Q1-14 through Q2-15

Historical Quarterly
Financials
(Q1-14 through Q2-15)
July 1, 2015 (updated August 27, 2015)
The following presentation has been updated to include financial information related to Q2'15 and
weighted average shares for Q1'14 through Q2'15. The related financial information for Q1'14
through Q1'15 was included in the presentation entitled “Historical Quarterly Financials (Q1-14
through Q1-15)” which was furnished in the 8-K dated July 1, 2015.
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma
Statement of Income
June 30, 2015
Reported
Net revenues
Operating expenses:
Transaction expense
Transaction and loan losses
Customer support and operations
$
2,297
245
241
135
Depreciation and amortization
150
Weighted average shares:
Basic
Diluted
Operating margin
Effective tax rate
Non-GAAP
Pro-Forma
$
$
634
185
308
Sales and marketing
Product development
General and administrative
Restructuring
Total operating expense
Operating income
Other income (expense), net
Income before income taxes
Income tax expense
Net income (loss)
Non-GAAP
Entries
$
1
1,899
398
1
399
94
305
$
Pro-Forma
Non-GAAP
Adjustments
(in millions, except percentages)
—
$
2,297
$
(4) (g)
—
—
(15)
(2)
(11)
(35)
(21)
(5)
(7)
(3)
(2)
(20)
(1)
(122)
122
—
122
19
103
1,218 (o)
1,224 (o)
17 %
24 %
634
185
291
(a)
(f)
(a)
(a)
(a)
(b)
(f)
(m)
(a)
(c)
(e)
234
206
99
128
(d)
$
—
1,777
520
1
521
113
408
—
12
4
1
(12)
—
2
23 %
22 %
634
197
296
(h)
(h)
(i)(j)
(l)
(h)
222
206
101
4 (k)
132
—
11
(15)
—
(15)
(2) (n)
(13)
1,218 (o)
1,224 (o)
6%
(2)%
2,293
$
—
1,788
505
1
506
111
395
1,218 (o)
1,224 (o)
(1)%
0%
22 %
22 %
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets
(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 eBay’s customer protection programs.
Following the distribution, this program is no longer being administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPal’s customer protection programs
has been 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.
(m) Acquisition related transaction expense
(n) Reflects the tax effect of pro forma adjustments using the respective statutory tax rate for the quarter ended June 30, 2015.
(o) The weighted average number of common shares outstanding for basic and diluted earnings per share for the period is based on the number of shares of
PayPal common stock outstanding as of July 17, 2015, the distribution date from eBay.
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma
Statement of Income
March 31, 2015
Reported
Net revenues
Operating expenses:
Transaction expense
Transaction and loan losses
Customer support and operations
$
2,137
236
224
138
Depreciation and amortization
141
Weighted average shares:
Basic
Diluted
Operating margin
Effective tax rate
Non-GAAP
Pro-Forma
$
$
575
178
275
Sales and marketing
Product development
General and administrative
Restructuring
Total operating expense
Operating income
Other income (expense), net
Income before income taxes
Income tax expense
Net income (loss)
Non-GAAP
Entries
$
48
1,815
322
(1)
321
66
255
$
Pro-Forma
Non-GAAP
Adjustments
(in millions, except percentages)
—
$
2,137
$
(3) (g)
—
—
(13)
(1)
(13)
(29)
(22)
(3)
(4)
(2)
(16)
(48)
(151)
151
—
151
46
105
1,218 (n)
1,224 (n)
15 %
21 %
(a)
(f)
(a)
(a)
(a)
(b)
(f)
(a)
(c)
(e)
(d)
$
575
178
261
—
10 (h)
3 (h)(i)(j)
575
188
264
223
195
109
(13) (l)
—
1 (h)
210
195
110
123
4 (k)
127
—
1,664
473
(1)
472
112
360
—
5
(8)
—
(8)
(1) (m)
(7)
—
1,669
465
(1)
464
111
353
$
1,218 (n)
1,224 (n)
7%
3%
2,134
22 %
24 %
$
1,218 (n)
1,224 (n)
—%
—%
22 %
24 %
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets
(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 eBay’s customer protection programs.
Following the distribution, this program is no longer being administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPal’s customer protection programs
has been 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.
(m) Reflects the tax effect of pro forma adjustments using the respective statutory tax rate for the quarter ended March 31, 2015.
(n) The weighted average number of common shares outstanding for basic and diluted earnings per share for the period is based on the number of shares of
PayPal common stock outstanding as of July 17, 2015, the distribution date from eBay.
