SAN JOSE, Calif., July 24, 2019 /PRNewswire/ -- Global technology
platform and digital payments leader PayPal Holdings, Inc. (NASDAQ:
PYPL) today announced second quarter results for the period ended
June 30, 2019.
"PayPal delivered another solid quarter, and consequently we
are raising EPS guidance for the year. Net new active accounts
increased by a record 41 million over the last 12 months, and
engagement per active account once again increased by 9% to 39
times a year. Venmo's momentum continues, with 70% growth in total
payment volume to $24 billion.
Earlier this month, Xoom expanded to 32 new send markets throughout
Europe," said Dan Schulman, President and CEO of
PayPal.
Financial highlights for second quarter 2019
- Revenue of $4.31 billion; growing
12% on both a spot and foreign currency-neutral (FX-neutral or FXN)
basis.
-
- The completion of the sale of the U.S. consumer credit
receivables portfolio to Synchrony in July
2018 negatively affected revenue growth by approximately
seven percentage points.
- GAAP operating margin of 16.4% with non-GAAP operating margin
of 23.2%.
- GAAP EPS of $0.69, increasing
58%; non-GAAP EPS of $0.86,
increasing 47%.
-
- Q2-19 EPS includes $0.14 benefit
related to PayPal's strategic investments versus $0.02 benefit in Q2-18.
- Operating cash flow of $1.17
billion, free cash flow of $1.04
billion.
Operating highlights for second quarter 2019
- 9.0 million net new active accounts, bringing total active
accounts to 286 million accounts, up 17%.
- 3.0 billion payment transactions, up 28%.
- $172 billion in total payment
volume (TPV), up 24%, or 26% on an FX-neutral basis.
- 39.0 payment transactions per active account on a trailing
twelve months basis, up 9%.
PayPal's key business drivers
- Merchant Services volume grew 30% on an FX-neutral
basis.
- eBay Marketplaces volume declined 4% on an FX-neutral basis
versus growth of 6% in Q2-18, and represented 9% of TPV for the
quarter versus 12% a year ago.
- Person-to-Person (P2P) volume grew 40% to $46 billion, and represented 27% of TPV.
- Venmo processed $24 billion of
TPV in the second quarter, growing 70%.
PayPal's platform and strategic investments
In the second quarter, PayPal announced the PayPal Commerce
Platform, a new solution designed to meet the specific needs of
marketplaces, e-commerce solution providers, and crowdfunding
platforms by bringing together a comprehensive set of technologies,
tools, services, and financing solutions for businesses.
In addition, PayPal extended its global partnership with Uber in
the second quarter and announced plans to explore future commercial
payment collaborations. PayPal also made a $500 million strategic investment in Uber.
In July, PayPal's Xoom product launched its international money
transfer services in the UK and 31 other European markets.
Customers across Europe can now
use Xoom to send money, pay bills or reload phones to more than 130
markets internationally.
