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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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47-2989869
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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2211 North First Street
San Jose, California
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95131
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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ý
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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o
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Emerging growth company
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o
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
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Page Number
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March 31,
2019 |
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December 31,
2018 |
||||
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(In millions, except par value)
|
||||||
|
(Unaudited)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,515
|
|
|
$
|
7,575
|
|
Short-term investments
|
3,334
|
|
|
1,534
|
|
||
Accounts receivable, net
|
409
|
|
|
313
|
|
||
Loans and interest receivable, net of allowances of $195 and $172 as of March 31, 2019 and December 31, 2018, respectively
|
2,856
|
|
|
2,532
|
|
||
Funds receivable and customer accounts
|
22,738
|
|
|
20,062
|
|
||
Prepaid expenses and other current assets
|
1,039
|
|
|
947
|
|
||
Total current assets
|
34,891
|
|
|
32,963
|
|
||
Long-term investments
|
1,695
|
|
|
971
|
|
||
Property and equipment, net
|
1,731
|
|
|
1,724
|
|
||
Goodwill
|
6,234
|
|
|
6,284
|
|
||
Intangible assets, net
|
750
|
|
|
825
|
|
||
Other assets
|
979
|
|
|
565
|
|
||
Total assets
|
$
|
46,280
|
|
|
$
|
43,332
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
226
|
|
|
$
|
281
|
|
Notes payable
|
1,999
|
|
|
1,998
|
|
||
Funds payable and amounts due to customers
|
24,238
|
|
|
21,562
|
|
||
Accrued expenses and other current liabilities
|
2,097
|
|
|
2,002
|
|
||
Income taxes payable
|
75
|
|
|
61
|
|
||
Total current liabilities
|
28,635
|
|
|
25,904
|
|
||
Deferred tax liability and other long-term liabilities
|
2,488
|
|
|
2,042
|
|
||
Total liabilities
|
31,123
|
|
|
27,946
|
|
||
Commitments and Contingencies (Note 13)
|
|
|
|
|
|||
Equity:
|
|
|
|
||||
Common stock, $0.0001 par value; 4,000 shares authorized; 1,172 and 1,174 shares outstanding as of March 31, 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 March 31, 2019 and December 31, 2018, respectively
|
(6,216
|
)
|
|
(5,511
|
)
|
||
Additional paid-in-capital
|
14,848
|
|
|
14,939
|
|
||
Retained earnings
|
6,550
|
|
|
5,880
|
|
||
Accumulated other comprehensive income (loss)
|
(25
|
)
|
|
78
|
|
||
Total equity
|
15,157
|
|
|
15,386
|
|
||
Total liabilities and equity
|
$
|
46,280
|
|
|
$
|
43,332
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except per share data)
|
||||||
|
(Unaudited)
|
||||||
Net revenues
|
$
|
4,128
|
|
|
$
|
3,685
|
|
Operating expenses:
|
|
|
|
||||
Transaction expense
|
1,549
|
|
|
1,275
|
|
||
Transaction and loan losses
|
341
|
|
|
305
|
|
||
Customer support and operations
|
388
|
|
|
342
|
|
||
Sales and marketing
|
329
|
|
|
281
|
|
||
Technology and development
|
511
|
|
|
448
|
|
||
General and administrative
|
419
|
|
|
347
|
|
||
Restructuring and other charges
|
73
|
|
|
153
|
|
||
Total operating expenses
|
3,610
|
|
|
3,151
|
|
||
Operating income
|
518
|
|
|
534
|
|
||
Other income (expense), net
|
199
|
|
|
14
|
|
||
Income before income taxes
|
717
|
|
|
548
|
|
||
Income tax expense
|
50
|
|
|
37
|
|
||
Net income
|
$
|
667
|
|
|
$
|
511
|
|
|
|
|
|
||||
Net income per share:
|
|
|
|
||||
Basic
|
$
|
0.57
|
|
|
$
|
0.43
|
|
Diluted
|
$
|
0.56
|
|
|
$
|
0.42
|
|
|
|
|
|
||||
Weighted average shares:
|
|
|
|
||||
Basic
|
1,171
|
|
|
1,192
|
|
||
Diluted
|
1,188
|
|
|
1,217
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
|
(Unaudited)
|
||||||
Net income
|
$
|
667
|
|
|
$
|
511
|
|
Other comprehensive income (loss), net of reclassification adjustments:
|
|
|
|
||||
Foreign currency translation
|
(67
|
)
|
|
2
|
|
||
Unrealized gains (losses) on investments, net
|
11
|
|
|
(15
|
)
|
||
Tax (expense) benefit on unrealized gains (losses) on investments, net
|
(2
|
)
|
|
4
|
|
||
Unrealized losses on hedging activities, net
|
(46
|
)
|
|
(18
|
)
|
||
Tax benefit on unrealized losses on hedging activities, net
|
1
|
|
|
—
|
|
||
Other comprehensive income (loss), net of tax
|
(103
|
)
|
|
(27
|
)
|
||
Comprehensive income
|
$
|
564
|
|
|
$
|
484
|
|
|
Common Stock Shares
|
|
Treasury Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other
Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total
Equity
|
|||||||||||
|
||||||||||||||||||||||
|
(In millions)
|
|||||||||||||||||||||
|
(Unaudited)
|
|||||||||||||||||||||
Balances at December 31, 2018
|
1,174
|
|
|
$
|
(5,511
|
)
|
|
$
|
14,939
|
|
|
$
|
78
|
|
|
$
|
5,880
|
|
|
$
|
15,386
|
|
Adoption of leases standard
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
667
|
|
|
667
|
|
|||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
(67
|
)
|
|
—
|
|
|
(67
|
)
|
|||||
Unrealized gains on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|||||
Tax expense on unrealized gains on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||||
Unrealized losses on hedging activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(46
