FSM: PayPal

Sahand Lali

x PayPal Income Statement Dec-19

(EUR) in Millions except per share data 2019A

Net Revenues 17,772

Operating Expenses:
Transaction Expenses 6,790
Transaction and credit losses 1,380
Customer Support and Operations 1,615
Sales and Marketing 1,401
Technology and Development 2,085
General and Administrative 1,711
Restructuring and Other Charges 71
Total Operating Expenses 15,053
Operating Income 2,719
Interest Income 197
Interest Expense (115)
Other 197
Income before income taxes 2,998
Income tax expense (benefit) 539
Net Income 2,459

Depreciation and Amortisation 912

Stock-based Comp 1,021

Net Revenue Growth

Transaction expenses (% of revenue) 38%
Transaction and credit losses (% of revenue) 8%
Customer support and operations (% of revenue) 9%
Sales and Marketing (% of revenue) 8%
Technology and development (% of revenue) 12%
General and Administrative (% of revenue) 10%
Restructuring and other charges (% of revenue) 0%
Other Expenses (% of revenue) 1%
Tax Rate 18%
Stock-based compensation (% of revenue) 6%

x PayPal Balance Sheet Dec-19

(EUR) in Millions except per share data 2019A

Cash, ST and LT Securities 11,786

 Accounts Receivable, Net 435
Loans and Interest Receivable 3,972
Funds Receivable and Customer Accounts 22,527
Prepaid Expenses and Other Current Assets 800
Property, Plant and Equipment 1,693
Strategic Investments 1,838
Goodwill 6,212
Intangible Assets 778
Other Assets 1,292
Total Assets 51,333

Accounts Payable 232

Funds Payable and Ammounts Due to Customers 24,527
Accrued Expenses and other current liabilties/Revolver 2,087
Transaction and credit losses
Income taxes payable 73
Deferred Tax Liability and Other Long-term liabilities 2,520
Long-term debt 4,965
Total Liabilities 34,404

Common stock 0
Preferred Stock 0
Treasury Stock (6,872)
Additional Paid in Capital 15,588
Retained Earnings 8,342
Other Comprehensive Income/Loss (173)
Noncontrolling interest 44
Total Equity 16,929
Reconciliation Check 0

x PayPal Cash-Flow Statement Dec-19

(EUR) in Millions except per share data 2019A

Net Income
Transaction and credit losses
Depreciation and Amortisation
Stock-based compensation
Decreases/(increases in working capital assets)
Increases/(decreases in working capital liabilties)
Non-Current Assets
Other Non-current assets
Other Non-Current Liabilities
Cash from Operating Activities

Capex
 Cash from investing activities

Long-term debt
Revolver
Share repurchases
Cash from financing activities

Net change in cash during period

x Property, Plant and Equipment

Beginning of period
Plus: Capital Expenditures 823
Less Depreciation (704)
End of period 1,693

D&A related to PPE as a % of Capex 85.5%

x Intangible Assets
Beginning of Period
Purchases
Amortization
End of period

Total Depreciation and Amortisation

x Share repurchases
Common stock repurchased 1,361

Loans and Interest Receivable

Beginning of Period
Plus: Additions
End of period

x Revolver (Model Plug) Dec-19

2019A

Cash at beginning of period

Less: Minimum Cash Balance
Plus: Current cash flows except revolver
Equals: Cash available to pay down revolver
Minimum cash as percentage of revenue

Accrued Expenses and other current liabilties/Revolver

Beginnning of period
Draw/(paydown)
 Additional discretionary draw/(paydown)
End of period

x Interest expense and interest income

Revolver
Weighted average interest rate
End of period balance (from b/s) 2,087
Interest Expense

Long-term debt
Weighted average interest rate
End of period balance (from b/s)
Interest expense

Total interest expense

Interest rate on cash

Interest rate on cash
Cash balance (from b/s)
Interest income
Dec-20 Dec-21 Dec-22 Dec-23 Dec-24
2020A 2021A 2022A 2023E 2024E