Second Quarter 2019 Financial and Operating
Highlights
|
Second
Quarter
|
(presented in
millions, except per share data and percentages)
|
2019
|
2018
|
YoY
Growth
|
FX-Neutral
YoY Growth
|
Total Payment Volume
(TPV)
|
$
|
172,359
|
|
$
|
139,403
|
|
$
|
32,956
|
|
24
|
%
|
26
|
%
|
GAAP
|
|
|
|
|
|
Net
revenues
|
$
|
4,305
|
|
$
|
3,857
|
|
$
|
448
|
|
12
|
%
|
12
|
%
|
Operating
margin
|
16.4
|
%
|
14.8
|
%
|
**
|
|
155
|
bps
|
N/A
|
|
Effective tax
rate
|
12.7
|
%
|
13.6
|
%
|
**
|
|
(90)
|
bps
|
N/A
|
|
Net income
|
$
|
823
|
|
$
|
526
|
|
$
|
297
|
|
56
|
%
|
N/A
|
|
Earnings per diluted
share
|
$
|
0.69
|
|
$
|
0.44
|
|
$
|
0.25
|
|
58
|
%
|
N/A
|
|
Net cash provided by
operating activities
|
$
|
1,174
|
|
$
|
28
|
|
**
|
|
**
|
|
N/A
|
|
Non-GAAP
|
|
|
|
|
|
Net
revenues
|
$
|
4,305
|
|
$
|
3,857
|
|
$
|
448
|
|
12
|
%
|
12
|
%
|
Operating
margin
|
23.2
|
%
|
21.3
|
%
|
**
|
|
192
|
bps
|
N/A
|
|
Effective tax
rate
|
17.6
|
%
|
18.0
|
%
|
**
|
|
(33)
|
bps
|
N/A
|
|
Net income
|
$
|
1,018
|
|
$
|
703
|
|
$
|
315
|
|
45
|
%
|
N/A
|
|
Earnings per diluted
share
|
$
|
0.86
|
|
$
|
0.58
|
|
$
|
0.28
|
|
47
|
%
|
N/A
|
|
Free cash
flow
|
$
|
1,035
|
|
$
|
(170)
|
|
**
|
|
**
|
|
N/A
|
|
Cash, Cash Equivalents, and Investments - PayPal's
cash, cash equivalents, and investments totaled $10.7 billion as of June 30, 2019.
Short-Term Borrowings - PayPal's notes payable totaled
$2.5 billion as of June 30,
2019.
2019 Financial Guidance
Full year 2019 revenue and earnings guidance
- PayPal expects revenue to grow 14 - 15% at current spot rates
and 14 - 15% on an FX-neutral basis, to a range of $17.60 - $17.80
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
$2.16 - $2.22 and non-GAAP earnings per diluted share in
the range of $3.12 - $3.17. EPS guidance for full year 2019 includes
$0.26 of unrealized gains from
PayPal's strategic investments recognized in the first and second
quarters of 2019 and an approximate $0.03 of expected net unrealized gains related to
PayPal's strategic investment portfolio in Q3 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 $0.40 to $0.44 on GAAP EPS and $0.08 to $0.10 on
non-GAAP EPS.
Third quarter 2019 revenue and earnings guidance
- PayPal expects revenue to grow 18 - 19% at current spot rates
and 18 - 19% on an FX-neutral basis, to a range of $4.33 - $4.38
billion.
- PayPal expects GAAP earnings per diluted share in the range of
$0.32 - $0.35 and non-GAAP earnings per diluted share in
the range of $0.69 - $0.71. GAAP and non-GAAP EPS guidance for third
quarter 2019 includes an approximate $0.03 of expected net unrealized gains related to
PayPal's strategic investment portfolio. GAAP EPS guidance also
includes an estimated $0.15 of
negative impact related to taxes associated with the acquisition of
iZettle.
- Estimated non-GAAP amounts for the three months ending
September 30, 2019, reflect
adjustments of approximately $300 -
$330 million, including estimated
stock-based compensation expense and related payroll taxes in the
range of $250 - $265 million.
- 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 $0.19 to $0.23 on GAAP EPS and $0.01 to $0.02 on
non-GAAP EPS.
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
second 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, SEC filings, public
conference calls, and webcasts.
About PayPal
Fueled by a fundamental belief that having access to financial
services creates opportunity, PayPal Holdings, Inc. (NASDAQ: PYPL)
is committed to democratizing financial services and
empowering people and businesses to join and thrive in the global
economy. Our open digital payments platform gives PayPal's 286
million active account holders the confidence to connect and
transact in new and powerful ways, whether they are online, on a
mobile device, in an app, or in person. Through a combination of
technological innovation and strategic partnerships,
PayPal creates better ways to manage and move money,
and offers choice and flexibility when sending payments, paying or
getting paid. Available in more than 200 markets around the
world, the PayPal platform, including Braintree, Venmo, Xoom and iZettle, enables
consumers and merchants to receive money in more than 100
currencies, withdraw funds in 56 currencies and hold balances in
their PayPal accounts in 25 currencies. For more information on
PayPal, visit https://www.paypal.com/about. For PayPal
Holdings, Inc. financial information,
visit https://investor.paypal-corp.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 Securities and Exchange
Commission (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 third 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; the risk that PayPal may
not realize the expected benefits of the sale of U.S. consumer
credit receivables to Synchrony Financial; 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
July 24, 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.
