|
|
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Delaware
|
47-2989869
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
2211 North First Street
San Jose, California
|
95131
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
|
Large accelerated filer
|
ý
|
Accelerated filer
|
o
|
|
|
|
|
Non-accelerated filer
|
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
o
|
|
Item 1:
|
Financial Statements
|
|
September 30,
2015 |
|
December 31,
2014 |
||||
|
(In millions, except par value)
|
||||||
|
(Unaudited)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,880
|
|
|
$
|
2,201
|
|
Short-term investments
|
2,419
|
|
|
29
|
|
||
Accounts receivable, net
|
173
|
|
|
65
|
|
||
Loans and interest receivable, net
|
3,602
|
|
|
3,586
|
|
||
Funds receivable and customer accounts
|
11,802
|
|
|
10,612
|
|
||
Notes and receivables from affiliates
|
—
|
|
|
694
|
|
||
Other current assets
|
678
|
|
|
378
|
|
||
Total current assets
|
20,554
|
|
|
17,565
|
|
||
Long-term investments
|
2,392
|
|
|
31
|
|
||
Property and equipment, net
|
1,298
|
|
|
922
|
|
||
Goodwill
|
3,415
|
|
|
3,189
|
|
||
Intangible assets, net
|
174
|
|
|
156
|
|
||
Other assets
|
63
|
|
|
54
|
|
||
Total assets
|
$
|
27,896
|
|
|
$
|
21,917
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
114
|
|
|
$
|
115
|
|
Funds payable and amounts due to customers
|
11,802
|
|
|
10,612
|
|
||
Notes and payables to affiliates
|
—
|
|
|
1,093
|
|
||
Accrued expenses and other current liabilities
|
1,089
|
|
|
1,434
|
|
||
Income taxes payable
|
67
|
|
|
29
|
|
||
Total current liabilities
|
13,072
|
|
|
13,283
|
|
||
Long-term liabilities
|
1,610
|
|
|
386
|
|
||
Total liabilities
|
14,682
|
|
|
13,669
|
|
||
Commitments and contingencies (Note 10)
|
|
|
|
|
|||
Equity:
|
|
|
|
||||
Net parent investment
|
—
|
|
|
8,138
|
|
||
Common stock, $0.0001 par value; 4,000 shares authorized; 1,221 and 1,218 outstanding
|
—
|
|
|
—
|
|
||
Additional paid-in-capital
|
12,910
|
|
|
—
|
|
||
Retained earnings
|
301
|
|
|
—
|
|
||
Accumulated other comprehensive income
|
3
|
|
|
110
|
|
||
Total equity
|
13,214
|
|
|
8,248
|
|
||
Total liabilities and equity
|
$
|
27,896
|
|
|
$
|
21,917
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions, except per share data)
|
||||||||||||||
|
(Unaudited)
|
||||||||||||||
Net revenues
|
$
|
2,258
|
|
|
$
|
1,975
|
|
|
$
|
6,692
|
|
|
$
|
5,832
|
|
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Transaction expense
|
651
|
|
|
537
|
|
|
1,860
|
|
|
1,576
|
|
||||
Transaction and loan losses
|
201
|
|
|
180
|
|
|
564
|
|
|
453
|
|
||||
Customer support and operations
|
317
|
|
|
257
|
|
|
900
|
|
|
775
|
|
||||
Sales and marketing
|
235
|
|
|
267
|
|
|
716
|
|
|
735
|
|
||||
Product development
|
230
|
|
|
232
|
|
|
695
|
|
|
651
|
|
||||
General and administrative
|
141
|
|
|
101
|
|
|
414
|
|
|
338
|
|
||||
Depreciation and amortization
|
153
|
|
|
129
|
|
|
444
|
|
|
384
|
|
||||
Restructuring
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
||||
Total operating expenses
|
1,928
|
|
|
1,703
|
|
|
5,642
|
|
|
4,912
|
|
||||
Operating income
|
330
|
|
|
272
|
|
|
1,050
|
|
|
920
|
|
||||
Other income (expense), net
|
20
|
|
|
4
|
|
|
20
|
|
|
(6
|
)
|
||||
Income before income taxes
|
350
|
|
|
276
|
|
|
1,070
|
|
|
914
|
|
||||
Income tax expense
|
49
|
|
|
42
|
|
|
209
|
|
|
781
|
|
||||
Net income
|
$
|
301
|
|
|
$
|
234
|
|
|
$
|
861
|
|
|
$
|
133
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.25
|
|
|
$
|
0.19
|
|
|
$
|
0.71
|
|
|
$
|
0.11
|
|
Diluted
|
$
|
0.25
|
|
|
$
|
0.19
|
|
|
$
|
0.70
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
1,221
|
|
|
1,218
|
|
|
1,221
|
|
|
1,218
|
|
||||
Diluted
|
1,227
|
|
|
1,224
|
|
|
1,227
|
|
|
1,224
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
|
(Unaudited)
|
||||||||||||||
Net income
|
$
|
301
|
|
|
$
|
234
|
|
|
$
|
861
|
|
|
$
|
133
|
|
Other comprehensive income (loss), net of reclassification adjustments:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation
|
(9
|
)
|
|
(23
|
)
|
|
(33
|
)
|
|
(25
|
)
|
||||
Unrealized losses on investments, net
|
(6
|
)
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
||||
Tax expense on unrealized gains (losses) on investments, net
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Unrealized gains (losses) on hedging activities, net
|
(7
|
)
|
|
140
|
|
|
(67
|
)
|
|
161
|
|
||||
Tax expense on unrealized gains (losses) on hedging activities, net
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(5
|
)
|
||||
Other comprehensive income (loss), net of tax
|
(21
|
)
|
|
115
|
|
|
(107
|
)
|
|
131
|
|
||||
Comprehensive income
|
$
|
280
|
|
|
$
|
349
|
|
|
$
|
754
|
|
|
$
|
264
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
|
(Unaudited)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
861
|
|
|
$
|
133
|
|
