The process of separating PayPal Holdings Inc. from eBay Inc. has resulted in differences between PayPal historical combined (“carve out”) financials/metrics in the Form 10 and those that have been previously provided for eBay Inc.’s Payments segment. For example:
- Revenue: Carve out includes certain intercompany transactions with eBay that are eliminated in eBay Inc.’s results.
- Operating Margin: Carve out includes allocations of corporate costs and other charges/credits not previously allocated to the Payments segment.
- Free cash flow: We previously stated 2014 pro forma FCF for PayPal was $1.4B. This figure attributed approximately $300M of PayPal cash use to operating activities, which we are now placing in cash use to investing activities in the Form 10. PayPal’s updated 2014 FCF is $1.7B.
The table below summarizes the differences as of February 25, 2015.
Note: The historical results of “New eBay” (i.e. the remaining operations of eBay, Inc. post the separation of PayPal) may not be derived by subtracting PayPal’s results as presented in the Form 10 from those presented in eBay Inc.’s 10-K. This is due to a number of factors, including anticipated changes in costs resulting from the separation, potential differences between historical allocations, and the impact of the transfer of certain assets and liabilities to PayPal from eBay.