Stock Analysis on Net
Stock Analysis on Net

PayPal Holdings Inc. (NASDAQ:PYPL)

This company has been moved to the archive! The financial data has not been updated since May 9, 2023.

Common-Size Income Statement

PayPal Holdings Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Net revenues 100.00 100.00 100.00 100.00 100.00
Transaction expense -44.24 -40.66 -36.98 -38.21 -36.12
Transaction and credit losses -5.71 -4.18 -8.12 -7.77 -8.25
Customer support and operations -7.70 -8.18 -8.29 -9.09 -9.11
Sales and marketing -8.20 -9.64 -8.67 -7.88 -8.50
Technology and development -11.82 -11.97 -12.31 -11.73 -11.85
General and administrative -7.63 -8.33 -9.65 -9.63 -9.97
Restructuring and other charges -0.75 -0.24 -0.65 -0.40 -2.00
Operating expenses -86.06% -83.20% -84.67% -84.70% -85.80%
Operating income 13.94% 16.80% 15.33% 15.30% 14.20%
Interest income 0.63 0.22 0.41 1.11 1.09
Interest expense -1.10 -0.91 -0.97 -0.65 -0.50
Net gains (losses) on strategic investments -1.10 0.18 8.92 1.17 0.56
Other -0.13 -0.13 -0.08 -0.06 0.03
Other income (expense), net -1.71% -0.64% 8.28% 1.57% 1.18%
Income before income taxes 12.23% 16.16% 23.61% 16.87% 15.38%
Income tax (expense) benefit -3.44 0.28 -4.02 -3.03 -2.06
Net income 8.79% 16.43% 19.59% 13.84% 13.31%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The common-size income statement analysis reveals a significant contraction in net income margins over the observed five-year period, falling from 13.31% in 2018 to 8.79% in 2022. While operational efficiency was achieved in several administrative categories, these gains were offset by rising direct transaction costs and volatile non-operating results.

Direct Cost Trends
Transaction expenses represent the most significant and growing cost driver, increasing steadily from 36.12% of net revenues in 2018 to 44.24% in 2022. This upward trend suggests an increase in the cost of processing payments or a shift in the mix of services provided. Transaction and credit losses showed volatility, reaching a low of 4.18% in 2021 before rising to 5.71% in 2022.
Operating Expense Management
Efficiencies are evident in General and Administrative expenses, which declined from 9.97% in 2018 to 7.63% in 2022. Similarly, Customer Support and Operations expenses saw a gradual reduction from 9.11% to 7.70%. Technology and Development costs remained remarkably stable, fluctuating narrowly around 12% of net revenues, indicating a consistent investment in infrastructure relative to growth.
Operating Income Performance
Operating income margins experienced a period of expansion, peaking at 16.80% in 2021 before declining to 13.94% in 2022. This decline aligns with the surge in transaction expenses, which pushed total operating expenses to their highest level in the period at 86.06% of net revenues.
Non-Operating and Net Profitability
Net income was heavily influenced by non-operating items, particularly net gains on strategic investments, which created a substantial spike in 2020, contributing 8.92% to net revenues. By 2022, this item transitioned to a loss of 1.10%, contributing to the overall compression of the bottom line. The combination of rising transaction costs and the disappearance of strategic investment gains resulted in the 2022 net income margin of 8.79%, the lowest in the five-year sequence.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.

How can I help you?