Adjustments:
|
|
|
|
||||
Transaction and loan losses
|
564
|
|
|
453
|
|
||
Depreciation and amortization
|
444
|
|
|
384
|
|
||
Stock-based compensation
|
256
|
|
|
218
|
|
||
Deferred income taxes
|
87
|
|
|
677
|
|
||
Excess tax benefits from stock-based compensation
|
(24
|
)
|
|
(35
|
)
|
||
Premium received on sale of principal loans receivable held for sale
|
(35
|
)
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(98
|
)
|
|
2
|
|
||
Notes and receivable from affiliates, net
|
121
|
|
|
24
|
|
||
Changes in principal loans receivable held for sale, net
|
9
|
|
|
—
|
|
||
Accounts payable
|
2
|
|
|
28
|
|
||
Notes payable to affiliates
|
(217
|
)
|
|
(116
|
)
|
||
Income taxes payable and other tax liabilities
|
89
|
|
|
26
|
|
||
Other assets and liabilities
|
(241
|
)
|
|
(205
|
)
|
||
Net cash provided by operating activities
|
1,818
|
|
|
1,589
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(558
|
)
|
|
(369
|
)
|
||
Proceeds from sales of property and equipment
|
26
|
|
|
—
|
|
||
Changes in principal loans receivable, net
|
(146
|
)
|
|
(495
|
)
|
||
Purchases of investments
|
(6,722
|
)
|
|
(65
|
)
|
||
Maturities and sales of investments
|
1,976
|
|
|
389
|
|
||
Acquisitions, net of cash acquired
|
(283
|
)
|
|
(1
|
)
|
||
Notes and receivables from affiliates
|
575
|
|
|
(348
|
)
|
||
Net cash used in investing activities
|
(5,132
|
)
|
|
(889
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
36
|
|
|
—
|
|
||
Excess tax benefits from stock-based compensation
|
24
|
|
|
35
|
|
||
Contribution from (to) parent
|
3,858
|
|
|
(2
|
)
|
||
Tax withholdings related to net share settlements of restricted stock units and restricted stock awards
|
(7
|
)
|
|
—
|
|
||
Repayments under financing arrangements, net
|
(877
|
)
|
|
(61
|
)
|
||
Funds receivable and customer accounts
|
(1,190
|
)
|
|
(698
|
)
|
||
Funds payable and amounts due to customers
|
1,190
|
|
|
698
|
|
||
Net cash provided by (used in) financing activities
|
3,034
|
|
|
(28
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(41
|
)
|
|
(17
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
(321
|
)
|
|
655
|
|
||
Cash and cash equivalents at beginning of period
|
2,201
|
|
|
1,604
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,880
|
|
|
$
|
2,259
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||
Cash paid for interest
|
$
|
14
|
|
|
$
|
13
|
|
Cash paid for income taxes
|
$
|
56
|
|
|
$
|
33
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
(2)
|
|
2014
(1)
|
|
2015
(2)
|
|
2014
(1)
|
||||||||
|
(In millions, except per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
301
|
|
|
$
|
234
|
|
|
$
|
861
|
|
|
$
|
133
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average shares of common stock - basic
|
1,221
|
|
|
1,218
|
|
|
1,221
|
|
|
1,218
|
|
||||
Dilutive effect of equity incentive awards
|
6
|
|
|
6
|
|
|
6
|
|
|
6
|
|
||||
Weighted average shares of common stock - diluted
|
1,227
|
|
|
1,224
|
|
|
1,227
|
|
|
1,224
|
|
||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.25
|
|
|
$
|
0.19
|
|
|
$
|
0.71
|
|
|
$
|
0.11
|
|
Diluted
|
$
|
0.25
|
|
|
$
|
0.19
|
|
|
$
|
0.70
|
|
|
$
|
0.11
|
|
Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive
|
3
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
December 31,
2014 |
|
Goodwill
Acquired
|
|
Adjustments
|
|
September 30,
2015 |
||||||||
Total Goodwill
|
$
|
3,189
|
|
|
$
|
231
|
|
|
$
|
(5
|
)
|
|
$
|
3,415
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Useful Life (Years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Useful Life (Years)
|
||||||||||||
|
(In millions, except years)
|
||||||||||||||||||||||||||
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer lists and user base
|
$
|
533
|
|
|
$
|
(492
|
)
|
|
$
|
41
|
|
|
5
|
|
$
|
520
|
|
|
$
|
(477
|
)
|
|
$
|
43
|
|
|
6
|
Marketing related
|
181
|
|
|
(141
|
)
|
|
40
|
|
|
3
|
|
181
|
|
|
(117
|
)
|
|
64
|
|
|
3
|
||||||
Developed technologies
|
213
|
|
|
(168
|
)
|
|
45
|
|
|
3
|
|
167
|
|
|
(153
|
)
|
|
14
|
|
|
3
|
||||||
All other
|
146
|
|
|
(98
|
)
|
|
48
|
|
|
5
|
|
105
|
|
|
(70
|
)
|
|
35
|
|
|
5
|
||||||
Intangible assets, net
|
$
|
1,073
|
|
|
$
|
(899
|
)
|
|
$
|
174
|
|
|
|
|
$
|
973
|
|
|
$
|
(817
|
)
|
|
$
|
156
|
|
|
|
Fiscal years:
|
|
||
Remaining 2015
|
$
|
24
|
|
2016
|
88
|
|
|
2017
|
39
|
|
|
2018
|
19
|
|
|
2019
|
4
|
|
|
Thereafter:
|
—
|
|
|
|
$
|
174
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
U.S.
|
$
|
1,138
|
|
|
$
|
949
|
|
|
$
|
3,338
|
|
|
$
|
2,834
|
|
United Kingdom
|
294
|
|
|
286
|
|
|
857
|
|
|
839
|
|
||||
Rest of world
|
826
|
|
|
740
|
|
|
2,497
|
|
|
2,159
|
|
||||
Total net revenues
|
$
|
2,258
|
|
|
$
|
1,975
|
|
|
$
|
6,692
|
|
|
$
|
5,832
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
(In millions)
|
||||||
Long-lived assets:
|
|
|
|
||||
U.S.