|
Unaudited
Condensed Consolidated Balance Sheets
|
|
|
June 30,
|
|
December 31,
|
2019
|
2018
|
|
(In millions,
except par value)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
4,909
|
|
|
$
|
7,575
|
|
Short-term
investments
|
3,506
|
|
|
1,534
|
|
Accounts receivable,
net
|
379
|
|
|
313
|
|
Loans and interest
receivable, net
|
3,166
|
|
|
2,532
|
|
Funds receivable and
customer accounts
|
23,573
|
|
|
20,062
|
|
Prepaid expenses and
other current assets
|
902
|
|
|
947
|
|
Total current
assets
|
36,435
|
|
|
32,963
|
|
Long-term
investments
|
2,278
|
|
|
971
|
|
Property and
equipment, net
|
1,720
|
|
|
1,724
|
|
Goodwill
|
6,236
|
|
|
6,284
|
|
Intangible assets,
net
|
699
|
|
|
825
|
|
Other
assets
|
1,023
|
|
|
565
|
|
Total
assets
|
$
|
48,391
|
|
|
$
|
43,332
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
199
|
|
|
$
|
281
|
|
Notes
payable
|
2,499
|
|
|
1,998
|
|
Funds payable and
amounts due to customers
|
25,073
|
|
|
21,562
|
|
Accrued expenses and
other current liabilities
|
2,022
|
|
|
2,002
|
|
Income taxes
payable
|
54
|
|
|
61
|
|
Total current
liabilities
|
29,847
|
|
|
25,904
|
|
Deferred tax
liability and other long-term liabilities
|
2,405
|
|
|
2,042
|
|
Total
liabilities
|
32,252
|
|
|
27,946
|
|
Equity:
|
|
|
|
Common stock, $0.0001
par value; 4,000 shares authorized; 1,177 and 1,174 shares
outstanding as of June 30, 2019 and December 31, 2018,
respectively
|
—
|
|
|
—
|
|
Preferred stock,
$0.0001 par value; 100 shares authorized, unissued
|
—
|
|
|
—
|
|
Treasury stock at
cost, 99 and 91 shares as of June 30, 2019 and December 31, 2018,
respectively
|
(6,216)
|
|
|
(5,511)
|
|
Additional
paid-in-capital
|
15,010
|
|
|
14,939
|
|
Retained
earnings
|
7,373
|
|
|
5,880
|
|
Accumulated other
comprehensive income (loss)
|
(28)
|
|
|
78
|
|
Total
equity
|
16,139
|
|
|
15,386
|
|
Total liabilities and
equity
|
$
|
48,391
|
|
|
$
|
43,332
|
|
PayPal Holdings,
Inc.