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma
Statement of Income
December 31, 2014
Reported
Net revenues
Operating expenses:
Transaction expense
Transaction and loan losses
Customer support and operations
Sales and marketing
Product development
General and administrative
$
Weighted average shares:
Basic
Diluted
Operating margin
Effective tax rate
$
—
$
—
—
(13)
(19)
(28)
(19)
(1)
(1)
(1)
(17)
—
(99)
99
—
99
27
72
594
193
280
263
239
144
Depreciation and amortization
Restructuring
Total operating expense
Operating income
Other income (expense), net
Income before income taxes
Income tax expense
Net income (loss)
2,193
Non-GAAP
Pro-Forma
Entries
Non-GAAP Adjustments
(in millions, except percentages)
132
$
—
1,845
348
(1)
347
61
286
1,218 (m)
1,224 (m)
16 %
18 %
$
2,193
$
594
193
267
244
211
123
(a)
(a)
(a)
(a)
(b)
(e)
(a)
(c)
114
(d)
$
—
1,746
447
(1)
446
88
358 $
(4) (f)
—
11
5
(15)
—
2
20 %
20 %
$
2,189
594
204
272
229
211
125
(g)
(g)(h)(i)
(k)
(g)
4 (j)
118
—
7
(11)
—
(11)
(1) (l)
(10)
—
1,753
436
(1)
435
87
348
1,218 (m)
1,224 (m)
4%
2%
Non-GAAP Pro-Forma
$
1,218 (m)
1,224 (m)
—%
—%
20 %
20 %
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets
(d) Income taxes associated with certain non-GAAP entries
(e) Restructuring charges
(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 eBay’s customer protection programs.
Following the distribution, this program is no longer being administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPal’s customer protection programs
has been 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.
(l) Reflects the tax effect of pro forma adjustments using the statutory tax rate for the year ended December 31, 2014
(m) The weighted average number of common shares outstanding for basic and diluted earnings per share for the period is based on the number of shares of
PayPal common stock outstanding as of July 17, 2015, the distribution date from eBay.
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma
Statement of Income
September 30, 2014
Reported
Net revenues
Operating expenses:
Transaction expense
Transaction and loan losses
Customer support and operations
Sales and marketing
Product development
General and administrative
$
1,975
$
$
—
—
(12)
(14)
(28)
(20)
(1)
(1)
(16)
—
(92)
92
1
(4)
89
25
64
129
Restructuring
Total operating expense
Operating income
Other income (expense), net
—
1,703
272
4
Income before income taxes
Income tax expense
Net income (loss)
276
42
234
Operating margin
Effective tax rate
Non-GAAP Pro-Forma
$
Pro-Forma
Non-GAAP
Adjustments
(in millions, except percentages)
—
$
1,975
$
(4) (g)
537
180
257
267
232
101
Depreciation and amortization
Weighted average shares:
Basic
Diluted
Non-GAAP
Entries
$
1,218 (n)
1,224 (n)
14 %
15 %
—
10
4
(13)
—
2
537
180
245
253
204
80
(a)
(a)
(a)
(a)
(b)
(a)
(c)
112
—
1,611
364
1
(e)
(f)
(d)
$
365
67
298
(h)
537
190
249
240
204
82
4 (k)
116
(11)
(1) (m)
(10)
1,218 (n)
1,224 (n)
4%
3%
18 %
18 %
(h)
(h)(i)(j)
(l)
—
7
(11)
—
$
1,971
—
1,618
353
1
$
354
66
288
1,218 (n)
1,224 (n)
—%
1%
18 %
19 %
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets
(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 eBay’s customer protection programs.
Following the distribution, this program is no longer being administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPal’s customer protection programs
has been 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.
(m) Reflects the tax effect of pro forma adjustments using the statutory tax rate for the year ended December 31, 2014
(n) The weighted average number of common shares outstanding for basic and diluted earnings per share for the period is based on the number of shares of
PayPal common stock outstanding as of July 17, 2015, the distribution date from eBay.
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma
Statement of Income
June 30, 2014
Reported
Net revenues
Operating expenses:
Transaction expense
Transaction and loan losses
Customer support and operations
Sales and marketing
Product development
General and administrative
$
Weighted average shares:
Basic
Diluted
Operating margin
Effective tax rate
Non-GAAP
Pro-Forma
$
Pro-Forma
Non-GAAP
Adjustments
(in millions, except percentages)
—
$
1,983
$
(2) (f)
$
1,981
$
—
—
(12)
(14)
(28)
(20)
(4)
(1)
(16)
—
(95)
95
1
96
27
69
$
525
154
253
224
193
99
—
112
—
—
1,560
421
(3)
418
72
346
525
144
263
253
221
122
Depreciation and amortization
Restructuring
Total operating expense
Operating income
Other income (expense), net
Income before income taxes
Income tax expense
Net income (loss)
1,983
Non-GAAP
Entries
125
$
—
1,653
330
(4)
326
45
281
1,218 (m)
1,224 (m)
17 %
14 %
—
10
2
(15)
—
1
525
144
251
239
193
98
(a)
(a)
(a)
(a)
(b)
(a)
(c)
(e)
(d)
$
(g)
108
4 (j)
—
1,558
425
(3)
422
72
350
—
2
(4)
—
(4)
— (l)
(4)
$
1,218 (m)
1,224 (m)
4%
3%
(g)
(g)(h)(i)
(k)
21 %
17 %
1,218 (m)
1,224 (m)
—%
—%
21 %
17 %
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets
(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 eBay’s customer protection programs.
Following the distribution, this program is no longer being administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPal’s customer protection programs
has been 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
(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.