21,454 25,371 27,518 29,664 32,038

7,934 10,315 12,173 11,872 12,967

1,741 1,060 1,572 1,911 1,958
1,778 2,075 2,120 2,373 2,563
1,861 2,445 2,257 2,551 2,812
2,642 3,038 3,253 3,548 3,850
2,070 2,114 2,099 2,263 2,444
139 62 207 0 0
18,165 21,109 23,681 24,518 26,594
3,289 4,262 3,837 5,147 5,443
88 57 174 528 665
(209) (232) (304) (534) (571)
1,897 12 (341) 0 0
5,065 4,099 3,366 5,141 5,538
863 (70) 947 1,183 1,274
4,202 4,169 2,419 3,959 4,264

1,189 1,265 1,317 861 899

1,411 1,421 1,315 1,632 1,762

21% 18% 8% 7.8% 8.0%

37% 41% 44% 40.0% 40.5%
8% 4% 6% 6.4% 6.1%
8% 8% 8% 8.0% 8.0%
9% 10% 8% 8.6% 8.8%
12% 12% 12% 12.0% 12.0%
10% 8% 8% 7.6% 7.6%
1% 0% 1% 0.0% 0.0%
9% 0% -1% 0.0% 0.0%
17% -2% 28% 23.0% 23.0%
7% 6% 5% 5.5% 5.5%

Dec-20 Dec-21 Dec-22 Dec-23 Dec-24

2020A 2021A 2022A 2023A 2024A

15,940 13,090 13,740 16,452 21,568

 577 800 963 1,038 1,121
2,769 4,846 7,431 9,931 10,725
33,418 36,141 36,357 38,175 40,084
1,148 1,287 1,898 1,965 2,131
1,807 1,909 1,730 1,844 1,963
3,232 3,207 2,146 2,146 2,146
9,135 11,454 11,209 11,209 11,209
1,048 1,332 788 724 678
1,305 1,737 2,455 2,646 2,858
70,379 75,803 78,717 86,130 94,484

252 197 126 130 142

35,418 38,841 40,107 43,235 46,694
2,648 3,755 4,055 4,000 4,300
1,911 3,869
129 236 813 1,015 1,093
2,930 2,998 2,925 3,153 3,405
8,939 8,049 10,417 11,230 12,128
50,316 54,076 58,443 64,675 71,632

0 0 0 0 0
0 0 0 0 0
(8,507) (11,880) (16,079) (20,488) (25,117)
16,644 17,208 18,327 19,959 21,721
12,366 16,535 18,954 22,913 27,177
(484) (136) (928) (928) (928)
44
20,063 21,727 20,274 21,455 22,852
0 0 0 0 0

Dec-20 Dec-21 Dec-22 Dec-23 Dec-24

2020A 2021A 2022A 2023A 2024A

3,959 4,264
1,911 1,958
861 899
1,632 1,762
(4,460) (2,953)
3,335 3,548
(191) (212)
(150) (150)
228 252
7,124 9,369

(761) (822)
 (761) (822)

813 898
(55) 300
(4,409) (4,629)
(3,651) (3,431)

2,712 5,116

1,730 1,844
866 908 706 761 822
(738) (822) (846) (647) (703)
1,807 1,909 1,730 1,844 1,963

85.2% 90.5% 119.8% 85.0% 85.5%

788 724
150 150
(214) (196)
788 724 678

861 899

1,635 3,373 4,199 4,409 4,629

7,431 9,931
2,500 2,500
7,431 9,931 12,431

Dec-20 Dec-21 Dec-22 Dec-23 Dec-24

2020A 2021A 2022A 2023E 2024E

13,740 16,452
(11,866) (12,815)
2,767 4,816
4,641 8,453
40% 40%

4,055 4,000
(4,055) (4,000)
 4,000 4,300
4,055 4,000 4,300

2.5% 2.5% 2.5%

2,648 3,755 4,055 4,000 4,300
101 104

4.0% 4.0% 4.0%

10,417 11,230 12,128
433 467

534 571

3.0% 3.5% 3.5%

13,740 16,452 21,568
528 665
Dec-25 Dec-26 Dec-27 Dec-28 Dec-29 Dec-30
2025E 2026E 2027E 2028E 2029E 2030E

