|
|
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
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)
|
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common stock, $0.0001 par value per share
|
PYPL
|
NASDAQ Global Select Market
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|
|
Emerging growth company
|
☐
|
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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|
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||
|
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||
|
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||
|
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||
|
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||
|
|||
|
|||
|
|||
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|||
|
|||
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|||
|
|||
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|||
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|||
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|||
|
|||
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
(In millions, except par value)
|
||||||
|
(Unaudited)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,909
|
|
|
$
|
7,575
|
|
Short-term investments
|
3,506
|
|
|
1,534
|
|
||
Accounts receivable, net
|
379
|
|
|
313
|
|
||
Loans and interest receivable, net of allowances of $222 and $172 as of June 30, 2019 and December 31, 2018, respectively
|
3,166
|
|
|
2,532
|
|
||
Funds receivable and customer accounts
|
23,573
|
|
|
20,062
|
|
||
Prepaid expenses and other current assets
|
902
|
|
|
947
|
|
||
Total current assets
|
36,435
|
|
|
32,963
|
|
||
Long-term investments
|
2,278
|
|
|
971
|
|
||
Property and equipment, net
|
1,720
|
|
|
1,724
|
|
||
Goodwill
|
6,236
|
|
|
6,284
|
|
||
Intangible assets, net
|
699
|
|
|
825
|
|
||
Other assets
|
1,023
|
|
|
565
|
|
||
Total assets
|
$
|
48,391
|
|
|
$
|
43,332
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
199
|
|
|
$
|
281
|
|
Notes payable
|
2,499
|
|
|
1,998
|
|
||
Funds payable and amounts due to customers
|
25,073
|
|
|
21,562
|
|
||
Accrued expenses and other current liabilities
|
2,022
|
|
|
2,002
|
|
||
Income taxes payable
|
54
|
|
|
61
|
|
||
Total current liabilities
|
29,847
|
|
|
25,904
|
|
||
Deferred tax liability and other long-term liabilities
|
2,405
|
|
|
2,042
|
|
||
Total liabilities
|
32,252
|
|
|
27,946
|
|
||
Commitments and Contingencies (Note 13)
|
|
|
|
|
|||
Equity:
|
|
|
|
||||
Common stock, $0.0001 par value; 4,000 shares authorized; 1,177 and 1,174 shares outstanding as of June 30, 2019 and December 31, 2018, respectively
|
—
|
|
|
—
|
|
||
Preferred stock, $0.0001 par value; 100 shares authorized, unissued
|
—
|
|
|
—
|
|
||
Treasury stock at cost, 99 and 91 shares as of June 30, 2019 and December 31, 2018, respectively
|
(6,216
|
)
|
|
(5,511
|
)
|
||
Additional paid-in-capital
|
15,010
|
|
|
14,939
|
|
||
Retained earnings
|
7,373
|
|
|
5,880
|
|
||
Accumulated other comprehensive income (loss)
|
(28
|
)
|
|
78
|
|
||
Total equity
|
16,139
|
|
|
15,386
|
|
||
Total liabilities and equity
|
$
|
48,391
|
|
|
$
|
43,332
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions, except per share data)
|
||||||||||||||
|
(Unaudited)
|
||||||||||||||
Net revenues
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Transaction expense
|
1,627
|
|
|
1,362
|
|
|
3,176
|
|
|
2,637
|
|
||||
Transaction and loan losses
|
318
|
|
|
334
|
|
|
659
|
|
|
639
|
|
||||
Customer support and operations
|
399
|
|
|
338
|
|
|
787
|
|
|
680
|
|
||||
Sales and marketing
|
356
|
|
|
307
|
|
|
685
|
|
|
588
|
|
||||
Technology and development
|
483
|
|
|
441
|
|
|
994
|
|
|
889
|
|
||||
General and administrative
|
419
|
|
|
387
|
|
|
838
|
|
|
734
|
|
||||
Restructuring and other charges
|
(2
|
)
|
|
116
|
|
|
71
|
|
|
269
|
|
||||
Total operating expenses
|
3,600
|
|
|
3,285
|
|
|
7,210
|
|
|
6,436
|
|
||||
Operating income
|
705
|
|
|
572
|
|
|
1,223
|
|
|
1,106
|
|
||||
Other income (expense), net
|
238
|
|
|
37
|
|
|
437
|
|
|
51
|
|
||||
Income before income taxes
|
943
|
|
|
609
|
|
|
1,660
|
|
|
1,157
|
|
||||
Income tax expense
|
120
|
|
|
83
|
|
|
170
|
|
|
120
|
|
||||
Net income
|
$
|
823
|
|
|
$
|
526
|
|
|
$
|
1,490
|
|
|
$
|
1,037
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.70
|
|
|
$
|
0.44
|
|
|
$
|
1.27
|
|
|
$
|
0.87
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.44
|
|
|
$
|
1.25
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
1,175
|
|
|
1,187
|
|
|
1,173
|
|
|
1,190
|
|
||||
Diluted
|
1,187
|
|
|
1,202
|
|
|
1,188
|
|
|
1,209
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions)
|
||||||||||||||
|
(Unaudited)
|
||||||||||||||
Net income
|
$
|
823
|
|
|
$
|
526
|
|
|
$
|
1,490
|
|
|
$
|
1,037
|
|
Other comprehensive income (loss), net of reclassification adjustments:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation
|
9
|
|
|
(29
|
)
|
|
(58
|
)
|
|
(27
|
)
|
||||
Unrealized gains (losses) on investments, net
|
10
|
|
|
5
|
|
|
21
|
|
|
(10
|
)
|
||||
Tax (expense) benefit on unrealized gains (losses) on investments, net
|
(4
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
3
|
|
||||
Unrealized gains (losses) on hedging activities, net
|
(18
|
)
|
|
233
|
|
|
(64
|
)
|
|
215
|
|
||||
Tax (expense) benefit on unrealized gains (losses) on hedging activities, net
|
—
|
|
|
(3
|
)
|
|
1
|
|
|
(3
|
)
|
||||
Other comprehensive income (loss), net of tax
|
(3
|
)
|
|
205
|
|
|
(106
|
)
|
|
178
|
|
||||
Comprehensive income
|
$
|
820
|
|
|
$
|
731
|
|
|
$
|
1,384
|
|
|
$
|
1,215
|
|
|
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
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
823
|
|
|
823
|
|
|||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|||||