|
Unaudited
Condensed Consolidated Statements of Income
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Transaction
expense
|
1,627
|
|
|
1,362
|
|
|
3,176
|
|
|
2,637
|
|
Transaction and loan
losses
|
318
|
|
|
334
|
|
|
659
|
|
|
639
|
|
Customer support and
operations(1)(2)
|
399
|
|
|
338
|
|
|
787
|
|
|
680
|
|
Sales and
marketing(1)(2)
|
356
|
|
|
307
|
|
|
685
|
|
|
588
|
|
Technology and
development (1)(2)
|
483
|
|
|
441
|
|
|
994
|
|
|
889
|
|
General and
administrative(1)(2)
|
419
|
|
|
387
|
|
|
838
|
|
|
734
|
|
Restructuring and
other charges
|
(2)
|
|
|
116
|
|
|
71
|
|
|
269
|
|
Total operating
expenses
|
3,600
|
|
|
3,285
|
|
|
7,210
|
|
|
6,436
|
|
Operating
income
|
705
|
|
|
572
|
|
|
1,223
|
|
|
1,106
|
|
Other income
(expense), net
|
238
|
|
|
37
|
|
|
437
|
|
|
51
|
|
Income before income
taxes
|
943
|
|
|
609
|
|
|
1,660
|
|
|
1,157
|
|
Income tax
expense
|
120
|
|
|
83
|
|
|
170
|
|
|
120
|
|
Net income
|
$
|
823
|
|
|
$
|
526
|
|
|
$
|
1,490
|
|
|
$
|
1,037
|
|
Net income per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
|
$
|
0.44
|
|
|
$
|
1.27
|
|
|
$
|
0.87
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.44
|
|
|
$
|
1.25
|
|
|
$
|
0.86
|
|
Weighted average
shares:
|
|
|
|
|
|
|
|
Basic
|
1,175
|
|
|
1,187
|
|
|
1,173
|
|
|
1,190
|
|
Diluted
|
1,187
|
|
|
1,202
|
|
|
1,188
|
|
|
1,209
|
|
|
|
|
|
|
|
|
|
(1)Includes stock-based compensation as
follows:
|
|
|
|
|
|
|
|
Customer support and
operations(2)
|
45
|
|
|
41
|
|
|
93
|
|
|
83
|
|
Sales and
marketing(2)
|
32
|
|
|
29
|
|
|
64
|
|
|
63
|
|
Technology and
development(2)
|
80
|
|
|
74
|
|
|
173
|
|
|
146
|
|
General and
administrative(2)
|
73
|
|
|
66
|
|
|
154
|
|
|
127
|
|
|
$
|
230
|
|
|
$
|
210
|
|
|
$
|
484
|
|
|
$
|
419
|
|
|
(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
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In
millions)
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
823
|
|
|
$
|
526
|
|
|
$
|
1,490
|
|
|
$
|
1,037
|
|
Adjustments:
|
|
|
|
|
|
|
|
Transaction and loan
losses
|
318
|
|
|
334
|
|
|
659
|
|
|
639
|
|
Depreciation and
amortization
|
228
|
|
|
180
|
|
|
458
|
|
|
365
|
|
Stock-based
compensation
|
223
|
|
|
205
|
|
|
470
|
|
|
410
|
|
Deferred income
taxes
|
(39)
|
|
|
(2)
|
|
|
35
|
|
|
89
|
|
Cost basis
adjustments to loans and interest receivable held for
sale
|
—
|
|
|
116
|
|
|
—
|
|
|
244
|
|
Unrealized gains on
strategic investments
|
(218)
|
|
|
(31)
|
|
|
(398)
|
|
|
(31)
|
|
Other
|
(48)
|
|
|
(5)
|
|
|
(92)
|
|
|
(10)
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
30
|
|
|
(24)
|
|
|
(66)
|
|
|
1
|
|
Changes in loans and
interest receivable held for sale, net
|
—
|
|
|
(977)
|
|
|
4
|
|
|
(2,268)
|
|
Accounts
payable
|
(46)
|
|
|
18
|
|
|
(49)
|
|
|
(17)
|
|
Income taxes
payable
|
(21)
|
|
|
(14)
|
|
|
(7)
|
|
|
(14)
|
|
Other assets and
liabilities
|
(76)
|
|
|
(298)
|
|
|
(303)
|
|
|
(766)
|
|
Net cash provided by
(used in) operating activities
|
1,174
|
|
|
28
|
|
