PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Overview and Summary of Significant Accounting Policies

Overview and Organization

PayPal Holdings, Inc. (“PayPal,” the “Company,” “we,” “us,” or “our”) was incorporated in Delaware in January 2015 and is a leading technology platform and digital payments company that enables digital and mobile payments on behalf of merchants and consumers worldwide. PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy. Our goal is to enable our merchants and consumers to manage and move their money anywhere in the world, anytime, on any platform, and using any device. We also facilitate person-to-person payments through our PayPal, Venmo, and Xoom products and services and simplify and personalize shopping experiences for our consumers through our Honey Platform. Our combined payment solutions, including our core PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle, and ~~iZettle~~Hyperwallet products and services, comprise our proprietary Payments Platform.

We operate globally and in a rapidly evolving regulatory environment characterized by a heightened regulatory focus on all aspects of the payments industry. That focus continues to become even more heightened as regulators on a global basis focus on important issues such as countering terrorist financing, anti-money laundering, privacy, cybersecurity, and consumer protection. Some of the laws and regulations to which we are subject were enacted recently, and the laws and regulations applicable to us, including those enacted prior to the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation. New or changing laws and regulations, including the way laws and regulations are interpreted and implemented, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition. Therefore, we monitor these areas closely to design compliant solutions for our customers who depend on us.

Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the financial statements of PayPal and our wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Noncontrolling interest reported as a component of equity on our condensed consolidated balance sheets represents the equity interests not owned by PayPal and is recorded for consolidated entities we control and of which we own less than 100%. Noncontrolling interest is not presented separately on our condensed consolidated statements of income as the amount is de minimis.

Investments in entities where we have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investee’s results of operations is included in other income (expense), net on our condensed consolidated statements of income and our investment balance is included in long-term investments on our condensed consolidated balance sheets. Investments in entities where we do not have the ability to exercise significant influence over the investee are accounted for at fair value or cost minus impairment, if any, adjusted for changes resulting from observable price changes, which are included in other income (expense), net on our condensed consolidated statements of income. Our investment balance is included in long-term investments on our condensed consolidated balance sheets.

We determine at the inception of each arrangement whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine it is, we then assess if we are the primary beneficiary, which would require consolidation. As of June 30, 2020, we held an investment in a VIE which did not qualify for consolidation as we are not the primary beneficiary. The investment balance is de minimis and included as a non-marketable equity security in long-term investments on our condensed consolidated balance sheets.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) filed with the Securities and Exchange Commission on February 6, 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the condensed consolidated financial statements for interim periods. Certain amounts for prior years have been reclassified to conform to the financial statement presentation as of and for the three and six months ended ~~March 31,~~June 30, 2020.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and credit losses, loss contingencies, income taxes, revenue recognition, and the valuation of goodwill and intangible assets. We base our estimates on historical experience and various other assumptions which we believe to be reasonable under the circumstances. These estimates may change as new events occur, and as additional information surrounding the impact of the novel coronavirus (“COVID-19”) pandemic is obtained. Actual results could differ from these estimates and any such differences may be material to our financial statements.

Investments

Short-term investments include time deposits, government and agency securities, and corporate debt securities with original maturities of greater than three months but less than one year when purchased or maturities of less than one year on the reporting date. Long-term investments include time deposits, government and agency securities and corporate debt securities with maturities exceeding one year, and our strategic investments. Government and agency securities and corporate debt securities are classified as available-for-sale and are reported at fair value using the specific identification method. Unrealized gains and losses are reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. Accrued interest receivable on available-for-sale debt securities totaled ~~$45~~$39 million and $54 million, respectively, at ~~March 31,~~June 30, 2020 and December 31, 2019 and is included in other current assets on our condensed consolidated balance sheets.

We elect to account for foreign currency denominated available-for-sale investments underlying funds receivable and customer accounts, short-term investments, and long-term investments under the fair value option as further discussed in “Note 9—Fair Value Measurement of Assets and Liabilities.” The changes in fair value related to initial measurement and subsequent changes in fair value are included in earnings as a component of other income (expense), net.

Our strategic investments consist of marketable equity securities, which are publicly traded, and non-marketable equity securities, which are investments in privately held companies. Marketable equity securities have readily determinable fair values with changes in fair value recorded in other income (expense), net. Non-marketable equity securities include investments that do not have a readily determinable fair value and equity method investments. The investments that do not have readily determinable fair value are measured at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”). All gains and losses on these investments, realized and unrealized, are recorded in other income (expense), net on our condensed consolidated statements of income. Our investments where we have the ability to exercise significant influence, but not control, over the investee are accounted for as equity method investments and our share of the investee’s results of operations is included in other income (expense), net.

We assess whether an impairment loss on our non-marketable equity securities and an other-than-temporary impairment loss on our equity method investments has occurred due to declines in fair value or other market conditions. If any impairment is identified for non-marketable equity securities or impairment is considered other-than-temporary for our equity method investments, we write down the investment to its fair value and record the corresponding charge through other income (expense), net in our condensed consolidated statements of income.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Our available-for-sale debt securities in an unrealized loss position will be written down to fair value through a charge to other income (expense), net in our condensed consolidated statements of income if we intend to sell the security or it is more likely than not we will be required to sell the security before recovery of its amortized cost basis. For the remaining available-for-sale debt securities in an unrealized loss position, if we identify that the decline in fair value has resulted from credit losses, considering changes to the rating of the security by rating agencies, implied yields versus benchmark yields, and the extent to which fair value is less than amortized cost, among other factors, we will estimate the present value of cash flows expected to be collected. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Loans and interest receivable, net

Loans and interest receivable, net represents merchant receivables originated under our PayPal Working Capital (“PPWC”) product and PayPal Business Loan (“PPBL”) product and international consumer loans originated under our PayPal Credit products. In the U.S., we partner with an independent chartered financial institution that extends credit to merchants using our PPWC product or PPBL product and purchase the related receivables extended by the independent chartered financial institution.

For our international consumer credit products, we extend credit through our Luxembourg banking subsidiary. For our merchant credit products outside the U.S., we extend working capital advances in the U.K. and loans in Germany through our Luxembourg banking subsidiary, and we extend working capital loans in Australia through an Australian subsidiary.

As part of our arrangement with the independent chartered financial institution in the U.S., we sell back a participation interest in the pool of merchant receivables. For this arrangement, gains or losses on the sale of the participation interests are not material as the carrying amount of the participation interest sold approximates the fair value at time of transfer. The independent chartered financial institution has no recourse against us related to their participation interests for failure of debtors to pay when due. The participation interests held by the chartered financial institution have the same priority to the interests held by us and are subject to the same credit, prepayment, and interest rate risk associated with this pool of merchant receivables. All risks of loss are shared pro rata based on participation interests held among all participating stakeholders. We apply a control-oriented, financial-components approach and account for the asset transfer as a sale and derecognize the portion of the participation interests for which control has been surrendered.

Loans, advances, and interest and fees receivable are reported at their outstanding balances, net of any participation interests sold and pro rata allowances, including unamortized deferred origination costs and estimated collectible interest and fees. We maintain the servicing rights for the entire pool of consumer and merchant receivables outstanding and receive a fee approximating the fair value for servicing the assets underlying the participation interest sold.

We offer both revolving and installment credit products to our international consumers. The terms of our consumer relationships require us to submit monthly bills to the consumer detailing loan repayment requirements. The terms also allow us to charge the consumer interest and fees in certain circumstances. Due to the relatively small dollar amount of individual loans and interest receivable, we do not require collateral on these balances.

U.S. Consumer Credit Portfolio

In November 2017, we reached an agreement to sell our U.S. consumer credit receivables portfolio to Synchrony Bank (“Synchrony”). Following the closing of this transaction in July 2018, Synchrony became the exclusive issuer of the PayPal Credit online consumer financing program in the U.S. We no longer hold an ownership interest in the receivables generated through the program and thus, no longer record these receivables on our condensed consolidated financial statements. PayPal earns a revenue share on the portfolio of consumer receivables owned by Synchrony, which includes both the sold and newly generated receivables, and it is recorded in revenue from other ~~value-added~~value added services on our condensed consolidated statements of income. ~~See “Note 11—Loans and Interest Receivable” for additional information related to this arrangement.~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Through the closing of the transaction with Synchrony, we continued to work with an independent chartered financial institution to extend credit to U.S. consumers using our PayPal Credit product. We purchased the related receivables extended by the independent chartered financial ~~institutions~~institution until July 2018. As part of the arrangements we had with the independent chartered financial institutions in the U.S., we sold back a participation interest in the pool of U.S. consumer receivables outstanding under PayPal Credit consumer accounts. For these arrangements, gains or losses on the sale of the participation interest were not material as the carrying amount of the participation interest sold approximated the fair value at time of transfer.

Allowance for loans and interest receivable

The allowance for loans and interest receivable represents our estimate of lifetime expected credit losses inherent in our portfolio of loans and interest receivables. Increases to the allowance for loans receivable are reflected as a component of transaction and credit losses on our condensed consolidated financial statements. Increases to the allowance for interest and fees receivable are reflected as a reduction of net revenues on our condensed consolidated statements of income, or as a reduction of deferred revenue when interest and fees are billed at the inception of a loan or advance. The evaluation process to assess the adequacy of allowances is subject to numerous estimates and judgments.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The allowance for loans and interest receivable is primarily based on expectations of credit losses based on historical lifetime loss data as well as macroeconomic forecasts applied to the portfolio that is segmented by geographic region, delinquency, and vintage, among other factors. Loss curves are generated using historical loss data for each loan portfolio and are applied to segments of each portfolio, categorized by geographic region, first borrowing versus reuse, delinquency, credit rating, and vintage, among other factors, which vary by portfolio. We then apply macroeconomic factors such as forecasted trends in unemployment and benchmark credit card charge-off rates, which are sourced externally, using a single scenario that is most appropriate to the economic conditions applicable to a particular period. Projected loss rates, inclusive of historical loss data and macroeconomic factors, are applied to the principal amount of our consumer and merchant receivables. Further, we may include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our expected lifetime losses. Our consumer receivables ~~which~~ are primarily revolving in nature and do not have a contractual term; however, the reasonable and supportable forecast period we have included in our projected loss rates based on externally sourced data is approximately seven years. Our merchant receivables vary in contractual term; however, the reasonable and supportable forecast period considered for projected loss rates is approximately 2.5 to 3.5 years, depending upon the product. The allowance for losses against the interest and fees receivable is determined primarily by applying loss curves to each portfolio by geography, delinquency, and period of origination, among other factors.

