☒ |
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 |
Page Number | |||||||||||
September 30,
2021 |
December 31,
2020 |
||||||||||
(In millions, except par value) | |||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 7,782 | $ | 4,794 | |||||||
Short-term investments | 5,510 | 8,289 | |||||||||
Accounts receivable, net | 736 | 577 | |||||||||
Loans and interest receivable, net of allowances of $489 and $838 as of September 30, 2021 and December 31, 2020, respectively
|
3,713 | 2,769 | |||||||||
Funds receivable and customer accounts | 35,104 | 33,418 | |||||||||
Prepaid expenses and other current assets | 1,285 | 1,148 | |||||||||
Total current assets | 54,130 | 50,995 | |||||||||
Long-term investments | 6,753 | 6,089 | |||||||||
Property and equipment, net | 1,900 | 1,807 | |||||||||
Goodwill | 9,550 | 9,135 | |||||||||
Intangible assets, net | 808 | 1,048 | |||||||||
Other assets | 1,393 | 1,305 | |||||||||
Total assets | $ | 74,534 | $ | 70,379 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 186 | $ | 252 | |||||||
Funds payable and amounts due to customers | 37,804 | 35,418 | |||||||||
Accrued expenses and other current liabilities | 3,554 | 2,648 | |||||||||
Income taxes payable | 151 | 129 | |||||||||
Total current liabilities | 41,695 | 38,447 | |||||||||
Deferred tax liability and other long-term liabilities | 2,800 | 2,930 | |||||||||
Long-term debt | 7,949 | 8,939 | |||||||||
Total liabilities | 52,444 | 50,316 | |||||||||
Commitments and contingencies (Note 13) | |||||||||||
Equity: | |||||||||||
Common stock, $0.0001 par value; 4,000 shares authorized; 1,174 and 1,172 shares outstanding as of September 30, 2021 and December 31, 2020, respectively
|
— | — | |||||||||
Preferred stock, $0.0001 par value; 100 shares authorized, unissued
|
— | — | |||||||||
Treasury stock at cost, 124 and 117 shares as of September 30, 2021 and December 31, 2020, respectively
|
(10,380) | (8,507) | |||||||||
Additional paid-in-capital | 16,860 | 16,644 | |||||||||
Retained earnings | 15,734 | 12,366 | |||||||||
Accumulated other comprehensive income (loss) | (124) | (484) | |||||||||
Total PayPal stockholders’ equity | 22,090 | 20,019 | |||||||||
Noncontrolling interest | — | 44 | |||||||||
Total equity | 22,090 | 20,063 | |||||||||
Total liabilities and equity | $ | 74,534 | $ | 70,379 |
|
4
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions, except per share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Net revenues | $ | 6,182 | $ | 5,459 | $ | 18,453 | $ | 15,338 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Transaction expense | 2,564 | 2,022 | 7,363 | 5,604 | |||||||||||||||||||
Transaction and credit losses | 268 | 344 | 710 | 1,375 | |||||||||||||||||||
Customer support and operations | 504 | 449 | 1,543 | 1,271 | |||||||||||||||||||
Sales and marketing | 549 | 471 | 1,779 | 1,256 | |||||||||||||||||||
Technology and development | 755 | 674 | 2,242 | 1,910 | |||||||||||||||||||
General and administrative | 498 | 503 | 1,544 | 1,501 | |||||||||||||||||||
Restructuring and other charges | 1 | 19 | 60 | 95 | |||||||||||||||||||
Total operating expenses | 5,139 | 4,482 | 15,241 | 13,012 | |||||||||||||||||||
Operating income | 1,043 | 977 | 3,212 | 2,326 | |||||||||||||||||||
Other income (expense), net | 122 | 167 | 181 | 880 | |||||||||||||||||||
Income before income taxes | 1,165 | 1,144 | 3,393 | 3,206 | |||||||||||||||||||
Income tax expense | 78 | 123 | 25 | 571 | |||||||||||||||||||
Net income | $ | 1,087 | $ | 1,021 | $ | 3,368 | $ | 2,635 | |||||||||||||||
Net income per share: | |||||||||||||||||||||||
Basic | $ | 0.93 | $ | 0.87 | $ | 2.87 | $ | 2.25 | |||||||||||||||
Diluted | $ | 0.92 | $ | 0.86 | $ | 2.84 | $ | 2.22 | |||||||||||||||
Weighted average shares: | |||||||||||||||||||||||
Basic | 1,174 | 1,172 | 1,174 | 1,173 | |||||||||||||||||||
Diluted | 1,187 | 1,190 | 1,187 | 1,186 |
|
5
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Net income | $ | 1,087 | $ | 1,021 | $ | 3,368 | $ | 2,635 | |||||||||||||||
Other comprehensive income (loss), net of reclassification adjustments: | |||||||||||||||||||||||
Foreign currency translation adjustments (“CTA”) | (29) | 8 | (51) | (111) | |||||||||||||||||||
Net investment hedge CTA gain | — | — | — | 55 | |||||||||||||||||||
Unrealized gains (losses) on cash flow hedges, net | 204 | (163) | 434 | (111) | |||||||||||||||||||
Tax (expense) benefit on unrealized gains (losses) on cash flow hedges, net | (7) | 2 | (10) | 1 | |||||||||||||||||||
Unrealized (losses) gains on investments, net | — | (12) | (17) | 10 | |||||||||||||||||||
Tax benefit (expense) on unrealized (losses) gains on investments, net | — | 3 | 4 | (3) | |||||||||||||||||||
Other comprehensive income (loss), net of tax | 168 | (162) | 360 | (159) | |||||||||||||||||||
Comprehensive income | $ | 1,255 | $ | 859 | $ | 3,728 | $ | 2,476 |
|
6
|
Common Stock Shares | Treasury Stock | Additional Paid-In Capital |
Accumulated Other
Comprehensive Income (Loss) |
Retained Earnings | Noncontrolling Interest |
Total
Equity |
|||||||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2020 | 1,172 | $ | (8,507) | $ | 16,644 | $ | (484) | $ | 12,366 | $ | 44 | $ | 20,063 | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 1,097 | — | 1,097 | ||||||||||||||||||||||||||||||||||
Foreign CTA | — | — | — | (53) | — | — | (53) | ||||||||||||||||||||||||||||||||||
Unrealized gains on cash flow hedges, net | — | — | — | 198 | — | — | 198 | ||||||||||||||||||||||||||||||||||
Tax expense on unrealized gains on cash flow hedges, net | — | — | — | (3) | — | — | (3) | ||||||||||||||||||||||||||||||||||
Unrealized losses on investments, net | — | — | — | (15) | — | — | (15) | ||||||||||||||||||||||||||||||||||
Tax benefit on unrealized losses on investments, net | — | — | — | 4 | — | — | 4 | ||||||||||||||||||||||||||||||||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes | 7 | — | (870) | — | — | — | (870) | ||||||||||||||||||||||||||||||||||
Common stock repurchased | (5) | (1,323) | — | — | — | — | (1,323) | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 387 | — | — | — | 387 | ||||||||||||||||||||||||||||||||||
Change in noncontrolling interest | — | — | — | — | — | (44) | (44) | ||||||||||||||||||||||||||||||||||
Balances at March 31, 2021 | 1,174 | $ | (9,830) | $ | 16,161 | $ | (353) | $ | 13,463 | $ | — | $ | 19,441 | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 1,184 | — | 1,184 | ||||||||||||||||||||||||||||||||||
Foreign CTA | — | — | — | 31 | — | — | 31 | ||||||||||||||||||||||||||||||||||
Unrealized gains on cash flow hedges, net | — | — | — | 32 | — | — | 32 | ||||||||||||||||||||||||||||||||||
Unrealized losses on investments, net | — | — | — | (2) | — | — | (2) | ||||||||||||||||||||||||||||||||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes | 2 | — | 12 | — | — | — | 12 | ||||||||||||||||||||||||||||||||||
Common stock repurchased | (1) | (200) | — | — | — | — | (200) | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 407 | — | — | — | 407 | ||||||||||||||||||||||||||||||||||
Balances at June 30, 2021 | 1,175 | $ | (10,030) | $ | 16,580 | $ | (292) | $ | 14,647 | $ | — | $ | 20,905 | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 1,087 | — | 1,087 | ||||||||||||||||||||||||||||||||||
Foreign CTA | — | — | — | (29) | — | — | (29) | ||||||||||||||||||||||||||||||||||
Unrealized gains on cash flow hedges, net | — | — | — | 204 | — | — | 204 | ||||||||||||||||||||||||||||||||||
Tax expense on unrealized gains on cash flow hedges, net | — | — | — | (7) | — | — | (7) | ||||||||||||||||||||||||||||||||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes | — | — | (37) | — | — | — | (37) | ||||||||||||||||||||||||||||||||||
Common stock repurchased | (1) | (350) | — | — | — | — | (350) | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 317 | — | — | — | 317 | ||||||||||||||||||||||||||||||||||
Balances at September 30, 2021 | 1,174 | $ | (10,380) | $ | 16,860 | $ | (124) | $ | 15,734 | $ | — | $ | 22,090 |
|
7
|
Common Stock Shares | Treasury Stock | Additional Paid-In Capital |
Accumulated Other
Comprehensive Income (Loss) |
Retained Earnings | Noncontrolling Interest |
Total
Equity |
|||||||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2019 | 1,173 | $ | (6,872) | $ | 15,588 | $ | (173) | $ | 8,342 | $ | 44 | $ | 16,929 | ||||||||||||||||||||||||||||
Adoption of current expected credit loss standard | — | — | — | — | (168) | — | (168) | ||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 84 | — | 84 | ||||||||||||||||||||||||||||||||||
Foreign CTA | — | — | — | (171) | — | — | (171) | ||||||||||||||||||||||||||||||||||
Net investment hedge CTA gain | — | — | — | 71 | — | — | 71 | ||||||||||||||||||||||||||||||||||
Unrealized gains on cash flow hedges, net | — | — | — | 144 | — | — | 144 | ||||||||||||||||||||||||||||||||||
Tax expense on unrealized gains on cash flow hedges, net | — | — | — | (2) | — | — | (2) | ||||||||||||||||||||||||||||||||||
Unrealized gains on investments, net | — | — | — | 15 | — | — | 15 | ||||||||||||||||||||||||||||||||||
Tax expense on unrealized gains on investments, net | — | — | — | (4) | — | — | (4) | ||||||||||||||||||||||||||||||||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes | 8 | — | (382) | — | — | — | (382) | ||||||||||||||||||||||||||||||||||
Common stock repurchased | (8) | (800) | — | — | — | — | (800) | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 295 | — | — | — | 295 | ||||||||||||||||||||||||||||||||||
Balances at March 31, 2020 | 1,173 | $ | (7,672) | $ | 15,501 | $ | (120) | $ | 8,258 | $ | 44 | $ | 16,011 | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 1,530 | — | 1,530 | ||||||||||||||||||||||||||||||||||
Foreign CTA | — | — | — | 52 | — | — | 52 | ||||||||||||||||||||||||||||||||||
Net investment hedge CTA loss | — | — | — | (16) | — | — | (16) | ||||||||||||||||||||||||||||||||||
Unrealized losses on cash flow hedges, net | — | — | — | (92) | — | — | (92) | ||||||||||||||||||||||||||||||||||
Tax benefit on unrealized losses on cash flow hedges, net | — | — | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||
Unrealized gains on investments, net | — | — | — | 7 | — | — | 7 | ||||||||||||||||||||||||||||||||||
Tax expense on unrealized gains on investments, net | — | — | — | (2) | — | — | (2) | ||||||||||||||||||||||||||||||||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes | 1 | — | 52 | — | — | — | 52 | ||||||||||||||||||||||||||||||||||