|
$
|
4,472
|
|
|
$
|
3,784
|
|
International
|
466
|
|
|
401
|
|
||
Total long-lived assets
|
$
|
4,938
|
|
|
$
|
4,185
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Transaction revenues
|
$
|
1,982
|
|
|
$
|
1,754
|
|
|
$
|
5,866
|
|
|
$
|
5,140
|
|
Other value added services:
|
276
|
|
|
221
|
|
|
826
|
|
|
692
|
|
||||
Total net revenues
|
$
|
2,258
|
|
|
$
|
1,975
|
|
|
$
|
6,692
|
|
|
$
|
5,832
|
|
|
September 30, 2015
|
||||||||||||||
|
Gross
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
(In millions)
|
||||||||||||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Restricted cash
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Corporate debt securities
|
2,212
|
|
|
—
|
|
|
(1
|
)
|
|
2,211
|
|
||||
Government and agency securities
|
180
|
|
|
—
|
|
|
—
|
|
|
180
|
|
||||
Time deposits
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Corporate debt securities
|
2,373
|
|
|
1
|
|
|
(8
|
)
|
|
2,366
|
|
||||
Total
(1)
|
$
|
4,793
|
|
|
$
|
1
|
|
|
$
|
(9
|
)
|
|
$
|
4,785
|
|
|
December 31, 2014
|
||||||||||||||
|
Gross
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
(In millions)
|
||||||||||||||
Short-term investments
(2)
:
|
|
|
|
|
|
|
|
||||||||
Time deposits
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
September 30, 2015
|
||
|
(In millions)
|
||
One year or less (including restricted cash of $19)
|
$
|
2,419
|
|
One year through two years
|
1,485
|
|
|
Two years through three years
|
680
|
|
|
Three years through four years
|
130
|
|
|
Four years through five years
|
63
|
|
|
Greater than five years
|
8
|
|
|
Total
(3)
|
$
|
4,785
|
|
Description
|
|
Balances at
September 30, 2015 |
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
||||||
|
|
(In millions)
|
||||||||||
Assets:
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
1,880
|
|
|
$
|
879
|
|
|
$
|
1,001
|
|
Short-term investments:
|
|
|
|
|
|
|
||||||
Restricted Cash
|
|
19
|
|
|
19
|
|
|
—
|
|
|||
Corporate debt securities
|
|
2,211
|
|
|
—
|
|
|
2,211
|
|
|||
Government and agency securities
|
|
180
|
|
|
—
|
|
|
180
|
|
|||
Time deposits
|
|
9
|
|
|
—
|
|
|
9
|
|
|||
Total short-term investments
|
|
$
|
2,419
|
|
|
$
|
19
|
|
|
$
|
2,400
|
|
Funds receivable and customer accounts
|
|
6,481
|
|
|
—
|
|
|
6,481
|
|
|||
Derivatives
|
|
92
|
|
|
—
|
|
|
92
|
|
|||
Long-term investments:
|
|
|
|
|
|
|
||||||
Corporate debt securities
|
|
2,366
|
|
|
—
|
|
|
2,366
|
|
|||
Total financial assets
|
|
$
|
13,238
|
|
|
$
|
898
|
|
|
$
|
12,340
|
|
Liabilities:
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
25
|
|
Description
|
|
Balances at
December 31, 2014 |
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
||||||
|
|
(In millions)
|
||||||||||
Assets:
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
2,201
|
|
|
$
|
2,201
|
|
|
$
|
—
|
|
Short-term investments:
|
|
|
|
|
|
|
||||||
Time deposits
|
|
29
|
|
|
—
|
|
|
29
|
|
|||
Total short-term investments
|
|
29
|
|
|
—
|
|
|
29
|
|
|||
Funds receivable and customer accounts
|
|
4,161
|
|
|
—
|
|
|
4,161
|
|
|||
Derivatives
|
|
135
|
|
|
—
|
|
|
135
|
|
|||
Total financial assets
|
|
$
|
6,526
|
|
|
$
|
2,201
|
|
|
$
|
4,325
|
|
Liabilities:
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
Balance Sheet Location
|
|
September 30,
2015 |
|
December 31,
2014 |
||||
|
|
|
(In millions)
|
||||||
Derivative Assets:
|
|
|
|
|
|
||||
Foreign exchange contracts designated as cash flow hedges
|
Other Current Assets
|
|
$
|
65
|
|
|
$
|
128
|
|
Foreign exchange contracts not designated as hedging instruments
|
Other Current Assets
|
|
27
|
|
|
7
|
|
||
Total derivative assets
|
|
|
$
|
92
|
|
|
$
|
135
|
|
|
|
|
|
|
|
||||
Derivative Liabilities:
|
|
|
|
|
|
||||
Foreign exchange contracts designated as cash flow hedges
|
Other Current Liabilities
|
|
$
|
6
|
|
|
$
|
2
|
|
Foreign exchange contracts not designated as hedging instruments
|
Other Current Liabilities
|
|
19
|
|
|
5
|
|
||
Total derivative liabilities
|
|
|
$
|
25
|
|
|
$
|
7
|
|
|
|
|
|
|
|
||||
Net fair value of derivative instruments
|
|
|
$
|
67
|
|
|
$
|
128
|
|
|
December 31, 2014
|
|
Amount of gain
recognized in other
comprehensive income
(effective portion)
|
|
Amount of gain
reclassified from
accumulated other
comprehensive income
to net revenue
(effective portion)
|
|
September 30, 2015
|
||||||
|
(In millions)
|
||||||||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
126
|
|
|
83
|
|
|
150
|
|
|
$
|
59
|
|
|
December 31, 2013
|
|
Amount of (loss)
recognized in other
comprehensive income
(effective portion)
|
|
Amount of (loss)
reclassified from
accumulated other
comprehensive income
to net revenue
(effective portion)
|
|
September 30, 2014
|
||||||
|
(In millions)
|
||||||||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
(91
|
)
|
|
105
|
|
|
(56
|
)
|
|
$
|
70
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Foreign exchange contracts designated as cash flow hedges recognized in net revenues
|
$
|
38
|
|
|
$
|
(16
|
)
|
|
$
|
150
|
|
|
$
|
(56
|
)
|
Foreign exchange contracts not designated as cash flow hedges recognized in other income (expense), net
|
14
|
|
|
(1
|
)
|
|
14
|
|
|
(9
|
)
|
||||
Total gain (loss) recognized from derivative contracts in the combined statement of income
|
$
|
52
|
|
|
$
|
(17
|
)
|
|
$
|
164
|
|
|
$
|
(65
|
)
|
|