In connection with our agreement to sell our U.S. consumer credit receivables to Synchrony and the designation of that portfolio as held for sale in November 2017, we reversed the corresponding allowances against those loans and interest receivable balances. Such allowances on any newly originated U.S. consumer loans and interest receivables, held for sale were not established. Adjustments to the cost basis of this portfolio until the sale was completed, which were primarily driven by charge-offs, were recorded in restructuring and other charges on our condensed consolidated statements of income.

Leases

We determine whether an arrangement is a lease for accounting purposes at contract inception. Operating leases are recorded as right-of-use (“ROU”) assets, which are included in other assets, and lease liabilities, which are included in accrued expenses and other liabilities and other long-term liabilities on our condensed consolidated balance sheets. For sale-leaseback transactions, we evaluate the sale and the lease arrangement based on our conclusion as to whether control of the underlying asset has been transferred and recognize the sale-leaseback as either a sale transaction or under the financing method. The financing method ~~would require~~requires the asset to remain on the condensed consolidated balance sheets throughout the term of the lease and the proceeds to be recognized as a financing obligation. As of ~~March 31,~~June 30, 2020, we had no finance leases.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Our leases do not provide an implicit rate; we use an incremental borrowing rate for specific terms on a collateralized basis based on the information available on the commencement date in determining the present value of lease payments. The ROU asset calculation includes lease payments to be made and excludes lease incentives. The ROU asset and lease liability may include amounts attributed to options to extend or terminate the lease when it is reasonably certain we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components. We have elected to apply the practical expedient and account for the lease and non-lease components as a single lease component for all leases. In addition, we have elected the practical expedients related to lease classification, hindsight, and land easement. We apply a single portfolio approach to account for the ROU assets and lease liabilities.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Allowance for transaction losses

We are exposed to transaction losses due to credit card and other payment misuse as well as nonperformance from sellers who accept payments through PayPal. We establish an allowance for estimated losses arising from completing customer transactions, such as chargebacks for unauthorized credit card use and merchant-related chargebacks due to non-delivery of goods or services, buyer protection program claims, and account takeovers. This allowance represents an accumulation of the estimated amounts ~~necessary to provide for~~of transaction losses incurred as of the reporting date, including those which we have not yet identified. The allowance is monitored regularly and is updated based on actual data received, including actual claims data reported by our claims processors. The allowance is based on known facts and circumstances, internal factors including experience with similar cases, historical trends involving loss payment patterns, the mix of transaction and loss types, as well as macroeconomic factors, as applicable. Additions to the allowance are reflected as a component of transaction and credit losses on our condensed consolidated statements of income. At ~~March 31,~~June 30, 2020 and December 31, 2019, the allowance for transaction losses totaled ~~$120~~$152 million and $136 million, respectively, and was included in accrued expenses and other current liabilities on our condensed consolidated balance sheets.

Allowance for negative customer balances

Negative customer balances occur primarily when there are insufficient funds in a customer’s PayPal account to cover charges applied for ACH returns, debit card transactions, and merchant-related chargebacks due to non-delivery or unsatisfactory delivery of goods or services, which are generally within the scope of our protection programs. Negative customer balances can be cured by the customer by adding funds to their account, receiving payments, or through back-up funding sources. We also utilize third-party collection agents. For negative customer balances that are not expected to be cured or otherwise collected, we provide an allowance for lifetime expected losses. The allowance represents expected losses based on historical trends involving collection and write-off patterns, internal factors including our experience with similar cases, other known facts and circumstances, and reasonable and supportable macroeconomic forecasts, as necessary. Loss rates are derived using historical loss data for each delinquency bucket using a roll rate model that captures the losses and the likelihood that a negative customer balance will be written-off as the delinquency age of such balance increases. The loss rates are then applied to the outstanding negative customer balances. Once the quantitative calculation is performed, we review the adequacy of the allowance and determine if qualitative adjustments need to be considered. We ~~write off~~write-off negative customer balances in the month in which the balance becomes outstanding for 120 days. Write-offs that are recovered are recorded as a reduction to our allowance for negative customer balances.

Negative customer balances are included in other current assets, net of the allowance on our condensed consolidated balance sheets. Adjustments to the allowance for negative customer balances are recorded as a component of transaction and credit losses on our condensed consolidated statements of income. The allowance for negative customer balances was ~~$276~~$221 million and $263 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Guidance

In 2020, the Financial Accounting Standards Board (“FASB”) issued amended guidance that provides transition relief for the accounting impact of reference rate reform. For a limited period, this guidance provides optional expedients and exceptions for applying GAAP to certain contract modifications, hedging relationships, and other transactions affected by a reference rate expected to be discontinued due to reference rate reform. The amended guidance is effective through December 31, 2022. Our exposure to LIBOR is primarily limited to an insignificant amount of ~~fixed rate investment~~available-for-sale debt securities and, ~~therefore,~~accordingly, we do not expect ~~the impact from~~ reference rate reform to ~~be material.~~have a material impact on our condensed consolidated financial statements.

Recently Adopted Accounting Guidance

In 2019, the FASB issued amended guidance for simplifying certain aspects for the accounting for income taxes. This amended guidance is intended to remove certain exceptions to the general principles in current GAAP, reduce the cost and complexity in accounting for income taxes, and improve financial statement preparers’ application of income tax-related guidance. This guidance does not create new accounting requirements. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. We early adopted this guidance in the first quarter of 2020. Adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In 2016, the FASB issued new guidance on the measurement of credit losses on financial instruments. Under the new guidance, credit losses on loans, trade and other receivables, held-to-maturity debt securities, and other instruments reflect our current estimate of the expected credit losses and generally result in the earlier recognition of allowances for losses. Credit losses on available-for-sale debt securities with unrealized losses are recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. Additional disclosures are required, including information used to track credit quality by year of origination for most financing receivables. We are required to apply the provisions of this guidance as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted with impairment of available-for-sale debt securities applied prospectively after adoption. We adopted the new guidance effective January 1, 2020. For additional information, see “Note 11—Loans and Interest Receivable.”

There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt, as ~~applicable, and we~~applicable. We do not believe any of these accounting pronouncements have had, or will have, a material impact on our condensed consolidated financial statements or disclosures.

Note 2—Revenue

PayPal enables its customers to send and receive payments. We earn revenue primarily by completing payment transactions for our customers on our Payments Platform and from other value added services. Our revenues are classified into two categories: transaction revenues and revenues from other value added services.

Disaggregation of Revenue

We determine operating segments based on how our chief operating decision maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. Our CODM is our Chief Executive Officer, who reviews our operating results on a consolidated basis. We operate as 1 segment and have 1 reportable segment. Based on the information provided to and reviewed by our CODM, we believe that the nature, amount, timing, and uncertainty of our revenue and cash flows and how they are affected by economic factors are most appropriately depicted through our primary geographical markets and type of revenue categories (transaction revenues and revenues from other value added services). Revenues recorded within these categories are earned from similar services for which the nature of associated fees and the related revenue recognition models are substantially the same.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents our revenue disaggregated by primary geographical market and category:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In millions)
Primary geographical markets
United States (“U.S.”)	$	2,651	$	2,297	$	5,120	$	4,484
United Kingdom (“U.K.”)	586		454		1,064		887
Other countries⁽¹⁾	2,024		1,554		3,695		3,062
Total revenues⁽²⁾	$	5,261	$	4,305	$	9,879	$	8,433

Revenue category
Transaction revenues	$	4,945	$	3,878	$	9,160	$	7,609
Revenues from other value added services	316		427		719		824
Total revenues⁽²⁾	$	5,261	$	4,305	$	9,879	$	8,433

Three Months Ended March 31,
2020 2019
(In millions)
Primary geographical markets
United States (“U.S.”) $ 2,469
$ 2,187
United Kingdom (“U.K.”) 478
433
Other countries⁽¹⁾
1,671
1,508
Total revenues⁽²⁾
$ 4,618
$ 4,128

Revenue category
Transaction revenues $ 4,215
$ 3,731
Other value added services 403
397
Total revenues⁽²⁾
$ 4,618
$ 4,128

⁽¹⁾No single country included in the other countries category generated more than 10% of total revenue.

⁽²⁾Total revenues include ~~$247~~$154 million and ~~$257~~$276 million for the three months ended ~~March 31,~~June 30, 2020 and 2019, respectively, and $401 million and $533 million for the six months ended June 30, 2020 and 2019, respectively, which do not represent revenues recognized in the scope of Accounting Standards Codification Topic 606, Revenue from contracts with customers. Such revenues relate to interest, fees, and gains earned on loans and interest receivable, as well as hedging gains or losses, and interest earned on certain ~~PayPal~~assets underlying customer balances.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Net revenues are attributed to the country in which the merchant is located, or in the case of a cross-border transaction, may be earned from the country in which the consumer and the merchant respectively reside. Net revenues earned from other value added services are typically attributed to the country in which either the customer or partner reside.

Note 3—Net Income Per Share

Basic net income per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding for the period. The dilutive effect of outstanding equity incentive awards is reflected in diluted net income per share by application of the treasury stock method. The calculation of diluted net income per share excludes all anti-dilutive common shares.

The following table sets forth the computation of basic and diluted net income per share for the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In millions, except per share amounts)
Numerator:
Net income	$	1,530	$	823	$	1,614	$	1,490
Denominator:
Weighted average shares of common stock - basic	1,173		1,175		1,173		1,173
Dilutive effect of equity incentive awards	11		12		12		15
Weighted average shares of common stock - diluted	1,184		1,187		1,185		1,188
Net income per share:
Basic	$	1.30	$	0.70	$	1.38	$	1.27
Diluted	$	1.29	$	0.69	$	1.36	$	1.25
Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive	—		—		1		2

Three Months Ended March 31,
2020 2019
(In millions, except per share amounts)
Numerator:
Net income $ 84
$ 667
Denominator:
Weighted average shares of common stock - basic 1,173
1,171
Dilutive effect of equity incentive awards 12
17
Weighted average shares of common stock - diluted 1,185
1,188
Net income per share:
Basic $ 0.07
$ 0.57
Diluted $ 0.07
$ 0.56
Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive 2
3

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4—Business Combinations

Honey Science Corporation

We completed our acquisition of Honey Science Corporation (“Honey”) in January 2020 by acquiring all outstanding shares for total consideration of approximately $4.0 billion, consisting of approximately $3.6 billion in cash and approximately $400 million in assumed restricted stock, restricted stock units, and options, subject to vesting conditions. We believe our acquisition of Honey will enhance our value proposition by allowing us to further simplify and personalize shopping experiences for consumers while driving conversion and increasing consumer engagement and sales for merchants.