Common stock repurchased | (1) | (220) | — | — | — | — | (220) | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 361 | — | — | — | 361 | ||||||||||||||||||||||||||||||||||
Balances at June 30, 2020 | 1,173 | $ | (7,892) | $ | 15,914 | $ | (170) | $ | 9,788 | $ | 44 | $ | 17,684 | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 1,021 | 1,021 | |||||||||||||||||||||||||||||||||||
Foreign CTA | — | — | — | 8 | — | — | 8 | ||||||||||||||||||||||||||||||||||
Unrealized losses on cash flow hedges, net | — | — | — | (163) | — | — | (163) | ||||||||||||||||||||||||||||||||||
Tax benefit on unrealized losses on cash flow hedges, net | — | — | — | 2 | — | — | 2 | ||||||||||||||||||||||||||||||||||
Unrealized losses on investments, net | — | — | — | (12) | — | — | (12) | ||||||||||||||||||||||||||||||||||
Tax benefit on unrealized losses on investments, net | — | — | — | 3 | — | — | 3 | ||||||||||||||||||||||||||||||||||
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes | 1 | — | (41) | — | — | — | (41) | ||||||||||||||||||||||||||||||||||
Common stock repurchased | (2) | (350) | — | — | — | — | (350) | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 375 | — | — | — | 375 | ||||||||||||||||||||||||||||||||||
Balances at September 30, 2020 | 1,172 | $ | (8,242) | $ | 16,248 | $ | (332) | $ | 10,809 | $ | 44 | $ | 18,527 |
|
8
|
Nine Months Ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
(In millions) | |||||||||||
(Unaudited) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 3,368 | $ | 2,635 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Transaction and credit losses | 710 | 1,375 | |||||||||
Depreciation and amortization | 939 | 888 | |||||||||
Stock-based compensation | 1,058 | 999 | |||||||||
Deferred income taxes | (175) | (6) | |||||||||
Net gains on strategic investments | (336) | (973) | |||||||||
Other | 92 | 10 | |||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | (155) | 7 | |||||||||
Accounts payable | (50) | (93) | |||||||||
Income taxes payable | 18 | (115) | |||||||||
Other assets and liabilities | (892) | (220) | |||||||||
Net cash provided by operating activities | 4,577 | 4,507 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | (695) | (640) | |||||||||
Proceeds from sales of property and equipment | 3 | 120 | |||||||||
Changes in principal loans receivable, net | (643) | 523 | |||||||||
Purchases of investments | (30,905) | (28,333) | |||||||||
Maturities and sales of investments | 30,390 | 19,733 | |||||||||
Acquisitions, net of cash and restricted cash acquired | (469) | (3,609) | |||||||||
Funds receivable | (37) | (1,078) | |||||||||
Net cash used in investing activities | (2,356) | (13,284) | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of common stock | 90 | 72 | |||||||||
Purchases of treasury stock | (1,873) | (1,370) | |||||||||
Tax withholdings related to net share settlements of equity awards | (978) | (463) | |||||||||
Borrowings under financing arrangements | — | 6,966 | |||||||||
Repayments under financing arrangements | — | (3,000) | |||||||||
Funds payable and amounts due to customers | 2,575 | 7,940 | |||||||||
Other financing activities | — | (15) | |||||||||
Net cash (used in) provided by financing activities | (186) | 10,130 | |||||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (106) | 26 | |||||||||
Net change in cash, cash equivalents, and restricted cash | 1,929 | 1,379 | |||||||||
Cash, cash equivalents, and restricted cash at beginning of period | 18,040 | 15,743 | |||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 19,969 | $ | 17,122 | |||||||
Supplemental cash flow disclosures: | |||||||||||
Cash paid for interest | $ | 121 | $ | 91 | |||||||
Cash paid for income taxes, net | $ | 436 | $ | 444 | |||||||
The table below reconciles cash, cash equivalents, and restricted cash as reported in the condensed consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows: | |||||||||||
Cash and cash equivalents | $ | 7,782 | $ | 6,112 | |||||||
Short-term investments | 23 | 23 | |||||||||
Funds receivable and customer accounts | 12,164 | 10,987 | |||||||||
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows | $ | 19,969 | $ | 17,122 |
|
9
|
|
10
|
Nine Months Ended September 30, 2020 | |||||||||||||||||
(In millions) | |||||||||||||||||
As Previously Reported (1)
|
Adjustments | Reclassified | |||||||||||||||
Net cash provided by (used in):
|
|||||||||||||||||
Operating activities(2)
|
$ | 4,607 | $ | (100) | $ | 4,507 | |||||||||||
Investing activities(3)
|
(13,266) | (18) | (13,284) | ||||||||||||||
Financing activities(4)
|
10,012 | 118 | 10,130 | ||||||||||||||
Effect of exchange rates on cash, cash equivalents, and restricted cash | 26 | — | 26 | ||||||||||||||
Net increase in cash, cash equivalents, and restricted cash | $ | 1,379 | $ | — | $ | 1,379 |
|
11
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Primary geographical markets | |||||||||||||||||||||||
United States (“U.S.”) | $ | 3,476 | $ | 2,820 | $ | 9,811 | $ | 7,940 | |||||||||||||||
United Kingdom (“U.K.”) | 529 | 606 | 1,741 | 1,670 | |||||||||||||||||||
Other countries(1)
|
2,177 | 2,033 | 6,901 | 5,728 | |||||||||||||||||||
Total net revenues(2)
|
$ | 6,182 | $ | 5,459 | $ | 18,453 | $ | 15,338 | |||||||||||||||
Revenue category | |||||||||||||||||||||||
Transaction revenues | $ | 5,607 | $ | 5,076 | $ | 17,025 | $ | 14,236 | |||||||||||||||
Revenues from other value added services | 575 | 383 | 1,428 | 1,102 | |||||||||||||||||||
Total net revenues(2)
|
$ | 6,182 | $ | 5,459 | $ | 18,453 | $ | 15,338 |
|
12
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||||
Numerator: | |||||||||||||||||||||||
Net income | $ | 1,087 | $ | 1,021 | $ | 3,368 | $ | 2,635 | |||||||||||||||
Denominator: | |||||||||||||||||||||||
Weighted average shares of common stock - basic | 1,174 | 1,172 | 1,174 | 1,173 | |||||||||||||||||||
Dilutive effect of equity incentive awards | 13 | 18 | 13 | 13 | |||||||||||||||||||
Weighted average shares of common stock - diluted | 1,187 | 1,190 | 1,187 | 1,186 | |||||||||||||||||||
Net income per share: | |||||||||||||||||||||||
Basic | $ | 0.93 | $ | 0.87 | $ | 2.87 | $ | 2.25 | |||||||||||||||
Diluted | $ | 0.92 | $ | 0.86 | $ | 2.84 | $ | 2.22 | |||||||||||||||
Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive | — | — | 2 | 1 |
|
13
|
(In millions) | |||||
Goodwill | $ | 2,962 | |||
Customer lists and user base | 115 | ||||
Marketing related | 30 | ||||
Developed technology | 572 | ||||
Total intangibles | $ | 717 | |||
Accounts receivable, net | 50 | ||||
Deferred tax liabilities, net | (58) | ||||
Other net liabilities | (36) | ||||
Total purchase price | $ | 3,635 |
December 31, 2020 | Goodwill Acquired | Adjustments | September 30, 2021 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Total goodwill | $ | 9,135 | $ | 424 | $ | (9) | $ | 9,550 |
|
14
|
September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
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 | $ | 1,226 | $ | (880) | $ | 346 | 6 | $ | 1,206 | $ | (797) | $ | 409 | 6 | |||||||||||||||||||||||||||||||||
Marketing related | 324 | (309) | 15 | 3 | 321 | (278) | 43 | 3 | |||||||||||||||||||||||||||||||||||||||
Developed technology | 1,059 | (765) | 294 | 3 | 999 | (577) | 422 | 3 | |||||||||||||||||||||||||||||||||||||||
All other | 451 | (298) | 153 | 7 | 449 | (275) | 174 | 7 | |||||||||||||||||||||||||||||||||||||||
Intangible assets, net | $ | 3,060 | $ | (2,252) | $ | 808 | $ | 2,975 | $ | (1,927) | $ | 1,048 |
Fiscal years: | |||||
Remaining 2021 | $ | 93 | |||
2022 | 363 | ||||
2023 | 126 | ||||
2024 | 109 | ||||
2025 | 84 | ||||
Thereafter | 33 | ||||
Total | $ | 808 |
|
15
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Lease expense | |||||||||||||||||||||||
Operating lease expense | $ | 42 | $ | 42 | $ | 129 | $ | 122 | |||||||||||||||
Sublease income | (2) | (2) | (6) | (4) | |||||||||||||||||||
Lease expense, net | $ | 40 | $ | 40 | $ | 123 | $ | 118 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | |||||||||||||||||||||||
Operating cash flows from operating leases | $ | 42 | $ | 40 | $ | 126 | $ | 113 | |||||||||||||||
Right-of-use (“ROU”) assets obtained in exchange for operating lease liabilities | $ | 47 | $ | 15 | $ | 58 | $ | 261 |
September 30, 2021 | December 31, 2020 | ||||||||||
(In millions, except weighted-average figures) | |||||||||||
Operating lease ROU assets | $ | 645 | $ | 707 | |||||||
Other current operating lease liabilities | 135 | 144 | |||||||||
Operating lease liabilities | 616 | 642 | |||||||||
Total operating lease liabilities | $ | 751 | $ | 786 | |||||||
Weighted-average remaining lease term—operating leases
|
6.3 years | 6.9 years | |||||||||
Weighted-average discount rate—operating leases
|
3 | % | 3 | % |
Operating Leases | |||||
Fiscal years: | (In millions) | ||||
Remaining 2021 | $ | 42 | |||
2022 | 147 | ||||
2023 | 138 | ||||
2024 | 120 | ||||
2025 | 102 | ||||
Thereafter | 275 | ||||
Total | $ | 824 | |||
Less: present value discount | (73) | ||||
Lease liability | $ | 751 |
|
16
|
Unrealized Gains (Losses) on Cash Flow Hedges |
Unrealized Losses on Investments
|
Foreign Currency
Translation Adjustment (“CTA”)
|
Net Investment Hedge CTA Gain
|
Estimated Tax (Expense) Benefit | Total | ||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | (93) | $ | (6) | $ | (220) | $ | 24 | $ | 3 | $ | (292) | |||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | 160 | — | (29) | — | (7) | 124 | |||||||||||||||||||||||||||||
Less: Amount of loss reclassified from accumulated other comprehensive income (“AOCI”) | (44) | — | — | — | — | (44) | |||||||||||||||||||||||||||||
Net current period other comprehensive income (loss) | 204 | — | (29) | — | (7) | 168 | |||||||||||||||||||||||||||||
Ending balance | $ | 111 | $ | (6) | $ | (249) | $ | 24 | $ | (4) | $ | (124) |
Unrealized Gains (Losses) on Cash Flow Hedges |
Unrealized Gains (Losses) on Investments
|
Foreign CTA
|
Net Investment Hedge CTA Gain
|
Estimated Tax (Expense) Benefit | Total | ||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 58 | $ | 24 | $ | (269) | $ | 24 | $ | (7) | $ | (170) | |||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | (180) | (12) | 8 | — | 5 | (179) | |||||||||||||||||||||||||||||
Less: Amount of loss reclassified from AOCI | (17) | — | — | — | — | (17) | |||||||||||||||||||||||||||||
Net current period other comprehensive income (loss) | (163) | (12) | 8 | — | 5 | (162) | |||||||||||||||||||||||||||||
