SAN JOSE, Calif., Oct. 23, 2019 /PRNewswire/ -- Global technology
platform and digital payments leader PayPal Holdings, Inc. (NASDAQ:
PYPL) today announced third quarter results for the period ended
September 30, 2019.
"We had an excellent quarter financially and operationally,
reporting 19% revenue growth, more than 200 basis points of
operating margin expansion, accelerating TPV growth and nearly 10
million net new active accounts. This quarter we also
announced that we will be the first foreign payments platform to be
licensed to provide online payment services in China, a very significant development that has
the potential to meaningfully expand our addressable market," said
Dan Schulman, President and CEO of
PayPal.
Financial highlights for third quarter 2019
- Revenue of $4.38 billion; growing
19% on both a spot and foreign currency-neutral (FX-neutral or FXN)
basis.
- GAAP operating income of $0.7
billion, increasing 42%; non-GAAP operating income of
$1.03 billion, increasing 30%.
- GAAP operating margin of 15.9% with non-GAAP operating margin
of 23.4%.
- GAAP tax rate of 4.5%; non-GAAP tax rate of 11.1%.
-
- Adjusting for net unrealized losses from strategic investments,
GAAP tax rate of 10.3%; non-GAAP tax rate of 13.5%.
- GAAP EPS of $0.39, increasing 7%;
non-GAAP EPS of $0.61, increasing
5%.
-
- Q3-19 EPS includes a negative impact of $0.15 from net unrealized losses on strategic
investments in MercadoLibre (NASDAQ: MELI) and Uber (NASDAQ:
UBER).
- Excluding the impact of these net unrealized losses, GAAP EPS
of $0.54, increasing 48%; non-GAAP
EPS of $0.76 increasing 31%.
- Cash flow from operations of $1.1
billion with free cash flow of $923
million.
- Repurchased approximately 3.26 million shares of common stock,
returning $350 million to
stockholders.
- Accessed public debt markets for the first time and raised
$5.0 billion in senior fixed rate
notes. PayPal used a portion of the proceeds to repay
outstanding borrowings on its 364-day term loan credit facility
of $2.5 billion and plans to use the remainder of the proceeds
consistent with its capital allocation priorities.
Operating highlights for third quarter 2019
- 9.8 million net new active accounts, bringing total active
accounts to 295 million accounts, up 16%.
- 3.1 billion payment transactions, up 25%.
- $179 billion in total payment
volume (TPV), up 25%, or 27% on an FX-neutral basis.
- 39.8 payment transactions per active account on a trailing
twelve months basis, up 9%.
PayPal's key business drivers
- Merchant Services volume grew 31% on an FX-neutral
basis.
- eBay Marketplaces volume declined 3% on an FX-neutral basis
versus growth of 3% in Q3-18, and represented 8% of TPV for the
quarter versus 11% a year ago.
- Person-to-Person (P2P) volume grew 39% to $51 billion, and represented 28% of TPV.
- Venmo processed more than $27
billion of TPV in the third quarter, growing 64%.
PayPal's platform initiatives
In September, PayPal announced its plans to acquire a 70% equity
interest in Guofubao Information Technology Co., Ltd. (GoPay), a
holder of a payment business license in China. Upon closing,
PayPal will be the first foreign payments company to be licensed to
provide online payment services in China. The transaction is expected to close in
the fourth quarter of 2019 and is subject to customary closing
conditions.
In October, PayPal and Synchrony announced an agreement to
expand and extend their strategic consumer credit relationship. As
part of the agreement, Synchrony will become the exclusive issuer
of a Venmo co-branded consumer credit card, which is expected to
launch in the second half of 2020.
Third Quarter 2019 Financial and Operating Highlights
|
Third
Quarter
|
(presented in
millions, except per share data and percentages)
|
2019
|
2018
|
YoY
Growth
|
FX-Neutral
YoY Growth
|
Total Payment Volume
(TPV)
|
$
|
178,670
|
|
$
|
143,004
|
|
$
|
35,666
|
|
25
|
%
|
27
|
%
|
GAAP
|
|
|
|
|
|
Net
revenues
|
$
|
4,378
|
|
$
|
3,683
|
|
$
|
695
|
|
19
|
%
|
19
|
%
|
Operating
margin
|
15.9
|
%
|
13.3
|
%
|
**
|
|
262bps
|
N/A
|
|
Effective tax
rate
|
4.5
|
%
|
18.2
|
%
|
**
|
|
(13.7pts)
|
N/A
|
|
Net income
|
$
|
462
|
|
$
|
436
|
|
$
|
26
|
|
6
|
%
|
N/A
|
|
Earnings per diluted
share
|
$
|
0.39
|
|
$
|
0.36
|
|
$
|
0.03
|
|
7
|
%
|
N/A
|
|
Net cash provided by
operating activities
|
$
|
1,096
|
|
$
|
4,670
|
|
**
|
|
**
|
N/A
|
|
Non-GAAP
|
|
|
|
|
|
Net
revenues
|
$
|
4,378
|
|
$
|
3,683
|
|
$
|
695
|
|
19
|
%
|
19
|
%
|
Operating
margin
|
23.4
|
%
|
21.4
|
%
|
**
|
|
207bps
|
N/A
|
|
Effective tax
rate
|
11.1
|
%
|
16.4
|
%
|
**
|
|
(5.3pts)
|
N/A
|
|
Net income
|
$
|
723
|
|
$
|
694
|
|
$
|
29
|
|
4
|
%
|
N/A
|
|
Earnings per diluted
share
|
$
|
0.61
|
|
$
|
0.58
|
|
$
|
0.03
|
|
5
|
%
|
N/A
|
|
Free cash
flow
|
$
|
923
|
|
$
|
4,447
|
|
**
|
|
**
|
N/A
|
|
Cash, Cash Equivalents, and Investments - PayPal's
cash, cash equivalents, and investments totaled $13.2 billion as of September 30, 2019.