September 30, 2015
|
|
September 30, 2014
|
||||
|
(In millions)
|
||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
1,198
|
|
|
$
|
2,131
|
|
Foreign exchange contracts not designated as hedging instruments
|
1,999
|
|
|
396
|
|
||
Total
|
$
|
3,197
|
|
|
$
|
2,527
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
(In millions)
|
||||||
> 760
|
$
|
495
|
|
|
$
|
553
|
|
680 - 759
|
1,332
|
|
|
1,439
|
|
||
600 - 679
|
1,245
|
|
|
1,344
|
|
||
< 599
|
342
|
|
|
341
|
|
||
Total
|
$
|
3,414
|
|
|
$
|
3,677
|
|
September 30, 2015
|
||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||
Current
|
|
30 - 59 Days Past Due
|
|
60 - 89 Days Past Due
|
|
90 - 180 Days Past Due
|
|
Total Past Due
|
|
Total Consumer Receivables
|
||||||||||||
$
|
3,085
|
|
|
$
|
160
|
|
|
$
|
62
|
|
|
$
|
138
|
|
|
$
|
360
|
|
|
$
|
3,445
|
|
December 31, 2014
|
||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||
Current
|
|
30 - 59 Days Past Due
|
|
60 - 89 Days Past Due
|
|
90 - 180 Days Past Due
|
|
Total Past Due
|
|
Total Consumer Receivables
|
||||||||||||
$
|
3,303
|
|
|
$
|
163
|
|
|
$
|
62
|
|
|
$
|
149
|
|
|
$
|
374
|
|
|
$
|
3,677
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
Balance as of January 1
|
$
|
188
|
|
|
$
|
145
|
|
Reclassification from loans receivable to loans held for sale
|
(22
|
)
|
|
—
|
|
||
Provisions
|
231
|
|
|
215
|
|
||
Charge-offs
|
(227
|
)
|
|
(209
|
)
|
||
Recoveries
|
18
|
|
|
20
|
|
||
Balance as of September 30
|
$
|
188
|
|
|
$
|
171
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
(In millions)
|
||||||
> 630
|
$
|
232
|
|
|
$
|
58
|
|
566-629
|
73
|
|
|
23
|
|
||
<565
|
47
|
|
|
22
|
|
||
Total
|
$
|
352
|
|
|
$
|
103
|
|
September 30, 2015
|
||||||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||||||
Within Original Period
|
|
30 - 59 Days Greater
|
|
60 - 89 Days Greater
|
|
90 - 180 Days Greater
|
|
180+ Days with minimum payment in last 90 days
|
|
Total Past Original Expected Repayment
|
|
Total Merchant Receivables
|
||||||||||||||
$
|
284
|
|
|
$
|
36
|
|
|
$
|
15
|
|
|
$
|
15
|
|
|
$
|
2
|
|
|
$
|
68
|
|
|
$
|
352
|
|
December 31, 2014
|
||||||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||||||
Within Original Period
|
|
30 - 59 Days Greater
|
|
60 - 89 Days Greater
|
|
90 - 180 Days Greater
|
|
180+ Days with minimum payment in last 90 days
|
|
Total Past Original Expected Repayment
|
|
Total Merchant Receivables
|
||||||||||||||
$
|
79
|
|
|
$
|
10
|
|
|
$
|
5
|
|
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
24
|
|
|
$
|
103
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
Balance as of January 1
|
$
|
7
|
|
|
$
|
1
|
|
Provisions
|
19
|
|
|
7
|
|
||
Charge-offs
|
(10
|
)
|
|
(1
|
)
|
||
Recoveries
|
1
|
|
|
—
|
|
||
Balance as of September 30
|
$
|
17
|
|
|
$
|
7
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
(In millions)
|
||||||
Maximum potential exposure
|
$
|
101,762
|
|
|
$
|
75,833
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
(In millions)
|
||||||
Allowance for transaction losses
|
$
|
218
|
|
|
$
|
166
|
|
|
Options
|
|
Weighted Average
Grant-Date
Fair Value
(per share)
|
|||
|
(In thousands, except per share amounts)
|
|||||
Outstanding at January 1, 2015
|
2,409
|
|
|
|
||
Granted and assumed
|
1,778
|
|
|
$
|
8.51
|
|
Exercised
|
(3,029
|
)
|
|
|
||
Forfeited/expired/canceled
|
(204
|
)
|
|
|
||
Shares granted as a result of conversion and employee transitions
|
4,658
|
|
|
|
||
Outstanding at September 30, 2015
|
5,612
|
|
|
|
|
Units
|
|
Weighted Average
Grant-Date
Fair Value
(per share)
|
|||
|
(In thousands, except per share amounts)
|
|||||
Outstanding at January 1, 2015
|
14,715
|
|
|
|
||
Awarded and assumed
|
12,223
|
|
|
$
|
35.85
|
|
Vested
|
(7,673
|
)
|
|
|
||
Forfeited
|
(3,592
|
)
|
|
|
||
Shares granted as a result of conversion and employee transitions
|
12,051
|
|
|
|
||
Outstanding at September 30, 2015
|
27,724
|
|
|
|
||
Expected to vest
|
23,482
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Customer support and operations
|
$
|
16
|
|
|
$
|
14
|
|
|
$
|
47
|
|
|
$
|
44
|
|
Sales and marketing
|
18
|
|
|
14
|
|
|
42
|
|
|
40
|
|
||||
Product development
|
33
|
|
|
27
|
|
|
97
|
|
|
78
|
|
||||
General and administrative
|
25
|
|
|
16
|
|
|
59
|
|
|
44
|
|
||||
Depreciation and amortization
|
2
|
|
|
1
|
|
|
6
|
|
|
3
|
|
||||
Total stock-based compensation expense
|
$
|
94
|
|
|
$
|
72
|
|
|
$
|
251
|
|
|
$
|
209
|
|
|
Three Months Ended September 30, 2015
|
|
Nine Months Ended September 30, 2015
|
||||
|
(In millions)
|
||||||
Employee severance and benefits
|
$
|
—
|
|
|
$
|
49
|
|
Total
|
$
|
—
|
|
|
$
|
49
|
|
|
Employee Severance and Benefits
|
|
Other Associated Costs
|
|
Total
|
||||||
|
(In millions)
|
||||||||||
Accrued liability as of January 1, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Charges
|
49
|
|
|
—
|
|
|
49
|
|
|||
Payments
|
(47
|
)
|
|
—
|
|
|
(47
|
)
|
|||
Accrued liability as of September 30, 2015
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency
Translation
|
|
Estimated tax (expense) benefit
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
66
|
|
|
$
|
(2
|
)
|
|
$
|
(40
|
)
|
|
$
|
—
|
|
|
$
|
24
|
|
Other comprehensive income (loss) before reclassifications
|
31
|
|
|
(6
|
)
|
|
(9
|
)
|
|
1
|
|
|
17
|
|
|||||