|
2,201
|
|
|
(321)
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(139)
|
|
|
(198)
|
|
|
(357)
|
|
|
(376)
|
|
Changes in principal
loans receivable, net
|
(375)
|
|
|
262
|
|
|
(732)
|
|
|
1,000
|
|
Purchases of
investments
|
(5,053)
|
|
|
(5,341)
|
|
|
(13,191)
|
|
|
(10,616)
|
|
Maturities and sales
of investments
|
4,509
|
|
|
5,378
|
|
|
10,537
|
|
|
9,669
|
|
Acquisitions, net of
cash and restricted cash acquired
|
—
|
|
|
(16)
|
|
|
—
|
|
|
(16)
|
|
Funds
receivable
|
(39)
|
|
|
473
|
|
|
(2,214)
|
|
|
902
|
|
Net cash (used in)
provided by investing activities
|
(1,097)
|
|
|
558
|
|
|
(5,957)
|
|
|
563
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds from
issuance of common stock
|
67
|
|
|
65
|
|
|
74
|
|
|
78
|
|
Purchases of treasury
stock
|
—
|
|
|
(500)
|
|
|
(756)
|
|
|
(2,325)
|
|
Tax withholdings
related to net share settlements of equity awards
|
(140)
|
|
|
(37)
|
|
|
(449)
|
|
|
(372)
|
|
Borrowings under
financing arrangements
|
500
|
|
|
—
|
|
|
500
|
|
|
2,075
|
|
Repayments under
financing arrangements
|
—
|
|
|
(1,076)
|
|
|
—
|
|
|
(1,076)
|
|
Funds payable and
amounts due to customers
|
569
|
|
|
213
|
|
|
3,129
|
|
|
1,078
|
|
Net cash provided by
(used in) financing activities
|
996
|
|
|
(1,335)
|
|
|
2,498
|
|
|
(542)
|
|
Effect of exchange
rate changes on cash, cash equivalents, and restricted
cash
|
(2)
|
|
|
(56)
|
|
|
(1)
|
|
|
(63)
|
|
Net change in cash,
cash equivalents, and restricted cash
|
1,071
|
|
|
(805)
|
|
|
(1,259)
|
|
|
(363)
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
10,903
|
|
|
8,727
|
|
|
13,233
|
|
|
8,285
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
11,974
|
|
|
$
|
7,922
|
|
|
$
|
11,974
|
|
|
$
|
7,922
|
|
Supplemental cash
flow disclosures:
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
25
|
|
|
$
|
18
|
|
|
$
|
45
|
|
|
$
|
26
|
|
Cash paid for income
taxes, net
|
$
|
154
|
|
|
$
|
186
|
|
|
$
|
176
|
|
|
$
|
180
|
|
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
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
2019
|
2019
|
2018
|
2018
|
2018
|
|
(In millions,
except percentages)
|
Transaction
revenues
|
$
|
3,878
|
|
|
$
|
3,731
|
|
|
$
|
3,851
|
|
|
$
|
3,343
|
|
|
$
|
3,318
|
|
Current quarter vs
prior quarter
|
4
|
%
|
|
(3)
|
%
|
|
15
|
%
|
|
1
|
%
|
|
4
|
%
|
Current quarter vs
prior year quarter
|
17
|
%
|
|
17
|
%
|
|
19
|
%
|
|
17
|
%
|
|
20
|
%
|
Percentage of
total
|
90
|
%
|
|
90
|
%
|
|
91
|
%
|
|
91
|
%
|
|
86
|
%
|
|
|
|
|
|
|
|
|
|
|
Other value added
services
|
427
|
|
|
397
|
|
|
375
|
|
|
340
|
|
|
539
|
|
Current quarter vs
prior quarter
|
8
|
%
|
|
6
|
%
|
|
10
|
%
|
|
(37)
|
%
|
|
10
|
%
|
Current quarter vs
prior year quarter
|
(21)
|
%
|
|
(19)
|
%
|
|
(25)
|
%
|
|
(11)
|
%
|
|
49
|
%
|
Percentage of
total
|
10
|
%
|
|
10
|
%
|
|
9
|
%
|
|
9
|
%
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
Total net
revenues
|
$
|
4,305
|
|
|
$
|
4,128
|
|
|
$
|
4,226
|
|
|
$
|
3,683
|
|
|
$
|
3,857
|
|