Ending balance | $ | (105) | $ | 12 | $ | (261) | $ | 24 | $ | (2) | $ | (332) |
|
17
|
Unrealized Gains (Losses) on Cash Flow Hedges |
Unrealized Gains (Losses) on Investments
|
Foreign CTA
|
Net Investment Hedge CTA Gain
|
Estimated Tax (Expense) Benefit | Total | ||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | (323) | $ | 11 | $ | (198) | $ | 24 | $ | 2 | $ | (484) | |||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | 242 | (17) | (51) | — | (6) | 168 | |||||||||||||||||||||||||||||
Less: Amount of loss reclassified from AOCI | (192) | — | — | — | — | (192) | |||||||||||||||||||||||||||||
Net current period other comprehensive income (loss) | 434 | (17) | (51) | — | (6) | 360 | |||||||||||||||||||||||||||||
Ending balance | $ | 111 | $ | (6) | $ | (249) | $ | 24 | $ | (4) | $ | (124) |
Unrealized Gains (Losses) on Cash Flow Hedges |
Unrealized Gains on Investments
|
Foreign CTA
|
Net Investment Hedge CTA Gain (Loss)
|
Estimated Tax Expense | Total | ||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 6 | $ | 2 | $ | (150) | $ | (31) | $ | — | $ | (173) | |||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | (53) | 10 | (111) | 55 | (2) | (101) | |||||||||||||||||||||||||||||
Less: Amount of gain reclassified from AOCI | 58 | — | — | — | — | 58 | |||||||||||||||||||||||||||||
Net current period other comprehensive income (loss) | (111) | 10 | (111) | 55 | (2) | (159) | |||||||||||||||||||||||||||||
Ending balance | $ | (105) | $ | 12 | $ | (261) | $ | 24 | $ | (2) | $ | (332) |
Details about AOCI Components |
Amount of Gains (Losses) Reclassified from AOCI
|
Affected Line Item in the Statement of Income | ||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||||||||
(Losses) gains on cash flow hedges—foreign exchange contracts
|
$ | (44) | $ | (17) | $ | (192) | $ | 58 | Net revenues | |||||||||||||||||||||||
Unrealized gains (losses) on investments | — | — | — | — | Other income (expense), net | |||||||||||||||||||||||||||
$ | (44) | $ | (17) | $ | (192) | $ | 58 | Income before income taxes | ||||||||||||||||||||||||
— | — | — | — | Income tax expense | ||||||||||||||||||||||||||||
Total reclassifications for the period | $ | (44) | $ | (17) | $ | (192) | $ | 58 | Net income | |||||||||||||||||||||||
|
18
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Interest income | $ | 15 | $ | 17 | $ | 43 | $ | 72 | |||||||||||||||
Interest expense | (58) | (58) | (173) | (150) | |||||||||||||||||||
Net gains on strategic investments | 173 | 209 | 336 | 973 | |||||||||||||||||||
Other | (8) | (1) | (25) | (15) | |||||||||||||||||||
Other income (expense), net | $ | 122 | $ | 167 | $ | 181 | $ | 880 |
September 30, 2021 | December 31, 2020 | ||||||||||
(In millions) | |||||||||||
Funds receivable and customer accounts: | |||||||||||
Cash and cash equivalents | $ | 12,164 | $ | 13,222 | |||||||
Time deposits | 345 | 233 | |||||||||
Available-for-sale debt securities | 17,607 | 15,001 | |||||||||
Funds receivable | 4,988 | 4,962 | |||||||||
Total funds receivable and customer accounts | $ | 35,104 | $ | 33,418 | |||||||
Short-term investments: | |||||||||||
Time deposits | $ | 1,116 | $ | 1,519 | |||||||
Available-for-sale debt securities | 4,371 | 6,689 | |||||||||
Restricted cash | 23 | 81 | |||||||||
Total short-term investments | $ | 5,510 | $ | 8,289 | |||||||
Long-term investments: | |||||||||||
Time deposits | $ | 45 | $ | 31 | |||||||
Available-for-sale debt securities | 3,225 | 2,819 | |||||||||
Restricted cash | — | 7 | |||||||||
Strategic investments | 3,483 | 3,232 | |||||||||
Total long-term investments | $ | 6,753 | $ | 6,089 |
|
19
|
September 30, 2021(1)
|
|||||||||||||||||||||||
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 | $ | 9,171 | $ | 1 | $ | (4) | $ | 9,168 | |||||||||||||||
Foreign government and agency securities | 1,556 | — | (1) | 1,555 | |||||||||||||||||||
Corporate debt securities | 3,924 | 2 | (2) | 3,924 | |||||||||||||||||||
Asset-backed securities | 1,220 | — | — | 1,220 | |||||||||||||||||||
Municipal securities | 50 | — | — | 50 | |||||||||||||||||||
Short-term investments: | |||||||||||||||||||||||
U.S. government and agency securities | 639 | — | — | 639 | |||||||||||||||||||
Foreign government and agency securities | 602 | — | — | 602 | |||||||||||||||||||
Corporate debt securities | 2,293 | — | — | 2,293 | |||||||||||||||||||
Asset-backed securities | 181 | — | — | 181 | |||||||||||||||||||
Long-term investments: | |||||||||||||||||||||||
U.S. government and agency securities | 582 | — | — | 582 | |||||||||||||||||||
Foreign government and agency securities | 911 | — | (1) | 910 | |||||||||||||||||||
Corporate debt securities | 1,397 | 1 | (2) | 1,396 | |||||||||||||||||||
Asset-backed securities | 337 | — | — | 337 | |||||||||||||||||||
Total available-for-sale debt securities(2)
|
$ | 22,863 | $ | 4 | $ | (10) | $ | 22,857 |
December 31, 2020(1)
|
|||||||||||||||||||||||
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 | $ | 7,929 | $ | 4 | $ | — | $ | 7,933 | |||||||||||||||
Foreign government and agency securities | 1,504 | 2 | — | 1,506 | |||||||||||||||||||
Corporate debt securities | 2,011 | — | — | 2,011 | |||||||||||||||||||
Municipal securities | 637 | — | — | 637 | |||||||||||||||||||
Short-term investments: | |||||||||||||||||||||||
U.S. government and agency securities | 1,510 | — | — | 1,510 | |||||||||||||||||||
Foreign government and agency securities | 277 | — | — | 277 | |||||||||||||||||||
Corporate debt securities | 4,900 | 2 | — | 4,902 | |||||||||||||||||||
Long-term investments: | |||||||||||||||||||||||
U.S. government and agency securities | 28 | — | — | 28 | |||||||||||||||||||
Foreign government and agency securities | 1,305 | — | (1) | 1,304 | |||||||||||||||||||
Corporate debt securities | 1,255 | 4 | — | 1,259 | |||||||||||||||||||
Asset-backed securities | 228 | — | — | 228 | |||||||||||||||||||
Total available-for-sale debt securities(2)
|
$ | 21,584 | $ | 12 | $ | (1) | $ | 21,595 |
|
20
|
September 30, 2021(1)
|
|||||||||||||||||||||||||||||||||||
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 | $ | 5,436 | $ | (4) | $ | — | $ | — | $ | 5,436 | $ | (4) | |||||||||||||||||||||||
Foreign government and agency securities | 893 | (1) | — | — | 893 | (1) | |||||||||||||||||||||||||||||
Corporate debt securities | 1,336 | (2) | — | — | 1,336 | (2) | |||||||||||||||||||||||||||||
Asset-backed securities | 665 | — | — | — | 665 | — | |||||||||||||||||||||||||||||
Short-term investments: | |||||||||||||||||||||||||||||||||||
U.S. government and agency securities | 441 | — | — | — | 441 | — | |||||||||||||||||||||||||||||
Foreign government and agency securities | 332 | — | — | — | 332 | — | |||||||||||||||||||||||||||||
Corporate debt securities | 234 | — | — | — | 234 | — | |||||||||||||||||||||||||||||
Asset-backed securities | 34 | — | — | — | 34 | — | |||||||||||||||||||||||||||||
Long-term investments: | |||||||||||||||||||||||||||||||||||
U.S. government and agency securities | 426 | — | — | — | 426 | — | |||||||||||||||||||||||||||||
Foreign government and agency securities | 612 | (1) | — | — | 612 | (1) | |||||||||||||||||||||||||||||
Corporate debt securities | 799 | (2) | — | — | 799 | (2) | |||||||||||||||||||||||||||||
Asset-backed securities | 242 | — | — | — | 242 | — | |||||||||||||||||||||||||||||
Total available-for-sale debt securities | $ | 11,450 | $ | (10) | $ | — | $ | — | $ | 11,450 | $ | (10) |
|
21
|
December 31, 2020(1)
|
|||||||||||||||||||||||||||||||||||
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 | $ | 262 | $ | — | $ | — | $ | — | $ | 262 | $ | — | |||||||||||||||||||||||
Foreign government and agency securities | 353 | — | — | — | 353 | — | |||||||||||||||||||||||||||||
Corporate debt securities | 641 | — | — | — | 641 | — | |||||||||||||||||||||||||||||
Municipal securities | 50 | — | — | — | 50 | — | |||||||||||||||||||||||||||||
Short-term investments: | |||||||||||||||||||||||||||||||||||
U.S. government and agency securities | 270 | — | — | — | 270 | — | |||||||||||||||||||||||||||||
Foreign government and agency securities | 72 | — | — | — | 72 | — | |||||||||||||||||||||||||||||
Corporate debt securities | 392 | — | — | — | 392 | — | |||||||||||||||||||||||||||||
Long-term investments: | |||||||||||||||||||||||||||||||||||
U.S. government and agency securities | 28 | — | — | — | 28 | — | |||||||||||||||||||||||||||||
Foreign government and agency securities | 405 | (1) | — | — | 405 | (1) | |||||||||||||||||||||||||||||
Corporate debt securities | 97 | — | — | — | 97 | — | |||||||||||||||||||||||||||||
Asset-backed securities | 15 | — | — | — | 15 | — | |||||||||||||||||||||||||||||
Total available-for-sale debt securities | $ | 2,585 | $ | (1) | $ | — | $ | — | $ | 2,585 | $ | (1) |
September 30, 2021 | |||||||||||
Amortized Cost | Fair Value | ||||||||||
(In millions) | |||||||||||
One year or less | $ | 12,198 | $ | 12,198 | |||||||
After one year through five years | 9,873 | 9,866 | |||||||||
After five years through ten years | 746 | 746 | |||||||||
After ten years | 46 | 47 | |||||||||
Total | $ | 22,863 | $ | 22,857 |
|
22
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Carrying amount, beginning of period | $ | 1,009 | $ | 552 | $ | 779 | $ | 497 | |||||||||||||||
Adjustments related to non-marketable equity securities: | |||||||||||||||||||||||
Net additions(1)
|
97 | 49 | 110 | 74 | |||||||||||||||||||
Gross unrealized gains | 90 | — | 307 | 45 | |||||||||||||||||||
Gross unrealized losses and impairments | — | (7) | — | (22) | |||||||||||||||||||
Carrying amount, end of period | $ | 1,196 | $ | 594 | $ | 1,196 | $ | 594 |
September 30, 2021 | December 31, 2020 | ||||||||||
(In millions) | |||||||||||
Cumulative gross unrealized gains | $ | 684 | $ | 378 | |||||||
Cumulative gross unrealized losses and impairment | $ | (27) | $ | (27) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Net unrealized gains | $ | 173 | $ | 162 | $ | 265 | $ | 670 |
|
23
|
|
September 30, 2021 |
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable Inputs (Level 2) |
|||||||||||||||||
(In millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents(1)
|
$ | 271 | $ | — | $ | 271 | ||||||||||||||
Short-term investments(2):
|
||||||||||||||||||||
U.S. government and agency securities | 639 | — | 639 | |||||||||||||||||
Foreign government and agency securities | 1,258 | — | 1,258 | |||||||||||||||||
Corporate debt securities | 2,293 | — | 2,293 | |||||||||||||||||