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~~(Unaudited)~~

The following table summarizes the preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed:

(In millions)
Goodwill $ 2,959
Customer lists and user base 115
Marketing related 30
Developed technology 572
Total intangibles $ 717
Accounts receivable, net 55
Deferred tax liabilities, net (76 )
Other net liabilities (18 )
Total purchase consideration $ 3,637


	(In millions)
Goodwill	$	2,957
Customer lists and user base	115
Marketing related	30
Developed technology	572
Total intangibles	$	717
Accounts receivable, net	55
Deferred tax liabilities, net	(76)
Other net liabilities	(18)
Total purchase consideration	$	3,635

The intangible assets acquired consist primarily of customer contracts, trade name/trademarks, and developed technology with estimated useful lives of three years. The excess of the purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, and is attributable to the workforce of Honey and the synergies expected to arise from the acquisition through continued customer acquisition, cross selling initiatives, and product enhancements. We do not expect goodwill to be deductible for income tax purposes. The allocation of the purchase price for this acquisition has been prepared on a preliminary basis and changes to the allocation to certain assets, liabilities, and tax estimates may occur as additional information becomes available.

In association with the acquisition, we assumed restricted stock, restricted stock units, and options with an approximate grant date fair value of $400 million, which represents post business combination expense. The equity granted is a combination of shares issued to certain former Honey employees subject to a holdback arrangement and assumed Honey employee grants, which vest over a period of up to four years and are subject to continued employment.

We have included the financial results of the acquired business in our condensed consolidated financial statements from the date of acquisition. Revenues and expenses related to the acquisition ~~for the three months ended March 31, 2020 were not material. Pro~~and pro forma results of operations have not been presented for the three and six months ended June 30, 2020 because the effects of this acquisition were not material to our ~~financial results.~~overall operations.

There were 0 acquisitions or divestitures completed during the ~~three~~six months ended ~~March 31,~~June 30, 2019.

Note 5—Goodwill and Intangible Assets

Goodwill

The following table presents goodwill balances and adjustments to those balances during the ~~three~~six months ended ~~March 31,~~June 30, 2020:


	December 31, 2019		Goodwill Acquired		Adjustments		June 30, 2020
	(In millions)
Total goodwill	$	6,212	$	2,957	$	(51)	$	9,118

December 31,
2019
Goodwill
Acquired
Adjustments March 31,
2020
(In millions)
Total goodwill $ 6,212
$ 2,959
$ (47 ) $ 9,124

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The goodwill acquired during the ~~three~~six months ended ~~March 31,~~June 30, 2020 was associated with the acquisition of Honey. The adjustments to goodwill during the ~~three~~six months ended ~~March 31,~~June 30, 2020 pertain to foreign currency translation adjustments.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Intangible Assets

The components of identifiable intangible assets are as follows:

March 31, 2020 December 31, 2019

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 $ 1,205
$ (713 ) $ 492
6 $ 1,114
$ (700 ) $ 414
7
Marketing related 321
(247 ) 74
3 294
(239 ) 55
3
Developed technology 999
(388 ) 611
3 445
(343 ) 102
3
All other 433
(241 ) 192
7 436
(229 ) 207
7
Intangible assets, net $ 2,958
$ (1,589 ) $ 1,369
$ 2,289
$ (1,511 ) $ 778


	June 30, 2020													December 31, 2019
	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	$	1,203	$	(741)	$	462	6	$	1,114	$	(700)	$	414	7
Marketing related	321		(257)		64		3	294		(239)		55		3
Developed technology	999		(452)		547		3	445		(343)		102		3
All other	434		(253)		181		7	436		(229)		207		7
Intangible assets, net	$	2,957	$	(1,703)	$	1,254		$	2,289	$	(1,511)	$	778

Amortization expense for intangible assets was ~~$114~~$115 million and ~~$57~~$51 million for the three months ended ~~March 31,~~June 30, 2020 and 2019, respectively. Amortization expense for intangible assets was $229 million and $108 million for the six months ended June 30, 2020 and 2019, respectively.

Expected future intangible asset amortization as of ~~March 31,~~June 30, 2020 was as follows (in millions):


Fiscal years:
Remaining 2020	$	221
2021	398
2022	335
2023	98
2024	96
Thereafter	106
Total	$	1,254

Fiscal years:
Remaining 2020 $ 335
2021 398
2022 336
2023 98
2024 96
Thereafter 106
Total $ 1,369

Note 6—Leases

PayPal enters into various leases, which are primarily real estate operating leases. We use these properties for executive and administrative offices, data centers, product development offices, and customer service and operations centers. Many leases include one or more renewal or termination options. These options are not included in our determination of the lease term at commencement unless it is reasonably certain the Company will exercise the option. When we reach a decision to exercise a lease renewal or termination option, we recognize the associated impact to the ROU asset and lease liability.

While a majority of lease payments are based on the stated rate in the lease, some lease payments are subject to annual changes based on the Consumer Price Index or another referenced index. In the event of changes to the relevant index, lease liabilities are not ~~re-measured~~remeasured and instead are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. All of PayPal’s variable lease payments are based on an index or rate.

The short-term lease exemption has been adopted for all leases with a duration of less than 12 months.

PayPal’s lease portfolio contains a small number of subleases. A sublease situation can arise when currently leased real estate space is available and is surplus to operational requirements.

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PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of lease expense were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In millions)
Lease expense
Operating lease expense	$	42	$	32	$	80	$	66


Sublease income	(1)		(2)		(2)		(4)
Total lease expense cost	$	41	$	30	$	78	$	62

Three Months Ended
March 31, 2020 Three Months Ended
March 31, 2019
(In millions)
Lease expense
Operating lease expense $ 38
$ 34
Sublease income (1 ) (2 )
Total lease expense cost $ 37
$ 32

Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 35
$ 31
Right-of-use assets obtained in exchange for new operating lease liabilities $ 244
$ 5

Balance at March 31, 2020 Balance at December 31, 2019
(In millions, except weighted-average figures)
Operating lease right-of-use assets $ 687
$ 479
Other current lease liabilities 122
104
Operating lease liabilities 608
403
Total operating lease liabilities 730
507
Weighted-average remaining lease term—operating leases
7.3 years
5.8 years
Weighted-average discount rate—operating leases
4 % 5 %
Supplemental cash and noncash information related to leases were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	38	$	31	$	73	$	62
Right-of-use assets obtained in exchange for operating lease liabilities	$	2	$	63	$	246	$	68

Supplemental balance sheet information related to leases was as follows:


	June 30, 2020			December 31, 2019
	(In millions, except weighted-average figures)
Operating lease right-of-use assets	$	671		$	479
Other current lease liabilities	129			104
Operating lease liabilities	611			403
Total operating lease liabilities	$	740		$	507
Weighted-average remaining lease term—operating leases	7.2 years			5.8 years
Weighted-average discount rate—operating leases	4		%	5		%

Future minimum lease payments for our operating leases as of ~~March 31,~~June 30, 2020 were as follows:


	Operating Leases
Fiscal years:	(In millions)
Remaining 2020	$	79
2021	149
2022	114
2023	100
2024	90
Thereafter	315
Total	$	847
Less: present value discount	(107)
Lease liability	$	740

Operating Leases
Fiscal years: (In millions)
Remaining 2020 $ 114
2021 139
2022 107
2023 94
2024 86
Thereafter 300
Total $ 840
Less: present value discount (110 )
Lease liability $ 730

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans, or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, mergers or acquisitions, or management strategies). Additionally, our forward looking statements include expectations related to anticipated impacts of the outbreak of the novel coronavirus. These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,” and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), as supplemented in the risk factors set forth below in Part II, Item 1A, Risk Factors, of this Form 10-Q, as well as in our unaudited condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission (“SEC”). We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. You should read the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report. Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” and “PayPal” refer to PayPal Holdings, Inc. and its consolidated subsidiaries.

Business Environment

We are a leading technology platform and digital payments company that enables digital and mobile payments on behalf of merchants and consumers worldwide. PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy. Our goal is to enable our merchants and consumers to manage and move their money anywhere in the world, anytime, on any platform, and using any device. We also facilitate person-to-person (“P2P”) payments through our PayPal, Venmo, and Xoom products and services and simplify and personalize shopping experiences for our consumers through our Honey Platform. Our combined payment solutions, including our core PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle, and ~~iZettle~~Hyperwallet products and services, comprise our proprietary Payments Platform.

Information security risks for global payments and technology companies like us have significantly increased in recent years. ~~We are not immune~~Although we have developed systems and processes designed to protect data we manage, prevent data loss and other security breaches and effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, we remain subject to these risks and there can be no assurance that weour security measures will ~~not suffer such losses in the future.~~provide sufficient security or prevent breaches or attacks. For additional information regarding our information security risks, see Part I, Item 1A, Risk Factors in our 2019 Form 10-K, as supplemented and, to the extent inconsistent, superseded below (if applicable) in Part II, Item 1A, Risk Factors in this Form 10-Q.

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In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) as a pandemic. The rapidly changing global market and economic conditions as a result of ~~COVID 19~~COVID-19 have impacted, and are expected to continue to impact, our operations and business. To protect the health and safety of our employees, we have modified our business practices, including restrictions on employee travel, ~~closings or significant~~enabling the majority of our workforce to work from home, establishing a strict health and safety protocol for our offices that remain open including limitations on ~~employee work locations,~~site visitors, and ~~cancellation of~~restricting physical participation in meetings, events, and conferences, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, and business partners. The broader implications of the COVID-19 outbreak on our business, financial condition, and results of operations remain uncertain. While the current macroeconomic environment as a result of the COVID-19 outbreak has adversely impacted general consumer and merchant spending with a more pronounced impact on travel and events verticals, the spread of COVID-19 has also accelerated the shift from in-store shopping and traditional in-store payment methods (e.g., credit cards, debit cards, cash) towards e-commerce and digital payments and resulted in increased customer demand for safer payment and delivery solutions (e.g. contactless payment methods, buy online and pick up in store) and a significant increase in online spending in certain verticals that have historically had a strong in-store presence. On balance, our business has benefited from these behavioral shifts, including a significant increase in net new active accounts and payments volume. To the extent that consumer preferences revert to pre-COVID-19 behaviors as mitigation measures to limit the spread of COVID-19 are lifted, our business, financial condition, and results of operations could be adversely impacted. The COVID-19 outbreak has adversely impacted, and is likely to continue to adversely impact global commerce due to reduced business activity and customer spending, and increased unemployment rates, among other factors, which could materially and adversely impact our business, financial condition, and results of operations in future periods. For additional information on how COVID-19 has impacted and could continue to negatively impact our business, see below for specific discussion in the respective areas, and also refer to Part II, Item 1A, Risk Factors in this Form 10-Q.