Long-Term Debt - PayPal's long-term debt totaled
$5.0 billion as of September 30,
2019.
2019 Financial Guidance
Full year 2019 revenue and earnings guidance
- PayPal expects revenue to grow approximately 15% at current
spot rates and approximately 15% on an FX-neutral basis, to a range
of $17.70 - $17.76 billion. As previously disclosed, full
year 2019 revenue growth guidance includes an expected decline of
approximately 3.5 percentage points for full year 2019 related to
the sale of U.S. consumer credit receivables portfolio to
Synchrony.
- PayPal expects GAAP earnings per diluted share in the range of
$2.03 - $2.06 and non-GAAP earnings per diluted share in
the range of $3.06 - $3.08. EPS guidance for full year 2019 includes
$0.11 of net unrealized gains from
PayPal's strategic investments recognized in the first three
quarters of 2019. GAAP and non-GAAP EPS guidance do not
include any expectation of unrealized gains or losses from PayPal's
strategic investment portfolio in Q4 2019.
- Estimated non-GAAP amounts for the twelve months ending
December 31, 2019, reflect
adjustments of approximately $1.37 -
$1.43 billion, including estimated
stock-based compensation expense and related payroll taxes in the
range of $1.06 - $1.10 billion.
- Estimated revenue includes approximately 1.5 points of revenue
growth from acquisitions that closed in 2018.
- The dilutive impact of acquisitions that closed in 2018 is
estimated to be an approximate $0.41
on GAAP EPS, including an estimated $0.22 of negative impact related to taxes
associated with the acquisition of iZettle, and an approximate
$0.08 on non-GAAP EPS.
Fourth quarter 2019 revenue and earnings guidance
- PayPal expects revenue to grow 16 - 17% at current spot rates
and 17 - 18% on an FX-neutral basis, to a range of $4.89 - $4.95
billion.
- PayPal expects GAAP earnings per diluted share in the range of
$0.39 - $0.42 and non-GAAP earnings per diluted share in
the range of $0.81 - $0.83. GAAP and non-GAAP EPS guidance for fourth
quarter 2019 do not include any expectation of unrealized gains or
losses from PayPal's strategic investment portfolio. GAAP EPS
guidance includes an estimated $0.22
of negative impact related to taxes associated with the acquisition
of iZettle.
- Estimated non-GAAP amounts for the three months ending
December 31, 2019, reflect
adjustments of approximately $330 -
$390 million, including estimated
stock-based compensation expense and related payroll taxes in the
range of $260 - $300 million.
Please see "Non-GAAP Financial Measures" and "Non-GAAP Measures
of Financial Performance" for important additional information.
Quarterly conference call and webcast
PayPal Holdings, Inc. will host a conference call to discuss
third quarter 2019 results at 2:00 p.m. Pacific Time today. A
live webcast of the conference call, together with a slide
presentation that includes supplemental financial information and
reconciliations of certain non-GAAP measures to their most directly
comparable GAAP measures, can be accessed through the company's
Investor Relations website at https://investor.paypal-corp.com. In
addition, an archive of the webcast will be accessible for 90 days
through the same link.
PayPal Holdings, Inc. uses its Investor Relations website
(https://investor.paypal-corp.com), its PayPal Stories Blog
(https://www.paypal.com/stories/us), Twitter handles (@PayPal and
@PayPalNews), LinkedIn page
(https://www.linkedin.com/company/paypal), Facebook page
(https://www.facebook.com/PayPalUSA/), YouTube channel
(https://www.youtube.com/paypal), Dan
Schulman's LinkedIn profile
(https://www.linkedin.com/in/dan-schulman/), John Rainey's LinkedIn profile
(www.linkedin.com/in/john-rainey-pypl) and Dan Schulman's Facebook page
(https://www.facebook.com/DanSchulmanPayPal/) as a means of
disclosing information about the company and for complying with its
disclosure obligations under Regulation FD. The information
that is posted through these channels may be deemed
material. Accordingly, investors should monitor these channels
in addition to PayPal's press releases, filings with the Securities
and Exchange Commission ("SEC"), public conference calls, and
webcasts.
About PayPal
PayPal has remained at the forefront of the digital payment
revolution for more than 20 years. By leveraging technology to make
financial services and commerce more convenient, affordable, and
secure, the PayPal platform is empowering more than 295 million
consumers and merchants in more than 200 markets to join and thrive
in the global economy. For more information,
visit paypal.com.
Presentation
All growth rates represent year-over-year comparisons, except as
otherwise noted. FX-neutral results are calculated by translating
the current period local currency results by the prior period
exchange rate. FX-neutral growth rates are calculated by comparing
the current period FX-neutral results with the prior period
results, excluding the impact from hedging activities. All amounts
in tables are presented in U.S. dollars, rounded to the nearest
millions, except as otherwise noted. As a result, certain amounts
and rates may not sum or recalculate using the rounded dollar
amounts provided.