|
)
|
|
—
|
|
|
(46
|
)
|
|||||
Tax benefit on unrealized losses on hedging activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes
|
6
|
|
|
—
|
|
|
(302
|
)
|
|
—
|
|
|
—
|
|
|
(302
|
)
|
|||||
Common stock repurchased
|
(8
|
)
|
|
(705
|
)
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
(750
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
256
|
|
|
—
|
|
|
—
|
|
|
256
|
|
|||||
Balances at March 31, 2019
|
1,172
|
|
|
$
|
(6,216
|
)
|
|
$
|
14,848
|
|
|
$
|
(25
|
)
|
|
$
|
6,550
|
|
|
$
|
15,157
|
|
|
Common Stock Shares
|
|
Treasury Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other
Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total
Equity
|
|||||||||||
|
||||||||||||||||||||||
|
(In millions)
|
|||||||||||||||||||||
|
(Unaudited)
|
|||||||||||||||||||||
Balances at December 31, 2017
|
1,200
|
|
|
$
|
(2,001
|
)
|
|
$
|
14,314
|
|
|
$
|
(142
|
)
|
|
$
|
3,823
|
|
|
$
|
15,994
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
511
|
|
|
511
|
|
|||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|||||
Unrealized losses on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
|||||
Tax benefit on unrealized losses on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||
Unrealized losses on hedging activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
|||||
Tax benefit on unrealized losses on hedging activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes
|
7
|
|
|
—
|
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
|||||
Common stock repurchased
|
(24
|
)
|
|
(1,810
|
)
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(1,825
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
214
|
|
|
—
|
|
|
—
|
|
|
214
|
|
|||||
Balances at March 31, 2018
|
1,183
|
|
|
$
|
(3,811
|
)
|
|
$
|
14,287
|
|
|
$
|
(169
|
)
|
|
$
|
4,334
|
|
|
$
|
14,641
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
|
(Unaudited)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
667
|
|
|
$
|
511
|
|
Adjustments:
|
|
|
|
||||
Transaction and loan losses
|
341
|
|
|
305
|
|
||
Depreciation and amortization
|
230
|
|
|
185
|
|
||
Stock-based compensation
|
247
|
|
|
205
|
|
||
Deferred income taxes
|
74
|
|
|
91
|
|
||
Cost basis adjustments to loans and interest receivable held for sale
|
—
|
|
|
128
|
|
||
Unrealized gains on strategic investments
|
(180
|
)
|
|
—
|
|
||
Other
|
(44
|
)
|
|
(5
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(96
|
)
|
|
25
|
|
||
Changes in loans and interest receivable held for sale, net
|
4
|
|
|
(1,291
|
)
|
||
Accounts payable
|
(3
|
)
|
|
(35
|
)
|
||
Income taxes payable
|
14
|
|
|
—
|
|
||
Other assets and liabilities
|
(227
|
)
|
|
(468
|
)
|
||
Net cash provided by (used in) operating activities
|
1,027
|
|
|
(349
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(218
|
)
|
|
(178
|
)
|
||
Changes in principal loans receivable, net
|
(357
|
)
|
|
738
|
|
||
Purchases of investments
|
(8,138
|
)
|
|
(5,275
|
)
|
||
Maturities and sales of investments
|
6,028
|
|
|
4,291
|
|
||
Funds receivable
|
(2,175
|
)
|
|
429
|
|
||
Net cash (used in) provided by investing activities
|
(4,860
|
)
|
|
5
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
7
|
|
|
13
|
|
||
Purchases of treasury stock
|
(756
|
)
|
|
(1,825
|
)
|
||
Tax withholdings related to net share settlements of equity awards
|
(309
|
)
|
|
(335
|
)
|
||
Borrowings under financing arrangements
|
—
|
|
|
2,075
|
|
||
Funds payable and amounts due to customers
|
2,560
|
|
|
865
|
|
||
Net cash provided by financing activities
|
1,502
|
|
|
793
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
1
|
|
|
(7
|
)
|
||
Net change in cash, cash equivalents and restricted cash
|
(2,330
|
)
|
|
442
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
13,233
|
|
|
8,285
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
10,903
|
|
|
$
|
8,727
|
|
|
|
|
|
||||
Supplemental cash flow disclosures:
|
|
|
|
||||
Cash paid for interest
|
$
|
20
|
|
|
$
|
8
|
|
Cash paid (refund received) for income taxes, net
|
$
|
22
|
|
|
$
|
(6
|
)
|
|
|
|
|
||||
The below table reconciles cash, cash equivalents and restricted cash as reported in the condensed consolidated balance sheet to the total of the same amounts shown in the condensed consolidated statement of cash flows:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,515
|
|
|
$
|
2,879
|
|
Short term investments
|
15
|
|
|
16
|
|
||
Funds receivable and customer accounts
|
6,373
|
|
|
5,832
|
|
||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows
|
$
|
10,903
|
|
|
$
|
8,727
|
|
|
Three Months Ended March 31, 2018
|
||||||||||
|
(In millions)
|
||||||||||
|
As Reported
|
|
Adjustments
|
|
Revised
|
||||||
|
|
|
|
|
|
||||||
Transaction expense
|
$
|
1,275
|
|
|
$
|
—
|
|
|
$
|
1,275
|
|
Transaction and loan losses
|
305
|
|
|
—
|
|
|
305
|
|
|||
Customer support and operations
|
351
|
|
|
(9
|
)
|
|
342
|
|
|||
Sales and marketing
|
285
|
|
|
(4
|
)
|
|
281
|
|
|||
Product development
|
258
|
|
|
(258
|
)
|
|
—
|
|
|||
Technology and development
|
—
|
|
|
448
|
|
|
448
|
|
|||
General and administrative
|
339
|
|
|
8
|
|
|
347
|
|
|||
Depreciation and amortization
|
185
|
|
|
(185
|
)
|
|
—
|
|
|||
Restructuring and other charges
|
153
|
|
|
—
|
|
|
153
|
|
|||
Total operating expenses
|
$
|
3,151
|
|
|
$
|
—
|
|
|
$
|
3,151
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Primary geographical markets
|
|
|
|
||||
United States (“U.S.”)
|
$
|
2,187
|
|
|
$
|
2,023
|
|
United Kingdom (“U.K.”)