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The United Kingdom (“U.K.”) held a referendum in June 2016 in which a majority of voters approved an exit from the European Union (“EU”), commonly referred to as “Brexit.” The U.K. formally exited the EU (and the European Economic Area (“EEA”)) on January 31, 2020 and a transition period is in place until December 31, 2020 during which time the U.K. will remain in both the EU customs union and single market and follow EU ~~rules.~~rules, including those extending to EEA states. There is a significant lack of clarity over the terms of the U.K.’s future relationship with the EU, and the international bodies that are linked to it, after ~~that~~this date. We are currently unable to determine the impact that Brexit will have on our business, as any impact will depend, in part, on the outcome of tariff, trade, regulatory, and other negotiations. For additional information on how Brexit could affect our business, see Part I,II, Item 1A, Risk Factors in ~~our 2019~~this Form ~~10-K.~~10-Q.

Brexit could adversely affect U.K., regional (including European), and worldwide economic and market conditions, and could contribute to instability in global financial and foreign currency exchange markets, including volatility in the value of the British Pound and Euro. We have foreign currency exchange exposure management programs designed to help reduce the impact from foreign currency exchange rate movements. Net revenues generated from our U.K. operations constituted ~~10%~~11% of total net revenues for ~~both~~each of the three and six months ended ~~March 31,~~June 30, 2020 and June 30, 2019, respectively. During each of these periods, net revenues generated from the EU (excluding the U.K.) constituted less than 20% of total net revenues. Approximately ~~35%~~38% and 37% of our gross loans and interest receivables as of ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, were generated from our U.K. operations. Approximately 7%8% and 6% of our gross loans and interest receivables as of ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, were generated from the EU (excluding the U.K.).

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Overview of Results of Operations

The following table provides a summary of our condensed consolidated financial results for the three and six months ended ~~March 31,~~June 30, 2020 and 2019:


	Three Months Ended March 31,						Percent Increase/(Decrease)			Three Months Ended June 30,								Percent Increase/(Decrease)				Six Months Ended June 30,							Percent Increase/(Decrease)
	2020			2019						2020			2019								2020				2019			Percent Increase/(Decrease)
	(In millions, except percentages and per share data)									(In millions, except percentages and per share data)
Net revenues	$	4,618		$	4,128		12	%	Net revenues	$	5,261		$	4,305		22	%	$	9,879			$	8,433			17	%
Operating expenses	4,220			3,610			17	%	Operating expenses	4,310			3,600			20	%	8,530				7,210				18	%
Operating income	$	398		$	518		(23	)%	Operating income	$	951		$	705		35	%	$	1,349			$	1,223			10	%
Operating margin	9		%	13		%	**		Operating margin	18		%	16		%	**		14		%		15		%		**
Other income (expense), net	$	(135	)	$	199		(168	)%	Other income (expense), net	$	848		$	238		256	%	$	713			$	437			63	%
Income tax expense	$	179		$	50		258	%	Income tax expense	$	269		$	120		124	%	$	448			$	170			164	%
Effective tax rate	68		%	7		%	**		Effective tax rate	15		%	13		%	**		22		%		10		%		**
Net income	$	84		$	667		(87	)%	Net income	$	1,530		$	823		86	%	$	1,614			$	1,490			8	%
Net income per diluted share	$	0.07		$	0.56		(87	)%	Net income per diluted share	$	1.29		$	0.69		86	%	$	1.36			$	1.25			9	%
Net cash provided by operating activities	$	1,504		$	1,027		46	%	Net cash provided by operating activities	$	2,383		$	1,174		103	%	$	3,887			$	2,201			77	%

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Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as interest rates, foreign currency exchange rates, and equity investment risk. Management establishes and oversees the implementation of policies governing our investing, funding, and foreign currency derivative activities in order to mitigate market risks. We monitor risk exposures on an ongoing basis.

Interest Rate Risk

We are exposed to interest-rate risk relating to our investment portfolio and from interest-rate sensitive assets underlying the customer balances we hold on our condensed consolidated balance sheets as customer accounts.

As of ~~March 31,~~June 30, 2020 and December 31, 2019, approximately ~~73%~~47% and 63%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents. The assets underlying the customer balances which we hold on our condensed consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, U.S. and foreign government and agency securities, and corporate debt securities. We seek to preserve principal while holding eligible liquid assets, as defined by applicable regulatory requirements and commercial law in certain jurisdictions where we operate, equal to at least 100% of the aggregate amount of all customer balances. We do not pay interest on amounts due to customers.

We have ~~$5.0~~$9.0 billion in fixed rate debt with varying maturity dates. Since these notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates. However, the fair value of these notes fluctuates when interest rates change. We also have various committed credit facilities available to us aggregating to $6.0 billion. We are obligated to pay interest on ~~loans~~borrowings under these facilities as well as other customary fees, including an upfront fee and an unused commitment fee based on our debt rating. Borrowings under these facilities, if any, bear interest at floating rates. As a result, we are exposed to the risk related to fluctuations in interest rate to the extent of our borrowings. As of ~~March 31,~~both June 30, 2020 and December 31, 2019, we had ~~$3.0 billion and~~ no amounts outstanding under these credit ~~facilities, respectively.~~facilities. For additional information, see “Note 12—Debt” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Interest rates may also adversely impact our customers’ spending levels and ability and willingness to pay outstanding amounts owed to us. Higher interest rates often lead to higher payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net income.

A 100 basis point increase in interest rates would not have had a material impact on our financial assets or liabilities at ~~March 31,~~June 30, 2020 and December 31, 2019.

Foreign Currency Exchange Rate Risk

We have significant operations internationally that are denominated in foreign currencies, primarily the British Pound, Euro, Australian Dollar, and Canadian Dollar, subjecting us to foreign currency exchange rate risk, which may adversely impact our financial results. We transact business in various foreign currencies and have significant international revenues and costs. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services. Our cash flows, results of operations, and certain of our intercompany balances that are exposed to foreign currency exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities. We are generally a net receiver of foreign currencies and therefore benefit from a weakening of the U.S. dollar, and are adversely affected by a strengthening of the U.S. dollar, relative to foreign currencies.

We have a foreign currency exchange exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our consolidated cash flows and results of operations through the execution of foreign currency exchange contracts. These foreign currency exchange contracts are accounted for as derivative instruments; for additional details related to our foreign currency exchange contracts, please see “Note 10—Derivative Instruments” to the condensed consolidated financial statements included in this Form 10-Q.

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We use foreign currency exchange forward contracts to protect our forecasted U.S. dollar-equivalent earnings and our investment in a foreign subsidiary from adverse changes in foreign currency exchange rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign currency exchange rate movements. We designate these contracts as cash flow and net investment hedges for accounting purposes. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”). Cash flow hedges are subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings. The accumulated gains and losses associated with the net investment hedge will remain in AOCI until the foreign subsidiary is sold or substantially liquidated, at which point they will be reclassified into earnings.

We considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that changes in exchange rates of 20% for all currencies could be experienced in the near term. If the U.S. dollar weakened by 20% at ~~March 31,~~June 30, 2020 and December 31, 2019, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately ~~$840~~$736 million and $900 million lower, respectively. If the U.S. dollar strengthened by 20% at ~~March 31,~~June 30, 2020 and December 31, 2019, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately ~~$840~~$736 million and $900 million higher, respectively.

We have an additional foreign currency exchange management program ~~whereby~~in which we use foreign currency exchange contracts to offset the foreign currency exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. These contracts are not designated as hedging instruments and reduce, but do not entirely eliminate, the impact of currency exchange rate movements on our assets and liabilities. The foreign currency exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign currency exchange contracts.

Adverse changes in exchange rates of 20% for all currencies would have resulted in an adverse impact on income before income taxes of approximately ~~$94~~$267 million and $147 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, without considering the offsetting effect of hedging. Foreign currency exchange contracts in place as of ~~March 31,~~June 30, 2020 would have positively impacted income before income taxes by approximately ~~$99~~$269 million, resulting in a net positive impact of approximately $5$2 million. Foreign currency exchange contracts in place as of December 31, 2019 would have positively impacted income before income taxes by approximately $153 million, resulting in a net positive impact of approximately $6 million. These reasonably possible adverse changes in exchange rates of 20% were applied to total monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.

Equity Investment Risk

Our strategic investments are subject to a variety of market-related risks that could substantially reduce or increase the carrying value of the portfolio. As of ~~March 31,~~June 30, 2020 and December 31, 2019, our strategic investments totaled ~~$1.7~~$2.6 billion and $1.8 billion, respectively, which represented approximately ~~14%~~16% and 13% of our total cash, cash equivalents, and investment portfolio at those respective dates. Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are investments in privately held companies that are not publicly traded. We are required to record all adjustments to the carrying value of these strategic investments through our condensed consolidated statements of income. As such, we anticipate volatility to our net income in future periods due to changes in fair value related to our investments in marketable equity securities and changes in observable prices related to our non-marketable equity securities accounted for under the Measurement Alternative. These changes could be material based on market conditions. A hypothetical adverse change of 10% in the carrying value of our strategic investments as of ~~10%,~~June 30, 2020, which could be experienced in the near term, would ~~result~~have resulted in a decrease of approximately ~~$170~~$263 million to the carrying value of the portfolio. We review our non-marketable equity investments accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value. Our analysis includes a review of recent operating results and trends, recent purchases and sales of securities, and other publicly available data.

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Item 4: Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) required by Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

(b) Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1: Legal Proceedings

The information set forth under “Note 13—Commitments and Contingencies—Litigation and Regulatory Matters” to the condensed consolidated financial statements included in Part I, Item 1 of this report is incorporated herein by reference.

Item 1A: Risk Factors

We are subject to various risks and uncertainties, which could materially affect our business, results of operations, financial condition, future results, and the trading price of our common stock. You should read carefully the following information together with the information appearing in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 6, 2020 (“2019 Form 10-K”). The following information supplements and, to the extent inconsistent, supersedes some of the information appearing in the Risk Factors section of our 2019 Form 10-K. These risk factors, as well as our condensed consolidated financial statements and notes thereto and the other information appearing in this report, should be reviewed carefully for important information regarding risks that affect us.