Unrealized gains on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
|||||
Tax expense on unrealized gains 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
|
5
|
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|
(73
|
)
|
|||||
Common stock repurchased
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
235
|
|
|
—
|
|
|
—
|
|
|
235
|
|
|||||
Balances at June 30, 2019
|
1,177
|
|
|
$
|
(6,216
|
)
|
|
$
|
15,010
|
|
|
$
|
(28
|
)
|
|
$
|
7,373
|
|
|
$
|
16,139
|
|
|
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
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
526
|
|
|
526
|
|
|||||
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
|||||
Unrealized gains on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|||||
Tax expense on unrealized gains on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Unrealized gains on hedging activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
233
|
|
|
—
|
|
|
233
|
|
|||||
Tax expense on unrealized losses on hedging activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes
|
7
|
|
|
—
|
|
|
(67
|
)
|
|
—
|
|
|
—
|
|
|
(67
|
)
|
|||||
Common stock repurchased
|
(6
|
)
|
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
214
|
|
|
—
|
|
|
—
|
|
|
214
|
|
|||||
Balances at June 30, 2018
|
1,184
|
|
|
$
|
(4,311
|
)
|
|
$
|
14,434
|
|
|
$
|
36
|
|
|
$
|
4,860
|
|
|
$
|
15,019
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
|
(Unaudited)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
1,490
|
|
|
$
|
1,037
|
|
Adjustments:
|
|
|
|
||||
Transaction and loan losses
|
659
|
|
|
639
|
|
||
Depreciation and amortization
|
458
|
|
|
365
|
|
||
Stock-based compensation
|
470
|
|
|
410
|
|
||
Deferred income taxes
|
35
|
|
|
89
|
|
||
Cost basis adjustments to loans and interest receivable held for sale
|
—
|
|
|
244
|
|
||
Unrealized gains on strategic investments
|
(398
|
)
|
|
(31
|
)
|
||
Other
|
(92
|
)
|
|
(10
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(66
|
)
|
|
1
|
|
||
Changes in loans and interest receivable held for sale, net
|
4
|
|
|
(2,268
|
)
|
||
Accounts payable
|
(49
|
)
|
|
(17
|
)
|
||
Income taxes payable
|
(7
|
)
|
|
(14
|
)
|
||
Other assets and liabilities
|
(303
|
)
|
|
(766
|
)
|
||
Net cash provided by (used in) operating activities
|
2,201
|
|
|
(321
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(357
|
)
|
|
(376
|
)
|
||
Changes in principal loans receivable, net
|
(732
|
)
|
|
1,000
|
|
||
Purchases of investments
|
(13,191
|
)
|
|
(10,616
|
)
|
||
Maturities and sales of investments
|
10,537
|
|
|
9,669
|
|
||
Acquisitions, net of cash and restricted cash acquired
|
—
|
|
|
(16
|
)
|
||
Funds receivable
|
(2,214
|
)
|
|
902
|
|
||
Net cash (used in) provided by investing activities
|
(5,957
|
)
|
|
563
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
74
|
|
|
78
|
|
||
Purchases of treasury stock
|
(756
|
)
|
|
(2,325
|
)
|
||
Tax withholdings related to net share settlements of equity awards
|
(449
|
)
|
|
(372
|
)
|
||
Borrowings under financing arrangements
|
500
|
|
|
2,075
|
|
||
Repayments under financing arrangements
|
—
|
|
|
(1,076
|
)
|
||
Funds payable and amounts due to customers
|
3,129
|
|
|
1,078
|
|
||
Net cash provided by (used in) financing activities
|
2,498
|
|
|
(542
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(1
|
)
|
|
(63
|
)
|
||
Net change in cash, cash equivalents, and restricted cash
|
(1,259
|
)
|
|
(363
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
13,233
|
|
|
8,285
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
11,974
|
|
|
$
|
7,922
|
|
|
|
|
|
||||
Supplemental cash flow disclosures:
|
|
|
|
||||
Cash paid for interest
|
$
|
45
|
|
|
$
|
26
|
|
Cash paid for income taxes, net
|
$
|
176
|
|
|
$
|
180
|
|
|
|
|
|
||||
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
|
$
|
4,909
|
|
|
$
|
2,840
|
|
Short term investments
|
12
|
|
|
16
|
|
||
Funds receivable and customer accounts
|
7,053
|
|
|
5,066
|
|
||
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows
|
$
|
11,974
|
|
|
$
|
7,922
|
|
|
Three Months Ended June 30, 2018
|
||||||||||
|
(In millions)
|
||||||||||
|
As Previously Reported
|
|
Adjustments
|
|
Revised
|
||||||
|
|
|
|
|
|
||||||
Transaction expense
|
$
|
1,362
|
|
|
$
|
—
|
|
|
$
|
1,362
|
|
Transaction and loan losses
|
334
|
|
|
—
|
|
|
334
|
|
|||
Customer support and operations
|
357
|
|
|
(19
|
)
|
|
338
|
|
|||
Sales and marketing
|
313
|
|
|
(6
|
)
|
|
307
|
|
|||
Product development
|
255
|
|
|
(255
|
)
|
|
—
|
|
|||
Technology and development
|
—
|
|
|
441
|
|
|
441
|
|
|||
General and administrative
|
368
|
|
|
19
|
|
|
387
|
|
|||
Depreciation and amortization
|
180
|
|
|
(180
|
)
|
|
—
|
|
|||
Restructuring and other charges
|
116
|
|
|
—
|
|
|
116
|
|
|||
Total operating expenses
|
$
|
3,285
|
|
|
$
|
—
|
|
|
$
|
3,285
|
|
|
Six Months Ended June 30, 2018
|
||||||||||
|
(In millions)
|
||||||||||
|
As Previously Reported
|
|
Adjustments
|
|
Revised
|
||||||
|
|
|
|
|
|
||||||
Transaction expense
|
$
|
2,637
|
|
|
$
|
—
|
|
|
$
|
2,637
|
|
Transaction and loan losses
|
639
|
|
|
—
|
|
|
639
|
|
|||
Customer support and operations
|
708
|
|
|
(28
|
)
|
|
680
|
|
|||
Sales and marketing
|
598
|
|
|
(10
|
)
|
|
588
|
|
|||
Product development
|
513
|
|
|
(513
|
)
|
|
—
|
|
|||
Technology and development
|
—
|
|
|
889
|
|
|
889
|
|
|||
General and administrative
|
707
|
|
|
27
|
|
|
734
|
|
|||
Depreciation and amortization
|
365
|
|
|
(365
|
)
|
|
—
|
|
|||
Restructuring and other charges
|
269
|
|
|
—
|
|
|
269
|
|
|||
Total operating expenses
|
$
|
6,436
|
|
|
$
|
—
|
|
|
$
|
6,436
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions)
|
||||||||||||||
Primary geographical markets
|
|
|
|
|
|
|
|
||||||||
United States (“U.S.”)
|
$
|
2,297
|
|
|
$
|
2,150
|
|
|
$
|
4,484
|
|
|
$
|
4,173
|
|
United Kingdom (“U.K.”)