Amount of gain reclassified from accumulated other comprehensive income
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|||||
Net current period other comprehensive income
|
(7
|
)
|
|
(6
|
)
|
|
(9
|
)
|
|
1
|
|
|
(21
|
)
|
|||||
Ending balance
|
$
|
59
|
|
|
$
|
(8
|
)
|
|
$
|
(49
|
)
|
|
$
|
1
|
|
|
$
|
3
|
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency Translation |
|
Estimated tax (expense) benefit
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
(70
|
)
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
1
|
|
|
$
|
(45
|
)
|
Other comprehensive income (loss) before reclassifications
|
124
|
|
|
—
|
|
|
(23
|
)
|
|
(2
|
)
|
|
99
|
|
|||||
Amount of gain reclassified from accumulated other comprehensive income
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|||||
Net current period other comprehensive income
|
140
|
|
|
—
|
|
|
(23
|
)
|
|
(2
|
)
|
|
115
|
|
|||||
Ending balance
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
70
|
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency
Translation
|
|
Estimated tax (expense) benefit
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
(16
|
)
|
|
$
|
—
|
|
|
$
|
110
|
|
Other comprehensive income (loss) before reclassifications
|
83
|
|
|
(8
|
)
|
|
(33
|
)
|
|
1
|
|
|
43
|
|
|||||
Amount of gain reclassified from accumulated other comprehensive income
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150
|
|
|||||
Net current period other comprehensive income
|
(67
|
)
|
|
(8
|
)
|
|
(33
|
)
|
|
1
|
|
|
(107
|
)
|
|||||
Ending balance
|
$
|
59
|
|
|
$
|
(8
|
)
|
|
$
|
(49
|
)
|
|
$
|
1
|
|
|
$
|
3
|
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency Translation |
|
Estimated tax (expense) benefit
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
(91
|
)
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
4
|
|
|
$
|
(61
|
)
|
Other comprehensive income (loss) before reclassifications
|
105
|
|
|
—
|
|
|
(25
|
)
|
|
(5
|
)
|
|
75
|
|
|||||
Amount of gain reclassified from accumulated other comprehensive income
|
(56
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|||||
Net current period other comprehensive income
|
161
|
|
|
—
|
|
|
(25
|
)
|
|
(5
|
)
|
|
131
|
|
|||||
Ending balance
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
70
|
|
Details about Accumulated Other Comprehensive
Income Components
|
|
Amount of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income
|
|
Affected Line Item in the Statement of Income
|
||||||
|
|
Three Months Ended September 30,
|
|
|
||||||
|
|
2015
|
|
2014
|
|
|
||||
|
|
(In millions)
|
|
|
||||||
Gains (losses) on cash flow hedges-foreign exchange contracts
|
|
$
|
38
|
|
|
$
|
(16
|
)
|
|
Net revenues
|
|
|
$
|
38
|
|
|
$
|
(16
|
)
|
|
Income before income taxes
|
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
||
Total reclassifications for the period
|
|
$
|
38
|
|
|
$
|
(16
|
)
|
|
Net income/(loss)
|
Details about Accumulated Other Comprehensive
Income Components
|
|
Amount of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income
|
|
Affected Line Item in the Statement of Income
|
||||||
|
|
Nine Months Ended September 30,
|
|
|
||||||
|
|
2015
|
|
2014
|
|
|
||||
|
|
(In millions)
|
|
|
||||||
Gains (losses) on cash flow hedges-foreign exchange contracts
|
|
$
|
150
|
|
|
$
|
(56
|
)
|
|
Net revenues
|
|
|
$
|
150
|
|
|
$
|
(56
|
)
|
|
Income before income taxes
|
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
||
Total reclassifications for the period
|
|
$
|
150
|
|
|
$
|
(56
|
)
|
|
Total, net of income taxes
|
|
Three Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Net revenues
|
$
|
2,258
|
|
|
$
|
1,975
|
|
|
14
|
%
|
|
$
|
6,692
|
|
|
$
|
5,832
|
|
|
15
|
%
|
Operating expenses
|
1,928
|
|
|
1,703
|
|
|
13
|
%
|
|
5,642
|
|
|
4,912
|
|
|
15
|
%
|
||||
Operating income
|
330
|
|
|
272
|
|
|
21
|
%
|
|
1,050
|
|
|
920
|
|
|
14
|
%
|
||||
Income tax expense
|
49
|
|
|
42
|
|
|
17
|
%
|
|
209
|
|
|
781
|
|
|
(73
|
)%
|
||||
Effective tax rate
|
14
|
%
|
|
15
|
%
|
|
**
|
|
|
20
|
%
|
|
85
|
%
|
|
**
|
|
||||
Net income
|
$
|
301
|
|
|
$
|
234
|
|
|
29
|
%
|
|
$
|
861
|
|
|
$
|
133
|
|
|
547
|
%
|
Net income per diluted share
(1)(2)
|
$
|
0.25
|
|
|
$
|
0.19
|
|
|
28
|
%
|
|
$
|
0.70
|
|
|
$
|
0.11
|
|
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Non-GAAP operating income
|
$
|
450
|
|
|
$
|
364
|
|
|
24
|
%
|
|
$
|
1,443
|
|
|
$
|
1,201
|
|
|
20
|
%
|
Non-GAAP operating margin
|
20
|
%
|
|
18
|
%
|
|
**
|
|
|
22
|
%
|
|
21
|
%
|
|
**
|
|
||||
Non-GAAP net income
|
$
|
377
|
|
|
$
|
298
|
|
|
27
|
%
|
|
$
|
1,145
|
|
|
$
|
985
|
|
|
16
|
%
|
Non-GAAP net income per diluted share
(1)(2)
|
$
|
0.31
|
|
|
$
|
0.24
|
|
|
26
|
%
|
|
$
|
0.93
|
|
|
$
|
0.80
|
|
|
16
|
%
|
Free Cash Flow
|
$
|
519
|
|
|
$
|
431
|
|
|
20
|
%
|
|
$
|
1,260
|
|
|
$
|
1,220
|
|
|
3
|
%
|
•
|
Transaction revenues: Net transaction fees charged to consumers and merchants based on the volume of activity processed through our Payments Platform, including our PayPal, PayPal Credit, Venmo and Braintree products.
|
•
|
Other value added services: Net revenues derived principally from interest and fees earned on our PayPal Credit products, subscription fees, gateway fees, revenue share we earn through partnerships and other services that we provide to consumers and merchants.