Current quarter vs
prior quarter
|
4
|
%
|
|
(2)
|
%
|
|
15
|
%
|
|
(5)
|
%
|
|
5
|
%
|
Current quarter vs
prior year quarter
|
12
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues by
Geography
|
Three Months
Ended
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
2019
|
2019
|
2018
|
2018
|
2018
|
|
(In millions,
except percentages)
|
U.S. net
revenues
|
$
|
2,297
|
|
|
$
|
2,187
|
|
|
$
|
2,189
|
|
|
$
|
1,962
|
|
|
$
|
2,150
|
|
Current quarter vs
prior quarter
|
5
|
%
|
|
—
|
%
|
|
12
|
%
|
|
(9)
|
%
|
|
6
|
%
|
Current quarter vs
prior year quarter
|
7
|
%
|
|
8
|
%
|
|
7
|
%
|
|
13
|
%
|
|
27
|
%
|
Percent of
total
|
53
|
%
|
|
53
|
%
|
|
52
|
%
|
|
53
|
%
|
|
56
|
%
|
|
|
|
|
|
|
|
|
|
|
International net
revenues
|
2,008
|
|
|
1,941
|
|
|
2,037
|
|
|
1,721
|
|
|
1,707
|
|
Current quarter vs
prior quarter
|
3
|
%
|
|
(5)
|
%
|
|
18
|
%
|
|
1
|
%
|
|
3
|
%
|
Current quarter vs
prior year quarter
|
18
|
%
|
|
17
|
%
|
|
20
|
%
|
|
15
|
%
|
|
18
|
%
|
(FXN) Current
quarter vs prior year quarter
|
18
|
%
|
|
17
|
%
|
|
19
|
%
|
|
15
|
%
|
|
16
|
%
|
Percent of
total
|
47
|
%
|
|
47
|
%
|
|
48
|
%
|
|
47
|
%
|
|
44
|
%
|
|
|
|
|
|
|
|
|
|
|
Total net
revenues
|
$
|
4,305
|
|
|
$
|
4,128
|
|
|
$
|
4,226
|
|
|
$
|
3,683
|
|
|
$
|
3,857
|
|
Current quarter vs
prior quarter
|
4
|
%
|
|
(2)
|
%
|
|
15
|
%
|
|
(5)
|
%
|
|
5
|
%
|
Current quarter vs
prior year quarter
|
12
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
|
23
|
%
|
(FXN) Current
quarter vs prior year quarter
|
12
|
%
|
|
12
|
%
|
|
13
|
%
|
|
14
|
%
|
|
22
|
%
|
PayPal Holdings,
Inc.
|
Unaudited
Supplemental Operating Data
|
|
|
Three Months
Ended,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
2019
|
2019
|
2018
|
2018
|
2018
|
|
(In millions,
except percentages)
|
Active
accounts(1)
|
286
|
|
|
277
|
|
|
267
|
|
|
254
|
|
|
244
|
|
Current quarter vs
prior quarter
|
3
|
%
|
|
3
|
%
|
|
5
|
%
|
|
4
|
%
|
|
3
|
%
|
Current quarter vs
prior year quarter
|
17
|
%
|
|
17
|
%
|
|
17
|
%
|
|
15
|
%
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
Number of payment
transactions(2)
|
2,973
|
|
|
2,838
|
|
|
2,867
|
|
|
2,463
|
|
|
2,327
|
|
Current quarter vs
prior quarter
|
5
|
%
|
|
(1)
|
%
|
|
16
|
%
|
|
6
|
%
|
|
5
|
%
|
Current quarter vs
prior year quarter
|
28
|
%
|
|
28
|
%
|
|
28
|
%
|
|
27
|
%
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
Payment
transactions per active account(3)
|
39.0
|
|
|
37.9
|
|
|
36.9
|
|
|
36.5
|
|
|
35.7
|
|
Current quarter vs
prior quarter
|
3
|
%
|
|
3
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
Current quarter vs
prior year quarter
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
Total Payment
Volume(4)
|
$
|
172,359
|
|
|
$
|
161,492
|
|
|
$
|
163,648
|
|
|
$
|
143,004
|
|
|
$
|
139,403
|
|
Current quarter vs
prior quarter
|
7
|
%
|
|
(1)
|
%
|
|
14
|
%
|
|
3
|
%
|
|
5
|
%
|
Current quarter vs
prior year quarter
|
24
|
%
|
|
22
|
%
|
|
23
|
%
|
|
24
|
%
|
|
29
|
%
|
(FXN) Current
quarter vs prior year quarter