The ~~recent~~ novel coronavirus ~~(COVID-19)~~(“COVID-19”) outbreak could materially and adversely affect our business, ~~our~~ financial condition, and results of operations.

The novel strain of the coronavirus identified in late 2019 has spread globally, and the World Health Organization characterized the outbreak ~~was characterized~~ as a pandemic ~~by the World Health Organization~~ in March 2020. The outbreak has resulted in government authorities and businesses throughout the world implementing numerous measures intended to contain and limit the spread of COVID-19, including travel bans and restrictions, quarantines, shelter-in-place and lock-down orders, and business limitations and shutdowns. These measures have negatively impacted consumer and business spending and payments activity generally, and have significantly contributed to deteriorating macroeconomic conditions and higher unemployment in some countries, including those in which we have significant operations. While governments around the world have taken steps to attempt to mitigate some of the more severe anticipated economic effects of COVID-19, there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

The COVID-19 outbreak has adversely impacted and is likely to further adversely impact ~~our results of operations, as well as~~ the operations of our customers, suppliers, vendors and other business ~~partners. As~~partners, and may adversely impact our results of operations in the ~~COVID-19 outbreak has spread, cross-border~~future. Cross-border activity and domestic commerce ~~have sharply declined, due in large part to~~may be adversely impacted by the measures described above, which are intended to contain and limit the outbreak’s spread. ~~These~~While many of these mitigation measures are gradually being lifted, to the extent they may remain in place or are reinstated for a significant ~~period~~periods of time, ~~and are likely to continue to~~they may adversely affect our business, financial condition, and results of ~~operations and financial condition.~~operations. In particular, we have experienced and may continue to experience adverse financial impacts from a number of operational factors, including, but not limited to, the following:

•Merchants selling goods or services in advance of the date of their delivery (e.g., travel and events verticals) or experiencing bankruptcy, insolvency, business failure, or other business interruption, which could result in our ~~being~~becoming liable to the buyers of such goods or services, either through our buyer protection program or through chargebacks on payment cards used by customers to fund their payments;

•Merchants who utilize our PayPal Working Capital and PayPal Business Loan products defaulting on their payment obligations;


•	•Consumers who utilize our PayPal Credit products defaulting on their payment obligations, including U.S. consumers, which may adversely impact our revenue share on the portfolio of U.S. consumer receivables owned by Synchrony Bank; •~~revenue share on the portfolio of U.S. consumer receivables owned by Synchrony Bank~~;

Increased cyber and payment fraud risk related to COVID-19, as cybercriminals attempt to profit from the disruption in light of increased online banking, ~~ecommerce,~~e-commerce, and other online activity;

•Challenges to the availability and reliability of our products and services resulting from changes to our normal operations, including due to one or more clusters of COVID-19 cases occurring at our data centers or customer service and operations centers or the temporary closure of sites due to mandatory local ~~lockdown~~lock-down requirements, which may impact our employees and/or the systems or employees of our customers and business partners; and

•An increased volume of unanticipated customer requests for support (resulting in increased call center volume to our customer support and operations centers) and regulatory requests for information and support or additional regulatory requirements, which could require additional resources and costs to address.

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~~These~~A sustained or prolonged COVID-19 outbreak or a resurgence could exacerbate the factors described above and intensify the impact on our business, and the resumption of economic activity and business operations to pre-pandemic levels may ~~remain prevalent for a significant period of time~~be delayed or constrained by lingering effects on our merchants and consumers. Accordingly, these factorsmay ~~continue to~~ adversely affect our business, financial condition, and results of operations, ~~and financial condition,~~ even after the COVID-19 outbreak has subsided. In addition, actions that we have taken or may take in the future intended to assist customers impacted by COVID-19 (e.g., waiving certain fees and deferring repayments on business loans for certain affected small business customers) may negatively impact our results of operations.

While the current macroeconomic environment as a result of the COVID-19 outbreak has adversely impacted general consumer and merchant spending with a more pronounced impact on travel and events verticals, the spread of COVID-19 has also accelerated the shift from in-store shopping and traditional in-store payment methods (e.g., credit cards, debit cards, cash) towards e-commerce and digital payments and resulted in increased customer demand for safer payment and delivery solutions (e.g. contactless payment methods, buy online and pick up in store) and a significant increase in online spending in certain verticals that have historically had a strong in-store presence. On balance, our business has benefited from these behavioral shifts, including a significant increase in net new active accounts and payments volume. To the extent that consumer preferences revert to pre-COVID-19 behaviors as mitigation measures to limit the spread of COVID-19 are lifted, our business, financial condition and results of operations could be adversely impacted.

The COVID-19 outbreak has required and is likely to continue to require significant management attention and substantial investments of time and resources across our enterprise. The spread of COVID-19 has caused us to make significant modifications to our business practices, including ~~restrictions on employee travel, closings or significant limitations on employee~~enabling most of our workforce to work ~~locations,~~from home, establishing strict health and ~~cancellation of~~safety protocols for our offices, restricting physical participation in meetings, events, and ~~conferences. An increased~~conferences and imposing restrictions on employee travel. The significant increase in the number of our employees who are working remotely as a result of the outbreak, and an extended period of remote work arrangements and subsequent reintroduction into the workplace could introduce operational risk, increase cybersecurity risk, strain our business continuity plans, negatively impact productivity, give rise to claims by employees, and impair our ability to manage our business or otherwise adversely affect our business. Additionally, COVID-19 could negatively affect our internal controls over financial reporting as a significant portion of our workforce is required to work from home and therefore new or modified processes, procedures, and controls could be required to respond to changes in our business environment. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will otherwise be satisfactory to government authorities.

The extent to which the COVID-19 pandemic impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, difficult to predict and subject to change, including, but not limited to, the duration, scope and severity of the outbreak, the actions to contain COVID-19 or treat its impact, and how quickly and to what extent normal economic and operating conditions could potentially resume.

The spread of COVID-19 has led to disruption and volatility in the global capital markets, which may increase our cost of capital and may adversely affect our ability to access the capital markets. Even after the COVID-19 outbreak has subsided, we may continue to experience adverse impacts to our business as a result of the global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future. In addition, we cannot predict the impact that COVID-19 will have on our customers, suppliers, vendors, and other business partners, and their respective financial condition, and any significant negative impact on these parties could materially and adversely impact us. Additionally, government regulations or legislation adopted directly or indirectly in response to the COVID-19 outbreak may directly or indirectly negatively impact our business.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. The extent to which the COVID-19 pandemic impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, difficult to predict and subject to change, including, but not limited to, the duration, scope and severity of the outbreak, actions taken to contain COVID-19 or treat its impact, and how quickly and to what extent normal economic and operating conditions could potentially resume. While we do not yet know the full extent of the impacts on our business, financial condition, and results of operations, or the global economy as a whole, these impacts, individually or collectively, could have a material adverse impact on our business, financial condition and results of operations. In addition, the impact of COVID-19 may heighten or exacerbate many of the other risks discussed in “Item 1A—Risk Factors” in 2019 Form 10-K, any of which could have a material impact on us.

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The United Kingdom’s departure from the EU could adversely affect us.

The United Kingdom (“U.K.”) held a referendum in June 2016 in which a majority of voters approved an exit from the European Union (“EU”) (commonly referred to as “Brexit”). The U.K. formally exited the EU (and the European Economic Area (“EEA”)) on January 31, 2020 and a transition period is in place until December 31, 2020 during which time the U.K. will remain in both the EU customs union and single market and follow EU rules, including those extending to EEA states. There is a significant lack of clarity over the terms of the U.K.'s future relationship with the EU, and the international bodies that are linked to it, after this date.

Brexit could therefore adversely affect U.K., regional (including European), and worldwide economic and market conditions and could contribute to instability in global financial and foreign currency exchange markets, including volatility in the value of the British Pound and Euro, which in turn could adversely affect us or our customers and companies with which we do business, particularly in the U.K. Brexit could lead to greater restrictions on the supply and availability of goods and services between the U.K. and the EEA region, with the potential inability of U.K. companies to fulfill orders which could lead to a risk of increased merchant defaults and buyer protection claims. Brexit could also trigger a general deterioration in credit conditions, a downturn in consumer sentiment, and overall negative economic growth. Any of these scenarios could have an adverse effect on our business or our customers.

In addition, Brexit could lead to legal uncertainty and increased complexity for financial services firms as national laws and regulations in the U.K. start to diverge from EU laws and regulations. In particular, depending on the terms of Brexit and the nature of the U.K.’s future trading relationships with European countries after December 31, 2020, we expect to face new regulatory costs and challenges, including the following:

•if we are unable to utilize appropriate authorizations and regulatory permissions, our European operations could lose their ability to offer services into the U.K. market on a cross-border basis and our U.K.-based operations could lose their ability to offer services on a cross-border basis in the European markets. For example, our ability to work primarily with the Luxembourg regulator as the lead authority for various aspects of the U.K. operations of PayPal (Europe) S.à.r.l. et Cie., SCA (“PayPal (Europe)”) and with the Swedish regulator for various aspects of the U.K. operations of iZettle AB (“iZettle”) may be impacted;

•we could be required to obtain additional regulatory permissions to operate in the U.K. market, adding costs and potential inconsistency to our business. Depending on the capacity of the U.K. authorities, the criteria for obtaining permission, and any possible transitional arrangements, our business in the U.K. could be materially affected or disrupted;

•we could be required to comply with legal and regulatory requirements in the U.K. that are in addition to, or inconsistent with, those of the EU, leading to increased complexity and costs for our European and U.K. operations; and

•our ability to attract and retain the necessary human resources in appropriate locations to support our U.K. and European business could be adversely impacted.

These and other factors related to Brexit could, individually or in the aggregate, have a material adverse impact on our business, financial condition, and results of operations.

Our business is subject to extensive government regulation and oversight. Our failure to comply with extensive, complex, overlapping, and frequently changing rules, regulations, and legal interpretations could materially harm our business.

Our business is subject to laws, rules, regulations, policies, and legal interpretations in the markets in which we operate, including, but not limited to, those governing:

•banking,

•credit,

•deposit taking,

•cross-border and domestic money transmission,

•prepaid access,

•foreign currency exchange,

•privacy,

•data governance,

•data protection,

•cybersecurity,

•banking secrecy,

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•fraud detection,

•payment services (including payment processing and settlement services),

•consumer protection,

•antitrust and competition,

•economic and trade sanctions,

•anti-money laundering, and

•counter-terrorist financing.