Non-GAAP financial measures
This press release includes financial measures defined as
"non-GAAP financial measures" by the SEC including: non-GAAP net
income, non-GAAP earnings per diluted share, non-GAAP operating
income, non-GAAP operating margin, non-GAAP effective tax rate,
free cash flow, and adjusted free cash flow. For an explanation of
the foregoing non-GAAP measures, please see "Non-GAAP Measures of
Financial Performance" included in this press release. These
measures may be different from non-GAAP financial measures used by
other companies. The presentation of this financial information,
which is not prepared under any comprehensive set of accounting
rules or principles, is not intended to be considered in isolation
of, or as a substitute for, the financial information prepared and
presented in accordance with generally accepted accounting
principles (GAAP). For a reconciliation of these non-GAAP financial
measures to the most directly comparable GAAP measures, see
"Non-GAAP Measures of Financial Performance," "Reconciliation
of GAAP Operating Margin to Non-GAAP Operating Margin,"
"Reconciliation of GAAP Net Income to Non-GAAP Net
Income, GAAP Diluted EPS to Non-GAAP Diluted EPS and GAAP Effective
Tax Rate to Non-GAAP Effective Tax Rate," and "Reconciliation
of Operating Cash Flow to Free Cash Flow and Adjusted Free Cash
Flow."
Forward-looking statements
This press release contains forward-looking statements relating
to, among other things, the future results of operations, financial
condition, expectations, and plans of PayPal Holdings, Inc. and its
consolidated subsidiaries that reflect PayPal's current projections
and forecasts. Forward-looking statements can be identified by
words such as "may," "will," "would," "should," "could," "expect,"
"anticipate," "believe," "estimate," "intend," "strategy,"
"future," "opportunity," "plan," "project," "forecast," and other
similar expressions. Forward-looking statements include, but are
not limited to, statements regarding projected financial results
for the fourth quarter and full year 2019, impact and timing of
acquisitions, and projected future growth of PayPal's businesses.
Forward-looking statements are based upon various estimates and
assumptions, as well as information known to PayPal as of the date
of this press release, and are inherently subject to numerous risks
and uncertainties. Accordingly, actual results could differ
materially from those predicted or implied by forward-looking
statements. Factors that could cause or contribute to such
differences include, but are not limited to: the effect of
political, business, economic, market, and trade conditions,
including any regional or general economic downturn or crisis and
any conditions that affect payments or e-commerce growth;
fluctuations in foreign currency exchange rates; the competitive,
regulatory, payment card association-related and other risks
specific to the PayPal, PayPal Credit, Braintree, Venmo, Xoom,
iZettle, and other products, especially as PayPal continues to
expand geographically and introduce new products and as new laws
and regulations related to payments and financial services come
into effect; the impact of PayPal's customer choice initiatives,
including on its funding mix and transaction expense; PayPal's
ability to successfully compete in an increasingly competitive
environment for its businesses, products and services, including
competition for consumers and merchants and the increasing
importance of mobile payments and mobile commerce; the outcome of
legal and regulatory proceedings and PayPal's need and ability to
manage regulatory, tax and litigation risks as its products and
services are offered in more jurisdictions and applicable laws
become more restrictive; changes to PayPal's capital allocation or
management of operating cash; uncertainty surrounding the
implementation and impact of the United
Kingdom's formal notification of its intent to withdraw from
the European Union; cyberattacks and security vulnerabilities in
PayPal products and services that could disrupt business, reduce
revenue, increase costs, harm us competitively, or lead to
liability; the effect of management changes and business
initiatives; any changes PayPal may make to its product offerings;
the effect of any natural disasters or other business interruptions
on PayPal or PayPal's customers; PayPal's ability to timely upgrade
and develop its technology systems, infrastructure and customer
service capabilities at reasonable cost; PayPal's ability to
maintain the stability, security, and performance of its Payment
Platform while adding new products and features in a timely
fashion; risks that planned acquisitions will not be completed on
contemplated terms, or at all, and that any businesses PayPal may
acquire may not perform in accordance with its expectations; and
PayPal's ability to profitably integrate, manage, and grow
businesses that have been acquired or may be acquired in the
future. The forward-looking statements in this release do not
include the potential impact of any acquisitions or divestitures
that may be announced and/or completed after the date hereof.
More information about factors that could adversely affect
PayPal's results of operations, financial condition and prospects
or that could cause actual results to differ from those expressed
or implied in forward-looking statements is included under the
captions "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in PayPal's most
recent annual report on Form 10-K and its subsequent quarterly
reports on Form 10-Q, copies of which may be obtained by
visiting PayPal's Investor Relations website at
https://investor.paypal-corp.com or the SEC's website at
www.sec.gov. All information in this release speaks as of
October 23, 2019. For the reasons discussed above, you should
not place undue reliance on the forward-looking statements in this
press release. PayPal assumes no obligation to update such
forward-looking statements.
Copyright © 1999-2019 PayPal. All rights reserved. Other company
and product names may be trademarks of their respective owners.