|
26
|
%
|
|
25
|
%
|
|
25
|
%
|
|
25
|
%
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
Transaction Expense
Rate(5)
|
0.94
|
%
|
|
0.96
|
%
|
|
0.96
|
%
|
|
0.96
|
%
|
|
0.98
|
%
|
Transaction and Loan
Loss Rate(6)
|
0.18
|
%
|
|
0.21
|
%
|
|
0.21
|
%
|
|
0.21
|
%
|
|
0.24
|
%
|
Transaction
Margin(7)
|
54.8
|
%
|
|
54.2
|
%
|
|
54.6
|
%
|
|
54.9
|
%
|
|
56.0
|
%
|
|
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 net income per
diluted 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 net income per diluted 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 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
June 30,
|
|
2019
|
|
2018
|
|
(In millions,
except percentages)
|
|
(unaudited)
|
GAAP operating
income
|
$
|
705
|
|
|
$
|
572
|
|
Stock-based
compensation expense and related employer payroll taxes
|
244
|
|
|
223
|
|
Amortization of
acquired intangible assets
|
51
|
|
|
25
|
|
Other(1)
|
(2)
|
|
|
—
|
|
Total non-GAAP
operating income adjustments
|
293
|
|
|
248
|
|
Non-GAAP operating
income
|
$
|
998
|
|
|
$
|
820
|
|
Non-GAAP operating
margin
|
23
|
%
|
|
21
|
%
|
|
(1) Gain
of $2 million related to the sale of our U.S. consumer credit
receivables portfolio executed during the year ended December 31,
2018.
|
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
June 30,
|
|
2019
|
|
2018
|
|
(In millions,
except per share data
and percentages)
|
|
(unaudited)
|
GAAP income before
income taxes
|
$
|
943
|
|
|
$
|
609
|
|
GAAP income tax
expense
|
120
|
|
|
83
|
|
GAAP net
income
|
823
|
|
|
526
|
|
Non-GAAP adjustments
to net income:
|
|
|
|
Non-GAAP operating
income adjustments (see table above)
|
293
|
|
|
248
|
|
Other(1)
|
—
|
|
|
32
|
|
Tax effect of
non-GAAP adjustments
|
(98)
|
|
|
(103)
|
|
Non-GAAP net
income
|
$
|
1,018
|
|
|
$
|
703
|
|
|
|
|
|
Diluted net income
per share:
|
|
|
|
GAAP
|
$
|
0.69
|
|
|
$
|
0.44
|
|
Non-GAAP
|
$
|
0.86
|
|
|
$
|
0.58
|
|
Shares used in GAAP
diluted share calculation
|
1,187
|
|
|
1,202
|
|
Shares used in
non-GAAP diluted share calculation
|
1,187
|
|
|
1,202
|
|
|
|
|
|
GAAP effective tax
rate
|
13
|
%
|
|
14
|
%
|
Tax effect of
non-GAAP adjustments to net income
|
5
|
%
|
|
4
|
%
|
Non-GAAP effective
tax rate
|
18
|
%
|
|
18
|
%
|
|
(1) Tax
expense related to the Tax Cuts and Jobs Act.
|
PayPal Holdings,
Inc.
|
Reconciliation of
Operating Cash Flow to Free Cash Flow and Adjusted Free Cash
Flow
|
|
|
Three Months Ended
June 30,
|
|
2019
|
|
2018
|
|
(In
millions/unaudited)
|
Net cash provided by
operating activities
|
$
|
1,174
|
|
|
$
|
28
|
|
Less: Purchases of
property and equipment
|
(139)
|
|
|
(198)
|
|
Free cash
flow
|
$
|
1,035
|
|
|
$
|
(170)
|
|
Impact of held for
sale accounting presentation related to our U.S. consumer credit
receivables portfolio on cash flow from operating
activities
|
—
|
|
|
907
|
|
Adjusted free cash
flow
|
$
|
1,035
|
|
|
$
|
737
|
|
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SOURCE PayPal Holdings, Inc.