|
|
Three Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Transaction revenues
|
$
|
1,982
|
|
|
$
|
1,754
|
|
|
13
|
%
|
|
$
|
5,866
|
|
|
$
|
5,140
|
|
|
14
|
%
|
Other value-added services
|
276
|
|
|
221
|
|
|
25
|
%
|
|
826
|
|
|
$
|
692
|
|
|
19
|
%
|
|||
Net revenues
|
$
|
2,258
|
|
|
$
|
1,975
|
|
|
14
|
%
|
|
$
|
6,692
|
|
|
$
|
5,832
|
|
|
15
|
%
|
|
Three Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Active customer accounts
1
|
173
|
|
|
157
|
|
|
10
|
%
|
|
173
|
|
|
157
|
|
|
10
|
%
|
||||
Number of payment transactions
2
|
1,216
|
|
|
972
|
|
|
25
|
%
|
|
3,500
|
|
|
2,820
|
|
|
24
|
%
|
||||
Total TPV
3
|
$
|
69,738
|
|
|
$
|
58,184
|
|
|
20
|
%
|
|
$
|
200,241
|
|
|
$
|
168,596
|
|
|
19
|
%
|
Percent of cross-border TPV
|
21
|
%
|
|
24
|
%
|
|
(13
|
)%
|
|
22
|
%
|
|
24
|
%
|
|
(8
|
)%
|
||||
Percent of TPV from large merchants
4
|
46
|
%
|
|
43
|
%
|
|
7
|
%
|
|
46
|
%
|
|
42
|
%
|
|
10
|
%
|
|
Three Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Transaction expense
|
$
|
651
|
|
|
$
|
537
|
|
|
21
|
%
|
|
$
|
1,860
|
|
|
$
|
1,576
|
|
|
18
|
%
|
Transaction and loan losses
|
201
|
|
|
180
|
|
|
12
|
%
|
|
564
|
|
|
453
|
|
|
25
|
%
|
||||
Customer support and operations
|
317
|
|
|
257
|
|
|
23
|
%
|
|
900
|
|
|
775
|
|
|
16
|
%
|
||||
Sales and marketing
|
235
|
|
|
267
|
|
|
(12
|
)%
|
|
716
|
|
|
735
|
|
|
(3
|
)%
|
||||
Product development
|
230
|
|
|
232
|
|
|
(1
|
)%
|
|
695
|
|
|
651
|
|
|
7
|
%
|
||||
General and administrative
|
141
|
|
|
101
|
|
|
40
|
%
|
|
414
|
|
|
338
|
|
|
22
|
%
|
||||
Depreciation and amortization
|
153
|
|
|
129
|
|
|
19
|
%
|
|
444
|
|
|
384
|
|
|
16
|
%
|
||||
Restructuring
|
—
|
|
|
—
|
|
|
**
|
|
|
49
|
|
|
—
|
|
|
**
|
|
||||
Total operating expenses
|
$
|
1,928
|
|
|
$
|
1,703
|
|
|
13
|
%
|
|
$
|
5,642
|
|
|
$
|
4,912
|
|
|
15
|
%
|
Transaction expense rate
1
|
0.93
|
%
|
|
0.92
|
%
|
|
**
|
|
|
0.93
|
%
|
|
0.93
|
%
|
|
**
|
|
||||
Transaction and loan loss rate
2
|
0.29
|
%
|
|
0.31
|
%
|
|
**
|
|
|
0.28
|
%
|
|
0.27
|
%
|
|
**
|
|
|
September 30,
2015 |
|
December 31,
2014 |
||
Percentage of Loans Receivable with FICO scores > 680
|
54
|
%
|
|
54
|
%
|
Percentage of Loans Receivable with FICO scores < 599
|
10
|
%
|
|
9
|
%
|
|
|
|
|
||
Percent of Loans Receivable current
|
90
|
%
|
|
90
|
%
|
Percent of Loans Receivable > 90 days outstanding
|
4
|
%
|
|
4
|
%
|
•
|
Stock-based compensation expense and related employer payroll taxes
. This expense consists of expenses for stock options, restricted stock and employee stock purchases. The company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that management does not believe are reflective of ongoing operating results. The related employer payroll taxes is dependent on the company's stock price and the timing and size of exercises by employees of their stock options and the vesting of their restricted stock, over which management has limited to no control, and as such management does not believe it correlates to the company's operation of the business.
|
•
|
Amortization or impairment of acquired intangible assets, impairment of goodwill, significant gains or losses and transaction expenses from the acquisition or disposal of a business and certain gains or losses on investments
. 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 also exclude certain gains and losses on investments. We exclude these items because management does not believe they are reflective of our ongoing operating results.
|
•
|
Separation
. These are significant expenses related to the separation of our business from eBay into a separate, independent publicly-traded company. These consist primarily of third-party consulting fees, legal fees, employee retention payments and other expenses incurred to complete the separation. We exclude these items because management does not believe they are reflective of our ongoing operating results.
|
•
|
Restructuring.
These charges consist of expenses for employee severance and other exit and disposal costs. We exclude restructuring charges because management does not believe they are reflective of our ongoing operating results.
|
•
|
Certain gains and losses on investments.
These consist of significant, one-time gains or losses as determined in accordance with GAAP. We exclude these items because management does not believe they are reflective of our ongoing operating results.
|
•
|
Other certain significant gains, losses, or charges that are not indicative of our core operating results
. These are significant gains, losses, 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. We exclude these amounts from our results because management does not believe they are indicative of our ongoing operating results. For the
nine months ended September 30, 2014
, this includes the recognition of a U.S. deferred tax liability of approximately $650 million.
|
•
|
Tax effect of non-GAAP adjustments
. This amount is used to present the amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
GAAP operating income
|
$
|
330
|
|
|
$
|
272
|
|
|
$
|
1,050
|
|
|
$
|
920
|
|
Stock-based compensation expense and related employer payroll taxes
|
95
|
|
|
76
|
|
|
266
|
|
|
228
|
|
||||
Amortization of acquired intangible assets
|
20
|
|
|
16
|
|
|
56
|
|
|
53
|
|
||||
Separation
|
3
|
|
|
—
|
|
|
17
|
|
|
—
|
|
||||
Restructuring
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
||||
Acquisition related transaction expense
|
2
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Total non-GAAP operating income adjustments
|
120
|
|
|
92
|
|
|
393
|
|
|
281
|
|
||||
Non-GAAP operating income
|
$
|
450
|
|
|
$
|
364
|
|
|
$
|
1,443
|
|
|
$
|
1,201
|
|
Non-GAAP operating margin
|
20
|
%
|
|
18
|
%
|
|
22
|
%
|
|
21
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
GAAP income before income taxes
|
$
|
350
|
|
|
$
|
276
|
|
|
$
|
1,070
|
|
|
$
|
914
|
|
GAAP provision for income taxes
|
49
|
|
|
42
|
|
|
209
|
|
|
781
|
|
||||
GAAP net income
|
301
|
|
|
234
|
|
|
861
|
|
|
133
|
|
||||
Non-GAAP adjustments to net income:
|
|
|
|
|
|
|
|
||||||||
Non-GAAP operating income adjustments (see table above)
|
120
|
|
|
92
|
|
|
393
|
|
|
281
|
|
||||
Amortization of investments
|
—
|
|
|
1
|
|
|
—
|
|
|
4
|
|
||||
Other certain significant gains, losses, or charges
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
646
|
|
||||
Separation (other income and expense)
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
||||
Tax effect of non-GAAP adjustments
|
(32
|
)
|
|
(25
|
)
|
|
(97
|
)
|
|
(79
|
)
|
||||
Non-GAAP net income
|
$
|
377
|
|
|
$
|
298
|
|
|
$
|
1,145
|
|
|
$
|
985
|
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP net income per diluted share
|
$
|
0.31
|
|
|
$
|
0.24
|
|
|
$
|
0.93
|
|
|
$
|
0.80
|
|
Shares used in non-GAAP diluted share calculation