PayPal Holdings,
Inc.
|
|
|
|
Investor Relations
Contacts
|
|
Gabrielle
Rabinovitch
|
Akila
Moorthy
|
grabinovitch@paypal.com
|
amoorthy@paypal.com
|
|
|
Media Relations
Contact
|
|
Amanda
Miller
|
|
amandacmiller@paypal.com
|
|
408.219.0563
|
|
PayPal Holdings,
Inc.
|
Unaudited
Condensed Consolidated Balance Sheets
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
(In millions,
except par value)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
6,877
|
|
|
$
|
7,575
|
|
Short-term
investments
|
3,585
|
|
|
1,534
|
|
Accounts receivable,
net
|
417
|
|
|
313
|
|
Loans and interest
receivable, net
|
3,477
|
|
|
2,532
|
|
Funds receivable and
customer accounts
|
22,511
|
|
|
20,062
|
|
Prepaid expenses and
other current assets
|
881
|
|
|
947
|
|
Total current
assets
|
37,748
|
|
|
32,963
|
|
Long-term
investments
|
2,771
|
|
|
971
|
|
Property and
equipment, net
|
1,701
|
|
|
1,724
|
|
Goodwill
|
6,178
|
|
|
6,284
|
|
Intangible assets,
net
|
629
|
|
|
825
|
|
Other
assets
|
1,196
|
|
|
565
|
|
Total
assets
|
$
|
50,223
|
|
|
$
|
43,332
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
193
|
|
|
$
|
281
|
|
Short-term
debt
|
—
|
|
|
1,998
|
|
Funds payable and
amounts due to customers
|
24,011
|
|
|
21,562
|
|
Accrued expenses and
other current liabilities
|
2,038
|
|
|
2,002
|
|
Income taxes
payable
|
98
|
|
|
61
|
|
Total current
liabilities
|
26,340
|
|
|
25,904
|
|
Deferred tax
liability and other long-term liabilities
|
2,436
|
|
|
2,042
|
|
Long-term
debt
|
4,964
|
|
|
—
|
|
Total
liabilities
|
33,740
|
|
|
27,946
|
|
Equity:
|
|
|
|
Common stock,
$0.0001 par value; 4,000 shares authorized; 1,174 shares
outstanding as of both September 30, 2019 and December 31,
2018
|
—
|
|
|
—
|
|
Preferred stock,
$0.0001 par value; 100 shares authorized, unissued
|
—
|
|
|
—
|
|
Treasury stock at
cost, 102 and 91 shares as of September 30, 2019 and December 31,
2018, respectively
|
(6,566)
|
|
|
(5,511)
|
|
Additional
paid-in-capital
|
15,266
|
|
|
14,939
|
|
Retained
earnings
|
7,835
|
|
|
5,880
|
|
Accumulated other
comprehensive income (loss)
|
(52)
|
|
|
78
|
|
Total
equity
|
16,483
|
|
|
15,386
|
|
Total liabilities and
equity
|
$
|
50,223
|
|
|
$
|
43,332
|
|
PayPal Holdings,
Inc.
|
Unaudited
Condensed Consolidated Statements of Income
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
|
4,378
|
|
|
$
|
3,683
|
|
|
$
|
12,811
|
|
|
$
|
11,225
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Transaction
expense
|
1,701
|
|
|
1,366
|
|
|
4,877
|
|
|
4,003
|
|
Transaction and loan
losses
|
340
|
|
|
295
|
|
|
999
|
|
|
934
|
|
Customer support and
operations(1)(2)
|
390
|
|
|
350
|
|
|
1,177
|
|
|
1,030
|
|
Sales and marketing
(1)(2)
|
316
|
|
|
325
|
|
|
1,001
|
|
|
913
|
|
Technology and
development (1)(2)
|
533
|
|
|
452
|
|
|
1,527
|
|
|
1,341
|
|
General and
administrative (1)(2)
|
401
|
|
|
377
|
|
|
1,239
|
|
|
1,111
|
|
Restructuring and
other charges
|
—
|
|
|
28
|
|
|
71
|
|
|
297
|
|
Total operating
expenses
|
3,681
|
|
|
3,193
|
|
|
10,891
|
|
|
9,629
|
|
Operating
income
|
697
|
|
|
490
|
|
|
1,920
|
|
|
1,596
|
|
Other income
(expense), net
|
(213)
|
|
|
43
|
|
|
224
|
|
|
94
|
|
Income before income
taxes
|
484
|
|
|
533
|
|
|
2,144
|
|
|
1,690
|
|
Income tax
expense
|
22
|
|
|
97
|
|
|
192
|
|
|
217
|
|
Net income
|
$
|
462
|
|
|
$
|
436
|
|
|
$
|
1,952
|
|
|
$
|
1,473
|
|
Net income per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.39
|
|
|
$
|
0.37
|
|
|
$
|
1.66
|
|
|
$
|
1.24
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
0.36
|
|
|
$
|
1.64
|
|
|
$
|
1.22
|
|
Weighted average
shares:
|
|
|
|
|
|
|
|
Basic
|
1,175
|
|
|
1,181
|
|
|
1,174
|
|
|
1,187
|
|
Diluted
|
1,188
|
|
|
1,199
|
|
|
1,188
|
|
|
1,206
|
|
|
|
|
|
|
|
|
|
(1)
Includes stock-based compensation as follows:
|
|
|
|
|
|
|
|
Customer support and
operations(2)
|
51
|
|
|
46
|
|
|
144
|
|
|
129
|
|
Sales and
marketing(2)
|
31
|
|
|
30
|
|
|
95
|
|
|
93
|
|
Technology and
development(2)
|
119
|
|
|
76
|
|
|
292
|
|
|
222
|
|
General and
administrative(2)
|
72
|
|
|
65
|
|
|
226
|
|
|
192
|
|
|
$
|
273
|
|
|
$
|
217
|
|
|
$
|
757
|
|
|
$
|
636
|
|
(2)
Prior period amounts have been updated to reflect the
classification changes described in the Form 8-K filed on April 9,
2019.
|
PayPal Holdings,
Inc.