|
433
|
|
|
392
|
|
||
Other countries
(1)
|
1,508
|
|
|
1,270
|
|
||
Total revenues
(2)
|
$
|
4,128
|
|
|
$
|
3,685
|
|
|
|
|
|
||||
Types of revenues
|
|
|
|
||||
Transaction revenues
|
$
|
3,731
|
|
|
$
|
3,197
|
|
Other value added services
|
397
|
|
|
488
|
|
||
Total revenues
(2)
|
$
|
4,128
|
|
|
$
|
3,685
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except per share amounts)
|
||||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
667
|
|
|
$
|
511
|
|
Denominator:
|
|
|
|
||||
Weighted average shares of common stock - basic
|
1,171
|
|
|
1,192
|
|
||
Dilutive effect of equity incentive awards
|
17
|
|
|
25
|
|
||
Weighted average shares of common stock - diluted
|
1,188
|
|
|
1,217
|
|
||
Net income per share:
|
|
|
|
||||
Basic
|
$
|
0.57
|
|
|
$
|
0.43
|
|
Diluted
|
$
|
0.56
|
|
|
$
|
0.42
|
|
Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive
|
3
|
|
|
—
|
|
|
December 31,
2018 |
|
Goodwill
Acquired
|
|
Adjustments
|
|
March 31,
2019 |
||||||||
|
(In millions)
|
||||||||||||||
Total goodwill
|
$
|
6,284
|
|
|
$
|
—
|
|
|
$
|
(50
|
)
|
|
$
|
6,234
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||
|
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
|
$
|
1,121
|
|
|
$
|
(644
|
)
|
|
$
|
477
|
|
|
7
|
|
$
|
1,134
|
|
|
$
|
(623
|
)
|
|
$
|
511
|
|
|
7
|
Marketing related
|
298
|
|
|
(215
|
)
|
|
83
|
|
|
3
|
|
301
|
|
|
(207
|
)
|
|
94
|
|
|
3
|
||||||
Developed technology
|
449
|
|
|
(290
|
)
|
|
159
|
|
|
3
|
|
453
|
|
|
(269
|
)
|
|
184
|
|
|
3
|
||||||
All other
|
245
|
|
|
(214
|
)
|
|
31
|
|
|
5
|
|
245
|
|
|
(209
|
)
|
|
36
|
|
|
5
|
||||||
Intangible assets, net
|
$
|
2,113
|
|
|
$
|
(1,363
|
)
|
|
$
|
750
|
|
|
|
|
$
|
2,133
|
|
|
$
|
(1,308
|
)
|
|
$
|
825
|
|
|
|
Fiscal years:
|
|
||
Remaining 2019
|
$
|
152
|
|
2020
|
190
|
|
|
2021
|
137
|
|
|
2022
|
72
|
|
|
2023
|
72
|
|
|
Thereafter
|
127
|
|
|
|
$
|
750
|
|
|
March 31, 2019
|
||
|
(in millions, except weighted-average figures)
|
||
Lease expense
|
|
||
Operating lease expense
|
$
|
34
|
|
Sublease income
|
(2
|
)
|
|
Total lease expense cost
|
$
|
32
|
|
|
|
||
Other information:
|
|
||
Cash paid for amounts included in the measurement of lease liabilities
|
|
||
Operating cash flows from operating leases
|
$
|
31
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities as of January 1, 2019
|
$
|
511
|
|
Weighted-average remaining lease term - operating leases
|
6.3 years
|
|
|
Weighted-average discount rate - operating leases
|
4
|
%
|
|
Operating Leases
|
||
Fiscal years:
|
(In millions)
|
||
Remaining 2019
|
$
|
92
|
|
2020
|
110
|
|
|
2021
|
88
|
|
|
2022
|
69
|
|
|
2023
|
52
|
|
|
Thereafter
|
169
|
|
|
Total
|
$
|
580
|
|
Less: present value discount
|
(82
|
)
|
|
Lease liability
|
$
|
498
|
|
|
Operating Leases
|
||
Fiscal years:
|
(In millions)
|
||
2019
|
$
|
124
|
|
2020
|
111
|
|
|
2021
|
96
|
|
|
2022
|
81
|
|
|
2023
|
63
|
|
|
Thereafter
|
189
|
|
|
Total minimum lease payments
|
$
|
664
|
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency
Translation
|
|
Estimated Tax Benefit (Expense)
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
182
|
|
|
$
|
(13
|
)
|
|
$
|
(93
|
)
|
|
$
|
2
|
|
|
$
|
78
|
|
Other comprehensive income (loss) before reclassifications
|
6
|
|
|
11
|
|
|
(67
|
)
|
|
(1
|
)
|
|
(51
|
)
|
|||||
Less: Amount of gain (loss) reclassified from accumulated other comprehensive income
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|||||
Net current period other comprehensive income (loss)
|
(46
|
)
|
|
11
|
|
|
(67
|
)
|
|
(1
|
)
|
|
(103
|
)
|
|||||
Ending balance
|
$
|
136
|
|
|
$
|
(2
|
)
|
|
$
|
(160
|
)
|
|
$
|
1
|
|
|
$
|
(25
|
)
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency Translation |
|
Estimated Tax Benefit
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
(111
|
)
|
|
$
|
(12
|
)
|
|
$
|
(25
|
)
|
|
$
|
6
|
|
|
$
|
(142
|
)
|
Other comprehensive income (loss) before reclassifications
|
(62
|
)
|
|
(16
|
)
|
|
2
|
|
|
4
|
|
|
(72
|
)
|
|||||
Less: Amount of gain (loss) reclassified from accumulated other comprehensive income
|
(44
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|||||
Net current period other comprehensive income (loss)
|
(18
|
)
|
|
(15
|
)
|
|
2
|
|
|
4
|
|
|
(27
|
)
|
|||||
Ending balance
|
$
|
(129
|
)
|
|
$
|
(27
|
)
|
|
$
|
(23
|
)
|
|
$
|
10
|
|
|
$
|
(169
|
)
|
Details of Accumulated Other Comprehensive
Income (Loss) Components |
|
Amount of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss)
|
|
Affected Line Item in the Statement of Income
|
||||||
|
|
Three Months Ended March 31,
|
|
|
||||||
|
|
2019
|
|
2018
|
|
|
||||
|
|
(In millions)
|
|
|
||||||
Gains (losses) on cash flow hedges
—
foreign exchange contracts
|
|
$
|
52
|
|
|
$
|
(44
|
)
|
|
Net revenues
|
Unrealized (losses) on investments
|
|
—
|
|
|
(1
|
)
|
|
Other income (expense), net
|
||
|
|
$
|
52
|
|
|
$
|
(45
|
)
|
|
Income before income taxes
|
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
||
Total reclassifications for the period
|
|
$
|
52
|
|
|
$
|
(45
|
)
|
|
Net income
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except per share amounts)
|
||||||
Interest income
|
$
|
49
|
|
|
$
|
28
|
|
Interest expense
|
(22
|
)
|
|
(16
|
)
|
||
Gains (losses) on strategic investments
|
180
|
|
|
—
|
|
||
Other
|
(8
|
)
|
|
2
|
|
||
Other income (expense), net
|
$
|
199
|
|
|
$
|
14
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(In millions)
|
||||||
Funds receivable and customer accounts:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
6,373
|
|
|
$
|
5,642
|
|
Time deposits
|
370
|
|
|
389
|
|
||
Available-for-sale debt securities
|
10,699
|
|
|
10,940
|
|
||
Funds receivable
|
5,296
|
|
|
3,091
|
|
||
Total funds receivable and customer accounts
|
$
|
22,738
|
|
|
$
|
20,062
|
|
Short-term investments:
|
|
|
|
||||
Time deposits
|
$
|
743
|
|
|
$
|
774
|
|
Available-for-sale debt securities
|
2,518
|
|
|
685
|
|
||
Restricted cash
|
73
|
|
|
75
|
|
||
Total short-term investments
|
$
|
3,334
|
|
|
$
|
1,534
|
|
Long-term investments:
|
|
|
|
||||
Available-for-sale debt securities
|
$
|
451
|
|
|
$
|
676
|
|
Restricted cash
|
2
|
|
|
2
|
|
||
Strategic investments
|
1,242
|
|
|
293
|
|
||
Total long-term investments
|
$
|
1,695
|
|
|
$
|
971
|
|
|
March 31, 2019
|
||||||||||||||
|
Gross
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
(In millions)
|
||||||||||||||
Funds receivable and customer accounts:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
7,123
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
7,128
|
|
Foreign government and agency securities
|
788
|
|
|
—
|
|
|
—
|
|
|
788
|
|
||||
Corporate debt securities
|
627
|
|
|
—
|
|
|
—
|
|
|
627
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|||||||
U.S. government and agency securities
|
298
|
|
|
—
|
|
|
—
|
|
|
298
|
|
||||
Foreign government and agency securities
|
26
|
|
|
—
|
|
|
—
|
|
|
26
|
|
||||
Corporate debt securities
|
1,913
|
|
|
—
|
|
|
(3
|
)
|
|
1,910
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Foreign government and agency securities
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||
Corporate debt securities
|
433
|
|
|
—
|
|
|
(4
|
)
|
|
429
|
|
||||
Total available-for-sale debt securities
(1)
|
$
|
11,220
|
|
|
$
|
5
|
|
|
$
|
(7
|
)
|
|
$
|
11,218
|
|
|
December 31, 2018
|
||||||||||||||
|
Gross
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
(In millions)
|
||||||||||||||
Funds receivable and customer accounts:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
6,945
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
6,947
|
|
Foreign government and agency securities
|
772
|
|
|
—
|
|
|
(1
|
)
|
|
771
|
|
||||
Corporate debt securities
|
883
|
|
|
—
|
|
|
—
|
|
|
883
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Corporate debt securities
|
393
|
|
|
—
|
|
|
(3
|
)
|
|
390
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Foreign government and agency securities
|
38
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||
Corporate debt securities
|
639
|
|
|
—
|
|
|
(11
|
)
|
|
628
|
|
||||
Total available-for-sale debt securities
(1)
|
$
|
9,670
|
|
|
$
|
2
|
|
|
$
|
(15
|
)
|
|
$
|
9,657
|
|
|
March 31, 2019
|
||||||||||||||||||||||
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross
Unrealized Losses |
|
Fair Value
|
|
Gross
Unrealized Losses |
|
Fair Value
|
|
Gross
Unrealized Losses |
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Funds receivable and customer accounts:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
124
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
124
|
|
|
$
|
—
|
|
Foreign government and agency securities
|
74
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
123
|
|
|
—
|
|
||||||
Corporate debt securities
|
25
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
32
|
|
|
—
|
|
||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign government and agency securities
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
26
|
|
|
—
|
|
||||||
Corporate debt securities
|
39
|
|
|
—
|
|
|
518
|
|
|
(3
|
)
|
|
557
|
|
|
(3
|
)
|
||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign government and agency securities
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
||||||
Corporate debt securities
|
18
|
|
|
—
|
|
|
395
|
|
|
(4
|
)
|
|
413
|
|
|
(4
|
)
|
||||||
Total available-for-sale debt securities
|
$
|
280
|
|
|
$
|
—
|
|
|
$
|
1,007
|
|
|
$
|
(7
|
)
|
|
$
|
1,287
|
|
|
$
|
(7
|
)
|
|
December 31, 2018
|
||||||||||||||||||||||
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross
Unrealized Losses |
|
Fair Value
|
|
Gross
Unrealized Losses |
|
Fair Value
|
|
Gross
Unrealized Losses |
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Funds receivable and customer accounts:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
2,419
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
2,437
|
|
|
$
|
—
|
|
Foreign government and agency securities
|
295
|
|
|
—
|
|
|
49
|
|
|
(1
|
)
|
|
344
|
|
|
(1
|
)
|
||||||
Corporate debt securities
|
281
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
288
|
|
|
—
|
|
||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Corporate debt securities
|
57
|
|
|
—
|
|
|
333
|
|
|
(3
|
)
|
|
390
|
|
|
(3
|
)
|
||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign government and agency securities
|
10
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
38
|
|
|
—
|
|
||||||
Corporate debt securities
|
94
|
|
|
(2
|
)
|
|
534
|
|
|
(9
|
)
|
|
628
|
|
|
(11
|
)
|
||||||
Total available-for-sale debt securities
|
$
|
3,156
|
|
|
$
|
(2
|
)
|
|
$
|
969
|
|
|
$
|
(13
|
)
|
|
$
|
4,125
|
|
|
$
|
(15
|
)
|
|
March 31, 2019
|
|||||
|
Amortized Cost
|
Fair Value
|
||||
|
(In millions)
|
(In millions)
|
||||
One year or less
|
$
|
10,746
|
|
$
|
10,748
|
|
After one year through five years
|
468
|
|
464
|
|
||
After five years through ten years
|
6
|
|
6
|
|
||
Total
|
$
|
11,220
|
|
$
|
11,218
|
|
|
(In millions)
|
||
Carrying amount, beginning of period
|
$
|
293
|
|
Adjustments related to non-marketable equity securities:
|
|
||
Additions, net of sales
|
19
|
|
|
Gross unrealized gains
|
57
|
|
|
Gross unrealized losses and impairments
|
—
|
|
|
Carrying amount, end of period
|
$
|
369
|
|
|
|
March 31, 2019
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
||||||
|
|
(In millions)
|
||||||||||
Assets:
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
(1)
|
|
$
|
2,167
|
|
|
$
|
—
|
|
|
$
|
2,167
|
|
Short-term investments
(2)
:
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
|
299
|
|
|
—
|
|
|
299
|
|
|||