34,601 37,023 39,984 43,103 46,336 49,579

14,306 15,372 16,330 17,692 19,085 20,401

1,942 2,210 2,413 2,557 2,728 2,953
2,768 2,962 3,199 3,448 3,707 3,966
3,046 3,182 3,476 3,233 3,475 3,718
4,133 4,258 4,598 4,957 5,329 5,702
2,639 2,824 3,050 3,288 3,534 3,782
0 0 0 0 0 0
28,834 30,807 33,065 35,174 37,857 40,522
5,767 6,215 6,919 7,929 8,478 9,058
852 1,053 1,284 1,337 1,599 1,881
(553) (593) (636) (606) (649) (693)
0 0 0 0 0 0
6,066 6,675 7,567 8,661 9,429 10,245
1,395 1,535 1,740 1,992 2,169 2,356
4,671 5,139 5,826 6,669 7,260 7,889

923 925 892 881 867 872

1,903 2,036 2,199 2,371 2,548 2,727

8.0% 7.0% 8.0% 7.8% 7.5% 7.0%

41.3% 41.5% 40.8% 41.0% 41.2% 41.1%
5.6% 6.0% 6.0% 5.9% 5.9% 6.0%
8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
8.8% 8.6% 8.7% 7.5% 7.5% 7.5%
11.9% 11.5% 11.5% 11.5% 11.5% 11.5%
7.6% 7.6% 7.6% 7.6% 7.6% 7.6%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
23.0% 23.0% 23.0% 23.0% 23.0% 23.0%
5.5% 5.5% 5.5% 5.5% 5.5% 5.5%

Dec-25 Dec-26 Dec-27 Dec-28 Dec-29 Dec-30

2025A 2026A 2027A 2028A 2029A 2030A

27,143 33,010 40,372 48,787 57,842 67,543

 1,211 1,296 1,399 1,508 1,622 1,735
11,584 12,394 13,386 14,430 15,512 16,598
42,088 44,192 46,402 48,722 51,158 53,716
2,311 2,469 2,650 2,819 3,034 3,248
2,088 2,216 2,339 2,458 2,566 2,670
2,146 2,146 2,146 2,146 2,146 2,146
11,209 11,209 11,209 11,209 11,209 11,209
668 715 800 900 975 1,050
3,087 3,303 3,567 3,845 4,134 4,423
103,533 112,950 124,270 136,825 150,197 164,337

153 164 176 187 201 216

50,430 53,960 58,277 62,822 67,534 72,261
4,600 4,900 5,200 5,500 5,800 6,100
5,811 8,021 10,434 12,990 15,718 18,671
1,198 1,318 1,494 1,710 1,862 2,023
3,678 3,935 4,250 4,582 4,925 5,270
13,098 14,015 15,136 16,317 17,541 18,768
78,968 86,313 94,967 104,108 113,581 123,309

0 0 0 0 0 0
0 0 0 0 0 0
(29,978) (35,082) (40,441) (46,068) (51,977) (58,181)
23,624 25,660 27,859 30,230 32,778 35,505
31,848 36,988 42,814 49,483 56,743 64,632
(928) (928) (928) (928) (928) (928)

24,566 26,637 29,304 32,716 36,617 41,028

0 0 0 0 0 0

Dec-25 Dec-26 Dec-27 Dec-28 Dec-29 Dec-30

2025A 2026A 2027A 2028A 2029A 2030A

4,671 5,139 5,826 6,669 7,260 7,889

1,942 2,210 2,413 2,557 2,728 2,953
923 925 892 881 867 872
1,903 2,036 2,199 2,371 2,548 2,727
(3,131) (3,158) (3,486) (3,642) (3,847) (3,971)
3,852 3,661 4,505 4,773 4,878 4,903
(229) (216) (264) (278) (288) (289)
(150) (150) (150) (150) (150) (150)
272 257 315 332 344 345
10,053 10,704 12,249 13,511 14,340 15,277

(888) (950) (950) (950) (900) (900)

 (888) (950) (950) (950) (900) (900)

970 917 1,121 1,181 1,224 1,228

300 300 300 300 300 300
(4,861) (5,104) (5,359) (5,627) (5,908) (6,204)
(3,591) (3,887) (3,938) (4,146) (4,385) (4,676)