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In
millions)
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
462
|
|
|
$
|
436
|
|
|
$
|
1,952
|
|
|
$
|
1,473
|
|
Adjustments:
|
|
|
|
|
|
|
|
Transaction and loan
losses
|
340
|
|
|
295
|
|
|
999
|
|
|
934
|
|
Depreciation and
amortization
|
227
|
|
|
188
|
|
|
685
|
|
|
553
|
|
Stock-based
compensation
|
266
|
|
|
213
|
|
|
736
|
|
|
623
|
|
Deferred income
taxes
|
(157)
|
|
|
(123)
|
|
|
(122)
|
|
|
(34)
|
|
Cost basis
adjustments to loans and interest receivable held for
sale
|
—
|
|
|
—
|
|
|
—
|
|
|
244
|
|
Unrealized losses
(gains) on strategic investments
|
228
|
|
|
—
|
|
|
(170)
|
|
|
(31)
|
|
Other
|
(38)
|
|
|
(38)
|
|
|
(130)
|
|
|
(48)
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(37)
|
|
|
(134)
|
|
|
(103)
|
|
|
(133)
|
|
Changes in loans and
interest receivable held for sale, net
|
—
|
|
|
3,675
|
|
|
4
|
|
|
1,407
|
|
Accounts
payable
|
(2)
|
|
|
22
|
|
|
(51)
|
|
|
5
|
|
Income taxes
payable
|
(26)
|
|
|
(7)
|
|
|
(33)
|
|
|
(21)
|
|
Other assets and
liabilities
|
(167)
|
|
|
143
|
|
|
(470)
|
|
|
(623)
|
|
Net cash provided by
operating activities
|
1,096
|
|
|
4,670
|
|
|
3,297
|
|
|
4,349
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(173)
|
|
|
(223)
|
|
|
(530)
|
|
|
(599)
|
|
Proceeds from sales
of property and equipment
|
17
|
|
|
—
|
|
|
17
|
|
|
—
|
|
Changes in principal
loans receivable, net
|
(379)
|
|
|
2,573
|
|
|
(1,111)
|
|
|
3,573
|
|
Purchases of
investments
|
(6,617)
|
|
|
(5,025)
|
|
|
(19,808)
|
|
|
(15,641)
|
|
Maturities and sales
of investments
|
6,853
|
|
|
6,278
|
|
|
17,390
|
|
|
15,947
|
|
Acquisitions, net of
cash and restricted cash acquired
|
—
|
|
|
(2,120)
|
|
|
—
|
|
|
(2,136)
|
|
Funds
receivable
|
922
|
|
|
(1,329)
|
|
|
(1,292)
|
|
|
(427)
|
|
Net cash provided by
(used in) investing activities
|
623
|
|
|
154
|
|
|
(5,334)
|
|
|
717
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds from
issuance of common stock
|
4
|
|
|
5
|
|
|
78
|
|
|
83
|
|
Purchases of treasury
stock
|
(350)
|
|
|
(600)
|
|
|
(1,106)
|
|
|
(2,925)
|
|
Tax withholdings
related to net share settlements of equity awards
|
(24)
|
|
|
(20)
|
|
|
(473)
|
|
|
(392)
|
|
Borrowings under
financing arrangements
|
4,971
|
|
|
—
|
|
|
5,471
|
|
|
2,075
|
|
Repayments under
financing arrangements
|
(2,509)
|
|
|
(25)
|
|
|
(2,509)
|
|
|
(1,101)
|
|
Funds payable and
amounts due to customers
|
(753)
|
|
|
1,689
|
|
|
2,376
|
|
|
2,767
|
|
Net cash provided by
financing activities
|
1,339
|
|
|
1,049
|
|
|
3,837
|
|
|
507
|
|
Effect of exchange
rate changes on cash, cash equivalents, and restricted
cash
|
(48)
|
|
|
(26)
|
|
|
(49)
|
|
|
(89)
|
|
Net change in cash,
cash equivalents, and restricted cash
|
3,010
|
|
|
5,847
|
|
|
1,751
|
|
|
5,484
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
11,974
|
|
|
7,922
|
|
|
13,233
|
|
|
8,285
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
14,984
|
|
|
$
|
13,769
|
|
|
$
|
14,984
|
|
|
$
|
13,769
|
|
Supplemental cash
flow disclosures:
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
31
|
|
|
$
|
21
|
|
|
$
|
76
|
|
|
$
|
47
|
|
Cash paid for income
taxes, net
|
$
|
44
|
|
|
$
|
48
|
|
|
$
|
220
|
|
|
$
|
228
|
|
PayPal Holdings,
Inc.
|
Unaudited Summary
of Consolidated Net Revenues
|
|
We earn revenue from
the following types of transactions:
|
|
|
•
|
Transaction
revenues: Net transaction fees charged to merchants and
consumers on a transaction basis primarily based on the volume of
activity, or Total Payment Volume ("TPV"), completed on our
Payments Platform, including our PayPal, PayPal Credit, Venmo,
Braintree, Xoom, and iZettle products.
|
|
|
•
|
Other value added
services: Net revenues derived primarily from revenue earned
through partnerships, subscription fees, gateway fees, and other
services we provide to our merchants and customers. We also earn
revenues from interest and fees earned primarily on our PayPal
credit portfolio of loans receivable, gain on sale of participation
interest in certain loans and advances, and interest earned on
certain PayPal customer account balances.