Foreign government and agency securities
|
|
287
|
|
|
—
|
|
|
287
|
|
|||
Corporate debt securities
|
|
1,932
|
|
|
—
|
|
|
1,932
|
|
|||
Total short-term investments
|
|
$
|
2,518
|
|
|
$
|
—
|
|
|
$
|
2,518
|
|
Funds receivable and customer accounts
(3)
:
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
1,051
|
|
|
—
|
|
|
1,051
|
|
|||
U.S. government and agency securities
|
|
7,128
|
|
|
—
|
|
|
7,128
|
|
|||
Foreign government and agency securities
|
|
2,316
|
|
|
—
|
|
|
2,316
|
|
|||
Corporate debt securities
|
|
1,255
|
|
|
—
|
|
|
1,255
|
|
|||
Total funds receivable and customer accounts
|
|
$
|
11,750
|
|
|
$
|
—
|
|
|
$
|
11,750
|
|
Derivatives
|
|
223
|
|
|
—
|
|
|
223
|
|
|||
Long-term investments
(2).(4)
:
|
|
|
|
|
|
|
||||||
Foreign government and agency securities
|
|
22
|
|
|
—
|
|
|
22
|
|
|||
Corporate debt securities
|
|
429
|
|
|
—
|
|
|
429
|
|
|||
Marketable equity securities
|
|
873
|
|
|
873
|
|
|
—
|
|
|||
Total long-term investments
|
|
$
|
1,324
|
|
|
$
|
873
|
|
|
$
|
451
|
|
Total financial assets
|
|
$
|
17,982
|
|
|
$
|
873
|
|
|
$
|
17,109
|
|
Liabilities:
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
68
|
|
|
$
|
—
|
|
|
$
|
68
|
|
|
|
December 31, 2018
|
|
Significant Other
Observable Inputs (Level 2) |
||||
|
|
(In millions)
|
||||||
Assets:
|
|
|
|
|
||||
Cash and cash equivalents
(1)
|
|
$
|
3,678
|
|
|
$
|
3,678
|
|
Short-term investments
(2)
:
|
|
|
|
|
||||
Foreign government and agency securities
|
|
235
|
|
|
235
|
|
||
Corporate debt securities
|
|
450
|
|
|
450
|
|
||
Total short-term investments
|
|
685
|
|
|
685
|
|
||
Funds receivable and customer accounts
(3)
:
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
605
|
|
|
605
|
|
||
U.S. government and agency securities
|
|
6,946
|
|
|
6,946
|
|
||
Foreign government and agency securities
|
|
2,434
|
|
|
2,434
|
|
||
Corporate debt securities
|
|
1,560
|
|
|
1,560
|
|
||
Total funds receivable and customer accounts
|
|
11,545
|
|
|
11,545
|
|
||
Derivatives
|
|
320
|
|
|
320
|
|
||
Long-term investments
(2),(4)
:
|
|
|
|
|
||||
Foreign government and agency securities
|
|
48
|
|
|
48
|
|
||
Corporate debt securities
|
|
628
|
|
|
628
|
|
||
Total long-term investments
|
|
676
|
|
|
676
|
|
||
Total financial assets
|
|
$
|
16,904
|
|
|
$
|
16,904
|
|
Liabilities:
|
|
|
|
|
||||
Derivatives
|
|
$
|
67
|
|
|
$
|
67
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Funds receivable and customer accounts
|
$
|
2,156
|
|
|
$
|
2,339
|
|
Short-term investments
|
$
|
284
|
|
|
$
|
295
|
|
Long-term investments
|
$
|
10
|
|
|
$
|
10
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Funds receivable and customer accounts
|
$
|
(29
|
)
|
|
$
|
40
|
|
Short-term investments
|
$
|
—
|
|
|
$
|
8
|
|
|
|
March 31, 2019
|
|
Significant Other
Observable Inputs (Level 2) |
|||
|
|
(In millions)
|
|||||
Non-marketable equity investments measured using the Measurement Alternative
(1)
|
|
$
|
103
|
|
|
103
|
|
|
|
December 31, 2018
|
|
Significant Other
Observable Inputs (Level 2) |
|||
|
|
(In millions)
|
|||||
Non-marketable equity investments measured using the Measurement Alternative
(1)
|
|
$
|
116
|
|
|
116
|
|
|
Balance Sheet Location
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
|
|
(In millions)
|
||||||
Derivative Assets:
|
|
|
|
|
|
||||
Foreign exchange contracts designated as cash flow hedges
|
Other current assets
|
|
$
|
140
|
|
|
$
|
170
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other assets (non-current)
|
|
8
|
|
|
11
|
|
||
Foreign exchange contracts not designated as hedging instruments
|
Other current assets
|
|
75
|
|
|
139
|
|
||
Total derivative assets
|
|
|
$
|
223
|
|
|
$
|
320
|
|
|
|
|
|
|
|
||||
Derivative Liabilities:
|
|
|
|
|
|
||||
Foreign exchange contracts designated as cash flow hedges
|
Other current liabilities
|
|
$
|
9
|
|
|
$
|
3
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other long-term liabilities
|
|
3
|
|
|
—
|
|
||
Foreign exchange contracts not designated as hedging instruments
|
Other current liabilities
|
|
56
|
|
|
64
|
|
||
Total derivative liabilities
|
|
|
$
|
68
|
|
|
$
|
67
|
|
|
December 31, 2018
|
|
Amount of gains (losses)
recognized in other
comprehensive income
|
|
Less: Amount of gains (losses)
reclassified from
accumulated other
comprehensive income
to net revenue
|
|
March 31, 2019
|
||||||||
|
(In millions)
|
||||||||||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
182
|
|
|
$
|
6
|
|
|
$
|
52
|
|
|
$
|
136
|
|
|
December 31, 2017
|
|
Amount of gains (losses)
recognized in other
comprehensive income
|
|
Less: Amount of gains (losses)
reclassified from
accumulated other
comprehensive income
to net revenue
|
|
March 31, 2018
|
||||||||
|
(In millions)
|
||||||||||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
(111
|
)
|
|
$
|
(62
|
)
|
|
$
|
(44
|
)
|
|
$
|
(129
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
|
Net revenues
|
||||||
Total amounts presented in the condensed consolidated statements of income in which the effects of cash flow hedges are recorded
|
$
|
4,128
|
|
|
$
|
3,685
|
|
Gains (losses) on foreign exchange contracts designated as cash flow hedges reclassified from accumulated other comprehensive income
|
$
|
52
|
|
|
$
|
(44
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Gains (losses) on foreign exchange contracts recognized in other income (expense), net
|
$
|
(10
|
)
|
|
$
|
(44
|
)
|
Gains (losses) on foreign exchange contracts recognized in net revenues
|
—
|
|
|
(6
|
)
|
||
Total gains (losses) recognized from foreign exchange contracts not designated as hedging instruments
|
$
|
(10
|
)
|
|
$
|
(50
|
)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
3,568
|
|
|
$
|
3,831
|
|
Foreign exchange contracts not designated as hedging instruments
|
11,310
|
|
|
10,703
|
|