Our success and increased visibility may result in increased regulatory oversight and enforcement and more restrictive rules and regulations that apply to our business. As we introduce new products and services, or expand our product and service offerings, in U.S. and international markets, we may become subject to additional regulations, restrictions, and licensing requirements. In particular, as we expand and localize our international activities, we have become increasingly obligated to comply with the laws of the markets in which we operate. In addition, because our services are accessible worldwide and we facilitate sales of goods and provide services to customers worldwide, one or more jurisdictions may claim that we or our customers are required to comply with their laws. Laws regulating the internet, mobile, and related technologies outside of the U.S. often impose different, more specific, or even conflicting obligations on us, as well as broader liability. For example, certain transactions that may be permissible in a local jurisdiction may be prohibited by regulations of U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) or U.S. anti-money laundering or counter-terrorist financing regulations.

Any failure or perceived failure to comply with existing or new laws, regulations, or orders of any government authority (including changes to or expansion of the interpretation of those laws, regulations, or orders), including those discussed in this risk factor, may subject us to significant fines, penalties, criminal and civil lawsuits, forfeiture of significant assets, and enforcement actions in one or more jurisdictions; result in additional compliance and licensure requirements; cause us to lose existing licenses or prevent or delay us from obtaining additional licenses that may be required for our business; increase regulatory scrutiny of our business; restrict our operations; and force us to change our business practices, make product or operational changes, or delay planned transactions, product launches or improvements. Any of the foregoing could, individually or in the aggregate, harm our reputation, damage our brands and business, and adversely affect our results of operations and financial condition. The complexity of U.S. federal and state and international regulatory and enforcement regimes, coupled with the global scope of our operations and the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions. We have implemented policies and procedures designed to help ensure compliance with applicable laws and regulations, but there can be no assurance that our employees, contractors, and agents will not violate such laws and regulations.

Payments Regulation

In the U.S., PayPal, Inc. has obtained licenses to operate as a money transmitter (or its equivalent) in the states where such licenses are required, as well as in the District of Columbia, the U.S. Virgin Islands, and Puerto Rico. These licenses include not only the PayPal branded products and services in these states, but also our ~~Braintree,~~ Venmo, Hyperwallet and Xoom products and services. ~~We may also maintain such licenses for certain companies that we have acquired, such as Hyperwallet.~~ As a licensed money transmitter, PayPal is subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, and inspection by state regulatory agencies. Accordingly, if we violate these laws or regulations, we could be subject to liability and/or additional restrictions, forced to cease doing business with residents of certain states, forced to change our business practices, or required to obtain additional licenses or regulatory approvals, which could impose substantial costs.

While we currently allow our customers with payment cards to send payments from approximately 200 markets, we allow customers in only approximately half of those markets (including the U.S.) to also receive payments, in some cases with significant restrictions on the manner in which customers can hold balances or withdraw funds. These limitations may adversely affect our ability to grow our business in these markets.

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We principally provide our services to customers in the EU and the UK through PayPal (Europe), our wholly-owned subsidiary that is licensed and subject to regulation as a credit institution in Luxembourg. Accordingly, PayPal (Europe) is potentially subject to significant fines or other enforcement action if it violates the disclosure, reporting, anti-money laundering, capitalization, corporate governance, privacy, data protection, data governance, information security, banking secrecy, taxation, cross-border payment, risk management, sanctions, or other requirements imposed on Luxembourg credit institutions. In addition, EU laws and regulations are subject to potentially inconsistent interpretations by the countries that are members of the EU, which can make compliance more costly and operationally difficult to manage. Moreover, the countries that are EU members may each have different and potentially inconsistent domestic regulations implementing European Directives, which could make compliance more costly and operationally difficult to manage. The Revised Payment Services Directive (“PSD2”) took effect in Europe in 2018, with certain requirements becoming applicable from 2019 or later. PSD2 enables new payment and information sharing models whereby regulated payment providers are able to access bank and payment accounts (including PayPal accounts) for the purposes of accessing account information or initiating a payment on behalf of a customer. Such access could subject us to data security and other legal and financial risks and could create new competitive forces and new types of competitors in the European payments market. PSD2 also imposes new standards for payment security and strong customer authentication (“SCA”) that may make it more difficult and time consuming to carry out ~~a PayPal transaction,~~transactions on our Payments Platform, which may adversely impact PayPal’s European customer value proposition. ~~SCA was implemented in 2019.~~ In line with an opinion issued by the European Banking Authority (“EBA”), national competent authorities (including Luxembourg) have announced enforcement deferral periods for migration to SCA requirements for e-commerce card-based transactions. PayPal (Europe) has implemented SCA customer processes covering the majority of payment transactions initiated within the EU and has plans to finalize full compliance with SCA; amending or accelerating these plans may adversely impact PayPal’s European customer value proposition.

If the business activities of PayPal (Europe) exceed certain thresholds, or if the European Central Bank (“ECB”) so determines, PayPal (Europe) may be deemed a significant supervised entity such that some activity of PayPal (Europe) could become directly regulated by the ECB, rather than by the CSSF, the Luxembourg regulator, as its national supervisor, which could subject us to additional requirements and would likely increase compliance costs.

In many of the other markets outside the U.S. in which we do business, we serve our customers through PayPal Pte. Ltd., our wholly-owned subsidiary based in Singapore. PayPal Pte. Ltd. is supervised by the Monetary Authority of Singapore (“MAS”), but does not hold a remittance license. As a result, PayPal Pte. Ltd. is not able to offer outbound remittance payments from Singapore, and can only offer payments for the purchase of goods and services in Singapore. In many of the markets (other than Singapore) served by PayPal Pte. Ltd., it is unclear and uncertain whether our Singapore-based service is subject only to Singapore law or, if it is subject to the application of local laws, whether such local laws would require a payment processor like us to be licensed as a payments service, bank, financial institution, or otherwise. The Payment Services Act came into effect in Singapore in January 2020. PayPal Pte. Ltd. is currently operating within a statutory transitional period, and will be required to apply for a license with MAS before January 27, 2021 in order to continue to provide payments services in Singapore. Once PayPal Pte. Ltd. obtains its license, we will be required to comply with new regulatory requirements that will result in increased operational complexity and costs for our Singapore and international operations.

In certain markets outside the U.S. (e.g., Australia), we provide our services to customers through a local subsidiary subject to local regulatory supervision or oversight, which may be the holder of a local payment license, certification, or other authorization. In such markets, we may be subject to significant fines or other enforcement action if we violate applicable reporting, anti-money laundering, capital requirements, privacy, corporate governance, risk management, or any other applicable requirements.

PayPal Australia Pty Limited (“PPAU”) self-reported a potential violation to the Australian Transaction Reports and Analysis Centre (“AUSTRAC”) on May 22, 2019 with respect to the reporting of international funds transfer instructions under the Anti-Money Laundering and Counter-Terrorism Financing Act ~~2006 (“AML/CTF Act”).~~2006. Please see ~~"Note~~“Note 13—Commitments and Contingencies—Litigation and Regulatory Matters” for additional disclosure regarding this matter.

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From time to time, we may acquire entities subject to local regulatory supervision or oversight. For example, in December 2019, we completed our acquisition of a 70% equity stake in Guofubao Information Technology Co. (GoPay), Ltd. (“GoPay”), a provider of online payment services in China. GoPay holds ~~a number of payment~~certain licenses associated with its payments business ~~licenses~~ in China and is subject to regulatory supervision by the People’s Bank of China and other regulatory bodies. We have been, and expect to continue to be, required to apply for various licenses, certifications, and regulatory approvals in a number of the jurisdictions where we provide our services, including due to changes in applicable laws and regulations or the interpretation of such laws and regulations. There can be no assurance that we will be able to (or decide to) obtain any such licenses, certifications, and approvals. In addition, there are substantial costs and potential product changes involved in maintaining and renewing such licenses, certifications, and approvals, and we could be subject to fines, other enforcement action, and litigation if we are found to violate disclosure, reporting, anti-money laundering, capitalization, corporate governance, or other requirements of such licenses. These factors could impose substantial additional costs, involve considerable delay to the development or provision of our products or services, require significant and costly operational changes, or prevent us from providing our products or services in a given market.

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In many countries, it may not be clear whether we are required to be licensed as a payment services provider, bank, financial institution, or otherwise. In such markets, we may rely on local banks to process payments and conduct foreign currency exchange transactions in local currency. Local regulators may use their authority to slow or halt payments to local merchants conducted through local banks or otherwise prohibit or impede us from doing business in a jurisdiction. Such regulatory actions or the need to obtain licenses, certifications, or other regulatory approvals could impose substantial costs, involve considerable delay to the provision or development of our services, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business and products, or prevent us from providing any products or services in a given market.

Consumer Protection

We are subject to consumer protection, antitrust, and competition-related laws and regulations in the countries in which we operate. In the U.S., we are subject to federal and state consumer protection laws and regulations applicable to our activities, including the Electronic Fund Transfer Act (“EFTA”) and Regulation E as implemented by the Consumer Financial Protection Bureau (“CFPB”). These regulations require us to provide advance disclosure of changes to our services, follow specified error resolution procedures, and reimburse consumers for losses from certain transactions not authorized by the consumer. Additionally, technical violations of consumer protection laws could result in the assessment of actual damages or statutory damages or penalties of up to $1,000 in individual cases or up to $500,000 per violation in any class action and treble damages in some instances; we could also be liable for plaintiffs’ attorneys’ fees in such cases. We are subject to, and have paid amounts in settlement of, lawsuits containing allegations that our business violated the EFTA and Regulation E or otherwise advance claims for relief relating to our business practices (e.g., that we improperly held consumer funds or otherwise improperly limited consumer accounts).