|
454
|
|
|
402
|
|
|
887
|
|
|
794
|
|
||||
Other countries(1)
|
1,554
|
|
|
1,305
|
|
|
3,062
|
|
|
2,575
|
|
||||
Total revenues(2)
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
|
|
|
|
|
|
|
|
||||||||
Types of revenues
|
|
|
|
|
|
|
|
||||||||
Transaction revenues
|
$
|
3,878
|
|
|
$
|
3,318
|
|
|
$
|
7,609
|
|
|
$
|
6,515
|
|
Other value added services
|
427
|
|
|
539
|
|
|
824
|
|
|
1,027
|
|
||||
Total revenues(2)
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions, except per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
823
|
|
|
$
|
526
|
|
|
$
|
1,490
|
|
|
$
|
1,037
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average shares of common stock - basic
|
1,175
|
|
|
1,187
|
|
|
1,173
|
|
|
1,190
|
|
||||
Dilutive effect of equity incentive awards
|
12
|
|
|
15
|
|
|
15
|
|
|
19
|
|
||||
Weighted average shares of common stock - diluted
|
1,187
|
|
|
1,202
|
|
|
1,188
|
|
|
1,209
|
|
||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.70
|
|
|
$
|
0.44
|
|
|
$
|
1.27
|
|
|
$
|
0.87
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.44
|
|
|
$
|
1.25
|
|
|
$
|
0.86
|
|
Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive
|
—
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
December 31,
2018 |
|
Goodwill
Acquired
|
|
Adjustments
|
|
June 30,
2019 |
||||||||
|
(In millions)
|
||||||||||||||
Total goodwill
|
$
|
6,284
|
|
|
$
|
—
|
|
|
$
|
(48
|
)
|
|
$
|
6,236
|
|
|
June 30, 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
|
|
|
$
|
(663
|
)
|
|
$
|
458
|
|
|
7
|
|
$
|
1,134
|
|
|
$
|
(623
|
)
|
|
$
|
511
|
|
|
7
|
Marketing related
|
298
|
|
|
(224
|
)
|
|
74
|
|
|
3
|
|
301
|
|
|
(207
|
)
|
|
94
|
|
|
3
|
||||||
Developed technology
|
449
|
|
|
(308
|
)
|
|
141
|
|
|
3
|
|
453
|
|
|
(269
|
)
|
|
184
|
|
|
3
|
||||||
All other
|
245
|
|
|
(219
|
)
|
|
26
|
|
|
5
|
|
245
|
|
|
(209
|
)
|
|
36
|
|
|
5
|
||||||
Intangible assets, net
|
$
|
2,113
|
|
|
$
|
(1,414
|
)
|
|
$
|
699
|
|
|
|
|
$
|
2,133
|
|
|
$
|
(1,308
|
)
|
|
$
|
825
|
|
|
|
Fiscal years:
|
|
||
Remaining 2019
|
$
|
101
|
|
2020
|
190
|
|
|
2021
|
137
|
|
|
2022
|
72
|
|
|
2023
|
72
|
|
|
Thereafter
|
127
|
|
|
|
$
|
699
|
|
|
Three Months Ended
June 30, 2019 |
|
Six Months Ended
June 30, 2019 |
||||
|
(In millions, except weighted-average figures)
|
||||||
Lease expense
|
|
|
|
||||
Operating lease expense
|
$
|
32
|
|
|
$
|
66
|
|
Sublease income
|
(2
|
)
|
|
(4
|
)
|
||
Total lease expense cost
|
$
|
30
|
|
|
$
|
62
|
|
|
|
|
|
||||
Other information:
|
|
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
||||
Operating cash flows from operating leases
|
$
|
31
|
|
|
$
|
62
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
63
|
|
|
$
|
68
|
|
Weighted-average remaining lease term - operating leases
|
6.1 years
|
|
|
6.1 years
|
|
||
Weighted-average discount rate - operating leases
|
5
|
%
|
|
5
|
%
|
|
Operating Leases
|
||
Fiscal years:
|
(In millions)
|
||
Remaining 2019
|
$
|
62
|
|
2020
|
114
|
|
|
2021
|
91
|
|
|
2022
|
74
|
|
|
2023
|
57
|
|
|
Thereafter
|
196
|
|
|
Total
|
$
|
594
|
|
Less: present value discount
|
(87
|
)
|
|
Lease liability
|
$
|
507
|
|
|
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
|
$
|
136
|
|
|
$
|
(2
|
)
|
|
$
|
(160
|
)
|
|
$
|
1
|
|
|
$
|
(25
|
)
|
Other comprehensive income (loss) before reclassifications
|
40
|
|
|
10
|
|
|
9
|
|
|
(4
|
)
|
|
55
|
|
|||||
Less: Amount of gain (loss) reclassified from accumulated other comprehensive income
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|||||
Net current period other comprehensive income (loss)
|
(18
|
)
|
|
10
|
|
|
9
|
|
|
(4
|
)
|
|
(3
|
)
|
|||||
Ending balance
|
$
|
118
|
|
|
$
|
8
|
|
|
$
|
(151
|
)
|
|
$
|
(3
|
)
|
|
$
|
(28
|
)
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Investments
|
|
Foreign
Currency Translation |
|
Estimated Tax Benefit (Expense)
|
|
Total
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Beginning balance
|
$
|
(129
|
)
|
|
$
|
(27
|
)
|
|
$
|
(23
|
)
|
|
$
|
10
|
|
|
$
|
(169
|
)
|
Other comprehensive income (loss) before reclassifications
|
204
|
|
|
5
|
|
|
(29
|
)
|
|
(4
|
)
|
|
176
|
|
|||||
Less: Amount of gain (loss) reclassified from accumulated other comprehensive income
|
(29
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|||||
Net current period other comprehensive income (loss)
|
233
|
|
|
5
|
|
|
(29
|
)
|
|
(4
|
)
|
|
205
|
|
|||||
Ending balance
|
$
|
104
|
|
|
$
|
(22
|
)
|
|
$
|
(52
|
)
|
|
$
|
6
|
|
|
$
|
36
|
|
|
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
|
46
|
|
|
21
|
|
|
(58
|
)
|
|
(5
|
)
|
|
4
|
|
|||||
Less: Amount of gain (loss) reclassified from accumulated other comprehensive income
|
110
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|||||
Net current period other comprehensive income (loss)
|
(64
|
)
|
|
21
|
|
|
(58
|
)
|
|
(5
|
)
|
|
(106
|
)
|
|||||
Ending balance
|
$
|
118
|
|
|
$
|
8
|
|
|
$
|
(151
|
)
|
|
$
|
(3
|
)
|
|
$
|
(28
|
)
|
|
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
|
142
|
|
|
(11
|
)
|
|
(27
|
)
|
|
—
|
|
|
104
|
|
|||||
Less: Amount of gain (loss) reclassified from accumulated other comprehensive income
|
(73
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|||||
Net current period other comprehensive income (loss)
|
215
|
|
|
(10
|
)
|
|
(27
|
)
|
|
—
|
|
|
178
|
|
|||||
Ending balance
|
$
|
104
|
|
|
$
|
(22
|
)
|
|
$
|
(52
|
)
|
|
$
|
6
|
|
|
$
|
36
|
|
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 June 30,
|
|
|
||||||
|
|
2019
|
|
2018
|
|
|
||||
|
|
(In millions)
|
|
|
||||||
Gains (losses) on cash flow hedges—foreign exchange contracts
|
|
$
|
58
|
|
|
$
|
(29
|
)
|
|
Net revenues
|
Unrealized (losses) on investments
|
|
—
|
|
|
—
|
|
|
Other income (expense), net
|
||
