PayPal Holdings, Inc. reports 23.4% CAPEX growth in 2018 and 18.0% Revenue growth
01/30/2019 • About PayPal Holdings, Inc. (
$PYPL) • By InTwits
PayPal Holdings, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- PayPal Holdings, Inc. is a fast growth stock: 2018 revenue growth was 18.0%, 5 year revenue CAGR was 18.1% at 2018 ROIC 12.8%
- PayPal Holdings, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 4.5% while average EBITDA Margin was 21.3% for the sames years. In 2018 SBC/Revenue was even higher: 5.5%
- PayPal Holdings, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.1%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $534m in FY2018, $464m in FY2017, $710m in FY2016, $290m in FY2015, $299m in FY2014
- The company has highly profitable business model: ROIC is 12.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 18.0%. Revenue growth showed slowdown in 18Q4 - it was 12.9% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 3.2 pp from 22.4% to 19.2% in 2018.
SG&A as a % of Revenue showed almost no change in 2018. SG&A as a % of Revenue followed a declining trend at -0.84 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue grew at 0.67 pp per annum in 2014-2018.
Net Income margin showed almost no change in 2018. The efficient tax rate was 13.4% in 2018 while the average for the last five years was 23.0%.
Investments (CAPEX, working capital and M&A)
In 2018 PayPal Holdings, Inc. had CAPEX/Revenue of 5.3%. PayPal Holdings, Inc.'s CAPEX/Revenue decreased on 2.5 pp from 7.8% in 2015 to 5.3% in 2018. Average CAPEX/Revenue for the last three years was 5.5%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Accounts payable as a % of Revenue didn't change in 2018.
PayPal Holdings, Inc. has spent
$2,124m on M&A in 2018 which accounts for 13.7% of revenue.
Return on investment
The company operates at good ROIC (12.8%) and ROE (13.1%). ROIC showed almost no change in 2018. ROE increased slightly on 1.4 pp from 11.7% to 13.1% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -1.9x and Debt / EBITDA is 0.7x. Debt jumped on 99.8% while cash jumped on 163%.
PayPal Holdings, Inc. has no short term refinancing risk: cash is higher than short term debt (379.1%).
Valuation and dividends
PayPal Holdings, Inc.'s trades at EV/EBITDA 34.6x and P/E 52.7x.
Management team
Daniel H Schulman "Dan" is a the company's CEO. Daniel H Schulman "Dan" is a founder and has spent 4 years with the company. CEO total compensation was
$37,764,588 in 2018 which included
$1,000,000 salary. The company's CFO is John D Rainey. John D Rainey has 1 year tenure at the company.
0.12% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 21,800 employees. The number of employees surged on 16.6%. Average revenue per employee in 2018 was
$708,761 and it increased slightly on 1.2%.