(l) Reflects the tax effect of pro forma adjustments using the statutory tax rate for the year ended December 31, 2014
(m) The weighted average number of common shares outstanding for basic and diluted earnings per share for the period is based on the number of shares of
PayPal common stock outstanding as of July 17, 2015, the distribution date from eBay.
Unaudited Reconciliation of Quarterly GAAP to Non-GAAP Pro-Forma
Statement of Income
March 31, 2014
Reported
Net revenues
Operating expenses:
Transaction expense
Transaction and loan losses
Customer support and operations
Sales and marketing
Product development
General and administrative
$
Non-GAAP
Pro-Forma
$
$
1,874
514
129
255
215
198
115
Depreciation and amortization
Restructuring
Total operating expense
Operating income
Other income (expense), net
Income before income taxes
Income tax expense
Net income (loss)
Non-GAAP
Entries
130
$
—
1,556
318
(6)
312
694
(382)
Weighted average shares:
Basic
Diluted
1,218 (m)
1,224 (m)
Operating margin
Effective tax rate
17 %
222 %
$
Pro-Forma
Non-GAAP
Adjustments
(in millions, except percentages)
—
$
1,874
$
(3) (f)
—
—
(15)
(12)
(24)
(16)
(5)
(1)
(21)
—
(94)
94
2
96
(623)
719
—
12
2
(17)
—
1
514
129
240
203
174
94
(a)
(a)
(a)
(a)
(b)
(a)
(c)
(e)
(d)
$
—
1,462
412
(4)
408
71
337
—
2
(5)
—
(5)
(1) (l)
(4)
1,218 (m)
1,224 (m)
5%
(205)%
(g)
4 (j)
$
22 %
17 %
514
141
242
186
174
95
(g)
(g)(h)(i)
(k)
108
1,871
$
112
—
—
1,464
407
(4)
403
70
333
1,218 (m)
1,224 (m)
—%
—%
22 %
17 %
Notes:
(a) Stock-based compensation expense
(b) Employer payroll taxes on stock-based compensation
(c) Amortization of acquired intangible assets
(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 eBay’s customer protection programs.
Following the distribution, this program is no longer being administered by PayPal, and therefore these costs will not be reimbursed by eBay. PayPal’s customer protection programs
has been 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.
(l) Reflects the tax effect of pro forma adjustments using the statutory tax rate for the year ended December 31, 2014
(m) The weighted average number of common shares outstanding for basic and diluted earnings per share for the period is based on the number of shares of
PayPal common stock outstanding as of July 17, 2015, the distribution date from eBay.
Historical Quarterly TPV (Aligns with TPV as Presented in Form 10)
(in millions)
Total TPV*
Q1'14
$ 53,676
Q2'14
$ 56,736
Q3'14
$ 58,184
Q4'14
$ 66,039
Q1'15
$ 63,021
Q2'15
$ 67,482
*TPV is the value of payments, net of payment reversals, successfully completed through our Payments
Platform, excluding transactions processed through our gateway products. Includes volume related to
eBay Marketplaces owned PayPal accounts that was traditionally excluded from PayPal segment results
GAAP to Non-GAAP Reconciliations – Q2 2015
Three Months
Ended
June 30,
2015
GAAP operating income
Stock-based compensation expense and related
employer payroll taxes
Amortization of acquired intangible assets
Separation
Restructuring
$
398
89
20
9
1
Acquisition related transaction expense
Total non-GAAP operating income adjustments
Non-GAAP operating income
Non-GAAP operating margin
3
122
520
23 %
Three Months
Ended
June 30,
2015
GAAP income before income taxes
GAAP provision for income taxes
GAAP net income
Non-GAAP adjustments to net income:
Non-GAAP operating income adjustments (see table
above)
Amortization of investments
Other certain significant gains, losses, or charges
Tax effect of non-GAAP adjustments
Non-GAAP net income
$
$
399
94
305
$
122
—
—
(19)
408
Calculation of Free Cash Flow – Q2 2015
Three Months
Ended
June 30,
2015
(In millions)
Net cash provided by operating activities
Less: Purchases of property and equipment
$
622
(231)
Free cash flow
$
391
GAAP to Non-GAAP Reconciliations - 2014
Year Ended
December 31,
2014
GAAP operating income
Stock-based compensation expense and related
employer payroll taxes
Amortization of acquired intangible assets
Restructuring
Total non-GAAP operating income adjustments
Non-GAAP operating income
Non-GAAP operating margin
$
$
1,268
309
70
1
380
1,648
21 %
Year Ended
December 31,
2014
GAAP income before income taxes
GAAP provision for income taxes
GAAP net income
Non-GAAP adjustments to net income:
Non-GAAP operating income adjustments (see table
above)
Amortization of intangibles of investments
Certain gains and losses on investments
Other certain significant gains, losses, or charges
Tax effect of non-GAAP adjustments
Non-GAAP net income
$
$
1,261
842
419
$
380
4
(4)
650
(106)
1,343
Calculation of Free Cash Flow - 2014
Year Ended
December 31,
2014
(In millions)
Net cash provided by operating activities
Less: Purchases of property and equipment
$
2,220
(492)
Free cash flow
$
1,728

Download Report