Attached files
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8-K - 8-K - PayPal Holdings, Inc. | d94735d8k.htm |
Exhibit 99.1
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Historical Quarterly Financials (Q1-14 through Q1-15)
July 1, 2015
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Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma Statement of Income
March 31, 2015
Non-GAAP Pro-Forma Non-GAAP
Reported Entries Non-GAAP Adjustments Pro-Forma
(in millions, except percentages)
Net revenues $ 2,137 $ $ 2,137 $(3)(g) $ 2,134
Operating expenses:
Transaction expense 575 575 575
Transaction and loan losses 178 178 10(h) 188
Customer support and operations 275(13)(a) 261 3(h)(i)(j) 264
(1)(f)
Sales and marketing 236(13)(a) 223(13)(l) 210
Product development 224(29)(a) 195 195
General and administrative 138(22)(a) 109 1(h) 110
(3)(b)
(4)(f)
Depreciation and amortization 141(2)(a) 123 4(k) 127
(16)(c)
Restructuring 48(48)(e)
Total operating expense 1,815(151) 1,664 5 1,669
Operating income 322 151 473(8) 465
Other income (expense), net(1) (1) (1)
Income before income taxes 321 151 472(8) 464
Income tax expense 66 46 (d) 112(1) 111
Net income (loss) $ 255 $ 105 $ 360 $(7) $ 353
Operating margin 15 % 7 % 22 % % 22 %
Effective tax rate 21 % 3 % 24 % % 24 %
Notes:
(a) |
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Stock-based compensation expense |
(b) |
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Employer payroll taxes on stock-based compensation |
(c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Restructuring charges (f) Separation related
(g) Reflects the impact of lower transaction revenues from payment services provided by PayPal to eBay as the result of the terms of certain commercial agreements negotiated between the parties that stipulate lower transaction fees than those historically charged to eBay.
(h) Reflects the effect of the Protection program losses and service costs that were historically reimbursed to PayPal by eBay for the administration of eBays customer protection programs. Following the distribution, this program will no longer be administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPals customer protection programs will be extended to its customers purchases on eBay, and therefore PayPal expects to incur incremental costs associated with its customer protection programs.
(i) Reflects the impact of additional costs for shared data centers and information technology facilities, except for the facilities in Phoenix, Arizona, and Denver, Colorado, that will continue to be managed by eBay after the separation pursuant to the colocation services agreements.
(j) Reflect the reversal of historically allocated amounts from eBay to PayPal related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements. (k)
Reflects depreciation expense related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements.
(l) |
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Reflects the net reduction of costs charged to PayPal by eBay for referral services and user penetration. |
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Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma Statement of Income
December 31, 2014
Non-GAAP Pro-Forma Non-GAAP -
Reported Entries Non-GAAP Adjustments Pro-Forma
(in millions, except percentages)
Net revenues $ 2,193 $ $ 2,193 $(4)(f) $ 2,189
Operating expenses:
Transaction expense 594 594 594
Transaction and loan losses 193 193 11(g) 204
Customer support and operations 280(13)(a) 267 5(g)(h)(i) 272
Sales and marketing 263(19)(a) 244(15)(k) 229
Product development 239(28)(a) 211 211
General and administrative 144(19)(a) 123 2(g) 125
(1)(b)
(1)(e)
Depreciation and amortization 132(1)(a) 114 4(j) 118
(17)(c)
Restructuring
Total operating expense 1,845(99) 1,746 7 1,753
Operating income 348 99 447(11) 436
Other income (expense), net(1) (1) (1)
Income before income taxes 347 99 446(11) 435
Income tax expense 61 27(d) 88(1) 87
Net income (loss) $ 286 $ 72 $ 358 $(10) $ 348
Operating margin 16 % 4 % 20 % % 20 %
Effective tax rate 18 % 2 % 20 % % 20 %
Notes:
(a) |
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Stock-based compensation expense |
(b) |
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Employer payroll taxes on stock-based compensation |
(c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Restructuring
(f) Reflects the impact of lower transaction revenues from payment services provided by PayPal to eBay as the result of the terms of certain commercial agreements negotiated between the parties that stipulate lower transaction fees than those historically charged to eBay.
(g) Reflects the effect of the Protection program losses and service costs that were historically reimbursed to PayPal by eBay for the administration of eBays customer protection programs. Following the distribution, this program will no longer be administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPals customer protection programs will be extended to its customers purchases on eBay, and therefore PayPal expects to incur incremental costs associated with its customer protection programs.