|
Net Revenues by
Type
|
Three Months
Ended
|
|
September 30, 2019
|
|
June 30, 2019
|
|
March 31, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
(In millions,
except percentages)
|
Transaction
revenues
|
$
|
3,955
|
|
|
$
|
3,878
|
|
|
$
|
3,731
|
|
|
$
|
3,851
|
|
|
$
|
3,343
|
|
Current quarter vs
prior quarter
|
2
|
%
|
|
4
|
%
|
|
(3)
|
%
|
|
15
|
%
|
|
1
|
%
|
Current quarter vs
prior year quarter
|
18
|
%
|
|
17
|
%
|
|
17
|
%
|
|
19
|
%
|
|
17
|
%
|
Percentage of
total
|
90
|
%
|
|
90
|
%
|
|
90
|
%
|
|
91
|
%
|
|
91
|
%
|
|
|
|
|
|
|
|
|
|
|
Other value added
services
|
423
|
|
|
427
|
|
|
397
|
|
|
375
|
|
|
340
|
|
Current quarter vs
prior quarter
|
(1)
|
%
|
|
8
|
%
|
|
6
|
%
|
|
10
|
%
|
|
(37)
|
%
|
Current quarter vs
prior year quarter
|
24
|
%
|
|
(21)
|
%
|
|
(19)
|
%
|
|
(25)
|
%
|
|
(11)
|
%
|
Percentage of
total
|
10
|
%
|
|
10
|
%
|
|
10
|
%
|
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
Total net
revenues
|
$
|
4,378
|
|
|
$
|
4,305
|
|
|
$
|
4,128
|
|
|
$
|
4,226
|
|
|
$
|
3,683
|
|
Current quarter vs
prior quarter
|
2
|
%
|
|
4
|
%
|
|
(2)
|
%
|
|
15
|
%
|
|
(5)
|
%
|
Current quarter vs
prior year quarter
|
19
|
%
|
|
12
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
|
|
|
|
Net Revenues by
Geography
|
Three Months
Ended
|
|
September 30, 2019
|
|
June 30, 2019
|
|
March 31, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
(In millions,
except percentages)
|
U.S. net
revenues
|
$
|
2,327
|
|
|
$
|
2,297
|
|
|
$
|
2,187
|
|
|
$
|
2,189
|
|
|
$
|
1,962
|
|
Current quarter vs
prior quarter
|
1
|
%
|
|
5
|
%
|
|
—
|
%
|
|
12
|
%
|
|
(9)
|
%
|
Current quarter vs
prior year quarter
|
19
|
%
|
|
7
|
%
|
|
8
|
%
|
|
7
|
%
|
|
13
|
%
|
Percent of
total
|
53
|
%
|
|
53
|
%
|
|
53
|
%
|
|
52
|
%
|
|
53
|
%
|
|
|
|
|
|
|
|
|
|
|
International net
revenues
|
2,051
|
|
|
2,008
|
|
|
1,941
|
|
|
2,037
|
|
|
1,721
|
|
Current quarter vs
prior quarter
|
2
|
%
|
|
3
|
%
|
|
(5)
|
%
|
|
18
|
%
|
|
1
|
%
|
Current quarter vs
prior year quarter
|
19
|
%
|
|
18
|
%
|
|
17
|
%
|
|
20
|
%
|
|
15
|
%
|
(FXN) Current
quarter vs prior year quarter
|
20
|
%
|
|
18
|
%
|
|
17
|
%
|
|
19
|
%
|
|
15
|
%
|
Percent of
total
|
47
|
%
|
|
47
|
%
|
|
47
|
%
|
|
48
|
%
|
|
47
|
%
|
|
|
|
|
|
|
|
|
|
|
Total net
revenues
|
$
|
4,378
|
|
|
$
|
4,305
|
|
|
$
|
4,128
|
|
|
$
|
4,226
|
|
|
$
|
3,683
|
|
Current quarter vs
prior quarter
|
2
|
%
|
|
4
|
%
|
|
(2)
|
%
|
|
15
|
%
|
|
(5)
|
%
|
Current quarter vs
prior year quarter
|
19
|
%
|
|
12
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
(FXN) Current
quarter vs prior year quarter
|
19
|
%
|
|
12
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
PayPal Holdings,
Inc.
