 2017~~April 24, 2019
		Principal Financial Officer:

		By:	/s/ Scott F. Schenkel
			Scott F. Schenkel
			Senior Vice President, Chief Financial Officer
Date:	~~October 20, 2017~~April 24, 2019
		Principal Accounting Officer:

		By:	/s/ Brian J. Doerger
			Brian J. Doerger
			Vice President, Chief Accounting Officer
Date:	~~October 20, 2017~~April 24, 2019

6467



Delaware	77-0430924
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2025 Hamilton Avenue San Jose, California	95125
(Address of principal executive offices)	(Zip Code)



Large accelerated filer	[x]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	[ ]
			Emerging growth company	[ ]


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
	(In millions, except par value)						(In millions, except par value)
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,760		$	1,816		$	1,695		$	2,202
Short-term investments	4,270			5,333			2,746			2,713
Accounts receivable, net	626			592			716			712
Other current assets	1,202			1,134			1,508			1,499
Total current assets	7,858			8,875			6,665			7,126
Long-term investments	6,302			3,969			2,969			3,778
Property and equipment, net	1,546			1,516			1,582			1,597
Goodwill	4,669			4,501			5,208			5,160
Intangible assets, net	78			102			108			92
Operating lease right-of-use assets							696			—
Deferred tax assets	5,214			4,608			4,710			4,792
Other assets	276			276			391			274
Total assets	$	25,943		$	23,847		$	22,329		$	22,819
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	749		$	1,451		$	1,550		$	1,546
Accounts payable	260			283			251			286
Accrued expenses and other current liabilities	1,964			1,893			2,418			2,335
Deferred revenue	117			110			174			170
Income taxes payable	100			110			107			117
Total current liabilities	3,190			3,847			4,500			4,454
Deferred and other tax liabilities, net	2,157			1,888
Operating lease liabilities							547			—
Deferred tax liabilities							2,893			2,925
Long-term debt	9,249			7,509			7,700			7,685
Other liabilities	64			64			1,486			1,474
Total liabilities	14,660			13,308			17,126			16,538
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 3,580 shares authorized; 1,049 and 1,087 shares outstanding	2			2
Common stock, $0.001 par value; 3,580 shares authorized; 876 and 915 shares outstanding							2			2
Additional paid-in capital	15,169			14,907			15,785			15,716
Treasury stock at cost, 607 and 557 shares	(20,970		)	(19,205		)
Treasury stock at cost, 805 and 763 shares							(27,895		)	(26,394		)
Retained earnings	16,544			14,959			16,847			16,459
Accumulated other comprehensive income/(loss)	538			(124		)
Accumulated other comprehensive income							464			498
Total stockholders’ equity	11,283			10,539			5,203			6,281
Total liabilities and stockholders’ equity	$	25,943		$	23,847		$	22,329		$	22,819



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions, except per share amounts)
	(Unaudited)
Net revenues	$	2,409		$	2,217		$	6,954		$	6,584
Cost of net revenues	556			498			1,632			1,468
Gross profit	1,853			1,719			5,322			5,116
Operating expenses:
Sales and marketing	627			600			1,826			1,760
Product development	316			288			907			822
General and administrative	254			224			766			651
Provision for transaction losses	68			56			193			172
Amortization of acquired intangible assets	10			9			28			24
Total operating expenses	1,275			1,177			3,720			3,429
Income from operations	578			542			1,602			1,687
Interest and other, net	119			(9		)	113			(40		)
Income before income taxes	697			533			1,715			1,647
Income tax benefit (provision)	(174		)	(115		)	(130		)	(310		)
Income from continuing operations	$	523		$	418		$	1,585		$	1,337
Loss from discontinued operations, net of income taxes	—			(5		)	—			(7		)
Net income	$	523		$	413		$	1,585		$	1,330

Income (loss) per share - basic:
Continuing operations	$	0.49		$	0.37		$	1.48		$	1.17
Discontinued operations	—			—			—			(0.01		)
Net income per share - basic	$	0.49		$	0.37		$	1.48		$	1.16

Income (loss) per share - diluted:
Continuing operations	$	0.48		$	0.36		$	1.45		$	1.16
Discontinued operations	—			—			—			(0.01		)
Net income per share - diluted	$	0.48		$	0.36		$	1.45		$	1.15

Weighted-average shares:
Basic	1,062			1,126			1,074			1,143
Diluted	1,078			1,139			1,091			1,153



	Three Months Ended March 31,
	2019			2018
	(In millions, except per share amounts)
	(Unaudited)
Net revenues	$	2,643		$	2,580
Cost of net revenues	601			559
Gross profit	2,042			2,021
Operating expenses:
Sales and marketing	742			756
Product development	297			334
General and administrative	309			270
Provision for transaction losses	72			72
Amortization of acquired intangible assets	13			10
Total operating expenses	1,433			1,442
Income from operations	609			579
Interest and other, net	64			(32		)
Income before income taxes	673			547
Income tax provision	(152		)	(140		)
Income from continuing operations	521			407
Loss from discontinued operations, net of income taxes	(3		)	—
Net income	$	518		$	407