Asset-backed securities | 181 | — | 181 | |||||||||||||||||
Total short-term investments | 4,371 | — | 4,371 | |||||||||||||||||
Funds receivable and customer accounts(3):
|
||||||||||||||||||||
Cash and cash equivalents | 486 | — | 486 | |||||||||||||||||
U.S. government and agency securities | 9,168 | — | 9,168 | |||||||||||||||||
Foreign government and agency securities | 3,233 | — | 3,233 | |||||||||||||||||
Corporate debt securities | 3,936 | — | 3,936 | |||||||||||||||||
Asset-backed securities | 1,220 | — | 1,220 | |||||||||||||||||
Municipal securities | 50 | — | 50 | |||||||||||||||||
Total funds receivable and customer accounts | 18,093 | — | 18,093 | |||||||||||||||||
Derivatives | 348 | — | 348 | |||||||||||||||||
Long-term investments(2),(4):
|
||||||||||||||||||||
U.S. government and agency securities | 582 | — | 582 | |||||||||||||||||
Foreign government and agency securities | 910 | — | 910 | |||||||||||||||||
Corporate debt securities | 1,396 | — | 1,396 | |||||||||||||||||
Asset-backed securities | 337 | — | 337 | |||||||||||||||||
Marketable equity securities | 2,219 | 2,219 | — | |||||||||||||||||
Total long-term investments | 5,444 | 2,219 | 3,225 | |||||||||||||||||
Total financial assets | $ | 28,527 | $ | 2,219 | $ | 26,308 | ||||||||||||||
Liabilities: | ||||||||||||||||||||
Derivatives | $ | 158 | $ | — | $ | 158 | ||||||||||||||
|
24
|
|
December 31, 2020 |
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable Inputs
(Level 2)
|
|||||||||||||||||
(In millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents(1)
|
$ | 867 | $ | — | $ | 867 | ||||||||||||||
Short-term investments(2):
|
||||||||||||||||||||
U.S. government and agency securities | 1,510 | — | 1,510 | |||||||||||||||||
Foreign government and agency securities | 277 | — | 277 | |||||||||||||||||
Corporate debt securities | 4,902 | — | 4,902 | |||||||||||||||||
Total short-term investments | 6,689 | — | 6,689 | |||||||||||||||||
Funds receivable and customer accounts(3):
|
||||||||||||||||||||
Cash and cash equivalents | 1,770 | — | 1,770 | |||||||||||||||||
U.S. government and agency securities | 7,933 | — | 7,933 | |||||||||||||||||
Foreign government and agency securities | 4,296 | — | 4,296 | |||||||||||||||||
Corporate debt securities | 2,135 | — | 2,135 | |||||||||||||||||
Municipal securities | 637 | — | 637 | |||||||||||||||||
Total funds receivable and customer accounts | 16,771 | — | 16,771 | |||||||||||||||||
Derivatives | 42 | — | 42 | |||||||||||||||||
Long-term investments(2), (4):
|
||||||||||||||||||||
U.S. government and agency securities | 28 | — | 28 | |||||||||||||||||
Foreign government and agency securities | 1,304 | — | 1,304 | |||||||||||||||||
Corporate debt securities | 1,259 | — | 1,259 | |||||||||||||||||
Asset-backed securities | 228 | — | 228 | |||||||||||||||||
Marketable equity securities | 2,443 | 2,443 | — | |||||||||||||||||
Total long-term investments | 5,262 | 2,443 | 2,819 | |||||||||||||||||
Total financial assets | $ | 29,631 | $ | 2,443 | $ | 27,188 | ||||||||||||||
Liabilities: | ||||||||||||||||||||
Derivatives | $ | 410 | $ | — | $ | 410 |
|
25
|
September 30, 2021 | December 31, 2020 | ||||||||||
(In millions) | |||||||||||
Funds receivable and customer accounts | $ | 1,690 | $ | 2,914 | |||||||
Short-term investments | $ | 656 | $ | — | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Funds receivable and customer accounts | $ | (45) | $ | 83 | $ | (85) | $ | 80 | |||||||||||||||
Short-term investments | $ | (18) | $ | — | $ | (25) | $ | (24) | |||||||||||||||
September 30, 2021 |
Significant Other
Observable Inputs
(Level 2)
|
||||||||||||||||
(In millions) | |||||||||||||||||
Non-marketable equity investments measured using the Measurement Alternative(1)
|
$ | 555 | $ | 555 | |||||||||||||
Other assets(2)
|
86 | 86 | |||||||||||||||
Total | $ | 641 | $ | 641 |
December 31, 2020 |
Significant Other
Observable Inputs
(Level 2)
|
||||||||||||||||
(In millions) | |||||||||||||||||
Non-marketable equity investments measured using the Measurement Alternative(1)
|
$ | 335 | $ | 335 | |||||||||||||
Other assets(2)
|
44 | 44 | |||||||||||||||
Total | $ | 379 | $ | 379 |
|
26
|
|
27
|
Balance Sheet Location | September 30, 2021 | December 31, 2020 | |||||||||||||||
(In millions) | |||||||||||||||||
Derivative Assets: | |||||||||||||||||
Foreign currency exchange contracts designated as hedging instruments | Other current assets | $ | 140 | $ | — | ||||||||||||
Foreign currency exchange contracts designated as hedging instruments | Other assets (non-current) | 29 | — | ||||||||||||||
Foreign currency exchange contracts not designated as hedging instruments | Other current assets | 179 | 42 | ||||||||||||||
Total derivative assets | $ | 348 | $ | 42 | |||||||||||||
Derivative Liabilities: | |||||||||||||||||
Foreign currency exchange contracts designated as hedging instruments | Other current liabilities | $ | 57 | $ | 287 | ||||||||||||
Foreign currency exchange contracts designated as hedging instruments | Other long-term liabilities | 1 | 35 | ||||||||||||||
Foreign currency exchange contracts not designated as hedging instruments | Other current liabilities | 100 | 88 | ||||||||||||||
Total derivative liabilities | $ | 158 | $ | 410 | |||||||||||||
|
28
|
September 30, 2021 | December 31, 2020 | |||||||||||||
(In millions) | ||||||||||||||
Cash collateral posted(1)
|
$ | 6 | $ | 340 | ||||||||||
Cash collateral received(2)
|
$ | 86 | $ | 1 | ||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Net revenues | |||||||||||||||||||||||
Total amounts presented in the condensed consolidated statements of income in which the effects of cash flow hedges are recorded | $ | 6,182 | $ | 5,459 | $ | 18,453 | $ | 15,338 | |||||||||||||||
(Losses) gains on foreign exchange contracts designated as cash flow hedges reclassified from AOCI | $ | (44) | $ | (17) | $ | (192) | $ | 58 | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Gains (losses) on foreign exchange contracts recognized in other income (expense), net | $ | 111 | $ | (40) | $ | 109 | $ | (8) | |||||||||||||||
Losses on equity derivative contracts recognized in other income (expense), net(1)
|
— | (64) | — | (64) | |||||||||||||||||||
Total gains (losses) recognized from contracts not designated as hedging instruments | $ | 111 | $ | (104) | $ | 109 | $ | (72) |
|
29
|
September 30, 2021 | December 31, 2020 | ||||||||||
(In millions) | |||||||||||
Foreign exchange contracts designated as hedging instruments | $ | 5,258 | $ | 5,335 | |||||||
Foreign exchange contracts not designated as hedging instruments | 22,266 | 16,098 | |||||||||
Total | $ | 27,524 | $ | 21,433 |
September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||
Amortized Cost Basis Revolving | Percent | Amortized Cost Basis Revolving | Percent | |||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||
Current | $ | 2,706 | 96.8 | % | $ | 2,124 | 97.9 | % | ||||||||||||||||||
30-59 days | 28 | 1.0 | % | 15 | 0.7 | % | ||||||||||||||||||||
60-89 days | 20 | 0.7 | % | 11 | 0.5 | % | ||||||||||||||||||||
90-179 days | 41 | 1.5 | % | 19 | 0.9 | % | ||||||||||||||||||||
Total consumer loans and interest receivable(1), (2), (3)
|
$ | 2,795 | 100.0 | % | $ | 2,169 | 100.0 | % |
|
30
|
September 30, 2021 | September 30, 2020 | ||||||||||||||||||||||
Consumer Loans Receivable | Interest Receivable |
Total Allowance(1)
|
Consumer Loans Receivable | Interest Receivable |
Total Allowance(1)
|
||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Beginning balance | $ | 299 | $ | 53 | $ | 352 | $ | 49 | $ | 8 | $ | 57 | |||||||||||
Adjustment for adoption of credit losses accounting standard | — | — | — | 24 | 4 | 28 | |||||||||||||||||
Provisions | (52) | — | (52) | 227 | 47 | 274 | |||||||||||||||||
Charge-offs | (78) | (13) | (91) | (57) | (10) | (67) | |||||||||||||||||
Recoveries(2)
|
25 | — | 25 | 21 | — | 21 | |||||||||||||||||
Other(3)
|
— | — | — | 7 | 1 | 8 | |||||||||||||||||
Ending balance | $ | 194 | $ | 40 | $ | 234 | $ | 271 | $ | 50 | $ | 321 |
|
31
|
September 30, 2021
|
||||||||||||||||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||
2021
|
2020 | 2019 | 2018 | 2017 | Total | Percent | ||||||||||||||||||||||||||||||||||||||
Current | $ | 939 | $ | 172 | $ | 120 | $ | 4 | $ | — | $ | 1,235 | 90.5% | |||||||||||||||||||||||||||||||
30 - 59 Days | 17 | 17 | 17 | 1 | — | 52 | 3.8% | |||||||||||||||||||||||||||||||||||||
60 - 89 Days | 7 | 10 | 9 | 1 | — | 27 | 2.0% | |||||||||||||||||||||||||||||||||||||
90 - 179 Days | 5 | 14 | 15 | 1 | — | 35 | 2.6% | |||||||||||||||||||||||||||||||||||||
180+ Days | — | 6 | 8 | 1 | — | 15 | 1.1% | |||||||||||||||||||||||||||||||||||||
Total(1)
|
$ | 968 | $ | 219 | $ | 169 | $ | 8 | $ | — | $ | 1,364 | 100% |
December 31, 2020
|
||||||||||||||||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||
2020
|
2019 | 2018 | 2017 | 2016 | Total | Percent | ||||||||||||||||||||||||||||||||||||||
Current | $ | 786 | $ | 250 | $ | 6 | $ | — | $ | — | $ | 1,042 | 75.4% | |||||||||||||||||||||||||||||||
30 - 59 Days | 55 | 47 | 3 | — | — | 105 | 7.6% | |||||||||||||||||||||||||||||||||||||
60 - 89 Days | 27 | 32 | 3 | — | — | 62 | 4.5% | |||||||||||||||||||||||||||||||||||||
90 - 179 Days | 57 | 78 | 7 | — | — | 142 | 10.3% | |||||||||||||||||||||||||||||||||||||
180+ Days | 6 | 20 | 5 | — | — | 31 | 2.2% | |||||||||||||||||||||||||||||||||||||
Total(1)
|
$ | 931 | $ | 427 | $ | 24 | $ | — | $ | — | $ | 1,382 | 100% |
|
32
|
September 30, 2021 | September 30, 2020 | ||||||||||||||||||||||
Merchant Loans and Advances | Interest and Fees Receivable | Total Allowance | Merchant Loans and Advances | Interest and Fees Receivable | Total Allowance | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Beginning balance | $ | 440 | $ | 43 | $ | 483 | $ | 171 | $ | 20 | $ | 191 | |||||||||||
Adjustment for adoption of credit losses accounting standard | — | — | — | 165 | 17 | 182 | |||||||||||||||||
Provisions | (87) | (19) | (106) | 298 | 27 | 325 | |||||||||||||||||
Charge-offs | (145) | (11) | (156) | (197) | (20) | (217) | |||||||||||||||||
Recoveries | 31 | — | 31 | 13 | — | 13 | |||||||||||||||||
Ending balance | $ | 239 | $ | 13 | $ | 252 | $ | 450 | $ | 44 | $ | 494 |
|
33
|
Three Months Ended September 30, 2021
|
||||||||||||||||||||
Number of Accounts
(in thousands)(1)
|
Outstanding Balances(2)
(in millions)
|
Weighted Average Payment Term Extensions
(in months) |
||||||||||||||||||
Loans and interest receivable | — | $ | 4 | 34 |