|
Unaudited
Supplemental Operating Data
|
|
|
Three Months
Ended,
|
|
September 30, 2019
|
|
June 30, 2019
|
|
March 31, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
(In millions,
except percentages)
|
Active
accounts(1)
|
295
|
|
|
286
|
|
|
277
|
|
|
267
|
|
|
254
|
|
Current quarter vs
prior quarter
|
3
|
%
|
|
3
|
%
|
|
3
|
%
|
|
5
|
%
|
|
4
|
%
|
Current quarter vs
prior year quarter
|
16
|
%
|
|
17
|
%
|
|
17
|
%
|
|
17
|
%
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
Number of payment
transactions(2)
|
3,090
|
|
|
2,973
|
|
|
2,838
|
|
|
2,867
|
|
|
2,463
|
|
Current quarter vs
prior quarter
|
4
|
%
|
|
5
|
%
|
|
(1)
|
%
|
|
16
|
%
|
|
6
|
%
|
Current quarter vs
prior year quarter
|
25
|
%
|
|
28
|
%
|
|
28
|
%
|
|
28
|
%
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
Payment
transactions per active account(3)
|
39.8
|
|
|
39.0
|
|
|
37.9
|
|
|
36.9
|
|
|
36.5
|
|
Current quarter vs
prior quarter
|
2
|
%
|
|
3
|
%
|
|
3
|
%
|
|
1
|
%
|
|
2
|
%
|
Current quarter vs
prior year quarter
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
Total Payment
Volume(4)
|
$
|
178,670
|
|
|
$
|
172,359
|
|
|
$
|
161,492
|
|
|
$
|
163,648
|
|
|
$
|
143,004
|
|
Current quarter vs
prior quarter
|
4
|
%
|
|
7
|
%
|
|
(1)
|
%
|
|
14
|
%
|
|
3
|
%
|
Current quarter vs
prior year quarter
|
25
|
%
|
|
24
|
%
|
|
22
|
%
|
|
23
|
%
|
|
24
|
%
|
(FXN) Current
quarter vs prior year quarter
|
27
|
%
|
|
26
|
%
|
|
25
|
%
|
|
25
|
%
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
Transaction Expense
Rate(5)
|
0.95
|
%
|
|
0.94
|
%
|
|
0.96
|
%
|
|
0.96
|
%
|
|
0.96
|
%
|
Transaction and Loan
Loss Rate(6)
|
0.19
|
%
|
|
0.18
|
%
|
|
0.21
|
%
|
|
0.21
|
%
|
|
0.21
|
%
|
Transaction
Margin(7)
|
53.4
|
%
|
|
54.8
|
%
|
|
54.2
|
%
|
|
54.6
|
%
|
|
54.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in the table
are rounded to the nearest million, except as otherwise noted. As a
result, certain amounts may not recalculate using the rounded
amounts provided.
|
(1) An
active account is an account registered directly with PayPal or a
platform access partner that has completed a transaction on our
Payments Platform, not including gateway-exclusive transactions,
within the past 12 months.
|
(2)
Payment transactions are the total number of payments, net of
payment reversals, successfully completed on our Payments Platform
or enabled by PayPal via a partner payment solution, not including
gateway-exclusive transactions.
|
(3) Number
of payment transactions per active account reflects the total
number of payment transactions within the previous 12 month period,
divided by active accounts at the end of the period.
|
(4) TPV is the value of payments, net
of reversals, successfully completed on our Payments Platform
or enabled by PayPal via a partner payment solution, not including
gateway-exclusive transactions.
|
(5)
Transaction expense rate is calculated by dividing transaction
expense by TPV.
|
(6)
Transaction and loan loss rate is calculated by dividing
transaction and loan loss by TPV.
|
(7)
Transaction margin is total revenue less transaction expense and
transaction and loan loss, divided by total revenue.
|
PayPal Holdings, Inc.
Non-GAAP Measures of Financial Performance
To supplement the company's condensed consolidated financial
statements presented in accordance with generally accepted
accounting principles, or GAAP, the company uses non-GAAP measures
of certain components of financial performance. These non-GAAP
measures include non-GAAP net income, non-GAAP diluted earnings per
share, non-GAAP operating income, non-GAAP operating margin,
non-GAAP effective tax rate, free cash flow and adjusted free cash
flow.
These non-GAAP measures are not in accordance with, or an
alternative to, measures prepared in accordance with GAAP and may
be different from non-GAAP measures used by other companies. In
addition, these non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. Non-GAAP
measures have limitations in that they do not reflect all of the
amounts associated with the company's results of operations as
determined in accordance with GAAP. These measures should only be
used to evaluate the company's results of operations in conjunction
with the corresponding GAAP measures.
Reconciliation to the most directly comparable GAAP measure of
all non-GAAP measures included in this press release can be found
in the tables included in this press release.
These non-GAAP measures are provided to enhance investors'
overall understanding of the company's current financial
performance and its prospects for the future. Specifically, the
company believes the non-GAAP measures provide useful information
to both management and investors by excluding certain expenses,
gains and losses, as the case may be, that may not be indicative of
its core operating results and business outlook. In addition,
because the company has historically reported certain non-GAAP
results to investors, the company believes that the inclusion of
non-GAAP measures provides consistency in the company's financial
reporting.
For its internal budgeting process, and as discussed further
below, the company's management uses financial measures that do not
include stock-based compensation expense, employer payroll taxes on
stock-based compensation, amortization or impairment of acquired
intangible assets, impairment of goodwill, restructuring-related
charges, certain other gains, losses, benefits or charges that are
not indicative of the company's core operating results and the
income taxes associated with the foregoing. In addition to the
corresponding GAAP measures, the company's management also uses the
foregoing non-GAAP measures in reviewing the financial results of
the company.
The company excludes the following items from non-GAAP net
income, non-GAAP diluted earnings per share, non-GAAP operating
income, non-GAAP operating margin and non-GAAP effective tax
rate:
Stock-based compensation
expense and related employer payroll taxes. This consists
of expenses for equity awards under our equity incentive plans. We
exclude stock-based compensation expense from our non-GAAP measures
primarily because they are non-cash expenses. The related employer
payroll taxes are dependent on our stock price and the timing and
size of exercises and vesting of equity awards, over which
management has limited to no control, and as such management does
not believe it correlates to the operation of our business.
Amortization or impairment of
acquired intangible assets, impairment of goodwill, and transaction
expenses from the acquisition or disposal of a business. We
incur amortization or impairment of acquired intangible assets and
goodwill in connection with acquisitions and may incur significant
gains or losses or transactional expenses from the acquisition or
disposal of a business and therefore exclude these amounts from our
non-GAAP measures. We exclude these items because management does
not believe they are reflective of our ongoing operating
results.
Restructuring. These
consist of expenses for employee severance and other exit and
disposal costs. The company excludes significant restructuring
charges primarily because management does not believe they are
reflective of ongoing operating results.