|
|
$
|
58
|
|
|
$
|
(29
|
)
|
|
Income before income taxes
|
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
||
Total reclassifications for the period
|
|
$
|
58
|
|
|
$
|
(29
|
)
|
|
Net income
|
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
|
||||||
|
|
Six Months Ended June 30,
|
|
|
||||||
|
|
2019
|
|
2018
|
|
|
||||
|
|
(In millions)
|
|
|
||||||
Gains (losses) on cash flow hedges—foreign exchange contracts
|
|
$
|
110
|
|
|
$
|
(73
|
)
|
|
Net revenues
|
Unrealized (losses) on investments
|
|
—
|
|
|
(1
|
)
|
|
Other income (expense), net
|
||
|
|
$
|
110
|
|
|
$
|
(74
|
)
|
|
Income before income taxes
|
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
||
Total reclassifications for the period
|
|
$
|
110
|
|
|
$
|
(74
|
)
|
|
Net income
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions, except per share amounts)
|
||||||||||||||
Interest income
|
$
|
48
|
|
|
$
|
27
|
|
|
$
|
97
|
|
|
$
|
55
|
|
Interest expense
|
(27
|
)
|
|
(19
|
)
|
|
(49
|
)
|
|
(35
|
)
|
||||
Gains (losses) on strategic investments
|
218
|
|
|
31
|
|
|
398
|
|
|
31
|
|
||||
Other
|
(1
|
)
|
|
(2
|
)
|
|
(9
|
)
|
|
—
|
|
||||
Other income (expense), net
|
$
|
238
|
|
|
$
|
37
|
|
|
$
|
437
|
|
|
$
|
51
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
(In millions)
|
||||||
Funds receivable and customer accounts:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
7,053
|
|
|
$
|
5,642
|
|
Time deposits
|
391
|
|
|
389
|
|
||
Available-for-sale debt securities
|
10,743
|
|
|
10,940
|
|
||
Funds receivable
|
5,386
|
|
|
3,091
|
|
||
Total funds receivable and customer accounts
|
$
|
23,573
|
|
|
$
|
20,062
|
|
Short-term investments:
|
|
|
|
||||
Time deposits
|
$
|
679
|
|
|
$
|
774
|
|
Available-for-sale debt securities
|
2,755
|
|
|
685
|
|
||
Restricted cash
|
72
|
|
|
75
|
|
||
Total short-term investments
|
$
|
3,506
|
|
|
$
|
1,534
|
|
Long-term investments:
|
|
|
|
||||
Available-for-sale debt securities
|
$
|
270
|
|
|
$
|
676
|
|
Restricted cash
|
2
|
|
|
2
|
|
||
Strategic investments
|
2,006
|
|
|
293
|
|
||
Total long-term investments
|
$
|
2,278
|
|
|
$
|
971
|
|
|
June 30, 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
|
$
|
7,069
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
7,079
|
|
Foreign government and agency securities
|
595
|
|
|
—
|
|
|
—
|
|
|
595
|
|
||||
Corporate debt securities
|
754
|
|
|
—
|
|
|
—
|
|
|
754
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|||||||
U.S. government and agency securities
|
770
|
|
|
—
|
|
|
—
|
|
|
770
|
|
||||
Foreign government and agency securities
|
38
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||
Corporate debt securities
|
1,857
|
|
|
—
|
|
|
(1
|
)
|
|
1,856
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|||||||
Corporate debt securities
|
261
|
|
|
—
|
|
|
(1
|
)
|
|
260
|
|
||||
Total available-for-sale debt securities(1)
|
$
|
11,344
|
|
|
$
|
10
|
|
|
$
|
(2
|
)
|
|
$
|
11,352
|
|
|
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
|
|
|
June 30, 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
|
$
|
137
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
137
|
|
|
$
|
—
|
|
Foreign government and agency securities
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
|
—
|
|
||||||
Corporate debt securities
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign government and agency securities
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
|
—
|
|
||||||
Corporate debt securities
|
109
|
|
|
—
|
|
|
514
|
|
|
(1
|
)
|
|
623
|
|
|
(1
|
)
|
||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Corporate debt securities
|
19
|
|
|
—
|
|
|
152
|
|
|
(1
|
)
|
|
171
|
|
|
(1
|
)
|
||||||
Total available-for-sale debt securities
|
$
|
265
|
|
|
$
|
—
|
|
|
$
|
745
|
|
|
$
|
(2
|
)
|
|
$
|
1,010
|
|
|
$
|
(2
|
)
|
|
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
|
)
|
|
June 30, 2019
|
||||||
|
Amortized Cost
|
|
Fair Value
|
||||
|
(In millions)
|
||||||
One year or less
|
$
|
11,083
|
|
|
$
|
11,092
|
|
After one year through five years
|
255
|
|
|
254
|
|
||
After five years through ten years
|
6
|
|
|
6
|
|
||
Total
|
$
|
11,344
|
|
|
$
|
11,352
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Carrying amount, beginning of period
|
$
|
293
|
|
|
$
|
88
|
|
Adjustments related to non-marketable equity securities:
|
|
|
|
||||
Additions, net of sales
|
65
|
|
|
53
|
|
||
Gross unrealized gains
|
81
|
|
|
31
|
|
||
Carrying amount, end of period
|
$
|
439
|
|
|
$
|
172
|
|
|
|
June 30, 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)
|
|
$
|
2,434
|
|
|
$
|
—
|
|
|
$
|
2,434
|
|
Short-term investments(2):
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
|
770
|
|
|
—
|
|
|
770
|
|
|||
Foreign government and agency securities
|
|
83
|
|
|
—
|
|
|
83
|
|
|||
Corporate debt securities
|
|
1,902
|
|
|
—
|
|
|
1,902
|
|
|||
Total short-term investments
|
|
$
|
2,755
|
|
|
$
|
—
|
|
|
$
|
2,755
|
|
Funds receivable and customer accounts(3):
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
|
1,342
|
|
|
—
|
|
|
1,342
|
|
|||
U.S. government and agency securities
|
|
7,079
|
|
|
—
|
|
|
7,079
|
|
|||
Foreign government and agency securities
|
|
2,350
|
|
|
—
|
|
|
2,350
|
|
|||
Corporate debt securities
|
|
1,314
|
|
|
—
|
|
|
1,314
|
|
|||
Total funds receivable and customer accounts
|
|
$
|
12,085
|
|
|
$
|
—
|
|
|
$
|
12,085
|
|
Derivatives
|
|
209
|
|
|
—
|
|
|
209
|
|
|||
Long-term investments(2).(4):
|
|
|
|
|
|
|
||||||
Foreign government and agency securities
|
|
10
|
|
|
—
|
|
|
10
|
|
|||
Corporate debt securities
|
|
260
|
|
|
—
|
|
|
260
|
|
|||
Marketable equity securities
|
|
1,567
|
|
|
1,567
|
|
|
—
|
|
|||
Total long-term investments
|
|
$
|
1,837
|
|
|
$
|
1,567
|
|
|