The CFPB issued a final rule on prepaid accounts that came into effect on April 1, 2019. The rule’s definition of prepaid account includes certain accounts that are capable of being loaded with funds and whose primary function is to conduct transactions with multiple, unaffiliated merchants, at ATMs and/or for P2P transfers. That definition includes certain digital wallets. The rule’s requirements include, among other things, the disclosure of fees and other information to the consumer prior to the creation of a prepaid account; the extension of Regulation E liability limits and error-resolution requirements to all prepaid accounts; the application of Regulation Z credit card requirements to prepaid accounts with overdraft and credit features; and the submission of prepaid account agreements to the CFPB and their publication to the general public. We have implemented certain changes to comply with the final rule and made substantial changes to the design of certain U.S. consumer accounts and their operability, which could lead to unintended customer confusion and dissatisfaction, discourage customers from opening new accounts, require us to reallocate resources, and increase our costs, which could negatively affect our business. In December 2019, we filed a lawsuit in the U.S. District Court for the District of Columbia against the CFPB challenging the validity of the prepaid account rule as applied to PayPal, Inc. The court has issued a briefing schedule requiring the filing of all written submissions by September 25, 2020. The assigned judge can resolve the matter without a trial at any time after briefing is completed. As with any litigation, there is no guarantee that our claims will succeed.

In May 2015, we entered into a Stipulated Final Judgment and Consent Order (“Consent Order”) with the CFPB in which we settled regulatory claims arising from PayPal Credit practices between 2011 and 2015. The Consent Order included obligations of PayPal to pay $15 million in redress to consumers and a $10 million civil monetary penalty, and required PayPal to make various changes to PayPal Credit disclosures and related business practices. We continue to cooperate and engage with the CFPB and work to ensure compliance with the Consent Order, which may result in our incurring additional costs.

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PayPal principally offers its services in EEA countries through a “passport” notification process through the Luxembourg regulator (in the case of PayPal (Europe)) or the Swedish regulator (in the case of iZettle AB) to regulators in other EEA member states in accordance with EU regulations. Regulators in these countries could notify us of local consumer protection laws that apply to our business, in addition to Luxembourg or Swedish consumer protection laws, and could also seek to persuade the local regulator to order PayPal to conduct its activities in the local country directly or through a branch office. Similarly, as a result of Brexit, the U.K. regulators may impose new or different legal requirements on our U.K. business, or require our activities to be conducted locally in the U.K. through a branch office or directly. These or similar actions by these regulators could increase the cost of, or delay, our plans to expand our business in Europe and the U.K.

Privacy and Protection of Customer Data

We are subject to a number of laws, rules, directives, and regulations (which we refer to as “privacy and data protection laws”) relating to the collection, use, retention, security, processing, and transfer (which we collectively refer to as “processing”) of personally identifiable information about our customers, our merchants’ customers, and employees (which we refer to as “personal data”) in the countries where we operate. Our business relies on the processing of personal data in many jurisdictions and the movement of data across national borders. As a result, much of the personal data that we process, which may include certain financial information associated with individuals, is regulated by multiple privacy and data protection laws and, in some cases, the privacy and data protection laws of multiple jurisdictions. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries, and other parties with which we have commercial relationships.

Regulatory scrutiny of privacy, data protection, cybersecurity practices, and the processing of personal data is increasing around the world. There is uncertainty associated with the legal and regulatory environment relating to privacy and data protection laws, which continue to develop in ways we cannot predict, including with respect to evolving technologies such as cloud computing, artificial intelligence, and blockchain technology. Any failure or perceived failure to comply with existing or new laws of any government authority (including changes to or expansion of the interpretation of those laws), including those discussed in this risk factor, may subject us to significant fines, penalties, civil lawsuits, and enforcement actions in one or more jurisdictions, result in additional compliance requirements, increase regulatory scrutiny of our business, restrict our operations, and force us to change our business practices, make product or operational changes, or delay planned product launches or improvements.

Any failure, or perceived failure, by us to comply with our privacy policies as communicated to users in one or more jurisdictions could result in proceedings or actions against us by data protection authorities, government entities or others, including class action privacy litigation in certain jurisdictions. Such proceedings or actions could subject us to significant fines, penalties, judgments, and negative publicity which may materially harm our business. The foregoing may require us to change our business practices and would likely increase the costs and complexity of compliance. In addition, compliance with inconsistent privacy and data protection laws may restrict our ability to provide products and services to our customers.

PayPal relies on a variety of compliance methods to transfer personal data of EEA individuals to the U.S., including reliance on Binding Corporate Rules (“BCRs”) for internal transfers of certain types of personal data and Standard Contractual Clauses (“SCCs”) as approved by the European Commission for transfers to and from third parties. PayPal must also ensure that third parties processing personal data of PayPal’s EEA customers and/or employees outside of the EEA have compliant transfer mechanisms. In October 2015, the European Court of Justice invalidated U.S.-EU Safe Harbor framework clauses that were previously relied upon by some PayPal vendors to lawfully transfer personal data of EU citizens to U.S. companies, and PayPal entered into SCCs with those third parties which had previously relied on the U.S.-EU Safe Harbor framework. In July 2016, the U.S. and EU authorities agreed on a replacement for the Safe Harbor framework known as “Privacy Shield.” PayPal did not certify under the Privacy Shield regime and continues to use SCCs and BCRs as the primary cross border data transfer mechanisms. Both the Privacy Shield framework and SCCs continued to face legal challenges and in July 2020, the European Court of Justice invalidated the Privacy Shield. To the extent that an entity acquired by PayPal or third party relies on the Privacy Shield, PayPal’s ability to process EEA personal data with third parties outside of the EEA and intra-group with its U.S. affiliates could be jeopardized.

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PayPal is not a bank or licensed lender in the U.S. and relies upon third parties to make loans and provide other products critical to our business, which raises additional risks.

As PayPal is neither a chartered financial institution, nor licensed to make loans in any state in the U.S., we rely on third-party chartered financial institutions to provide PayPal branded credit products to our customers in the U.S., including consumer credit products such as PayPal Credit, PayPal branded credit cards, and merchant credit products such as PayPal Working Capital and PayPal Business Loan products. Any termination or interruption in a partner bank’s ability or willingness to lend could interrupt or limit our ability to offer consumer credit and merchant credit products, which could materially and adversely affect our business. In the event of a partner bank’s inability or unwillingness to lend, we may be unable to reach a similar agreement with another chartered financial institution on favorable terms or at all. Obtaining a bank charter or lending licenses would be a costly, time-consuming and uncertain process, and would subject us to additional laws and regulatory requirements, which could significantly increase our costs and compliance obligations and require us to change our business practices, which could materially and adversely affect our business. In addition, as a service provider to these bank partners, which are federally supervised U.S. financial institutions, we are subject from time to time to examination by their federal banking regulators.

In July 2018, we completed the sale of our U.S. consumer credit receivables portfolio to Synchrony Bank, and do not hold an ownership interest in newly generated consumer credit receivables. As a part of a separate agreement, PayPal earns a revenue share on the portfolio of consumer receivables owned by Synchrony Bank, which includes both the sold and newly generated receivables. In the event the overall return on the PayPal branded credit programs funded by Synchrony does not meet a minimum rate of return (“minimum return threshold”) in a particular quarter, our revenue share for that period would be zero. Further, in the event the overall return on the PayPal branded credit programs managed by Synchrony does not meet the minimum return threshold as measured over four consecutive quarters and in the following quarter, we would be required to make a payment to Synchrony, subject to certain limitations. It may take us longer than expected to realize the anticipated benefits of the transaction, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results. In addition, our increased reliance on, and credit exposure to, Synchrony Bank, including in connection with this agreement, subjects us to risks in the nature of those discussed in the “Risk Factors” section of our 2019 Form 10-K under the captions “We rely on third parties in many aspects of our business, which creates additional risk” and “If one or more of our counterparty financial institutions default on their financial or performance obligations to us or fail, we may incur significant losses.”

In April 2020, PayPal was approved to participate in the U.S. Government’s Paycheck Protection Program, which is designed to provide a direct incentive for small businesses to keep their workers on payroll during the COVID-19 outbreak. Loans made under this program are funded by an independent chartered financial institution that we partner with, and the related receivables are not purchased by PayPal. We receive a fee for providing origination services and loan servicing for these loans and retain operational risk related to those activities. We have agreed to indemnify the chartered financial institution in connection with the services provided for loans made under this program under certain circumstances, including in the event the U.S. Small Business Administration denies a claim for payment on a loan guaranty or a loan forgiveness payment.

Our point of sale solutions expose us to additional risks.

We have several point of sale solutions, which enable merchants to accept card and contactless payments using a payments card reader attached to, or otherwise communicating with, a mobile device or to scan payment cards and codes to enable consumers to use their mobile devices to pay at the point of sale. We have entered into strategic partnerships with major payment card networks to further expand our relationship in a way that will make it easier for merchants to accept and consumers to choose to pay for transactions utilizing credit cards, debit cards, and contactless payments via PayPal at the point of sale. Those agreements provide us with access to each of these partner's tokenization services in the U.S. for in-store point of sale PayPal transactions, which we expect will increase the number of point of sale transactions that we process. We believe that our iZettle branded and PayPal contactless point of sale solutions will enable us to further expand our in-store presence. As we continue to expand our product and service offerings at the point of sale, we will face additional risks, including:

•increased expectations from merchants regarding the reliability and availability of our systems and services and correspondingly lower amounts of downtime, which we may not be able to meet;

•increased expectations from merchants that our systems and services will help them to comply with laws and regulations relating to tax, accounting, and bookkeeping, such as cash register systems, which we may not be able to meet;

•significant competition at the point of sale, particularly from established payment card providers, many of which have substantially greater resources than we do, and from other competing sale channels (such as e-commerce);

•increased targeting by fraudsters; given that our fraud models are less developed in this area, we may experience increases in fraud and associated transaction losses as we adjust to potential fraudulent activity at the point of sale;

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•exposure to product liability claims to the extent that hardware devices (e.g., card readers) that we produce for use at the point of sale malfunction or are not in compliance with laws, which could result in substantial liability and require product recalls or other actions;

•constraints in key resources to develop and maintain point of sale software and ancillary hardware;

•exposure to additional laws, rules, and regulations;

•application of payment card network rules or other agreements with payment card networks with respect to in-store transactions via PayPal;

•increased reliance on third parties involved with processing in-store payments, including independent software providers, electronic point of sale providers, hardware providers (such as card reader, cash drawer, and pin-pad providers), payment processors, and banks that enable in-store transactions; and

•lower operating income than our other payment solutions.

Unless we are able to successfully manage these risks, including driving adoption of, and significant volume through, our point of sale solutions over time, our business may be harmed.

There are risks associated with our relationship with eBay.