5,575 5,867 7,361 8,415 9,055 9,701

1,963 2,088 2,216 2,339 2,458 2,566

888 950 950 950 900 900
(763) (822) (827) (831) (792) (797)
2,088 2,216 2,339 2,458 2,566 2,670

86.0% 86.5% 87.0% 87.5% 88.0% 88.5%

678 668 715 800 900 975

150 150 150 150 150 150
(160) (103) (65) (50) (75) (75)
668 715 800 900 975 1,050

923 925 892 881 867 872

4,861 5,104 5,359 5,627 5,908 6,204

12,431 14,931 17,431 19,931 22,231 24,431

2,500 2,500 2,500 2,300 2,200 2,200
14,931 17,431 19,931 22,231 24,431 26,631

Dec-25 Dec-26 Dec-27 Dec-28 Dec-29 Dec-30

2025E 2026E 2027E 2028E 2029E 2030E

21,568 27,143 33,010 40,372 48,787 57,842

(13,840) (14,809) (15,994) (17,241) (18,534) (19,832)
5,275 5,567 7,061 8,115 8,755 9,401
13,003 17,901 24,078 31,245 39,007 47,411
40% 40% 40% 40% 40% 40%

4,300 4,600 4,900 5,200 5,500 5,800

(4,300) (4,600) (4,900) (5,200) (5,500) (5,800)
 4,600 4,900 5,200 5,500 5,800 6,100
4,600 4,900 5,200 5,500 5,800 6,100

2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

4,600 4,900 5,200 5,500 5,800 6,100
111 119 126 134 141 149

3.5% 3.5% 3.5% 3.0% 3.0% 3.0%

13,098 14,015 15,136 16,317 17,541 18,768
441 474 510 472 508 545

553 593 636 606 649 693

3.5% 3.5% 3.5% 3.0% 3.0% 3.0%

27,143 33,010 40,372 48,787 57,842 67,543
852 1,053 1,284 1,337 1,599 1,881
Dec-31 Dec-32
2031E 2032E

52,802 56,129

21,678 23,074
3,143 3,329
4,224 4,490
3,960 4,210
6,072 6,455
4,028 4,281
0 0
43,105 45,839
9,697 10,289
2,181 2,502
(738) (782)
0 0
11,141 12,009
2,562 2,762
8,578 9,247

832 818
2,904 3,087

6.5% 6.3%
41.1% 41.1%
6.0% 5.9%
8.0% 8.0%
7.5% 7.5%
11.5% 11.5%
7.6% 7.6%
0.0% 0.0%
0.0% 0.0%
23.0% 23.0%
5.5% 5.5%

Dec-31 Dec-32
2031A 2032A

77,863 88,906
 1,848 1,964
17,677 18,791
56,402 59,222
3,455 3,674
2,763 2,850
2,146 2,146
11,209 11,209
1,125 1,200
4,711 5,007
179,198 194,969

229 244
76,958 81,807
6,400 6,700
21,814 25,143
2,200 2,371
5,613 5,966
19,988 21,248
133,202 143,478

0 0
0 0
(64,695) (71,534)
38,409 41,496
73,210 82,457
(928) (928)

45,997 51,491
0 0

Dec-31 Dec-32
2031A 2032A

8,578 9,247
3,143 3,329
832 818
2,904 3,087
(4,084) (4,269)
4,888 5,034
(288) (297)
(150) (150)
343 354
16,165 17,153

(850) (830)
 (850) (830)

1,220 1,259
300 300
(6,514) (6,840)
(4,994) (5,280)

10,321 11,042

2,670 2,763
850 830
(757) (743)
2,763 2,850

89.0% 89.5%

1,050 1,125
150 150
(75) (75)
1,125 1,200

832 818

6,514 6,840

26,631 28,731
2,100 2,000
28,731 30,731

Dec-31 Dec-32
2031E 2032E

67,543 77,863
(21,121) (22,451)
10,021 10,742
56,442 66,154
40% 40%

6,100 6,400
(6,100) (6,400)
 6,400 6,700
6,400 6,700

2.5% 2.5%
6,400 6,700
156 164

3.0% 3.0%
19,988 21,248
581 619

738 782

3.0% 3.0%
77,863 88,906
2,181 2,502
Discounted Cash Flow Valuation: PayPal
Most recent fiscal year end 12/31/2022
End of first fiscal quarter 12/31/2023
Most recent quarter end date 12/31/2022
Valuation date 11/2/2023
Portion of year 1 cash flow in forecast 16.4%
WACC 10.5%