(h) Reflects the impact of additional costs for shared data centers and information technology facilities, except for the facilities in Phoenix, Arizona, and Denver, Colorado, that will continue to be managed by eBay after the separation pursuant to the colocation services agreements.
(i) Reflect the reversal of historically allocated amounts from eBay to PayPal related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements.
(j) Reflects depreciation expense related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements. (k) Reflects the net reduction of costs charged to PayPal by eBay for referral services and user penetration.
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Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma Statement of Income
September 30, 2014
Non-GAAP Pro-Forma Non-GAAP -
Reported Entries Non-GAAP Adjustments Pro-Forma
(in millions, except percentages)
Net revenues $ 1,975 $ $ 1,975 $(4)(g) $ 1,971
Operating expenses:
Transaction expense 537 537 537
Transaction and loan losses 180 180 10(h) 190
Customer support and operations 257(12)(a) 245 4(h)(i)(j) 249
Sales and marketing 267(14)(a) 253(13)(l) 240
Product development 232(28)(a) 204 204
General and administrative 101(20)(a) 80 2(h) 82
(1)(b)
Depreciation and amortization 129(1)(a) 112 4(k) 116
(16)(c)
Restructuring
Total operating expense 1,703(92) 1,611 7 1,618
Operating income 272 92 364(11) 353
Other income (expense), net 4 1(e) 1 1
(4)(f)
Income before income taxes 276 89 365(11) 354
Income tax expense 42 25(d) 67(1) 66
Net income (loss) $ 234 $ 64 $ 298 $(10) $ 288
Operating margin 14 % 4 % 18 % % 18 %
Effective tax rate 15 % 3 % 18 % 1 % 19 %
Notes:
(a) |
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Stock-based compensation expense |
(b) |
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Employer payroll taxes on stock-based compensation |
(c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Intangible amortization (f) Other certain gains and losses on investments
(g) Reflects the impact of lower transaction revenues from payment services provided by PayPal to eBay as the result of the terms of certain commercial agreements negotiated between the parties that stipulate lower transaction fees than those historically charged to eBay.
(h) Reflects the effect of the Protection program losses and service costs that were historically reimbursed to PayPal by eBay for the administration of eBays customer protection programs. Following the distribution, this program will no longer be administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPals customer protection programs will be extended to its customers purchases on eBay, and therefore PayPal expects to incur incremental costs associated with its customer protection programs.
(i) Reflects the impact of additional costs for shared data centers and information technology facilities, except for the facilities in Phoenix, Arizona, and Denver, Colorado, that will continue to be managed by eBay after the separation pursuant to the colocation services agreements.
(j) Reflect the reversal of historically allocated amounts from eBay to PayPal related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements.
(k) Reflects depreciation expense related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements. (l) Reflects the net reduction of costs charged to PayPal by eBay for referral services and user penetration.
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Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma Statement of Income
June 30, 2014
Non-GAAP Pro-Forma Non-GAAP
Reported Entries Non-GAAP Adjustments Pro-Forma
(in millions, except percentages)
Net revenues $ 1,983 $ $ 1,983 $(2)(f) $ 1,981
Operating expenses:
Transaction expense 525 525 525
Transaction and loan losses 144 144 10(g) 154
Customer support and operations 263(12)(a) 251 2(g)(h)(i) 253
Sales and marketing 253(14)(a) 239(15)(k) 224
Product development 221(28)(a) 193 193
General and administrative 122(20)(a) 98 1(g) 99
(4)(b)
Depreciation and amortization 125(1)(a) 108 4(j) 112
(16)(c)
Restructuring
Total operating expense 1,653(95) 1,558 2 1,560
Operating income 330 95 425(4) 421
Other income (expense), net(4) 1(e)(3) (3)
Income before income taxes 326 96 422(4) 418
Income tax expense 45 27(d) 72 72
Net income (loss) $ 281 $ 69 $ 350 $(4) $ 346
Operating margin 17 % 4 % 21 % % 21 %
Effective tax rate 14 % 3 % 17 % % 17 %
Notes:
(a) |
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Stock-based compensation expense |
(b) |
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Employer payroll taxes on stock-based compensation |
(c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Intangible amortization
(f) Reflects the impact of lower transaction revenues from payment services provided by PayPal to eBay as the result of the terms of certain commercial agreements negotiated between the parties that stipulate lower transaction fees than those historically charged to eBay.
(g) Reflects the effect of the Protection program losses and service costs that were historically reimbursed to PayPal by eBay for the administration of eBays customer protection programs. Following the distribution, this program will no longer be administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPals customer protection programs will be extended to its customers purchases on eBay, and therefore PayPal expects to incur incremental costs associated with its customer protection programs.