$
|
270
|
|
Total financial assets
|
|
$
|
19,320
|
|
|
$
|
1,567
|
|
|
$
|
17,753
|
|
Liabilities:
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
87
|
|
|
|
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
|
|
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Funds receivable and customer accounts
|
$
|
2,315
|
|
|
$
|
2,339
|
|
Short-term investments
|
$
|
91
|
|
|
$
|
295
|
|
Long-term investments
|
$
|
10
|
|
|
$
|
10
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions)
|
||||||||||||||
Funds receivable and customer accounts
|
$
|
27
|
|
|
$
|
(109
|
)
|
|
$
|
(2
|
)
|
|
$
|
(69
|
)
|
Short-term investments
|
$
|
(4
|
)
|
|
$
|
(14
|
)
|
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
|
|
June 30, 2019
|
|
Significant Other
Observable Inputs (Level 2) |
|||
|
|
(In millions)
|
|||||
Non-marketable equity investments measured using the Measurement Alternative(1)
|
|
$
|
179
|
|
|
179
|
|
|
|
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
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
(In millions)
|
||||||
Derivative Assets:
|
|
|
|
|
|
||||
Foreign exchange contracts designated as cash flow hedges
|
Other current assets
|
|
$
|
116
|
|
|
$
|
170
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other assets (non-current)
|
|
6
|
|
|
11
|
|
||
Foreign exchange contracts not designated as hedging instruments
|
Other current assets
|
|
87
|
|
|
139
|
|
||
Total derivative assets
|
|
|
$
|
209
|
|
|
$
|
320
|
|
|
|
|
|
|
|
||||
Derivative Liabilities:
|
|
|
|
|
|
||||
Foreign exchange contracts designated as cash flow hedges
|
Other current liabilities
|
|
$
|
2
|
|
|
$
|
3
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other long-term liabilities
|
|
2
|
|
|
—
|
|
||
Foreign exchange contracts not designated as hedging instruments
|
Other current liabilities
|
|
83
|
|
|
64
|
|
||
Total derivative liabilities
|
|
|
$
|
87
|
|
|
$
|
67
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
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
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
Gains (losses) on foreign exchange contracts designated as cash flow hedges reclassified from accumulated other comprehensive income
|
$
|
58
|
|
|
$
|
(29
|
)
|
|
$
|
110
|
|
|
$
|
(73
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions)
|
||||||||||||||
Gains (losses) on foreign exchange contracts recognized in other income (expense), net
|
$
|
9
|
|
|
$
|
59
|
|
|
$
|
(1
|
)
|
|
$
|
15
|
|
Gains (losses) on foreign exchange contracts recognized in net revenues
|
—
|
|
|
7
|
|
|
—
|
|
|
1
|
|
||||
Total gains (losses) recognized from foreign exchange contracts not designated as hedging instruments
|
$
|
9
|
|
|
$
|
66
|
|
|
$
|
(1
|
)
|
|
$
|
16
|
|
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Foreign exchange contracts designated as cash flow hedges
|
$
|
3,519
|
|
|
$
|
3,831
|
|
Foreign exchange contracts not designated as hedging instruments
|
11,906
|
|
|
10,703
|
|
||
Total
|
$
|
15,425
|
|
|
$
|
14,534
|
|
June 30, 2019
|
||||||||||||||||||||||
(In millions)
|
||||||||||||||||||||||
Current
|
|
30 - 59 Days Past Due
|
|
60 - 89 Days Past Due
|
|
90 - 180 Days Past Due
|
|
Total Past Due
|
|
Total
|
||||||||||||
$
|
855
|
|
|
$
|
28
|
|
|
$
|
9
|
|
|
$
|
17
|
|
|
$
|
54
|
|
|
$
|
909
|
|
94.1
|
%
|
|
3.0
|
%
|
|
1.0
|
%
|
|
1.9
|
%
|
|
5.9
|
%
|
|
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
|
%
|
|
June 30, 2019
|
|
June 30, 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
|
6
|
|
4
|
|
10
|
|
|
55
|
|
7
|
|
62
|
|
||||||
Charge-offs
|
(17
|
)
|
(3
|
)
|
(20
|
)
|
|
(68
|
)
|
(7
|
)
|
(75
|
)
|
||||||
Recoveries(2)
|
18
|
|
—
|
|
18
|
|
|
—
|
|
—
|
|
—
|
|
||||||
Ending balance
|
$
|
34
|
|
$
|
4
|
|
$
|
38
|
|
|
$
|
44
|
|
$
|
6
|
|
$
|
50
|
|
June 30, 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
|
||||||||||||||
$
|
2,175
|
|
|
$
|
82
|
|
|
$
|
41
|
|
|
$
|
78
|
|
|
$
|
13
|
|
|
$
|
214
|
|
|
$
|
2,389
|
|
91.0
|
%
|
|
3.4
|
%
|
|
1.7
|
%
|
|
3.3
|
%
|
|
0.6
|
%
|
|
9.0
|
%
|
|
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
|
%
|
|
June 30, 2019
|
|
June 30, 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
|
115
|
|
16
|
|
131
|
|
|
79
|
|
13
|
|
92
|
|
||||||
Charge-offs
|
(83
|
)
|
(9
|
)
|
(92
|
)
|
|
(49
|
)
|
(4
|
)
|
(53
|
)
|
||||||
Recoveries
|
7
|
|
—
|
|
7
|
|
|
5
|
|
—
|
|
5
|
|
||||||
Ending balance
|
$
|
154
|
|
$
|
22
|
|
$
|
176
|
|
|
$
|
87
|
|
$
|
16
|
|
$
|
103
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions)
|
||||||||||||||
Beginning balance
|
$
|
385
|
|
|
$
|
283
|
|
|
$
|
344
|
|
|
$
|
266
|
|
Provisions, net of recoveries
|
247
|
|
|
262
|
|
|
533
|
|
|
505
|
|
||||
Realized losses
|
(237
|
)
|
|
(241
|
)
|
|
(482
|
)
|
|
(467
|
)
|
||||
Ending balance
|
$
|
395
|
|
|
$
|
304
|
|
|
$
|
395
|
|
|
$
|
304
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(In millions)
|
||||||||||||||
Customer support and operations
|
$
|
45
|
|
|
$
|
41
|
|
|
$
|
93
|
|
|
$
|
83
|
|
Sales and marketing
|
32
|
|
|
29
|
|
|
64
|
|
|
63
|
|
||||
Technology and development
|
80
|
|
|
74
|
|
|
173
|
|
|
146
|
|
||||
General and administrative
|
73
|
|
|
66
|
|
|
154
|
|
|
127
|
|
||||
Total stock-based compensation expense
|
$
|
230
|
|
|
$
|
210
|
|
|
$
|
484
|
|
|
$
|
419
|
|
Capitalized as part of internal use software and website development costs
|
$
|
9
|
|
|
$
|
10
|
|
|
$
|
19
|
|
|
$
|
17
|
|
|
Employee Severance and Benefits
|
||
|
(In millions)
|
||
Accrued liability as of January 1, 2019
|
$
|
3
|
|
Charges
|
78
|
|
|
Payments
|
(34
|
)
|
|
Accrued liability as of June 30, 2019
|
$
|
47
|
|
|
Three Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||
|
(In millions, except percentages and per share data)
|