Income per share - basic:
Continuing operations	$	0.58		$	0.40
Discontinued operations	—			—
Net income per share - basic	$	0.58		$	0.40

Income per share - diluted:
Continuing operations	$	0.57		$	0.40
Discontinued operations	—			—
Net income per share - diluted	$	0.57		$	0.40

Weighted-average shares:
Basic	900			1,010
Diluted	908			1,029


[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




	eBay Inc.
(Exact name of registrant as specified in its charter)



	Motors.co.uk
Goodwill	$	65
Purchased intangible assets	30
Net liabilities	(2		)
Total	$	93



	December 31, 2018		Goodwill Acquired		Adjustments			March 31, 2019
Marketplace	$	4,594	$	—	$	(12	)	$	4,582
StubHub	227		—		(2		)	225
Classifieds	339		65		(3		)	401
Total	$	5,160	$	65	$	(17	)	$	5,208



	March 31, 2019								December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (Years)
Intangible assets:
Customer lists and user base	$	537	$	(452	)	$	85	5	$	519	$	(445	)	$	74	5
Marketing related	584		(575		)	9		5	584		(578		)	6		5
Developed technologies	282		(271		)	11		3	278		(269		)	9		3
All other	160		(157		)	3		4	160		(157		)	3		4
Total	$	1,563	$	(1,455	)	$	108		$	1,541	$	(1,449	)	$	92



	September 30, 2017								December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (Years)
Intangible assets:
Customer lists and user base	$	447	$	(415	)	$	32	5	$	434	$	(393	)	$	41	5
Marketing related	586		(562		)	24		5	568		(555		)	13		5
Developed technologies	266		(249		)	17		3	263		(229		)	34		3
All other	154		(149		)	5		4	154		(140		)	14		4
Total	$	1,453	$	(1,375	)	$	78		$	1,419	$	(1,317	)	$	102



Fiscal year:
Remaining 2017	$	16
2018	40
2019	15
2020	7
Thereafter	—
Total	$	78


(1)	Classifieds net revenues consists entirely of marketing services and other revenue.


(2)	Represents revenue generated between our reportable segments.


	September 30, 2017									March 31, 2019
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Short-term investments:
Restricted cash	$	22	$	—	$	—		$	22	$	17	$	—	$	—		$	17
Corporate debt securities	4,201		3		(8		)	4,196		2,733		1		(5		)	2,729
Government and agency securities	52		—		—			52
	$	4,275	$	3	$	(8	)	$	4,270	$	2,750	$	1	$	(5	)	$	2,746
Long-term investments:
Corporate debt securities	5,403		20		(6		)	5,417		2,827		3		(15		)	2,815
	$	5,403	$	20	$	(6	)	$	5,417	$	2,827	$	3	$	(15	)	$	2,815



	March 31, 2019
One year or less (including restricted cash of $17)	$	2,746
One year through two years	1,597
Two years through three years	792
Three years through four years	426
	$	5,561



	March 31, 2019		December 31, 2018
Equity investments without readily determinable fair values	$	137	$	137
Equity investments under the equity method of accounting	17		6
Total equity investments	$	154	$	143



	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents	$	1,760	$	1,731	$	29
Short-term investments:
Restricted cash	22		22		—
Corporate debt securities	4,196		—		4,196
Government and agency securities	52		—		52
Total short-term investments	4,270		22		4,248
Derivatives	79		—		79
Long-term investments:
Corporate debt securities	5,417		—		5,417
Total long-term investments	5,417		—		5,417
Total financial assets	$	11,526	$	1,753	$	9,773

Liabilities:
Derivatives	$	63	$	—	$	63



	Balance Sheet Location	March 31, 2019		December 31, 2018
Derivative Assets:
Foreign exchange contracts designated as cash flow hedges	Other Current Assets	$	37	$	72
Foreign exchange contracts designated as net investment hedges	Other Current Assets	5		—
Foreign exchange contracts not designated as hedging instruments	Other Current Assets	16		38
Warrant	Other Assets	261		148
Foreign exchange contracts designated as cash flow hedges	Other Assets	8		4
Interest rate contracts designated as fair value hedges	Other Assets	7		—
Total derivative assets		$	334	$	262

Derivative Liabilities:
Foreign exchange contracts designated as cash flow hedges	Other Current Liabilities	$	1	$	—
Foreign exchange contracts designated as net investment hedges	Other Current Liabilities	—		1
Interest rate contracts designated as fair value hedges	Other Current Liabilities	4		7
Foreign exchange contracts not designated as hedging instruments	Other Current Liabilities	17		30
Interest rate contracts designated as fair value hedges	Other Liabilities	5		10
Total derivative liabilities		$	27	$	48