Nine Months Ended September 30, 2021
|
||||||||||||||||||||
Number of Accounts
(in thousands) |
Outstanding Balances(1)
(in millions)
|
Weighted Average Payment Term Extensions
(in months) |
||||||||||||||||||
Loans and interest receivable | 3 | $ | 43 | 36 |
Maturities | Effective Interest Rate | September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
September 2019 debt issuance of $5.0 billion:
|
|||||||||||||||||||||||||||||||||||
Fixed-rate 2.200% notes
|
9/26/2022 | 2.39% | $ | 1,000 | $ | 1,000 | |||||||||||||||||||||||||||||
Fixed-rate 2.400% notes
|
10/1/2024 | 2.52% | 1,250 | 1,250 | |||||||||||||||||||||||||||||||
Fixed-rate 2.650% notes
|
10/1/2026 | 2.78% | 1,250 | 1,250 | |||||||||||||||||||||||||||||||
Fixed-rate 2.850% notes
|
10/1/2029 | 2.96% | 1,500 | 1,500 | |||||||||||||||||||||||||||||||
May 2020 debt issuance of $4.0 billion:
|
|||||||||||||||||||||||||||||||||||
Fixed-rate 1.350% notes
|
6/1/2023 | 1.55% | 1,000 | 1,000 | |||||||||||||||||||||||||||||||
Fixed-rate 1.650% notes
|
6/1/2025 | 1.78% | 1,000 | 1,000 | |||||||||||||||||||||||||||||||
Fixed-rate 2.300% notes
|
6/1/2030 | 2.39% | 1,000 | 1,000 | |||||||||||||||||||||||||||||||
Fixed-rate 3.250% notes
|
6/1/2050 | 3.33% | 1,000 | 1,000 | |||||||||||||||||||||||||||||||
Total term debt | $ | 9,000 | $ | 9,000 | |||||||||||||||||||||||||||||||
Unamortized premium (discount) and issuance costs, net | (53) | (61) | |||||||||||||||||||||||||||||||||
Less: current portion of long-term debt(1)
|
(998) | — | |||||||||||||||||||||||||||||||||
Total carrying amount of long-term debt | $ | 7,949 | $ | 8,939 |
|
34
|
Remaining 2021 | $ | — | |||
2022 | 1,000 | ||||
2023 | 1,000 | ||||
2024 | 1,250 | ||||
2025 | 1,000 | ||||
Thereafter | 4,750 | ||||
Total | $ | 9,000 |
|
35
|
|
36
|
|
37
|
|
38
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beginning balance | $ | 366 | $ | 373 | $ | 414 | $ | 399 | |||||||||||||||
Provision | 293 | 329 | 847 | 847 | |||||||||||||||||||
Realized losses | (313) | (280) | (964) | (863) | |||||||||||||||||||
Recoveries | 41 | 22 | 90 | 61 | |||||||||||||||||||
Ending balance | $ | 387 | $ | 444 | $ | 387 | $ | 444 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Customer support and operations | $ | 56 | $ | 63 | $ | 205 | $ | 179 | |||||||||||||||
Sales and marketing | 38 | 45 | 134 | 131 | |||||||||||||||||||
Technology and development | 117 | 138 | 403 | 384 | |||||||||||||||||||
General and administrative | 100 | 127 | 348 | 330 | |||||||||||||||||||
Total stock-based compensation expense | $ | 311 | $ | 373 | $ | 1,090 | $ | 1,024 | |||||||||||||||
Capitalized as part of internal use software and website development costs | $ | 17 | $ | 13 | $ | 51 | $ | 34 |
|
39
|
Employee Severance and Benefits and Other Associated Costs | |||||
(In millions) | |||||
Accrued liability as of January 1, 2021 | $ | 55 | |||
Charges | 27 | ||||
Payments | (72) | ||||
Accrued liability as of September 30, 2021
|
$ | 10 |
|
40
|
|
41
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net revenues generated from the U.K. | 9 | % | 11 | % | 9 | % | 11 | % | |||||||||||||||
Net revenues generated from the EU (excluding the U.K.) | 18 | % | 18 | % | 20 | % | 18 | % |
September 30, 2021 | December 31, 2020 | ||||||||||
Gross loans and interest receivable due from customers in the U.K. | 45 | % | 50 | % | |||||||
Gross loans and interest receivable due from customers in the EU (excluding the U.K.) | 20 | % | 14 | % |
|
42
|
Three Months Ended September 30, | Percent Increase/(Decrease) | Nine Months Ended September 30, | Percent Increase/(Decrease) | ||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
(In millions, except percentages and per share data) | |||||||||||||||||||||||||||||||||||
Net revenues | $ | 6,182 | $ | 5,459 | 13 | % | $ | 18,453 | $ | 15,338 | 20 | % | |||||||||||||||||||||||
Operating expenses | 5,139 | 4,482 | 15 | % | 15,241 | 13,012 | 17 | % | |||||||||||||||||||||||||||
Operating income | $ | 1,043 | $ | 977 | 7 | % | $ | 3,212 | $ | 2,326 | 38 | % | |||||||||||||||||||||||
Operating margin | 17 | % | 18 | % | ** | 17 | % | 15 | % | ** | |||||||||||||||||||||||||
Other income (expense), net | $ | 122 | $ | 167 | (27) | % | $ | 181 | $ | 880 | (79) | % | |||||||||||||||||||||||
Income tax expense | 78 | 123 | (37) | % | 25 | 571 | (96) | % | |||||||||||||||||||||||||||
Effective tax rate | 7 | % | 11 | % | ** | 1 | % | 18 | % | ** | |||||||||||||||||||||||||
Net income | $ | 1,087 | $ | 1,021 | 6 | % | $ | 3,368 | $ | 2,635 | 28 | % | |||||||||||||||||||||||
Net income per diluted share | $ | 0.92 | $ | 0.86 | 7 | % | $ | 2.84 | $ | 2.22 | 28 | % | |||||||||||||||||||||||
Net cash provided by operating activities(1)
|
$ | 1,513 | $ | 1,314 | 15 | % | $ | 4,577 | $ | 4,507 | 2 | % |
|
43
|
Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | ||||||||||
(In millions) | |||||||||||
Favorable impact to net revenues (exclusive of hedging impact) | $ | 61 | $ | 488 | |||||||
Hedging impact | (44) | (192) | |||||||||
Favorable impact to net revenues | 17 | 296 | |||||||||
Unfavorable impact to operating expense | (29) | (203) | |||||||||
Net (unfavorable) favorable impact to operating income | $ | (12) | $ | 93 |
|
44
|
|
45
|
|
46
|
Three Months Ended September 30, | Percent Increase/(Decrease) | Nine Months Ended September 30, | Percent Increase/(Decrease) | ||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
Number of payment transactions per active account | 44.2 | 40.1 | 10 | % | 44.2 | 40.1 | 10 | % | |||||||||||||||||||||||||||
Percent of cross-border TPV | 15 | % | 16 | % | ** | 16 | % | 16 | % | ** |
|
47
|
|
48
|
Three Months Ended September 30, | Percent Increase/(Decrease) | Nine Months Ended September 30, | Percent Increase/(Decrease) | ||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||||||||||||||
Transaction expense | $ | 2,564 | $ | 2,022 | 27 | % | $ | 7,363 | $ | 5,604 | 31 | % | |||||||||||||||||||||||
Transaction and credit losses | 268 | 344 | (22) | % | 710 | 1,375 | (48) | % | |||||||||||||||||||||||||||
Customer support and operations | 504 | 449 | 12 | % | 1,543 | 1,271 | 21 | % | |||||||||||||||||||||||||||
Sales and marketing | 549 | 471 | 17 | % | 1,779 | 1,256 | 42 | % | |||||||||||||||||||||||||||
Technology and development | 755 | 674 | 12 | % | 2,242 | 1,910 | 17 | % | |||||||||||||||||||||||||||
General and administrative | 498 | 503 | (1) | % | 1,544 | 1,501 | 3 | % | |||||||||||||||||||||||||||
Restructuring and other charges | 1 | 19 | (95) | % | 60 | 95 | (37) | % | |||||||||||||||||||||||||||
Total operating expenses | $ | 5,139 | $ | 4,482 | 15 | % | $ | 15,241 | $ | 13,012 | 17 | % | |||||||||||||||||||||||
Transaction expense rate(1)
|
0.83 | % | 0.82 | % | ** | 0.81 | % | 0.85 | % | ** | |||||||||||||||||||||||||
Transaction and credit loss rate(2)
|
0.09 | % | 0.14 | % | ** | 0.08 | % | 0.21 | % | ** |
|
49
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net charge-offs(1)
|
$ | 38 | $ | 79 | $ | 166 | $ | 232 | |||||||||||||||
Reserve build (release)(2)
|
(63) | (64) | (303) | 296 | |||||||||||||||||||
Credit losses | $ | (25) | $ | 15 | $ | (137) | $ | 528 |
|
50
|
September 30, | |||||||||||
2021 | 2020 | ||||||||||
Percent of consumer loans and interest receivable current | 96.8 | % | 98.2 | % | |||||||
Percent of consumer loans and interest receivable > 90 days outstanding(1)
|
1.5 | % | 0.7 | % | |||||||
Net charge-off rate(2)
|
2.6 | % | 5.0 | % |
September 30, | |||||||||||
2021(1)
|
2020(1)
|
||||||||||
Percent of merchant receivables within original expected or contractual repayment period | 90.5 | % | 77.6 | % | |||||||
Percent of merchant receivables > 90 days outstanding after the end of original expected or contractual repayment period | 3.7 | % | 9.8 | % | |||||||
Net charge-off rate(2)
|
6.8 | % | 12.2 | % |
|
51
|
|
52
|
|
53
|
|
54
|
September 30, 2021 | December 31, 2020 | ||||||||||
(In millions) | |||||||||||
Cash, cash equivalents, and investments(1)(2)
|
$ | 16,539 | $ | 15,852 |
|
55
|
|
56
|
Nine Months Ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
(In millions) | |||||||||||
Net cash provided by (used in): | |||||||||||
Operating activities(1)
|
$ | 4,577 | $ | 4,507 | |||||||
Investing activities(1)
|
(2,356) | (13,284) | |||||||||
Financing activities(1)
|
(186) | 10,130 | |||||||||
Effect of exchange rates on cash, cash equivalents, and restricted cash | (106) | 26 | |||||||||
Net increase in cash, cash equivalents, and restricted cash | $ | 1,929 | $ | 1,379 |
|
57
|
|
58
|
|
59
|
|
60
|
|
61
|
|
62
|
|
63
|
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 June 30, 2021 | $ | 6,910 | |||||||||||||||||||||||||||
July 1, 2021 through July 31, 2021 | — | $ | — | — | 6,910 | ||||||||||||||||||||||||
August 1, 2021 through August 31, 2021 | 1.3 | $ | 275.12 | 1.3 | 6,560 | ||||||||||||||||||||||||
September 1, 2021 through September 30, 2021 | — | $ | — | — | 6,560 | ||||||||||||||||||||||||
Balance as of September 30, 2021
|
1.3 | 1.3 | $ | 6,560 |
|
64
|
Incorporated by Reference | |||||||||||||||||
Exhibit
Number |
Exhibit Description | Form | Date Filed | Filed Herewith | |||||||||||||
Amendment to PayPal Holdings, Inc. Amended and Restated Employee Stock Purchase Plan | - | - | X | ||||||||||||||
PayPal Holdings, Inc. Executive Change in Control and Severance Plan, as amended and restated | - | - | 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 |
The following financial information related to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the related Notes to Condensed Consolidated Financial Statements
|
- | - | X | |||||||||||||
104 | Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101 | - | - | X |
|
65
|
PayPal Holdings, Inc. | |||||||||||
Principal Executive Officer: | |||||||||||
Date: | November 8, 2021 | By: | /s/ Daniel H. Schulman | ||||||||
Daniel H. Schulman | |||||||||||
President and Chief Executive Officer | |||||||||||
Principal Financial Officer: | |||||||||||
Date: | November 8, 2021 | By: |
/s/ John D. Rainey
|
||||||||
John D. Rainey | |||||||||||
Chief Financial Officer and Executive Vice President,
Global Customer Operations |
|||||||||||
Principal Accounting Officer: | |||||||||||
Date: | November 8, 2021 | By: | /s/ Jeffrey W. Karbowski | ||||||||
Jeffrey W. Karbowski | |||||||||||
Vice President, Chief Accounting Officer | |||||||||||
|
66
|
Plan Sponsor and Plan Administrator, including address and telephone: |
PayPal Holdings, Inc.