(h) Reflects the impact of additional costs for shared data centers and information technology facilities, except for the facilities in Phoenix, Arizona, and Denver, Colorado, that will continue to be managed by eBay after the separation pursuant to the colocation services agreements.
(i) Reflect the reversal of historically allocated amounts from eBay to PayPal related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation (j) Reflects depreciation expense related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements.
(k) |
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Reflects the net reduction of costs charged to PayPal by eBay for referral services and user penetration. |
|
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma Statement of Income
March 31, 2014
Non-GAAP Pro-Forma Non-GAAP
Reported Entries Non-GAAP Adjustments Pro-Forma
(in millions, except percentages)
Net revenues $ 1,874 $ $ 1,874 $(3)(f) $ 1,871
Operating expenses:
Transaction expense 514 514 514
Transaction and loan losses 129 129 12(g) 141
Customer support and operations 255(15)(a) 240 2(g)(h)(i) 242
Sales and marketing 215(12)(a) 203(17)(k) 186
Product development 198(24)(a) 174 174
General and administrative 115(16)(a) 94 1(g) 95
(5)(b)
Depreciation and amortization 130(1)(a) 108 4(j) 112
(21)(c)
Restructuring
Total operating expense 1,556(94) 1,462 2 1,464
Operating income 318 94 412(5) 407
Other income (expense), net(6) 2(e)(4) (4)
Income before income taxes 312 96 408(5) 403
Income tax expense 694(623)(d) 71(1) 70
Net income (loss) $ (382) $ 719 $ 337 $(4) $ 333
Operating margin 17 % 5 % 22 % % 22 %
Effective tax rate 222 %(205)% 17 % % 17 %
Notes:
(a) |
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Stock-based compensation expense |
(b) |
|
Employer payroll taxes on stock-based compensation |
(c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Intangible amortization
(f) Reflects the impact of lower transaction revenues from payment services provided by PayPal to eBay as the result of the terms of certain commercial agreements negotiated between the parties that stipulate lower transaction fees than those historically charged to eBay.
(g) Reflects the effect of the Protection program losses and service costs that were historically reimbursed to PayPal by eBay for the administration of eBays customer protection programs. Following the distribution, this program will no longer be administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPals customer protection programs will be extended to its customers purchases on eBay, and therefore PayPal expects to incur incremental costs associated with its customer protection programs.
(h) Reflects the impact of additional costs for shared data centers and information technology facilities, except for the facilities in Phoenix, Arizona, and Denver, Colorado, that will continue to be managed by eBay after the separation pursuant to the colocation services agreements.
(i) Reflect the reversal of historically allocated amounts from eBay to PayPal related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements. (j) Reflects depreciation expense related to data center facilities in Phoenix, Arizona, and Denver, Colorado, pursuant to the colocation services agreements.
(k) |
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Reflects the net reduction of costs charged to PayPal by eBay for referral services and user penetration. |
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PayPal Cash Flow Profile
2014 Non-GAAP*
($ billions)
8.0
1.6(0.3) |
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0.3 0.2(0.5) 0.4 1.7 |
1.3
Revenue Non- Tax Non- Non Cash Allowance Capex D&A Free Cash
GAAP Provision GAAP Net Taxes** for Loans*** Flow
Operating Income
Income
* |
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Does not include pro-forma adjustments |
** $298M tax provision reduced by $47M in cash taxes
*** Refers to allowance for loans receivable charged to net income; Transaction and loan losses $646M excluding allowance for transaction losses charged to net income $423M
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GAAP to Non-GAAP Reconciliations
Year Ended
December 31,
2014
GAAP operating income $ 1,268
Stock- based compensation expense and related
employer payroll taxes 309
Amortization of acquired intangible assets 70
Restructuring 1
Total non- GAAP operating income adjustments 380
Non- GAAP operating income $ 1,648
Non- GAAP operating margin 21%
Year Ended
December 31,
2014
GAAP income before income taxes $ 1,261
GAAP provision for income taxes 842
GAAP net income $ 419
Non- GAAP adjustments to net income:
Non- GAAP operating income adjustments (see table
above) 380
Amortization of intangibles of investments 4
Certain gains and losses on investments(4)
Other certain significant gains, losses, or charges 650
Tax effect of non- GAAP adjustments(106)
Non- GAAP net income $ 1,343
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Calculation of Free Cash Flow
Year Ended
December 31,
2014
(In millions)
Net cash provided by operating activities $ 2,220
Less: Purchases of property and equipment(492)
Free cash flow $ 1,728