||
Total
|
$
|
14,878
|
|
|
$
|
14,534
|
|
March 31, 2019
|
||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||
Current
|
|
30 - 59 Days Past Due
|
|
60 - 89 Days Past Due
|
|
90 - 180 Days Past Due
|
|
Total Past Due
|
|
Total
|
||||||||||||
$
|
747
|
|
|
$
|
22
|
|
|
$
|
8
|
|
|
$
|
15
|
|
|
$
|
45
|
|
|
$
|
792
|
|
94.3
|
%
|
|
2.8
|
%
|
|
1.0
|
%
|
|
1.9
|
%
|
|
5.7
|
%
|
|
100
|
%
|
December 31, 2018
|
||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||
Current
|
|
30 - 59 Days Past Due
|
|
60 - 89 Days Past Due
|
|
90 - 180 Days Past Due
|
|
Total Past Due
|
|
Total
|
||||||||||||
$
|
668
|
|
|
$
|
18
|
|
|
$
|
6
|
|
|
$
|
12
|
|
|
$
|
36
|
|
|
$
|
704
|
|
94.9
|
%
|
|
2.5
|
%
|
|
0.9
|
%
|
|
1.7
|
%
|
|
5.1
|
%
|
|
100
|
%
|
|
March 31, 2019
|
|
March 31, 2018
|
||||||||||||||||
|
Consumer Loans Receivable
|
Interest Receivable
|
Total Allowance
|
|
Consumer Loans Receivable
|
Interest Receivable
|
Total Allowance
(1)
|
||||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
27
|
|
$
|
3
|
|
$
|
30
|
|
|
$
|
57
|
|
$
|
6
|
|
$
|
63
|
|
Provisions
|
1
|
|
2
|
|
3
|
|
|
23
|
|
3
|
|
26
|
|
||||||
Charge-offs
|
(9
|
)
|
(1
|
)
|
(10
|
)
|
|
(39
|
)
|
(3
|
)
|
(42
|
)
|
||||||
Recoveries
|
10
|
|
—
|
|
10
|
|
|
—
|
|
—
|
|
—
|
|
||||||
Ending balance
|
$
|
29
|
|
$
|
4
|
|
$
|
33
|
|
|
$
|
41
|
|
$
|
6
|
|
$
|
47
|
|
March 31, 2019
|
||||||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||||||
Within Original Expected Repayment Period
|
|
30 - 59 Days Greater
|
|
60 - 89 Days Greater
|
|
90 - 180 Days Greater
|
|
180+ Days
|
|
Total Past Original Expected Repayment Period
|
|
Total
|
||||||||||||||
$
|
1,981
|
|
|
$
|
71
|
|
|
$
|
42
|
|
|
$
|
67
|
|
|
$
|
14
|
|
|
$
|
194
|
|
|
$
|
2,175
|
|
91.1
|
%
|
|
3.3
|
%
|
|
1.9
|
%
|
|
3.1
|
%
|
|
0.6
|
%
|
|
8.9
|
%
|
|
100
|
%
|
December 31, 2018
(1)
|
||||||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||||||
Within Original Expected Repayment Period
|
|
30 - 59 Days Greater
|
|
60 - 89 Days Greater
|
|
90 - 180 Days Greater
|
|
180+ Days
|
|
Total Past Original Expected Repayment Period
|
|
Total
|
||||||||||||||
$
|
1,706
|
|
|
$
|
66
|
|
|
$
|
32
|
|
|
$
|
57
|
|
|
$
|
13
|
|
|
$
|
168
|
|
|
$
|
1,874
|
|
91.0
|
%
|
|
3.6
|
%
|
|
1.7
|
%
|
|
3.0
|
%
|
|
0.7
|
%
|
|
9.0
|
%
|
|
100
|
%
|
|
March 31, 2019
|
|
March 31, 2018
|
||||||||||||||||
|
Merchant Loans and Advances
|
Interest and Fees Receivable
|
Total Allowance
|
|
Merchant Loans and Advances
|
Interest and Fees Receivable
|
Total Allowance
|
||||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
115
|
|
$
|
15
|
|
$
|
130
|
|
|
$
|
52
|
|
$
|
7
|
|
$
|
59
|
|
Provisions
|
54
|
|
6
|
|
60
|
|
|
39
|
|
6
|
|
45
|
|
||||||
Charge-offs
|
(37
|
)
|
(3
|
)
|
(40
|
)
|
|
(21
|
)
|
(2
|
)
|
(23
|
)
|
||||||
Recoveries
|
3
|
|
—
|
|
3
|
|
|
2
|
|
—
|
|
2
|
|
||||||
Ending balance
|
$
|
135
|
|
$
|
18
|
|
$
|
153
|
|
|
$
|
72
|
|
$
|
11
|
|
$
|
83
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Beginning balance
|
$
|
344
|
|
|
$
|
266
|
|
Provisions, net of recoveries
|
286
|
|
|
243
|
|
||
Realized losses
|
(245
|
)
|
|
(226
|
)
|
||
Ending balance
|
$
|
385
|
|
|
$
|
283
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Customer support and operations
|
$
|
48
|
|
|
$
|
42
|
|
Sales and marketing
|
32
|
|
|
34
|
|
||
Technology and development
|
93
|
|
|
72
|
|
||
General and administrative
|
81
|
|
|
61
|
|
||
Total stock-based compensation expense
|
$
|
254
|
|
|
$
|
209
|
|
Capitalized as part of internal use software and website development costs
|
$
|
10
|
|
|
$
|
7
|
|
|
Employee Severance and Benefits
|
||
|
(In millions)
|
||
Accrued liability as of January 1, 2019
|
$
|
3
|
|
Charges
|
78
|
|
|
Payments
|
(2
|
)
|
|
Accrued liability as of March 31, 2019
|
$
|
79
|
|
|
Three Months Ended March 31,
|
|
Percent Increase/(Decrease)
|
|||||||
|
2019
|
|
2018
|
|
||||||
|
(In millions, except percentages and per share data)
|
|||||||||
Net revenues
|
$
|
4,128
|
|
|
$
|
3,685
|
|
|
12
|
%
|
Operating expenses
|
3,610
|
|
|
3,151
|
|
|
15
|
%
|
||
Operating income
|
$
|
518
|
|
|
$
|
534
|
|
|
(3
|
)%
|
Operating margin
|
13
|
%
|
|
14
|
%
|
|
**
|
|
||
Income tax expense
|
$
|
50
|
|
|
$
|
37
|
|
|
35
|
%
|
Effective tax rate
|
7
|
%
|
|
7
|
%
|
|
**
|
|
||
Net income
|
$
|
667
|
|
|
$
|
511
|
|
|
31
|
%
|
Net income per diluted share
|
$
|
0.56
|
|
|
$
|
0.42
|
|
|
34
|
%
|
Net cash provided by operating activities
|
$
|
1,027
|
|
|
$
|
(349
|
)
|
|
**
|
|
|
Three Months Ended March 31, 2019
|
||
|
(In millions)
|
||
Unfavorable impact to net revenues (exclusive of hedging impact)
|
$
|
(116
|
)
|
Hedging impact
|
52
|
|
|
Unfavorable impact to net revenues
|
(64
|
)
|
|
Favorable impact to operating expense
|
62
|
|
|
Net unfavorable impact to operating income
|
$
|
(2
|
)
|
|
Three Months Ended March 31, 2018
|
||
|
(In millions)
|
||
Favorable impact to net revenues (exclusive of hedging impact)
|
$
|
141
|
|
Hedging impact
|
(50
|
)
|
|
Favorable impact to net revenues
|
91
|
|
|
Unfavorable impact to operating expense
|
(59
|
)
|
|
Net favorable impact to operating income
|
$
|
32
|
|
•
|
Transaction revenues
: Net transaction fees charged to merchants and consumers on a transaction basis primarily based on the volume of activity, or TPV, completed on our Payments Platform. Growth in TPV is directly impacted by the number of payment transactions that we enable on our Payments Platform. Payment transactions are the total number of payments, net of payment reversals, successfully completed through our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions. We earn additional fees on transactions settled in foreign currencies when we enable cross-border transactions (i.e., transactions where the merchant or consumer are in different countries).