Compensation Committee of the
PayPal Holdings, Inc. Board of Directors
2211 North First Street
San Jose, CA 95131
(408) 967-7000
|
|||||||
Name and address of person designated as agent for service of process: |
Kausik Rajgopal
EVP, Chief Human Resources Officer
PayPal Holdings, Inc.
2211 North First Street
San Jose, CA 95131
(408) 967-7000
|
|||||||
Basis on which Plan records are kept: | Calendar year - January 1 to December 31 | |||||||
Type of Plan: | Unfunded welfare benefit severance plan | |||||||
EIN: | 47-2989869 |
Outside of a Change in Control Period | |||||
Qualifying Termination |
“Qualifying Termination” will mean:
(a)involuntary termination by the Company for a reason other than Cause or Disability;
(b)resignation by the Eligible Participant due to Good Reason; or
(c)solely for purposes of the treatment of Company Equity Awards, death or Disability.
“Good Reason” will mean:
(a)a material reduction in the Eligible Participant’s annual base salary;
(b)a material reduction in the Eligible Participant’s annual target bonus opportunity;
(c)a material reduction in the Eligible Participant’s authority, duties or responsibilities as Chief Executive Officer (which would include a failure to report to the Board); or
(d)any material breach by the Company of the offer letter agreement between the Company and the Eligible Participant, as amended from time to time; in each case without such Eligible Participant’s written consent and subject to the notice and cure conditions set forth in the Plan.
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Severance Pay Benefit |
Severance Pay Benefit will mean:
(a)Two times the sum of the Eligible Participant’s (i) annual rate of base salary immediately prior to the Separation Date (without regard to any reduction by the Company that gives rise to Good Reason) and (ii) target AIP bonus amount for the year in which the Separation Date occurs; and
(b)Prorated AIP bonus amount for the year in which the Separation Date occurs, based on the number of full months Eligible Participant was employed with the Company during the AIP performance period and the actual Company performance through the end of the AIP performance period and target level of individual performance, settled in the form provided for under the terms and conditions of the relevant AIP, including without limitation, AIP Shares, as defined in the relevant AIP, if applicable.
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Health Benefits | Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the reimbursement of COBRA health premiums or payment of health premiums, at COBRA rates, for 18 months after the Separation Date or, if shorter, until the Eligible Participant becomes covered under a group health plan maintained by a subsequent employer, or other health plans, such as Medicare. |
Company Equity Awards |
Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the following Company Equity Award severance benefits:
(a)Time-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest solely based on the continued service of the Eligible Participant (i.e., time-vesting awards), will be treated as though immediately vested on the Eligible Participant’s Separation Date as to the portion of such Company Equity Awards that would have otherwise become vested pursuant to their regular vesting schedule prior to the 12-month anniversary of the Separation Date (or, in the case of a termination due to Disability, any Company Equity Awards granted to the Eligible Participant prior to July 1, 2021 that would have otherwise become vested pursuant to their regular vesting schedule prior to the 24-month anniversary of the Separation Date will be treated as though immediately vested on the Eligible Participant’s Separation Date and Company Equity Awards granted to the Eligible Participant on or after July 1, 2021 shall be eligible for continued vesting in accordance with Appendix B). Any such Company Equity Awards granted to the Eligible Participant prior to July 1, 2021 will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the Eligible Participant’s Separation Date and any such Company Equity Awards granted to the Eligible Participant on or after July 1, 2021 will be eligible to continue vesting in accordance with their original vesting schedule following the Eligible Participant’s Separation Date, in each case subject to an effective Separation Agreement (including the Release/Certification Requirements set forth in Appendix B) and Release; provided that to the extent such Company Equity Award is scheduled to vest more frequently than annually, any continued vesting date not falling on an anniversary of the grant date of such Company Equity Award shall be deemed to fall on the next following anniversary of such grant date.
(b)Performance-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest based on the achievement of performance targets over a given performance period, other than (i) the CEO PSU Award, described in paragraph (c), below, and (ii) any AIP Shares, will remain outstanding and eligible to vest, based solely on the achievement of the applicable Company performance targets for any performance period that ends prior to the 12-month anniversary of the Separation Date; and, following the end of the performance period, the Company will determine the number of shares subject to such Company Equity Awards earned based on actual Company achievement of the performance goals pursuant to the terms of the applicable award agreements, and such Company Equity Awards will be settled in accordance with the terms and conditions of the applicable award agreement on the date that similar awards held by other participants are settled; provided, that in the case of a termination due to Disability, such Company Equity Awards granted to the Eligible Participant prior to July 1, 2021 will become immediately vested, based on target achievement of the performance targets, on the Eligible Participant’s Separation Date
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to the extent they are subject to a performance period that ends prior to the 24-month anniversary of the Separation Date and Company Equity Awards granted to the Eligible Participant on or after July 1, 2021 shall be eligible for continued vesting in accordance with Appendix B. All such Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the applicable vesting date, subject to an effective Separation Agreement (including the Release/Certification Requirements set forth in Appendix B) and Release.
(c) CEO PSU Award. In the event any portion of the performance-based Company Equity Award that was granted on April 1, 2018 (the “CEO PSU Award”) is earned but unvested as of the Eligible Participant’s Separation Date, such portion of the CEO PSU Award will be treated as though immediately vested on the Eligible Participant’s Separation Date as to the portion of such CEO PSU Award that would have otherwise become vested pursuant to its regular vesting schedule prior to the 12-month anniversary of the Separation Date (or, in the case of a termination due to death or Disability, prior to the 24-month anniversary of the Separation Date). The CEO PSU Award will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the Eligible Participant’s Separation Date, subject to an effective Separation Agreement and Release. For the avoidance of doubt, any portion of the CEO PSU Award that is unearned and unvested as of the Eligible Participant’s Separation Date will be forfeited and cancelled upon the Eligible Participant’s Separation Date.
For the avoidance of doubt, any continued vesting of Company Equity Awards pursuant to this section, other than Company Equity Awards that were outstanding prior to July 1, 2021 to the extent they were eligible for accelerated or continued vesting in accordance with this section as in effect prior to July 1, 2021, shall be subject to the Eligible Participant satisfying the Release/Certification Requirements set forth in Appendix B.
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Within a Change in Control Period | |||||
Qualifying Termination |
“Qualifying Termination” will mean:
(a)involuntary termination by the Company for a reason other than Cause or Disability;
(b)resignation by the Eligible Participant due to Good Reason; or
(c)solely for purposes of the treatment of Company Equity Awards, death or Disability.
“Good Reason” will mean:
(a)a material reduction in the Eligible Participant’s annual base salary;
(b)a material reduction in the Eligible Participant’s annual target bonus opportunity;
(c)a material reduction in the Eligible Participant’s authority, duties or responsibilities as Chief Executive Officer (which would include a failure to report to the board of directors of the Successor Entity) or the failure of the Eligible Participant to serve as Chief Executive Officer of a publicly traded corporation; or
(d)any material breach by the Company of the offer letter agreement between the Company and the Eligible Participant, as amended from time to time; in each case without such Eligible Participant’s written consent and subject to the notice and cure conditions set forth in the Plan.
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Severance Pay Benefit |
Severance Pay Benefit will mean:
(a)Two times the sum of the Eligible Participant’s (i) annual rate of base salary immediately prior to the Separation Date (without regard to any reduction by the Company that gives rise to Good Reason) and (ii) target AIP bonus amount for the year in which the Separation Date occurs; and
(b)Prorated AIP bonus amount for the year in which the Separation Date occurs, based on the number of full months Eligible Participant was employed with the Company during the AIP performance period and the actual Company performance through the end of the AIP performance period and target level of individual performance, settled in the form provided for under the terms and conditions of the relevant AIP, including without limitation, AIP Shares, as defined in the relevant AIP, if applicable.
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Health Benefits |
Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for a lump sum payment of 24 months of health premiums, at COBRA rates, to be paid within sixty (60) days following the Separation Date.
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Company Equity Awards |
Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the following Company Equity Award severance benefits:
(a)Time-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest solely based on the continued service of the Eligible Participant (i.e., time-vesting awards), will be treated as though immediately vested on the Eligible Participant’s Separation Date. All such (time-based) Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the Eligible Participant’s Separation Date, subject to an effective Separation Agreement and Release.
(b)Performance-Based Awards. If a Change in Control occurs during the performance period applicable to a Company Equity Award that vests based on the achievement of performance targets over a given performance period, (i) other than the CEO PSU Award, and (ii) any AIP Shares, then such Company Equity Award will be subject to Section 11.2 of the Equity Award Incentive Plan. In the event the Eligible Participant’s Separation Date occurs within the Change in Control Period and (i) on or following the consummation of the Change in Control, then such Company Equity Awards will be treated as though immediately vested on the Eligible Participant’s Separation Date, or (ii) prior to the consummation of the Change in Control, then such Company Equity Awards will be treated as though immediately vested on the consummation of the Change in Control. All such (performance-based) Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the applicable vesting date, subject to an effective Separation Agreement and Release.