||||||||||||||||||||
Net revenues
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
12
|
%
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
|
12
|
%
|
Operating expenses
|
3,600
|
|
|
3,285
|
|
|
10
|
%
|
|
7,210
|
|
|
6,436
|
|
|
12
|
%
|
||||
Operating income
|
$
|
705
|
|
|
$
|
572
|
|
|
23
|
%
|
|
$
|
1,223
|
|
|
$
|
1,106
|
|
|
11
|
%
|
Operating margin
|
16
|
%
|
|
15
|
%
|
|
**
|
|
|
15
|
%
|
|
15
|
%
|
|
**
|
|
||||
Other income (expense), net
|
$
|
238
|
|
|
$
|
37
|
|
|
**
|
|
|
$
|
437
|
|
|
$
|
51
|
|
|
**
|
|
Income tax expense
|
$
|
120
|
|
|
$
|
83
|
|
|
45
|
%
|
|
$
|
170
|
|
|
$
|
120
|
|
|
42
|
%
|
Effective tax rate
|
13
|
%
|
|
14
|
%
|
|
**
|
|
|
10
|
%
|
|
10
|
%
|
|
**
|
|
||||
Net income
|
$
|
823
|
|
|
$
|
526
|
|
|
56
|
%
|
|
$
|
1,490
|
|
|
$
|
1,037
|
|
|
44
|
%
|
Net income per diluted share
|
$
|
0.69
|
|
|
$
|
0.44
|
|
|
58
|
%
|
|
$
|
1.25
|
|
|
$
|
0.86
|
|
|
46
|
%
|
Net cash provided by operating activities
|
$
|
1,174
|
|
|
$
|
28
|
|
|
**
|
|
|
$
|
2,201
|
|
|
$
|
(321
|
)
|
|
**
|
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||||
|
(In millions)
|
||||||
Unfavorable impact to net revenues (exclusive of hedging impact)
|
$
|
(93
|
)
|
|
$
|
(209
|
)
|
Hedging impact
|
58
|
|
|
110
|
|
||
Unfavorable impact to net revenues
|
(35
|
)
|
|
(99
|
)
|
||
Favorable impact to operating expense
|
50
|
|
|
112
|
|
||
Net favorable impact to operating income
|
$
|
15
|
|
|
$
|
13
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||
|
(In millions)
|
||||||
Favorable impact to net revenues (exclusive of hedging impact)
|
$
|
75
|
|
|
$
|
216
|
|
Hedging impact
|
(23
|
)
|
|
(73
|
)
|
||
Favorable impact to net revenues
|
52
|
|
|
143
|
|
||
Unfavorable impact to operating expense
|
(25
|
)
|
|
(84
|
)
|
||
Net favorable impact to operating income
|
$
|
27
|
|
|
$
|
59
|
|
•
|
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 June 30,
|
|
Percent Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Transaction revenues
|
$
|
3,878
|
|
|
$
|
3,318
|
|
|
17
|
%
|
|
$
|
7,609
|
|
|
$
|
6,515
|
|
|
17
|
%
|
Other value added services
|
427
|
|
|
539
|
|
|
(21
|
)%
|
|
824
|
|
|
1,027
|
|
|
(20
|
)%
|
||||
Net revenues
|
$
|
4,305
|
|
|
$
|
3,857
|
|
|
12
|
%
|
|
$
|
8,433
|
|
|
$
|
7,542
|
|
|
12
|
%
|
|
Three Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
|
Six Months Ended
June 30, |
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Active accounts(1)
|
286
|
|
|
244
|
|
|
17
|
%
|
|
286
|
|
|
244
|
|
|
17
|
%
|
||||
Number of payment transactions(2)
|
2,973
|
|
|
2,327
|
|
|
28
|
%
|
|
5,811
|
|
|
4,541
|
|
|
28
|
%
|
||||
Payment transactions per active account(3)
|
39.0
|
|
|
35.7
|
|
|
9
|
%
|
|
39.0
|
|
|
35.7
|
|
|
9
|
%
|
||||
TPV(4)
|
$
|
172,359
|
|
|
$
|
139,403
|
|
|
24
|
%
|
|
$
|
333,851
|
|
|
$
|
271,767
|
|
|
23
|
%
|
Percent of cross-border TPV
|
18
|
%
|
|
20
|
%
|
|
**
|
|
|
18
|
%
|
|
20
|
%
|
|
**
|
|
|
Three Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Transaction expense
|
$
|
1,627
|
|
|
$
|
1,362
|
|
|
19
|
%
|
|
$
|
3,176
|
|
|
$
|
2,637
|
|
|
20
|
%
|
Transaction and loan losses
|
318
|
|
|
334
|
|
|
(5
|
)%
|
|
659
|
|
|
639
|
|
|
3
|
%
|
||||
Customer support and operations(1)
|
399
|
|
|
338
|
|
|
18
|
%
|
|
787
|
|
|
680
|
|
|
16
|
%
|
||||
Sales and marketing(1)
|
356
|
|
|
307
|
|
|
16
|
%
|
|
685
|
|
|
588
|
|
|
16
|
%
|
||||
Technology and development(1)
|
483
|
|
|
441
|
|
|
10
|
%
|
|
994
|
|
|
889
|
|
|
12
|
%
|
||||
General and administrative(1)
|
419
|
|
|
387
|
|
|
8
|
%
|
|
838
|
|
|
734
|
|
|
14
|
%
|
||||
Restructuring and other charges
|
(2
|
)
|
|
116
|
|
|
(102
|
)%
|
|
71
|
|
|
269
|
|
|
(74
|
)%
|
||||
Total operating expenses
|
$
|
3,600
|
|
|
$
|
3,285
|
|
|
10
|
%
|
|
$
|
7,210
|
|
|
$
|
6,436
|
|
|
12
|
%
|
Transaction expense rate(2)
|
0.94
|
%
|
|
0.98
|
%
|
|
**
|
|
|
0.95
|
%
|
|
0.97
|
%
|
|
**
|
|
||||
Transaction and loan loss rate(3)
|
0.18
|
%
|
|
0.24
|
%
|
|
**
|
|
|
0.20
|
%
|
|
0.24
|
%
|
|
**
|
|
|
Three Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase/(Decrease)
|
||||||||||||||
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||
Transaction losses
|
$
|
247
|
|
|
$
|
262
|
|
|
(6
|
)%
|
|
$
|
533
|
|
|
$
|
505
|
|
|
6
|
%
|
Loan losses
|
71
|
|
|
72
|
|
|
(1
|
)%
|
|
126
|
|
|
134
|
|
|
(6
|
)%
|
||||
Transaction and loan losses
|
$
|
318
|
|
|
$
|
334
|
|
|
(5
|
)%
|
|
$
|
659
|
|
|
$
|
639
|
|
|
3
|
%
|
Transaction loss rate (1)
|
0.14
|
%
|
|
0.19
|
%
|
|
|
|
0.16
|
%
|
|
0.19
|
%
|
|
|
|
June 30,
|
||||
|
2019
|
|
2018
|
||
Percent of consumer loans and interest receivables current
|
94.1
|
%
|
|
95.0
|
%
|
Percent of consumer loans and interest receivables > 90 days outstanding(1)
|
1.9
|
%
|
|
1.7
|
%
|
Net charge off rate(2)
|
3.5
|
%
|
|
2.7
|
%
|
|
June 30,
|
||||
|
2019
|
|
2018
|
||
Merchant loans and advances
|
|
|
|
||
Percent of merchant receivables within original expected or contractual repayment period
|
91.0
|
%
|
|
90.6
|
%
|
Percent of merchant receivables > 90 days outstanding after the end of original expected or contractual repayment period
|
3.9
|
%
|
|
4.2
|
%
|
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
(In millions)
|
||||||
Cash, cash equivalents, and investments(1)(2)
|
$
|
8,613
|
|
|
$
|
9,710
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
2,201
|
|
|
$
|
(321
|
)
|
Investing activities
|
(5,957
|
)
|
|
563
|
|
||
Financing activities
|
2,498
|
|
|
(542
|
)
|
||
Effect of exchange rates on cash, cash equivalents, and restricted cash
|
(1
|
)
|
|
(63
|
)
|
||
Net decrease in cash, cash equivalents, and restricted cash
|
$
|
(1,259
|
)
|
|
$
|
(363
|
)
|
•
|
tighter credit,
|
•
|
higher unemployment,
|
•
|
consumer debt levels or reduced consumer confidence.