Actual
Unlevered Free Cash Flows Dec-22

Revenue 27,518
% Growth

EBIT 3,837
% Margin 13.9%

Tax on EBIT 1,080

Tax Rate 28%
NOPAT (EBIAT) 2,757

Depreciation and amortisation 1,317

Transaction and credit losses 1,572
Working capital assets
Working Capital Liabilities
Capital Expenditures

Unlevered Free Cash Flows

Valuation Date
Date for discounting cash flows 11/2/2023
Unlevered FCF's Stub adjusted
PV of Stub-Adjusted FCF's

Terminal Value- Growth in perpetuity approach

Long-term growth rate 1.5%
2032 FCFF * (1+g) 4,840
Terminal Value in 2032 53,774
Present Value of terminal Value 21,525
Present Value of stage 1 cash flows 49,701
Total Enterprise Value 71,226

Terminal value as a percentage of TEV 30.2%

Stage 1 cash flows as a percentage of TEV 69.8%
Implied TPV exit EBITDA Multiple 6.4

Net Debt
Debt 10,417
Minus Cash 13,740
Equity investments 2,146
Net Debt (5,469)

Shares Outsanding
Basic Shares 1154
RSU's 31
Net Diluted Shares Outstanding 1185

Valuation
Enterprise Value 71,226
Net Debt (5,469)
Equity Value 76,695
Shares Oustanding 1185
Equity Value per share 64.72
Current Share Price 71.48
 Expected
Dec-23 Dec-24 Dec-25 Dec-26 Dec-27 Dec-28

29,664 32,038 34,601 37,023 39,984 43,103

7.8% 8.0% 8.0% 7.0% 8.0% 7.8%

5,147 5,443 5,767 6,215 6,919 7,929

17.3% 17.0% 16.7% 16.8% 17.3% 18.4%

1,184 1,252 1,326 1,429 1,591 1,824

23% 23% 23% 23% 23% 23%
3,963 4,191 4,440 4,786 5,328 6,105

861 899 923 925 892 881

1,911 1,958 1,942 2,210 2,413 2,557
(4,802) (3,314) (3,510) (3,524) (3,900) (4,071)
3,563 3,800 4,124 3,918 4,820 5,104
(761) (822) (888) (950) (950) (950)

4,736 6,712 7,032 7,364 8,601 9,627

Year 1- Stub Year 2 Year 3 Year 4 Year 5 Year 6

12/31/2023 Dec-24 Dec-25 Dec-26 Dec-27 Dec-28
776 6,712 7,032 7,364 8,601 9,627
764 5,976 5,665 5,369 5,675 5,747
Dec-29 Dec-30 Dec-31 Dec-32

46,336 49,579 52,802 56,129

7.5% 7.0% 6.5% 6.3%

8,478 9,058 9,697 10,289

18.3% 18.3% 18.4% 18.3%

1,950 2,083 2,230 2,367

23% 23% 23% 23%
6,528 6,974 7,467 7,923

867 872 832 818

2,728 2,953 3,143 3,329
(4,285) (4,410) (4,522) (4,716)
5,221 5,247 5,230 5,388
(900) (900) (850) (830)

10,159 10,736 11,299 11,912

Year 7 Year 8 Year 9 Year 10

Dec-29 Dec-30 Dec-31 Dec-32
10,159 10,736 11,299 11,912 0.0542094
5,488 5,249 4,999 4,768
WACC Buildup: PayPal

Cost of Capital Assumptions

Cost of Debt 4.7%

Tax Rate 23%
Cost of Debt (After Tax) 3.6%

Risk Free Rate 3.4%

Beta 1.2
Market Risk Premium 6.00%
Cost of Equity 10.6%

Capital Weights

Current % of Total
Equity 76,695 108%
Debt -5469 -8%

Cost of Capital (WACC) 11.14%