(c)CEO PSU Award. If a Change in Control occurs during the performance period of the CEO PSU Award, then such CEO PSU Award will be subject to the terms and conditions of the CEO PSU Award agreement.
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Outplacement | Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for transition program services. |
Outside of a Change in Control Period | |||||
Qualifying Termination |
“Qualifying Termination” will mean:
(a)involuntary termination by the Company for a reason other than Cause or Disability;
(b)resignation by the Eligible Participant due to Good Reason; or
(c)solely for purposes of the treatment of Company Equity Awards, death or Disability.
“Good Reason” will mean:
(a)a material reduction in the Eligible Participant’s annual base salary;
(b)a material reduction in the Eligible Participant’s annual target bonus opportunity;
(c)a material reduction in the Eligible Participant’s authority, duties or responsibilities (which would include a failure to report to the Chief Executive Officer); or
(d)any material breach by the Company of the offer letter agreement between the Company and the Eligible Participant, as amended from time to time; in each case without such Eligible Participant’s written consent and subject to the notice and cure conditions set forth in the Plan.
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Severance Pay Benefit |
Severance Pay Benefit will mean:
(a)1.5 times the sum of the Eligible Participant’s (i) annual rate of base salary immediately prior to the Separation Date (without regard to any reduction by the Company that gives rise to Good Reason) and (ii) target AIP bonus amount for the year in which the Separation Date occurs; and
(b)Prorated AIP bonus amount for the year in which the Separation Date occurs, based on the number of full months Eligible Participant was employed with the Company during the AIP performance period and the actual Company performance through the end of the AIP performance period and target level of individual performance, settled in the form provided for under the terms and conditions of the relevant AIP, including without limitation, AIP Shares, as defined in the relevant AIP, if applicable.
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Health Benefits | Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the reimbursement of COBRA health premiums or payment of health premiums, at COBRA rates, for 12 months after the Separation Date or, if shorter, until the Eligible Participant becomes covered under a group health plan maintained by a subsequent employer, or other health plans, such as Medicare. |
Company Equity Awards |
Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the following Company Equity Award severance benefits:
(a)Time-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest solely based on the continued service of the Eligible Participant (i.e., time-vesting awards), will be treated as though immediately vested on the Eligible Participant’s Separation Date as to the portion of such Company Equity Awards that would have otherwise become vested pursuant to their regular vesting schedule prior to the 12-month anniversary of the Separation Date (or, in the case of a termination due to Disability, any Company Equity Awards granted to the Eligible Participant prior to July 1, 2021 that would have otherwise become vested pursuant to their regular vesting schedule prior to the 24-month anniversary of the Separation Date will be treated as though immediately vested on the Eligible Participant’s Separation Date and Company Equity Awards granted to the Eligible Participant on or after July 1, 2021 shall be eligible for continued vesting in accordance with Appendix B). Any such Company Equity Awards granted to the Eligible Participant prior to July 1, 2021 will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the Eligible Participant’s Separation Date and any such Company Equity Awards granted to the Eligible Participant on or after July 1, 2021 will be eligible to continue vesting in accordance with their original vesting schedule following the Eligible Participant’s Separation Date, in each case subject to an effective Separation Agreement (including the Release/Certification Requirements set forth in Appendix B) and Release; provided that to the extent such Company Equity Award is scheduled to vest more frequently than annually, any continued vesting date not falling on an anniversary of the grant date of such Company Equity Award shall be deemed to fall on the next following anniversary of such grant date.
(b)Performance-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest based on the achievement of performance targets over a given performance period, other than any AIP Shares, will remain outstanding and eligible to vest, based solely on the achievement of the applicable Company performance targets for any performance period that ends prior to the 12-month anniversary of the Separation Date; and, following the end of the performance period, the Company will determine the number of shares subject to such Company Equity Awards earned based on actual Company achievement of the performance goals pursuant to the terms of the applicable award agreements, and such Company Equity Awards will be settled in accordance with the terms and conditions of the applicable award agreement on the date that similar awards held by other participants are settled; provided, that in the case of a termination due to Disability, such Company Equity Awards granted to the Eligible Participant prior to July 1, 2021 will become immediately vested, based on target achievement of the performance targets, on the Eligible Participant’s Separation Date to the extent they are subject to a performance
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period that ends prior to the 24-month anniversary of the Separation Date and Company Equity Awards granted to the Eligible Participant on or after July 1, 2021 shall be eligible for continued vesting in accordance with Appendix B. All such Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the applicable vesting date, subject to an effective Separation Agreement (including the Release/Certification Requirements set forth in Appendix B) and Release.
For the avoidance of doubt, any continued vesting of Company Equity Awards pursuant to this section, other than Company Equity Awards that were outstanding prior to July 1, 2021 to the extent they were eligible for accelerated or continued vesting in accordance with this section as in effect prior to July 1, 2021, shall be subject to the Eligible Participant satisfying the Release/Certification Requirements set forth in Appendix B.
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Outplacement | Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for transition program services. |
Within a Change in Control Period | |||||
Qualifying Termination |
“Qualifying Termination” will mean:
(a)involuntary termination by the Company for a reason other than Cause or Disability;
(b)resignation by the Eligible Participant due to Good Reason; or
(c)solely for purposes of the treatment of Company Equity Awards, death or Disability.
“Good Reason” will mean:
(a)a material reduction in the Eligible Participant’s annual base salary;
(b)a material reduction in the Eligible Participant’s annual target bonus opportunity;
(c)a material reduction in the Eligible Participant’s authority, duties or responsibilities (which would include a failure to report to the Chief Executive Officer);
(d)a requirement by the Company that the Eligible Participant relocate his or her primary office to a location that is more than 35 miles from the location of his or her primary office immediately prior to the Change in Control; or
(e)any material breach by the Company of the offer letter agreement between the Company and the Eligible Participant, as amended from time to time; in each case without such Eligible Participant’s written consent and subject to the notice and cure conditions set forth in the Plan.
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Severance Pay Benefit |
Severance Pay Benefit will mean:
(a)Two times the sum of the Eligible Participant’s (i) annual rate of base salary immediately prior to the Separation Date (without regard to any reduction by the Company that gives rise to Good Reason) and (ii) target AIP bonus amount for the year in which the Separation Date occurs; and
(b)Prorated AIP bonus amount for the year in which the Separation Date occurs, based on the number of full months Eligible Participant was employed with the Company during the AIP performance period and the actual Company performance through the end of the AIP performance period and target level of individual performance, settled in the form provided for under the terms and conditions of the relevant AIP, including without limitation, AIP Shares, as defined in the relevant AIP, if applicable.
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Health Benefits | Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for a lump sum payment of 24 months of health premiums, at COBRA rates, to be paid within sixty (60) days following the Separation Date. |
Company Equity Awards |
Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the following Company Equity Award severance benefits:
(a)Time-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest solely based on the continued service of the Eligible Participant (i.e., time-vesting awards), will be treated as though immediately vested on the Eligible Participant’s Separation Date. All such Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the Eligible Participant’s Separation Date, subject to an effective Separation Agreement and Release.
(b)Performance-Based Awards. If a Change in Control occurs during the performance period applicable to a Company Equity Award that vests based on the achievement of performance targets over a given performance period, other than any AIP Shares, then such Company Equity Award will be subject to Section 11.2 of the Equity Award Incentive Plan. In the event the Eligible Participant’s Separation Date occurs within the Change in Control Period and (i) on or following the consummation of the Change in Control, then such Company Equity Awards will be treated as though immediately vested on the Eligible Participant’s Separation Date, or (ii) prior to the consummation of the Change in Control, then such Company Equity Awards will be treated as though immediately vested on the consummation of the Change in Control. All such Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the applicable vesting date, subject to an effective Separation Agreement and Release.
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Outplacement | Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for transition program services. |
Qualifying Termination |
For purposes of the Executive Long Term Incentive Program (the “ELTIP”) only:
“Qualifying Termination” will mean:
(a) Qualifying Retirement (as defined below); or
(b) Job Elimination (as defined below); or
(c) death or Disability.
“Qualifying Retirement” will mean a voluntary resignation by an Eligible Participant from the Company and its subsidiaries which satisfies each of the following requirements:
(a) The Eligible Participant provides sufficient advance notice to the Company, as determined solely by the Plan Administrator, which shall be no less than 12 months;
(b) The resignation is upon terms and conditions mutually agreed to by the Company and the Eligible Participant;
(c) The Eligible Participant provides a minimum of seven (7) years of continuous service to the Company as a Vice President or a higher position of the Company as of the day of such Eligible Participant’s voluntary resignation; and
(d) The Eligible Participant is sixty (60) years of age or older.
For purposes of a Qualifying Retirement only, the effective date for which an Eligible Participant may become entitled to benefits is based on the Eligible Participant’s employment classification as follows:
Job Classification Effective Date
CEO or EVP July 1, 2021
SVP July 1, 2022
VP July 1, 2023
“Job Elimination” will mean an involuntary termination by the Company due to a job elimination or role restructuring, as determined in the sole discretion of the Chief Executive Officer, Chief Human Resources Officer or the Chief Legal Officer of the Company (or their respective successors).
In order for any termination to be a Qualifying Termination for purposes of the ELTIP (other than death), the Eligible Participant must (i) provide services as requested by the Company in a cooperative and professional manner following notification of employment termination, and (ii) satisfy the Release/Certification Requirements set forth below.
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Release/Certification Requirements |
To qualify for continued vesting after termination of employment under any of the circumstances as set forth in this ELTIP, the Eligible Participant must satisfy each of the following requirements:
•the Eligible Participant must timely execute and deliver a release of claims in favor of the Company, in the form and within the period specified by the Plan Administrator or its delegate;
•with respect to a Qualifying Retirement, prior to the termination of employment, the Eligible Participant must provide written confirmation to the Company that he or she meets the eligibility criteria and receive written consent from the Company for such continued vesting;
•while the employment restrictions (see “Restrictions” below) are outstanding, the Eligible Participant must certify in the form specified by the Plan Administrator, prior to each vesting date, that the Eligible Participant complies with the employment restrictions from the date of termination of employment through the applicable vesting date;
•with respect to Disability, such Eligible Participant must satisfy the requirements described above and receive written consent from the Company for such continued vesting; and
•in all cases, complies with all other terms of this ELTIP, including each of the restrictions identified below.
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Restrictions |
The Eligible Participant is subject to continued certification of his or her compliance with all of the following restrictions in the form specified by the Plan Administrator. Subject to all of the other terms and conditions set forth in this Plan, the benefits provided under this Plan shall become vested and payable to an Eligible Participant only if the Eligible Participant satisfies each of the following vesting conditions, as determined by the Plan Administrator in good faith.
Confidentiality
The Eligible Participant must comply with the confidentiality provisions set forth in the Company’s Proprietary Information and Inventions Agreement (the “PIIA”) during and following his or her employment with the Company.
Non-Solicitation of Employees and Customers
During the Eligible Participant’s employment by the Company and for the longer of (i) the one-year period following his or her termination of employment, or (ii) during any remaining vesting periods of any equity awards held if he or she continues to vest after termination of employment with the Company, the Eligible Participant will not directly or indirectly, whether on his or her own behalf or on behalf of any other party, without the prior written consent of the EVP, Chief Business Affairs and Legal Officer (or its successor): (a) solicit, induce or encourage any of the Company’s then current employees to leave the Company or to apply for employment elsewhere; or (b) solicit or induce or attempt to induce to leave the Company, or divert or attempt to divert from doing business with the Company, any then current customers, suppliers or other persons or entities that were serviced by the Eligible Participant or whose names became known to the Eligible Participant by the virtue of his or her employment with the Company or otherwise interfere with the relationship between the Company and such customers, suppliers or other persons or entities.