|
•
|
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.
|
|
Three Months Ended March 31,
|
|
Percent Increase/(Decrease)
|
|||||||
|
2019
|
|
2018
|
|
||||||
|
(In millions, except percentages)
|
|||||||||
Transaction revenues
|
$
|
3,731
|
|
|
$
|
3,197
|
|
|
17
|
%
|
Other value-added services
|
397
|
|
|
488
|
|
|
(19
|
)%
|
||
Net revenues
|
$
|
4,128
|
|
|
$
|
3,685
|
|
|
12
|
%
|
|
Three Months Ended March 31,
|
|
Percent Increase/(Decrease)
|
|||||||
|
2019
|
|
2018
|
|
||||||
|
(In millions, except percentages)
|
|||||||||
Active accounts
(1)
|
277
|
|
|
237
|
|
|
17
|
%
|
||
Number of payment transactions
(2)
|
2,838
|
|
|
2,214
|
|
|
28
|
%
|
||
Payment transactions per active account
(3)
|
37.9
|
|
|
34.7
|
|
|
9
|
%
|
||
TPV
(4)
|
$
|
161,492
|
|
|
$
|
132,364
|
|
|
22
|
%
|
Percent of cross-border TPV
|
18
|
%
|
|
21
|
%
|
|
**
|
|
|
Three Months Ended March 31,
|
|
Percent Increase/(Decrease)
|
|||||||
|
2019
|
|
2018
|
|
||||||
|
(In millions, except percentages)
|
|||||||||
Transaction expense
|
$
|
1,549
|
|
|
$
|
1,275
|
|
|
21
|
%
|
Transaction and loan losses
|
341
|
|
|
305
|
|
|
12
|
%
|
||
Customer support and operations
(1)
|
388
|
|
|
342
|
|
|
13
|
%
|
||
Sales and marketing
(1)
|
329
|
|
|
281
|
|
|
17
|
%
|
||
Technology and development
(1)
|
511
|
|
|
448
|
|
|
14
|
%
|
||
General and administrative
(1)
|
419
|
|
|
347
|
|
|
21
|
%
|
||
Restructuring and other charges
|
73
|
|
|
153
|
|
|
(52
|
)%
|
||
Total operating expenses
|
$
|
3,610
|
|
|
$
|
3,151
|
|
|
15
|
%
|
Transaction expense rate
(2)
|
0.96
|
%
|
|
0.96
|
%
|
|
**
|
|
||
Transaction and loan loss rate
(3)
|
0.21
|
%
|
|
0.23
|
%
|
|
**
|
|
|
Three Months Ended March 31,
|
|
Percent Increase/(Decrease)
|
|||||||
|
2019
|
|
2018
|
|
||||||
|
(In millions, except percentages)
|
|||||||||
Transaction losses
|
$
|
286
|
|
|
$
|
243
|
|
|
18
|
%
|
Loan losses
|
55
|
|
|
62
|
|
|
(11
|
)%
|
||
Transaction and loan losses
|
$
|
341
|
|
|
$
|
305
|
|
|
12
|
%
|
Transaction loss rate
(1)
|
0.18
|
%
|
|
0.18
|
%
|
|
|
|
March 31,
|
||||
|
2019
|
|
2018
|
||
Percent of consumer loans and interest receivables current
|
94.3
|
%
|
|
95.3
|
%
|
Percent of consumer loans and interest receivables > 90 days outstanding
(1)
|
1.9
|
%
|
|
1.5
|
%
|
Net charge off rate
(2)
|
3.3
|
%
|
|
2.3
|
%
|
|
March 31,
|
||||
|
2019
|
|
2018
|
||
Merchant loans and advances
|
|
|
|
||
Percent of merchant receivables within original expected or contractual repayment period
|
91.1
|
%
|
|
90.1
|
%
|
Percent of merchant receivables > 90 days outstanding after the end of original expected or contractual repayment period
|
3.7
|
%
|
|
4.1
|
%
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Cash, cash equivalents, and investments
(1)(2)
|
$
|
8,227
|
|
|
$
|
9,710
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
1,027
|
|
|
$
|
(349
|
)
|
Investing activities
|
(4,860
|
)
|
|
5
|
|
||
Financing activities
|
1,502
|
|
|
793
|
|
||
Effect of exchange rates on cash, cash equivalents, and restricted cash
|
1
|
|
|
(7
|
)
|
||
Net (decrease) increase in cash, cash equivalents, and restricted cash
|
$
|
(2,330
|
)
|
|
$
|
442
|
|
•
|
if we are unable to utilize appropriate authorizations and regulator permissions, our EU operations could lose their ability to offer services
into the U.K. market on a cross-border basis and for our U.K. based operations to offer services on a cross-border basis in the EEA markets. For exa
mple, our ability to work primarily with the Luxembourg regulator as the lead authority for various aspects of our U.K. operations may be impacted;
|
•
|
we could be required to obtain additional regulatory permissions to operate in the U.K. market, adding costs and potential inconsistency to our business (and, depending on the capacity of the U.K. authorities, the criteria for obtaining permission, and any possible transitional arrangements, there is a risk that our business in the U.K. could be materially affected or disrupted);
|
•
|
we could be required to comply with regulatory requirements in the U.K. that are in addition to, or inconsistent with, the regulatory requirements of the EU, leading to increased complexity and costs for our EU and UK operations; and
|
•
|
our ability to attract and retain the necessary human resources in appropriate locations to support the U.K. business and the EU business of PayPal could be adversely impacted.
|
•
|
banking,
|
•
|
credit,
|
•
|
deposit taking,
|
•
|
cross-border and domestic money transmission,
|
•
|
prepaid access,
|
•
|
foreign exchange,
|
•
|
privacy,
|
•
|
data protection,
|
•
|
cybersecurity,
|
•
|
banking secrecy,
|
•
|
payment services (including payment processing and settlement services),
|
•
|
consumer protection,
|
•
|
economic and trade sanctions,
|
•
|
anti-money laundering, and
|
•
|
counter-terrorist financing.