(1)(2)
|
1,227
|
|
|
1,224
|
|
|
1,227
|
|
|
1,224
|
|
||||
|
|
|
|
|
|
|
|
||||||||
GAAP effective tax rate
|
14
|
%
|
|
15
|
%
|
|
20
|
%
|
|
85
|
%
|
||||
Tax effect of non-GAAP adjustments to net income
|
4
|
%
|
|
3
|
%
|
|
1
|
%
|
|
(67
|
)%
|
||||
Non-GAAP effective tax rate
|
18
|
%
|
|
18
|
%
|
|
21
|
%
|
|
18
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Net cash provided by operating activities
|
$
|
652
|
|
|
$
|
604
|
|
|
$
|
1,818
|
|
|
$
|
1,589
|
|
Less: Purchases of property and equipment
|
(133
|
)
|
|
(173
|
)
|
|
(558
|
)
|
|
(369
|
)
|
||||
Free cash flow
|
$
|
519
|
|
|
$
|
431
|
|
|
$
|
1,260
|
|
|
$
|
1,220
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
(In millions)
|
||||||
Cash, cash equivalents and available-for-sale investment securities
1
|
$
|
6,665
|
|
|
$
|
2,230
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
1,818
|
|
|
$
|
1,589
|
|
Investing activities
|
(5,132
|
)
|
|
(889
|
)
|
||
Financing activities
|
3,034
|
|
|
(28
|
)
|
||
Effect of exchange rates on cash and cash equivalents
|
(41
|
)
|
|
(17
|
)
|
||
Net increase/(decrease) in cash and cash equivalents
|
$
|
(321
|
)
|
|
$
|
655
|
|
Item 3:
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4:
|
Controls and Procedures
|
Item 1:
|
Legal Proceedings
|
Item 1A:
|
Risk Factors
|
•
|
paper-based transactions (principally cash and checks);
|
•
|
providers of traditional payment methods, particularly credit and debit cards, and Automated Clearing House transactions (these providers are primarily well-established banks);
|
•
|
providers of “digital wallets” which offer customers the ability to pay online and/or on mobile devices through a variety of payment methods, including with mobile applications, through contactless payments, and with a variety of payment cards;
|
•
|
providers of mobile payments solutions that use tokenized card data approaches and Near Field Communication (“NFC”) functionality (including Host Card Emulation (“HCE”) functionality to eliminate the need for access to the physical secure element in the device);
|
•
|
payment-card processors that offer their services to merchants, including for “card on file” payments where the merchant invites the consumer to select a payment method for their first transaction, and subsequently uses the same payment method for subsequent transactions;
|
•
|
providers of “person-to-person” payments that facilitate individuals sending money with an email address or mobile phone number;
|
•
|
providers of mobile payments; and
|
•
|
providers of card readers for mobile devices and of other new point of sale and multi-channel technologies.
|
•
|
money remitters;
|
•
|
services that provide online merchants the ability to offer their customers the option of paying for purchases from their bank account or paying on credit in the United States and abroad;
|
•
|
issuers of stored value targeted at online payments;
|
•
|
other international online payment-services providers;
|
•
|
other providers of online account-based payments;
|
•
|
payment services targeting users of social networks and online gaming, including those offering billing to the consumer’s mobile phone account;
|
•
|
mobile payment services between bank accounts;
|
•
|
payment services enabling banks to offer their online banking customers the ability to send and receive payments through their bank account;
|
•
|
online shopping services that provide special offers linked to a specific payment provider; and
|
•
|
services that help merchants accept and manage virtual currencies.
|
•
|
ability to attract, retain and engage both merchants and consumers with relatively low marketing expense;
|
•
|
ability to show that merchants will achieve incremental sales by offering our PayPal services;
|
•
|
security of transactions and the ability for consumers to use our PayPal products and services without sharing their financial information with the merchant or the party they are paying;
|
•
|
simplicity of our fee structure;
|
•
|
ability to develop services across multiple commerce channels, including mobile payments and payments at the retail point of sale;
|
•
|
trust in our dispute resolution and buyer and seller protection programs;
|
•
|
customer service;
|
•
|
brand recognition;
|
•
|
website, mobile platform and application onboarding, ease-of-use and accessibility;
|
•
|
system reliability and data security;
|
•
|
ease and quality of integration into third-party mobile applications; and
|
•
|
quality of developer tools such as our application programming interfaces and software development kits.
|
•
|
expenses associated with localizing our products and services and customer data, including offering customers the ability to transact business in the local currency and adapting our products and services to local preferences (e.g., payment methods) with which we may have limited or no experience;
|
•
|
trade barriers and changes in trade regulations;
|
•
|
difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;
|
•
|
stringent local labor laws and regulations;
|
•
|
credit risk and higher levels of payment fraud;
|
•
|
profit repatriation restrictions, foreign currency exchange restrictions or extreme fluctuations in foreign currency exchange rates for a particular currency;
|
•
|
political or social unrest, economic instability, repression, or human rights issues;
|
•
|
geopolitical events, including natural disasters, public health issues, acts of war, and terrorism;
|
•
|
import or export regulations;
|
•
|
compliance with U.S. laws such as the Foreign Corrupt Practices Act, and foreign laws prohibiting corrupt payments to government officials, as well as U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities;
|
•
|
antitrust and competition regulations;
|
•
|
potentially adverse tax developments and consequences;
|
•
|
economic uncertainties relating to sovereign and other debt;
|
•
|
different, uncertain, or more stringent user protection, data protection, privacy, and other laws;
|
•
|
risks related to other government regulation or required compliance with local laws;
|
•
|
risks related to multiple overlapping legal or regulatory regimes, which may impose conflicting requirements on us;
|
•
|
national or regional differences in macroeconomic growth rates;
|
•
|
local licensing and reporting obligations; and
|
•
|
increased difficulties in collecting accounts receivable.
|
•
|
our products and services continue to expand in scope and complexity;
|
•
|
we continue to expand into new business areas, including through acquisitions; and
|
•
|
the number of patent owners who may claim that we, any of the companies that we have acquired, or our customers infringe their patents, and the aggregate number of patents controlled by such patent owners, continues to increase.