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These restrictions do not apply to authorized actions the Eligible Participant took in the normal course of his or her employment with the Company, such as employment decisions with respect to employees the Eligible Participant supervised or business referrals in accordance with the Company’s policies.
Non-Competition
During the Eligible Participant’s employment by the Company and for the longer of (i) the one-year period following the termination of his or her employment or (ii) during any remaining vesting periods of any equity awards held if the Eligible Participant continues to vest after termination of employment with the Company, the Eligible Participant will not, (a) directly or indirectly, as an officer, director, employee, consultant, owner, partner, or in any other capacity solicit, perform, or provide, or attempt to perform or provide Conflicting Services (as defined below) anywhere in the Restricted Territory (as defined below), nor will the Eligible Participant assist another person to solicit, perform or provide or attempt to perform or provide Conflicting Services anywhere in the Restricted Territory or (b) work in the Eligible Participant’s profession; provided that the Eligible Participant may work for a government, education or Not-for-Profit Organization (as defined below) and provide board of director services, in each case not deemed to be Conflicting Services; and provided further that in the event that the Eligible Participant seeks to work for an organization to exclusively provide services to a government, education or Not-for-Profit Organization, in each case not deemed to be Conflicting Services, the Eligible Participant must seek consent from the Company, which consent may be withheld in the Company’s sole discretion.
“Restricted Territory” means the 50 mile radius of any of the following locations: (i) any Company business location at which the Eligible Participant has worked on a regular or occasional basis during the preceding year; (ii) the Eligible Participant’s home if Eligible Participant worked from home on a regular or occasional basis; (iii) any potential business location of Company under active consideration by Company to which the Eligible Participant has traveled in connection with the consideration of that location; (iv) the primary business location of a Customer or Potential Customer; or (v) any business location of a Customer or Potential Customer where representatives of the Customer or Potential Customer with whom the Eligible Participant has been in contact in the preceding year are based.
“Customer or Potential Customer” is any person or entity who or which, at any time during the one year period prior to the Eligible Participant’s contact with such person or entity if such contact occurs during the Eligible Participant’s employment or, if such contact occurs following the termination of my employment, during the one year period prior to the date the Eligible Participant’s employment with the Company ends: (i) contracted for, was billed for, or received from the Company any product, service or process with which the Eligible Participant worked directly or indirectly during employment by the Company or about which the Eligible Participant acquired Proprietary Information (as defined in the PIIA); or (ii) was in contact with the Eligible Participant or in contact with any other employee, owner, or agent of the Company, of which contact the Eligible Participant was or should have been aware, concerning the sale or purchase of, or contract for, any product, service or process with which the Eligible Participant worked directly or indirectly during the Eligible Participant’s employment with the Company or about which the Eligible Participant acquired Proprietary Information (as defined in the
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PIIA); or (iii) was solicited by the Company in an effort in which the Eligible Participant involved or of which the Eligible Participant was aware.
“Conflicting Services” means any product, service, or process or the research and development thereof, of any person or organization other than the Company that directly competes with a product, service, or process, including the research and development thereof, of the Company with which the Eligible Participant worked directly or indirectly during employment by the Company or about which the Eligible Participant acquired Proprietary Information (as defined in the PIIA) during the Eligible Participant’s employment by the Company.
“Not-for-Profit Organization” means an entity exempt from tax under state law and under Section 501(c)(3) of the Code. Section 501(c)(3) only includes entities organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, or to foster national or international amateur sports competition or for the prevention of cruelty to children or animals. Not-for-Profit Organization shall also mean entities outside the United States exempt from local and national tax laws because they are organized and operated exclusively for purposes identical to those applicable to Section 501(c)(3) organization.
Nondisparagement
The Eligible Participant must not utter or publish (including, but not limited to, written, oral, or website, social media or similar internet-based publication) any disparaging, derogatory or negative statements, comments, or remarks concerning the Company, or the Company’s officers, directors, employees, shareholders and agents, affiliates and subsidiaries in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided, that the Eligible Participant will respond accurately and fully to any question, inquiry or request for information when required by legal process.
Cooperation
The Eligible Participant must cooperate fully with the Company and its counsel, upon request, with respect to any potential or pending proceeding (including, but not limited to, any litigation, arbitration, regulatory proceeding, investigation or governmental action) that relates at least in part to matters with which the Eligible Participant was involved while he or she was an employee or other service provider of the Company or any of its affiliates, or with which the Eligible Participant has knowledge. The Eligible Participant must render such cooperation in a timely fashion and provide Company personnel and counsel with the full benefit of the Eligible Participant’s knowledge with respect to any such matter, and must be reasonably available for interviews, depositions, or court appearances at the request of the Company or its counsel. If the Eligible Participant receives a complaint or subpoena or other legal process relating to the Company or a request for interview or to provide information concerning any existing, potential or threatened claims against the Company, the Eligible Participant must give written notice to the Company within seven days of receipt and prior to the Eligible Participant’s response to any such process or communication, unless prohibited by applicable law. The Eligible Participant must cooperate with the
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Company in good faith to ensure that its trade secrets and other confidential and proprietary information are not disclosed, either intentionally or inadvertently.
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Company Equity Awards |
If the Eligible Participant has a Qualifying Termination, and pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for the following Company Equity Award benefits:
(a)Time-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest solely based on the continued service of the Eligible Participant (i.e., time-vesting awards), after taking into account any accelerated vesting of outstanding time-based equity awards as of July 1, 2021 in connection with the Eligible Participant’s Separation from Service (as provided for in Appendix A or C or other Company policies, as applicable), will be eligible to continue vesting in accordance with their original vesting schedule; provided that to the extent a Company Equity Award is scheduled to vest more frequently than annually, any continued vesting date not falling on an anniversary of the grant date of such Company Equity Award shall be deemed to fall on the next following anniversary of such grant date, until the Company Equity Award is completely vested.
Notwithstanding the above, in the event that the Eligible Participant terminates service for reason of Qualifying Retirement, and the Eligible Participant has outstanding time-based equity awards as of July 1, 2021, then those outstanding awards will be eligible for pro-rata acceleration in addition to the continued vesting set forth in the paragraph above. The pro-rata acceleration will be determined for each such award as follows: (i) the product of (A) the aggregate number of shares of stock underlying the award, multiplied by (B) the Eligible Participant’s number of full months of service since the date of grant, divided by the total number of months of vesting to which the award is subject (e.g., thirty-six months if the vesting schedule of the award is three years), minus (ii) any shares issued on previous vesting dates of the award. The result shall be rounded up to the nearest whole share of stock. Any remaining shares after the pro-rata acceleration is applied will not be forfeited and will continue to vest on the original vesting date(s) in accordance with the ELTIP.
(b)Performance-Based Awards. All Company Equity Awards that are unvested as of the date prior to the Eligible Participant’s Separation Date and vest based on the achievement of performance targets over a given performance period, other than any AIP Shares, will remain outstanding and eligible to vest, based solely on the achievement of the applicable Company performance targets for the applicable performance period. Following the end of each applicable performance period, the Company will determine the number of shares subject to such Company Equity Awards earned based on actual Company achievement of the performance goals pursuant to the terms of the applicable award agreements, and such Company Equity Awards will be settled in accordance with the terms and conditions of the applicable award agreement, on the date that similar awards held by other participants are settled.
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applicable award agreements, and such Company Equity Awards will be settled in accordance with the terms and conditions of the applicable award agreement, on the date that similar awards held by other participants are settled.
(c) Notwithstanding the above, in the event of the Eligible Participant’s termination due to death, all Company Equity Awards that are eligible to continue vesting pursuant to the ELTIP will become immediately vested on the date of the Eligible Participant’s death. For Company Equity Awards that are performance-based awards, any such accelerated vesting will be based on target achievement of the applicable performance targets. All such Company Equity Awards will be settled through the vesting and issuance or delivery of shares of Stock within sixty (60) days after the applicable vesting date, subject to an effective Separation Agreement and Release.
For the avoidance of doubt, any continued vesting of Company Equity Awards pursuant to the ELTIP, other than Company Equity Awards that were outstanding prior to July 1, 2021 to the extent they were eligible for accelerated or continued vesting in accordance with the applicable appendix as in effect prior to July 1, 2021, shall be subject to the Eligible Participant satisfying the Release/Certification Requirements set forth herein.
For the avoidance of doubt, the ELTIP (including any continued or accelerated vesting benefits provided under the ELTIP) shall not apply to the performance-based Company Equity Award that was granted on April 1, 2018 to the CEO, which award shall be subject to the applicable terms and conditions set forth in the award agreement and Appendix A.
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Health Benefits |
Pursuant and subject to the terms and conditions of the Plan, the Eligible Participant will be eligible for Company-subsidized health care coverage or payments in lieu thereof at COBRA rates, to be determined at the Plan Administrator’s sole discretion, for the period during which the Eligible Participant is eligible to continue vesting in any Company Equity Awards pursuant to the ELTIP. Notwithstanding the foregoing, no Eligible Participant will be eligible for continued health care coverage under the Company’s group health plans, or payments in lieu thereof, to the extent that the Eligible Participant is no longer eligible for or participates in continuation coverage under COBRA. If the Eligible Participant is eligible to continue vesting in any Company Equity Awards pursuant to the ELTIP and the Eligible Participant is no longer eligible for COBRA continuation coverage under the Company’s group health plans and is not covered under any other group health plan, the Eligible Participant will be eligible to receive prorated payments, calculated using COBRA rates, on the first vesting date of each year that unvested Company Equity Awards vest pursuant to the ELTIP. Each prorated payment will be determined by multiplying the monthly COBRA rate at the time the Eligible Participant is no longer covered under COBRA by a fraction, the numerator of which is the number of full months between the later of the COBRA coverage end date and the most recent Company Equity Award vesting date and the denominator of which is the number of full months between the COBRA coverage end date and the last vesting date under the ELTIP.
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For the avoidance of doubt, no benefits shall be provided pursuant to this section to the extent that they would result in a duplication of benefits, as determined by the Plan Administrator.
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Re: | The PayPal Holdings, Inc. Executive Change in Control and Severance Plan |
(a) | that you have received and reviewed a copy of the Plan; |
(b) | that capitalized terms not defined in this Letter Agreement will have the meaning assigned to them in the Plan; |
(c) | that participation in the Plan requires that you agree irrevocably and voluntarily to the terms of the Plan and the terms set forth below; and |
(d) | that you have had the opportunity to carefully evaluate this opportunity, and desire to participate in the Plan according to the terms and conditions set forth herein. |
PayPal Holdings, Inc. | |||||||||||||||||||||||
By |
Your Name (printed) | ||
Your Signature |
Re: | Amendment to PayPal Holdings, Inc. Executive Change in Control and Severance Plan |
(a) | you have received and reviewed a copy of the Plan, as amended and restated; and |
(b) | you affirmatively consent to the Plan, as amended and restated. |
PayPal Holdings, Inc. | |||||||||||||||||||||||
By |
Your Name (printed) | ||
Your Signature |
/s/ Daniel H. Schulman | |||||
Daniel H. Schulman | |||||
President, Chief Executive Officer and Director | |||||
(Principal Executive Officer) |
/s/ John D. Rainey
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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) |