|
•
|
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;
|
•
|
difficulty making strategic hires of new employees, declining employee morale, and retention issues affecting employees (particularly the potential loss of key personnel) of companies that we acquire or dispose of, which may result from changes in compensation, management, reporting relationships, future prospects, or the direction of the acquired or disposed business;
|
•
|
diversion of management time and focus;
|
•
|
inability to realize synergies expected to result from an acquisition;
|
•
|
the need to and difficulty of integrating the operations, systems (including accounting, compliance, management, information, human resource, and other administrative systems), technologies, data assets, products, and personnel of each acquired company, which is an inherently risky and potentially lengthy and costly process;
|
•
|
the need to and difficulty of implementing and/or enhancing controls, procedures, and policies appropriate for a larger public company at acquired companies which, prior to the acquisition, may have lacked such controls, procedures, and policies or whose controls, procedures, and policies did not meet applicable legal and regulatory standards;
|
•
|
the inefficiencies and lack of control that may result if integration of acquired companies is delayed or not implemented, and unforeseen difficulties and costs that may arise as a result;
|
•
|
potential exposure to new or increased regulatory oversight and regulatory obligations associated with new products and services or entry into new markets;
|
•
|
risks associated with our expansion into new international markets;
|
•
|
unidentified issues discovered in our due diligence process, including product or service quality issues, intellectual property issues, and legal contingencies;
|
•
|
risks associated with the complexity of entering into and effectively managing joint ventures, strategic investments, and other strategic partnerships;
|
•
|
risks associated with undetected cyberattacks or security breaches at companies that we acquire or with which we may combine or partner;
|
•
|
lawsuits or regulatory actions resulting from the transaction;
|
•
|
liability for activities or conduct of an acquired company before the acquisition, including legal and regulatory claims or disputes, violations of laws and regulations, commercial disputes, tax liabilities, and other known and unknown liabilities;
|
•
|
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 accounting, financial reporting, operating metrics and similar systems, controls and processes of acquired businesses, 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.
|
|
Total number of shares purchased
|
|
Average price
paid per share (1) |
|
Total number of shares purchased as part of publicly announced plans or programs
|
|
Approximate dollar value of shares that may yet be purchased under the plans or programs
|
||||||
|
(In millions, except per share amounts)
|
||||||||||||
Balance as of January 1, 2019
|
|
|
|
|
|
|
$
|
11,474
|
|
||||
January 1, 2019 through January 31, 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
11,474
|
|
||
February 1, 2019 through February 28, 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
11,474
|
|
|
February 1, 2019 through February 28, 2019 (ASR agreement)
(1)
|
7.1
|
|
|
$
|
96.91
|
|
|
7.1
|
|
|
10,724
|
|
|
March 1, 2019 through March 31, 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
10,724
|
|
|
March 1, 2019 through March 31, 2019 (ASR agreement)
(1)
|
0.6
|
|
|
$
|
96.91
|
|
|
0.6
|
|
|
10,724
|
|
|
Balance as of March 31, 2019
|
7.7
|
|
|
|
|
7.7
|
|
|
$
|
10,724
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
Form
|
Date Filed
|
Filed Herewith
|
|
PayPal Holdings, Inc. Restated Certificate of Incorporation
|
10-Q
|
7/27/2017
|
|
|
|
PayPal Holdings, Inc. Amended and Restated Bylaws, effective January 17, 2019
|
8-K
|
1/18/2019
|
|
|
|
Letter Agreement effective February 20, 2019 between Mark Britto and PayPal Holdings, Inc.
|
-
|
-
|
X
|
|
|
Letter Agreement dated December 22, 2018 between Allison Johnson and PayPal Holdings, Inc.
|
-
|
-
|
X
|
|
|
Certification of Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
-
|
-
|
X
|
|
|
Certification of Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
-
|
-
|
X
|
|
|
Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
-
|
-
|
X
|
|
|
Certification of Registrant’s Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
-
|
-
|
X
|
|
101.INS
|
|
XBRL Instance Document
|
-
|
-
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
-
|
-
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
-
|
-
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
-
|
-
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
-
|
-
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
-
|
-
|
X
|
|
|
PayPal Holdings, Inc.
|
|
|
|
Principal Executive Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ Daniel H. Schulman
|
|
|
|
Daniel H. Schulman
|
|
|
|
President and Chief Executive Officer
|
Date:
|
April 25, 2019
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ John D. Rainey
|
|
|
|
John D. Rainey
|
|
|
|
Chief Financial Officer and Executive Vice President,
Global Customer Operations
|
Date:
|
April 25, 2019
|
|
|
|
|
Principal Accounting Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ Aaron A. Anderson
|
|
|
|
Aaron A. Anderson
|
|
|
|
Vice President, Chief Accounting Officer
|
Date:
|
April 25, 2019
|
|
|
(i)
|
$2,500,000, payable in the payroll following December 31, 2019, less applicable deductions and tax withholdings (the “2019 Retention Bonus”). This bonus (i) will be subject to repayment if you terminate from PayPal prior to December 31, 2020, and;
|
(ii)
|
$5,000,000, payable in the payroll following December 31, 2020, less applicable deductions and tax withholdings (the “2020 Retention Bonus”)
|
Grant
|
Value
|
Vesting Schedule
|
Restricted Stock Units (“RSUs”)
|
USD $3,000,000
|
The value of these equity awards will be converted into the number of shares to be granted, as determined based on company policies at the time of grant. One-third (1/3) of the shares subject to the RSU awards will vest (conditioned upon your continued employment with a PayPal company) on each anniversary of the grant date, less applicable
taxes and withholdings.
|
Performance-based Restricted Stock Units (“PBRSUs”)
|
Target value of USD $1,000,000
|
The target value of these equity awards will be converted into the number of shares to be granted, as determined based on company policies.
Any PBRSUs earned based on PayPal Holdings’ performance over the three-year period commencing from January 1, 2019 through December 31, 2021 will be vested and settled in early 2022, conditioned upon your continued employment with a PayPal
company, less applicable taxes and withholdings.
|
|
/s/ Daniel H. Schulman
|
|
Daniel H. Schulman
|
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
|
/s/
John D. Rainey
|
|
John D. Rainey
|
|
Chief Financial Officer and Executive Vice President, Global Customer Operations
|
|
(Principal Financial Officer)
|
|
/s/ Daniel H. Schulman
|
|
Daniel H. Schulman
|
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
|
/s/ John D. Rainey
|
|
John D. Rainey
|
|
Chief Financial Officer and Executive Vice President, Global Customer Operations
|
|
(Principal Financial Officer)
|