|
•
|
the potential loss of key customers, vendors and other key business partners of the companies we acquire, or dispose of, following and continuing after announcement of our transaction plans;
|
•
|
declining employee morale and retention issues affecting employees of companies that we acquire or dispose of, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired or disposed business;
|
•
|
difficulty making new and strategic hires of new employees;
|
•
|
diversion of management time and a shift of focus from operating the business to the transaction, and in the case of an acquisition, integration and administration;
|
•
|
the need to integrate the operations, systems (including accounting, management, information, compliance, human resource and other administrative systems), technologies, products and personnel of each acquired company, which is an inherently risky and potentially lengthy and costly process;
|
•
|
the inefficiencies and lack of control that may result if such integration is delayed or not implemented, and unforeseen difficulties and expenditures that may arise as a result;
|
•
|
the need to implement or improve controls, procedures and policies appropriate for a larger public company at companies that prior to acquisition may have lacked such controls, procedures and policies or whose controls, procedures and policies did not meet applicable legal and other standards;
|
•
|
potential exposure to new or increased regulatory oversight associated with new lines of business;
|
•
|
risks associated with our expansion into new international markets;
|
•
|
derivative lawsuits resulting from the acquisition;
|
•
|
liability for activities of the acquired company before the acquisition, including intellectual property and other litigation claims or disputes, violations of laws, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities;
|
•
|
the potential loss of key employees following the transaction;
|
•
|
the acquisition of new customer and employee personal information, which in and of itself may require regulatory approval and or additional controls, policies and procedures and subject us to additional exposure and additional complexity and costs of compliance; and
|
•
|
our dependence on the acquired business’ accounting, financial reporting, operating metrics and similar systems, controls and processes and the risk that errors or irregularities in those systems, controls and processes will lead to errors in our financial statements or make it more difficult to manage the acquired business.
|
•
|
increased expectations from offline retailers regarding the reliability and availability of our systems and services and correspondingly lower amounts of downtime, which we may not be able to meet;
|
•
|
significant competition at the retail point of sale, particularly from established payment card providers such as Visa, MasterCard and American Express, many of which have substantially greater resources than we do;
|
•
|
increased targeting by fraudsters, and given that our fraud models are less developed in this area, we may experience increases in fraud and associated transaction losses as we adjust to fraudulent activity at the point of sale;
|
•
|
exposure to product liability claims to the extent that hardware devices that we produce for use at the retail point of sale malfunction or are not in compliance with laws, which could result in substantial liability and require product recalls or other actions;
|
•
|
exposure to new, revised or additional laws, rules and regulations;
|
•
|
increased reliance on third parties involved with processing in-store payments, including independent software providers, electronic point of sale providers, hardware providers (such as cash register and pin-pad providers), payment processors and banks that enable in-store transactions; and
|
•
|
lower operating income than our other payment solutions.
|
•
|
following the separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of eBay;
|
•
|
following the separation, our business is less diversified than eBay’s business prior to the separation; and
|
•
|
following the separation, regulatory requirements may inhibit or prevent certain activities that the parties intend to continue to preserve operating synergies.
|
•
|
Prior to the separation, our business was operated by eBay as part of its broader corporate organization, rather than as an independent company. eBay or its affiliates performed various corporate functions for us, such as legal, finance, treasury, accounting, tax, auditing, human resources, and public affairs. Our historical financial results reflect allocations of corporate expenses from eBay for such functions, which are likely to be less than the expenses we would have incurred had we operated as a separate publicly traded company.
|
•
|
Prior to the separation, our business was integrated with the other businesses of eBay. Historically, we shared economies of scope and scale in costs, employees, vendor relationships and customer relationships. Although we have entered into arm’s length agreements with eBay, including the operating agreement, these arrangements may not retain or fully capture the benefits that we have enjoyed as a result of being integrated with eBay and may result in our paying higher charges than in the past for these services. This could have an adverse effect on our results of operations and financial condition.
|
•
|
We may lose certain synergies and benefits we enjoyed as a result of being a part of eBay. As a part of eBay, we benefited from, among other things, the acquisition of new customers from eBay, capital to fund acquisitions, investments, and credit, and data from eBay that helps us to manage risks and maintain a low loss rate. In addition, being a part of eBay enabled us to leverage eBay’s technology capabilities, data, commerce platforms and relationships with retailers, brands and large merchants worldwide. The loss of these synergies and benefits could adversely affect our results of operations and financial condition.
|
•
|
Generally, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, were historically satisfied as part of the corporate-wide cash management policies of eBay. Following the separation, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, or through strategic relationships or other arrangements, which may or may not be available and may be more costly.
|
•
|
Following the separation, the cost of capital for our business may be higher than eBay’s cost of capital prior to the separation.
|
•
|
actual or anticipated fluctuations in our operating results;
|
•
|
changes in earnings estimated by securities analysts or our ability to meet those estimates;
|
•
|
the change in our stockholder base following the distribution;
|
•
|
the operating and stock price performance of comparable companies;
|
•
|
changes to the regulatory and legal environment under which we operate; and
|
•
|
market conditions in the payments industry, the industries of merchants and the domestic and worldwide economy as a whole.
|
•
|
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
|
•
|
the fact that directors may not be elected, removed or replaced at stockholder-requested special meetings unless a person, entity or group owns at least a majority of PayPal’s outstanding common stock;
|
•
|
the right of PayPal’s board to issue preferred stock without stockholder approval; and
|
•
|
the ability of PayPal’s directors, and not stockholders, to fill vacancies on PayPal’s board of directors in most circumstances.
|
Item 2:
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3:
|
Defaults Upon Senior Securities
|
Item 4:
|
Mine Safety Disclosures
|
Item 5:
|
Other Information
|
Item 6:
|
Exhibits
|
|
|
PayPal Holdings, Inc.
|
|
|
|
Principal Executive Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ Daniel H. Schulman
|
|
|
|
Daniel H. Schulman
|
|
|
|
President and Chief Executive Officer
|
Date:
|
October 29, 2015
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ John D. Rainey
|
|
|
|
John D. Rainey
|
|
|
|
Senior Vice President, Chief Financial Officer
|
Date:
|
October 29, 2015
|
|
|
|
|
Principal Accounting Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ Aaron Anderson
|
|
|
|
Aaron Anderson
|
|
|
|
Vice President, Chief Accounting Officer
|
Date:
|
October 29, 2015
|
|
|
|
|
|
Exhibit 10.01+
|
|
Letter Agreement dated July 13, 2015 between Marcia Morales-Jaffe and Registrant
|
Exhibit 10.02+
|
|
Letter Agreement dated July 29, 2015 between John Rainey and Registrant
|
Exhibit 31.01
|
|
Certification of Registrant's Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 31.02
|
|
Certification of Registrant's Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32.01
|
|
Certification of Registrant's Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 32.02
|
|
Certification of Registrant's Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
/s/ Daniel H. Schulman
|
|
Daniel H. Schulman
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/
John D. Rainey
|
|
John D. Rainey
|
|
Senior Vice President, Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
/s/ Daniel H. Schulman
|
|
Daniel H. Schulman
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ John D. Rainey
|
|
John D. Rainey
|
|
Senior Vice President, Chief Financial Officer
|
|
(Principal Financial Officer)
|