Financial and operational results
FY ended 12/31/2018
PayPal Holdings, Inc. ($PYPL) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 8,025 | 9,248 | 10,842 | 13,094 | 15,451 | 18.0% |
| SG&A | 1,687 | 1,810 | 1,997 | 2,283 | 2,764 | 21.1% |
| EBITDA | 1,784 | 2,069 | 2,310 | 2,932 | 2,970 | 1.3% |
| EBIT | 1,268 | 1,461 | 1,586 | 2,127 | 2,194 | 3.1% |
| Interest expence | 7 | | | | | |
| Tax | 842 | 260 | 230 | 405 | 319 | -21.2% |
| Net Income | 419 | 1,228 | 1,401 | 1,795 | 2,057 | 14.6% |
| Stock Based Compensation | 258 | 320 | 398 | 733 | 853 | 16.4% |
Balance Sheet
|
|---|
| Cash | 2,201 | 1,393 | 1,590 | 2,883 | 7,575 | 162.7% |
| Accounts Receivable | 65 | 137 | 214 | 283 | 313 | 10.6% |
| Accounts Payable | 115 | 145 | 192 | 257 | 281 | 9.3% |
| Short Term Debt | 1,093 | 0 | 0 | 1,000 | 1,998 | 99.8% |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 492 | 722 | 669 | 667 | 823 | 23.4% |
| Acquisitions | 2 | 1,225 | 19 | 323 | 2,124 | 557.6% |
Ratios
|
|---|
| Revenue growth | 19.3% | 15.2% | 17.2% | 20.8% | 18.0% | |
| EBITDA growth | 15.5% | 16.0% | 11.6% | 26.9% | 1.3% | |
|
|---|
| EBITDA Margin | 22.2% | 22.4% | 21.3% | 22.4% | 19.2% | -3.2% |
| EBIT Margin | 15.8% | 15.8% | 14.6% | 16.2% | 14.2% | -2.0% |
| SG&A, % of revenue | 21.0% | 19.6% | 18.4% | 17.4% | 17.9% | 0.5% |
| SBC, % of revenue | 3.2% | 3.5% | 3.7% | 5.6% | 5.5% | -0.1% |
| Net Income Margin | 5.2% | 13.3% | 12.9% | 13.7% | 13.3% | -0.4% |
| CAPEX, % of revenue | 6.1% | 7.8% | 6.2% | 5.1% | 5.3% | 0.2% |
|
|---|
| ROIC | 23.5% | 12.0% | 10.3% | 12.9% | 12.8% | -0.1% |
| ROE | | 11.2% | 9.8% | 11.7% | 13.1% | 1.4% |
| Net Debt/EBITDA | -0.6x | -0.7x | -0.7x | -0.6x | -1.9x | -1.2x |
| Interest expence / Average debt | 0.6% | | | | | |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | | 16,800 | 18,100 | 18,700 | 21,800 | 16.6% |
| Revenue/Employee, th. $ | | 550 | 599 | 700 | 709 | 1.2% |
PayPal Holdings, Inc. ($PYPL) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,685 | 3,857 | 3,683 | 4,226 | | 23.9% | 23.0% | 13.7% | 12.9% |
| EBITDA | 719 | 752 | 678 | 821 | | 17.1% | 19.2% | 9.9% | -23.3% |
| Net Income | 511 | 526 | 436 | 584 | | 33.1% | 28.0% | 14.7% | -5.8% |
Balance Sheet
|
|---|
| Cash | 2,879 | 2,840 | 8,147 | 7,575 | | 132.2% | 123.4% | 249.7% | 162.7% |
| Short Term Debt | 3,000 | 2,000 | 2,000 | 1,998 | | | | | 99.8% |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| EBITDA Margin | 19.5% | 19.5% | 18.4% | 19.4% | | -1.1% | -0.6% | -0.6% | -9.2% |
| Net Income Margin | 13.9% | 13.6% | 11.8% | 13.8% | | 1.0% | 0.5% | 0.1% | -2.7% |
Peers in Data Processing & Outsourced S
Below you can find PayPal Holdings, Inc. benchmarking vs. other companies in Data Processing & Outsourced S industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.0% | 7.6% | 10.1% | 7.4% |
|---|
| PayPal Holdings, Inc. ($PYPL) | | 15.2% | 17.2% | 20.8% | 18.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (45 companies) | 38.8% | 39.5% | 39.3% | 39.3% | 41.0% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.4% | 21.0% | 21.2% | 20.6% | 19.3% |
|---|
| PayPal Holdings, Inc. ($PYPL) | 22.2% | 22.4% | 21.3% | 22.4% | 19.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.0% |
|---|
| PayPal Holdings, Inc. ($PYPL) | 6.1% | 7.8% | 6.2% | 5.1% | 5.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 13.3% | 13.1% | 11.7% | 10.6% | 10.2% |
|---|
| PayPal Holdings, Inc. ($PYPL) | 23.5% | 12.0% | 10.3% | 12.9% | 12.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| PayPal Holdings, Inc. ($PYPL) | -0.6x | -0.7x | -0.7x | -0.6x | -1.9x |