|
•
|
financial market volatility,
|
•
|
fluctuations in foreign currency exchange rates and interest rates,
|
•
|
changes and uncertainties related to government fiscal and tax policies,
|
•
|
changes and uncertainties about trade relationships between the U.S. and various other countries with respect to international trade agreements and policies, treaties, government regulations and tariffs, including the possibility of the U.S. and/or other countries imposing greater restrictions on international trade, significant increases in tariffs on imported goods, and other restrictive actions
|
•
|
the inability of the U.S. Congress to enact a budget in a fiscal year, another sequestration, and/or another shutdown of the U.S. government,
|
•
|
government austerity programs, and
|
•
|
other negative financial news or macroeconomic developments.
|
•
|
if we are unable to utilize appropriate authorizations and regulator permissions, our European 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 European markets. For example, our ability to work primarily with the Luxembourg regulator as the lead authority for various aspects of the U.K. operations of PayPal (Europe) S.a.r.l. et Cie., SCA (“PayPal (Europe))” and with the Swedish regulator for various aspects of the U.K. operations of iZettle AB (pub)(“iZettle”) 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 European and U.K. operations; and
|
•
|
our ability to attract and retain the necessary human resources in appropriate locations to support our U.K. and the European business 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.
|
•
|
we could be required to comply with new regulatory requirements, resulting in increased complexity and costs for our Singapore and international operations;
|
•
|
we could be required to make changes to our compliance program, resulting in increased complexity and costs to operate both in Singapore as well as in the cross-border markets which are served by PayPal Pte. Ltd; and
|
•
|
we could be required to comply with additional safeguarding requirements, which could increase our operational costs.
|
•
|
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 not 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.
|
•
|
increased expectations from merchants regarding the reliability and availability of our systems and services and correspondingly lower amounts of downtime, which we may not be able to meet;
|
•
|
increased expectations from merchants that our systems and services will help them to comply with laws and regulations relating to tax, accounting, and bookkeeping, such as cash register systems, which we my not be able to meet;
|
•
|
significant competition at the point of sale, particularly from established payment card providers, many of which have substantially greater resources than we do;
|
•
|
increased targeting by fraudsters; 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 (e.g., card readers) that we produce for use at the point of sale malfunction or are not in compliance with laws, which could result in substantial liability and require product recalls or other actions;
|
•
|
constraints in key resources to develop and maintain point of sale software and ancillary hardware
|
•
|
exposure to 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 card reader, cash drawer and pin-pad providers), payment processors, and banks that enable in-store transactions; and
|
•
|
lower operating income than our other payment solutions.
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
Form
|
Date Filed
|
Filed Herewith
|
|
Letter Agreement dated as of June 17, 2019 between William J. Ready 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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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:
|
July 25, 2019
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ John D. Rainey
|
|
|
|
John D. Rainey
|
|
|
|
Chief Financial Officer and Executive Vice President,
Global Customer Operations
|
Date:
|
July 25, 2019
|
|
|
|
|
Principal Accounting Officer:
|
|
|
|
|
|
|
|
By:
|
/s/ Aaron A. Anderson
|
|
|
|
Aaron A. Anderson
|
|
|
|
Vice President, Chief Accounting Officer
|
Date:
|
July 25, 2019
|
|
|
1.
|
SEVERANCE BENEFITS. Although the Company is not required to provide any severance benefits, in exchange for signing and not revoking this Agreement, and contingent upon complying with the Company’s Code of Conduct and Insider Trading Policy, and your obligations set forth herein, and except as so limited by Section 6, the Company will continue to employ you with your regular salary and benefits through the earlier of the (a) Early Termination effective date or (b) December 31, 2019 (such applicable date, the "Separation Date"). You understand that the payments and benefits described in this Section are not for wages the Company concedes it owes you and are consideration for you signing and not revoking this Agreement. All payments under this Agreement will be subject to applicable tax withholdings.
|
2.
|
ADDITIONAL LUMP SUM PAYMENT. Provided you sign and do not revoke this Separation Agreement and timely execute and do not revoke the Release, and contingent upon complying with the Company’s Code of Conduct and Insider Trading Policy, and your obligations set forth herein, the Company will make a lump sum severance payment to you representing an amount equal to $1,500,000. You will receive this payment within thirty (30) days following the Separation Date. You understand that the payment described in this Section is not for wages the Company concedes it owes you and is consideration for you signing the Release.
|
3.
|
2019 ANNUAL INCENTIVE PLAN. Provided you sign and do not revoke this Separation Agreement and timely execute and do not revoke the Release, and contingent upon complying with the Company’s Code of Conduct and Insider Trading Policy, and your obligations set forth herein, you will be eligible to receive an annual bonus under PayPal’s annual incentive plan for 2019 (the “2019 AIP”), paid out based on actual PayPal performance for the company performance component should PayPal meet the threshold to pay out a bonus and subject to PayPal performance meeting threshold, and your individual performance component at target. The 2019 AIP bonus payment, including any AIP Shares (as defined in the 2019 AIP) will be paid out in accordance with the terms of the 2019 AIP on the date that all other participants in the plan receive their bonuses in respect to such fiscal year, with an anticipated pay out in February or March 2020 (but in all events prior to March 15, 2020). Your right to the bonus payment under the 2019 AIP, is conditioned upon you remaining employed through the Separation Date.
|
4.
|
EQUITY. Provided you sign and do not revoke this Separation Agreement, and timely execute and do not revoke the Release, and contingent upon complying with the Company’s Code of Conduct and Insider Trading Policy, and your obligations set forth herein,
|
5.
|
HEALTH INSURANCE. As provided by the federal COBRA law and by the Company's current group health insurance policies, you will be eligible to continue your health insurance benefits following the Separation Date. You are entitled to COBRA insurance whether or not you sign this Separation Agreement. Your current health
|
6.
|
AT-WILL EMPLOYMENT. Your employment remains at-will and nothing contained in this Separation Agreement is intended to create or imply any contrary policy. Either you or the Company may terminate your employment at any time, with or without cause or notice. If you are terminated for Cause (as defined in the PayPal Holdings, Inc. SVP and Above Standard Severance Plan) or if you voluntarily terminate (i) prior to July 15, 2019 (the “Step-Down Date”) or (ii) prior to the Separation Date without giving at least fifteen (15) days’ written notice to the Company, you will receive only your unpaid wages through termination, any accrued and unused vacation, and any ESPP contributions withheld thus far for the current purchase period (if applicable), subject to standard payroll deductions and withholdings and equity awards will cease vesting as of the earlier date of separation.
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7.
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OTHER COMPENSATION OR BENEFITS. You acknowledge that, except as expressly provided in this Agreement, you will not receive nor are you entitled to receive any additional compensation, severance or benefits after the Separation Date. You recognize and agree that your employment relationship with the Company will terminate upon the Separation Date, and the Company has no obligation, contractual or otherwise, to hire, re-hire or re-employ you in the future.