Total fair value of derivative instruments		$	307	$	214



	December 31, 2018		Amount of Gain (Loss) Recognized in Other Comprehensive Income			Amount of Gain (Loss) Reclassified From AOCI to Earnings		March 31, 2019
Foreign exchange contracts designated as cash flow hedges	$	68	$	(21	)	$	20	$	27



	December 31, 2017			Amount of Gain (Loss) Recognized in Other Comprehensive Income			Amount of Gain (Loss) Reclassified From AOCI to Earnings			March 31, 2018
Foreign exchange contracts designated as cash flow hedges	$	(57	)	$	(57	)	$	(28	)	$	(86	)



	December 31, 2015		Amount of Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)		Amount of Gain (Loss) Reclassified From AOCI to Earnings (Effective Portion)		September 30, 2016
Foreign exchange contracts designated as cash flow hedges	$	36	$	96	$	63	$	69



	March 31, 2019
Opening balance as of January 1, 2019	$	148
Change in fair value	113
Closing balance as of March 31, 2019	$	261



	Coupon	As of			Effective		As of			Effective
	Rate	March 31, 2019			Interest Rate		December 31, 2018			Interest Rate
Long-Term Debt
Floating Rate Notes:
Senior notes due 2019	LIBOR plus 0.48%	$	400		3.319	%	$	400		3.123	%
Senior notes due 2023	LIBOR plus 0.87%	400			3.730	%	400			3.499	%

Fixed Rate Notes:
Senior notes due 2019	2.200%	1,150			2.346	%	1,150			2.346	%
Senior notes due 2020	3.250%	500			3.389	%	500			3.389	%
Senior notes due 2020	2.150%	500			2.344	%	500			2.344	%
Senior notes due 2021	2.875%	750			2.993	%	750			2.993	%
Senior notes due 2022	3.800%	750			3.989	%	750			3.989	%
Senior notes due 2022	2.600%	1,000			2.678	%	1,000			2.678	%
Senior notes due 2023	2.750%	750			2.866	%	750			2.866	%
Senior notes due 2024	3.450%	750			3.531	%	750			3.531	%
Senior notes due 2027	3.600%	850			3.689	%	850			3.689	%
Senior notes due 2042	4.000%	750			4.114	%	750			4.114	%
Senior notes due 2056	6.000%	750			6.547	%	750			6.547	%
Total senior notes		9,300					9,300
Hedge accounting fair value adjustments		2					(10		)
Unamortized discount and debt issuance costs		(52		)			(55		)
Less: Current portion of long-term debt		(1,550		)			(1,550		)
Total long-term debt		7,700					7,685

Short-Term Debt
Current portion of long-term debt		1,550					1,550
Hedge accounting fair value adjustments		(4		)			(7		)
Unamortized discount and debt issuance costs		(1		)			(1		)
Other short-term borrowings		5					4
Total short-term debt		1,550					1,546
Total Debt		$	9,250				$	9,231



Lease Costs	Statement of Income Location	Three Months Ended March 31, 2019
Operating lease cost ⁽¹⁾	Cost of net revenues, Sales and marketing, Product development and General and administrative expenses	$	52
Total lease cost		$	52


(1)	Includes variable lease payments and sublease income that were immaterial during the three months ended March 31, 2019.



	Operating
Remaining 2019	$	149
2020	157
2021	146
2022	131
2023	89
Thereafter	119
Total lease payments	791
Less interest	(75		)
Present value of lease liabilities	$	716



	Leases ⁽¹⁾
2019	$	136
2020	104
2021	91
2022	76
2023	51
Thereafter	119
Total minimum lease payments	$	577


(1)	Amounts are based on ASC 840, Leases that was superseded upon our adoption of ASC 842, Leases on January 1, 2019.



	Three Months Ended March 31, 2019
Weighted Average Remaining Lease Term
Operating leases	5.14 years

Weighted Average Discount Rate
Operating leases	3.50	%



	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	50

Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	18



	Shares Repurchased ⁽¹⁾	Average Price per Share ⁽²⁾		Value of Shares Repurchased		Remaining Amount Authorized
Balance as of January 1, 2017						$	1,336
Authorization of additional plan in July 2017						3,000
Repurchase of shares of common stock	50	$	34.93	$	1,764	(1,764		)
Balance as of September 30, 2017						$	2,572



	Shares Repurchased ⁽¹⁾	Average Price per Share ⁽²⁾		Value of Shares Repurchased ⁽²⁾		Remaining Amount Authorized
Balance as of January 1, 2019						$	3,151
Authorization of additional plan in January 2019						4,000
Repurchase of shares of common stock	42	$	35.90	$	1,500	(1,500		)
Balance as of March 31, 2019						$	5,651


(1)	These repurchased shares of common stock were recorded as treasury stock and were accounted for under the cost method. NoNone of the repurchased shares of common stock have been retired.