Certain other significant
gains, losses, benefits, or charges that are not indicative of the
company's core operating results. These are significant
gains, losses, benefits, or charges during a period that are the
result of isolated events or transactions which have not occurred
frequently in the past and are not expected to occur regularly in
the future. The company excludes these amounts from its
non-GAAP results because management does not believe they are
indicative of its current or ongoing operating results.
Tax effect of non-GAAP
adjustments. This adjustment is made to present
stock-based compensation and the other amounts described above on
an after-tax basis consistent with the presentation of non-GAAP net
income.
The company also uses free cash flow, a non-GAAP measure. Free
cash flow represents operating cash flows less purchases of
property and equipment. The company considers free cash flow to be
a liquidity measure that provides useful information to management
and investors about the amount of cash generated by the business
after the purchases of property, buildings, and equipment, which
can then be used to, among other things, invest in the company's
business, make strategic acquisitions and investments, and
repurchase stock. A limitation of the utility of free cash flow as
a measure of financial performance is that it does not represent
the total increase or decrease in the company's cash balance for
the period.
In addition to the non-GAAP measures discussed above, the
company also analyzes certain measures, including net revenues and
operating expenses, on an FX-neutral basis to better measure the
comparability of operating results between periods. The company
believes that changes in foreign currency exchange rates are not
indicative of the company's operations and evaluating growth in net
revenues and operating expenses on an FX-neutral basis provides an
additional meaningful and comparable assessment of these measures
to both management and investors. FX-neutral results are calculated
by translating the current period's local currency results with the
prior period's exchange rate. FX-neutral growth rates are
calculated by comparing the current period's FX-neutral results by
the prior period's results, excluding the impact from hedging
activities.
PayPal Holdings,
Inc.
|
Reconciliation of
GAAP Operating Margin to Non-GAAP Operating Margin
|
|
|
Three Months Ended
September 30,
|
|
2019
|
|
2018
|
|
(In millions,
except percentages)
|
|
(unaudited)
|
GAAP operating
income
|
$
|
697
|
|
|
$
|
490
|
|
Stock-based
compensation expense and related employer payroll taxes
|
277
|
|
|
219
|
|
Amortization of
acquired intangible assets
|
52
|
|
|
33
|
|
Other(1)
|
—
|
|
|
28
|
|
Acquisition related
transaction expense
|
—
|
|
|
17
|
|
Total non-GAAP
operating income adjustments
|
329
|
|
|
297
|
|
Non-GAAP operating
income
|
$
|
1,026
|
|
|
$
|
787
|
|
Non-GAAP operating
margin
|
23
|
%
|
|
21
|
%
|
|
(1)Net
loss related to the sale of our U.S.consumer credit receivables
portfolio.
|
Reconciliation of
GAAP Net Income to Non-GAAP Net Income,
|
GAAP Diluted EPS
to Non-GAAP Diluted EPS,
|
and GAAP Effective
Tax Rate to Non-GAAP Effective Tax Rate
|
|
|
Three Months Ended
September 30,
|
|
2019
|
|
2018
|
|
(In millions,
except per share data
and percentages)
|
|
(unaudited)
|
GAAP income before
income taxes
|
$
|
484
|
|
|
$
|
533
|
|
GAAP income tax
expense
|
22
|
|
|
97
|
|
GAAP net
income
|
462
|
|
|
436
|
|
Non-GAAP adjustments
to net income:
|
|
|
|
Non-GAAP operating
income adjustments (see table above)
|
329
|
|
|
297
|
|
Other(1)
|
—
|
|
|
14
|
|
Tax effect of
non-GAAP adjustments
|
(68)
|
|
|
(53)
|
|
Non-GAAP net
income
|
$
|
723
|
|
|
$
|
694
|
|
|
|
|
|
Diluted net income
per share:
|
|
|
|
GAAP
|
$
|
0.39
|
|
|
$
|
0.36
|
|
Non-GAAP
|
$
|
0.61
|
|
|
$
|
0.58
|
|
Shares used in GAAP
diluted share calculation
|
1,188
|
|
|
1,199
|
|
Shares used in
non-GAAP diluted share calculation
|
1,188
|
|
|
1,199
|
|
|
|
|
|
GAAP effective tax
rate
|
5
|
%
|
|
18
|
%
|
Tax effect of
non-GAAP adjustments to net income
|
6
|
%
|
|
(2)
|
%
|
Non-GAAP effective
tax rate
|
11
|
%
|
|
16
|
%
|
|
(1) Tax
expense related to the Tax Cuts and Jobs Act and intra-entity
transfer of intellectual property.
|
PayPal Holdings,
Inc.
|
Reconciliation of
Operating Cash Flow to Free Cash Flow and Adjusted Free Cash
Flow
|
|
|
Three Months Ended
September 30,
|
|
2019
|
|
2018
|
|
(In
millions/unaudited)
|
Net cash provided by
operating activities
|
$
|
1,096
|
|
|
$
|
4,670
|
|
Less: Purchases of
property and equipment
|
(173)
|
|
|
(223)
|
|
Free cash
flow
|
$
|
923
|
|
|
$
|
4,447
|
|
Impact of held for
sale accounting presentation related to our U.S. consumer credit
receivables portfolio on cash flow from operating
activities
|
—
|
|
|
(3,675)
|
|
Adjusted free cash
flow
|
$
|
923
|
|
|
$
|
772
|
|
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SOURCE PayPal Holdings, Inc.