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8.
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EXPENSE REIMBURSEMENTS. On or within thirty (30) days following the Separation Date, you will submit your final documented expense reimbursement statement reflecting any and all authorized business expenses you incurred through the Separation Date for which you seek reimbursement. The Company will reimburse you for such expenses pursuant to its regular business practice.
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9.
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MESSAGING. The Company shall announce your departure on or about June 20, 2019, in releases that shall be subject to your prior review. The Company agrees that any press releases or any other publicly issued statements, or statements to the media, shall be consistent with such releases.
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10.
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RETURN OF COMPANY PROPERTY. On or before the Step-Down Date, you will return to the Company all Company documents (and all copies thereof) and other Company property and materials in your possession, or your control, including, but not limited to, Company files, laptop, smartphone, notes, memoranda, correspondence, lists, drawings, records, plans and forecasts, financial information, personnel information, customer and customer prospect information, sales and marketing information, product development and pricing information, specifications, computer-recorded information, tangible property, credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential material of the Company (and all reproductions thereof).
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11.
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PROPRIETARY INFORMATION OBLIGATIONS. You acknowledge your continuing obligations under and reaffirm your commitment to comply in all respects with your Employee Proprietary Information and Inventions Agreement (the “PIIA”), which include but are not limited to the obligation to refrain from any unauthorized use or disclosure of any confidential or proprietary information of the Company as well as the obligation to not solicit (directly or indirectly) Company employees for a period of one year (12 months) following the Separation Date. Failure to comply with this provision shall be a material breach of this Agreement. A copy of your PIIA is attached hereto as Exhibit B.
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12.
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NONDISPARAGEMENT. Subject to Section 15 below, you agree not to disparage the Company, or the Company’s officers, directors, employees and agents in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided, that you will respond accurately and fully to any question, inquiry or request for information when required by legal process. [***]
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13.
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COOPERATION. You agree that while your regular employment responsibilities will end on the Step-Down Date, between that date and the Separation Date you will provide, upon request, reasonable support to [***].
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14.
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SEPARATION MATTERS. You agree to resign from your position as Chief Operating Officer of PayPal Holdings, Inc., a director on any and all boards or committees and other positions you hold at the Company, on or before the Step-Down Date. You agree to take any and all further acts necessary to accomplish these resignations.
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15.
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PROTECTED RIGHTS. By your signature below, you acknowledge and agree that, with the exception of information that is protected from disclosure by any applicable law or privilege, nothing in this Separation Agreement or in any agreement between you and the Company prohibits or limits you (or your attorney) from initiating communications directly with, responding to any inquiry from, volunteering information to, or providing testimony before, the Securities and Exchange Commission, the Department of Justice, FINRA, any other self-regulatory organization, or any other governmental, law enforcement, or regulatory authority, regarding this Separation Agreement and its underlying facts and circumstances, or in connection with any reporting of, investigation into, or proceeding regarding suspected violations of law, and that you are not required to advise or seek permission from the Company before engaging in any such activity.
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16.
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RELEASE OF CLAIMS. In consideration for the payments and other promises and undertakings contained in this Separation Agreement to which you would not otherwise be entitled, and except as otherwise set forth in this Separation Agreement, you waive, release, acquit and forever discharge the Company, its parents and subsidiaries, and its and their respective officers, directors, agents, servants, employees, attorneys, shareholders, successors, assigns and affiliates (the “Releasees”), of and from any and all claims, liabilities, demands, charges, causes of action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, which you assert or could assert against the Releasees at common law or under any statute, rule, regulation, order or law, whether federal, state or local, on any ground whatsoever, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the date you sign this Separation Agreement, including but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with your employment with the Company or the termination of that employment; claims or demands related to salary, bonuses, pension or insurance contributions, commissions, stock, stock options, or any other ownership interests in the Company, vacation or other time off pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; any and all causes of action, including but not limited to actions for breach of contract, express or implied, breach of the covenant of good faith and fair dealing, express or implied, wrongful termination in violation of public policy, all other claims for wrongful termination and constructive discharge, and all other tort claims, including, but not limited to, intentional or negligent infliction of emotional distress, invasion of privacy, negligence, negligent investigation, negligent hiring, supervision or retention, assault and battery, false imprisonment, defamation, intentional or negligent misrepresentation, fraud, and any and all claims arising under any federal, state or local law or statute, including, but not limited to, the California Fair Employment and Housing Act; Business and Professions Code 17200; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991;
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17.
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RELEASE OF UNKNOWN CLAIMS. You acknowledge that you have read and understand Section 1542 of the California Civil Code, which reads as follows: “A general release does not extend to claims which the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that, if known by him or her would have materially affected his or her settlement with the debtor or released party.” You hereby knowingly, intentionally, and expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to your release of any unknown or unsuspected claims you may have against the Company.
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18.
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REDUCTION OF SEVERANCE PAY BENEFITS. In the event the Company triggers the Worker Adjustment and Retraining Notification Act (“WARN”) (or other similar federal or state statute) and if the Company provides pay-in-lieu of notice to you instead of advanced notice of your termination of employment in accordance with the requirements of WARN, then the amount of the severance benefits under this Agreement will be reduced (but not below zero) by any amount required to be paid or otherwise owing to you under WARN.
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19.
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CONDITIONAL BENEFITS AND CLAWBACK. Your vesting in, entitlement to, and receipt of the severance pay in Section 2-5 of this Agreement are expressly conditioned upon the Release herein becoming effective and your full compliance with your obligations under this Agreement, including but not limited to the obligations under Sections 10-14 herein. [***]
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20.
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MISCELLANEOUS. With the exception of the PIIA, the Mutual Arbitration Agreement, the 2019 AIP, and any equity award agreements, this Agreement, including all exhibits, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations, prior agreements and communications, whether oral or written, as to the specific subjects of this letter by and between you and the Company. This Agreement may not be modified or amended except in writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination
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21.
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DTSA. Please be advised, pursuant to the Defend Trade Secrets Act of 2016, an individual shall not be held criminally, or civilly, liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a Federal, State, or local government official, or an attorney, for the sole purpose of reporting, or investigating, a violation of law. Moreover, individuals may disclose trade secrets in a complaint, or other document, filed in a lawsuit, or other proceeding, if such filing is made under seal. Finally, any individual who files a lawsuit alleging retaliation by the Company for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret in the court proceeding, if the individual: files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
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22.
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You have fifteen (15) calendar days from the date of this Separation Agreement to consider whether to sign it. Upon acceptance of this Agreement, please sign below and return the executed original to me. Upon the date you sign this Separation Agreement (the “Effective Date”), this will become our binding agreement with respect to your separation from the Company.
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/s/ Daniel H. Schulman
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Daniel H. Schulman
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President, Chief Executive Officer and Director
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(Principal Executive Officer)
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/s/ John D. Rainey
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John D. Rainey
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Chief Financial Officer and Executive Vice President, Global Customer Operations
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(Principal Financial Officer)
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/s/ Daniel H. Schulman
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Daniel H. Schulman
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President, Chief Executive Officer and Director
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(Principal Executive Officer)
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/s/ John D. Rainey
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John D. Rainey
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Chief Financial Officer and Executive Vice President, Global Customer Operations
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(Principal Financial Officer)
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