In connection with our separation from eBay, we entered into a separation and distribution agreement with eBay, as well as various other agreements, including an operating agreement, a tax matters agreement, an employee matters agreement, an intellectual property matters agreement, a data sharing addendum, and a product development agreement. The separation agreement, the tax matters agreement, the employee matters agreement, and the intellectual property matters agreement determined the allocation of assets and liabilities (including by means of licensing) between the companies following the separation for those respective areas and include associated indemnification obligations. The operating agreement, the data sharing addendum, and the product development agreement established certain commercial relationships between eBay and us related to payment processing, credit, and data sharing. If either we or eBay are unable to satisfy our performance, payment, or indemnification obligations under these agreements, we could incur operational difficulties or losses or be required to make substantial indemnification or other payments to eBay. Disputes between eBay and us have arisen and others may arise in the future. An adverse outcome in any such matters could materially and adversely affect our business, results of operations, and financial condition.

Our operating agreement with eBay entered into at separation had a term of five years that expired in July 2020, and provides for a one-year tail period under that agreement and certain related agreements. The operating agreement defines a number of important elements of our commercial relationship with eBay, as well as certain obligations and restrictions related to PayPal’s provision of services to certain competitive platform operators of eBay (as specified in the operating agreement). While eBay remains a significant source of our revenues and operating income, we expect the portion of our revenue and operating income attributable to eBay will continue to decline due to various factors (many of which are beyond our control), including the speed and extent to which eBay intermediates payments on its platform (including by acting as a merchant of record and migrating eBay merchants to eBay's managed payments platform), limits the availability of PayPal as a payment option or offers (or promotes) alternative payment options, directs transactions on its platforms to different providers of payment services, or eliminates or modifies its risk management or customer protection programs on its platforms, which could result in customer dissatisfaction, reduction in eBay volume, and other consequences adverse to our business. If we are unable to generate sufficient business from our non-eBay customers to offset the expected reduction in the portion of our business attributable to eBay, it could materially impact the growth in our business and our ability to meet our long-term financial targets.

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Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

~~Issuances of Unregistered Securities~~

On January 3, 2020, in connection with the closing of the acquisition of Honey Science Corporation (“Honey”), the Company issued 2,433,499 shares of deferred and restricted shares to certain former holders of Honey equity securities (the “Honey Securityholders”) in exchange for certain Honey shares, with an aggregate value of approximately $265 million. The deferred and restricted shares are subject to repurchase or forfeiture in certain circumstances and vest over three years. The deferred and restricted shares were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon one or more of the following exemptions: Section 4(a)(2) of the Securities Act, Regulation D promulgated under the Securities Act, and/or Regulation S promulgated under the Securities Act.

Repurchases of Equity Securities

~~In April 2017, our Board of Directors authorized a stock repurchase program that provided for the repurchase of up to $5 billion of our common stock, with no expiration from the date of authorization.~~ In July 2018, our Board of Directors authorized ~~an additional~~a stock repurchase program that provides for the repurchase of up to $10 billion of our common stock, with no expiration from the date of authorization. ~~This program became effective during the first quarter of 2020 upon completion of the April 2017 stock repurchase program.~~ Our stock repurchase ~~programs are~~program is intended to offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, may also be used to make opportunistic repurchases of our common stock to reduce outstanding share count. Any share repurchases under our stock repurchase ~~programs~~program may be made through open market transactions, block trades, privately negotiated transactions including accelerated share repurchase agreements or other means at times and in such amounts as management deems appropriate, and will be funded from our working capital or other financing alternatives. Moreover, any stock repurchases are subject to market conditions and other uncertainties and we cannot predict if or when any stock repurchases will be made. We may terminate our stock repurchase ~~programs~~program at any time without prior notice.

The stock repurchase activity under our stock repurchase ~~programs~~program during the three months ended ~~March 31,~~June 30, 2020 is summarized below:


	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 March 31, 2020					$	9,268
April 1, 2020 through April 30, 2020	—	$	—	—	9,268
May 1, 2020 through May 31, 2020	—	$	—	—	9,268
June 1, 2020 through June 30, 2020	1.4	$	161.96	1.4	9,048
Balance as of June 30, 2020	1.4			1.4	$	9,048

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 December 31, 2019 $ 10,068
January 1, 2020 through January 31, 2020 —
$ —
—
10,068
February 1, 2020 through February 29, 2020 2.6
$ 113.31
2.6
9,766
March 1, 2020 through March 31, 2020 4.9
$ 102.22
4.9
9,268
Balance as of March 31, 2020 7.5
7.5
$ 9,268

⁽¹⁾Average price paid per share for open market purchases includes broker commissions.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

Table of Contents

Item 6: Exhibits

INDEX TO EXHIBITS

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

Date Filed

Filed Herewith

~~Exhibit~~

~~Number~~4.01

~~Exhibit Description~~

~~Form~~

~~Date Filed~~

~~Filed Herewith~~

~~10.01~~

~~Honey Science Corporation 2015 Equity Incentive Plan, as amended on February 17, 2017 and April 16, 2018~~

~~S-8~~

~~1/7/2020~~

~~10.02~~

~~First Amendment,~~Officer’s Certificate, dated as of ~~March 23,~~May 18, 2020, pursuant to the ~~Credit Agreement,~~Indenture, dated as of September ~~11,~~26, 2019, ~~among PayPal Holdings, Inc.,~~by and between the ~~Designated Borrowers party thereto, the Lenders party thereto~~Company and ~~JPMorgan Chase~~Wells Fargo Bank, ~~N.A., J.P. Morgan Securities Australia Limited, JPMorgan Chase Bank, N.A., Toronto Branch, and J.P. Morgan Europe Limited,~~National Association, as ~~the Administrative Agents~~Trustee

-8-K

-5/18/2020

~~10.03~~4.02

~~First Amendment, dated as~~Form of ~~March 23, 2020, to the 364-Day Credit Agreement, dated as of September 11, 2019, among PayPal Holdings, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent~~2023 Note (included in Exhibit 4.01 above)

-8-K

-5/18/2020

~~10.04~~4.03

~~Joinder Agreement, dated as~~Form of March 25, 2020, among PayPal International Treasury Centre S.à r.l., PayPal Holdings, Inc., and J.P. Morgan Securities Australia Limited, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, and JPMorgan Chase Bank, N.A., Toronto Branch, as the Administrative Agents, to the Credit Agreement, dated as of September 11, 2019, among PayPal Holdings, Inc., the Designated Borrowers party thereto, the Lenders party thereto and the Administrative Agents2025 Note (included in Exhibit 4.01 above)

-8-K

-5/18/2020

~~10.05~~4.04

~~Joinder Agreement, dated as~~Form of March 25, 2020, among PayPal (Europe) S.à r.l. et Cie, S.C.A., PayPal Holdings, Inc., and J.P. Morgan Securities Australia Limited, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, and JPMorgan Chase Bank, N.A., Toronto Branch, as the Administrative Agents, to the Credit Agreement, dated as of September 11, 2019, among PayPal Holdings, Inc., the Designated Borrowers party thereto, the Lenders party thereto and the Administrative Agents2030 Note (included in Exhibit 4.01 above)

-8-K

-5/18/2020

~~10.06~~4.05

~~Joinder Agreement, dated as~~Form of March 27, 2020, among PayPal Pte. Ltd., PayPal Holdings, Inc., and J.P. Morgan Securities Australia Limited, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, and JPMorgan Chase Bank, N.A., Toronto Branch, as the Administrative Agents, to the Credit Agreement, dated as of September 11, 2019, among PayPal Holdings, Inc., the Designated Borrowers party thereto, the Lenders party thereto and the Administrative Agents2050 Note (included in Exhibit 4.01 above)

-8-K

-5/18/2020

~~10.07~~31.01

Joinder Agreement, dated as of March 31, 2020, among PayPal Australia Pty Limited, PayPal Holdings, Inc., and J.P. Morgan Securities Australia Limited, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, and JPMorgan Chase Bank, N.A., Toronto Branch, as the Administrative Agents, to the Credit Agreement, dated as of September 11, 2019, among PayPal Holdings, Inc., the Designated Borrowers party thereto, the Lenders party thereto and the Administrative Agents

~~31.01~~

Certification of Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

31.02

Certification of Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

32.01*

Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

32.02*

Certification of Registrant’s Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

~~Table of Contents~~


101
~~101~~	The following financial information related to the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2020, 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.~~Statements	-	-	X
104			Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit ~~101.~~101	-	-	X

* The certifications furnished in Exhibits 32.01 and 32.02 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PayPal Holdings, Inc.

Principal Executive Officer:

~~PayPal Holdings, Inc.~~

By:

~~Principal Executive Officer:~~

~~By:~~

/s/ Daniel H. Schulman

Daniel H. Schulman

President and Chief Executive Officer

Date:

~~May 6,~~July 30, 2020

Principal Financial Officer:

By:

/s/ John D. Rainey

John D. Rainey

Chief Financial Officer and Executive Vice President,

Global Customer Operations

Date:

~~May 6,~~July 30, 2020

Principal Accounting Officer:

By:

/s/ Aaron A. Anderson

Aaron A. Anderson

Vice President, Chief Accounting Officer

Date:

~~May 6,~~July 30, 2020

6476



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


	March 31, 2020			December 31, 2019				June 30, 2020		December 31, 2019
	(In millions, except par value)							(In millions, except par value)
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	7,854		$	7,349		Cash and cash equivalents	$	6,353	$	7,349
Short-term investments	2,332			3,412			Short-term investments	6,695		3,412
Accounts receivable, net	412			435			Accounts receivable, net	446		435
Loans and interest receivable, net of allowances of $754 and $258 as of March 31, 2020 and December 31, 2019, respectively	3,712			3,972
Loans and interest receivable, net of allowances of $878 and $258 as of June 30, 2020 and December 31, 2019, respectively							Loans and interest receivable, net of allowances of $878 and $258 as of June 30, 2020 and December 31, 2019, respectively	3,135		3,972

Funds receivable and customer accounts	22,817			22,527			Funds receivable and customer accounts	29,031		22,527
Prepaid expenses and other current assets	1,057			800			Prepaid expenses and other current assets	840		800
Total current assets	38,184			38,495			Total current assets	46,500		38,495
Long-term investments	2,366			2,863			Long-term investments	3,175		2,863
Property and equipment, net	1,646			1,693			Property and equipment, net	1,717		1,693
Goodwill	9,124			6,212			Goodwill	9,118		6,212
Intangible assets, net	1,369			778			Intangible assets, net	1,254		778
Other assets	1,577			1,292			Other assets	1,402		1,292
Total assets	$	54,266		$	51,333		Total assets	$	63,166	$	51,333
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	217		$	232		Accounts payable	$	252	$	232

Funds payable and amounts due to customers	24,817			24,527			Funds payable and amounts due to customers	31,031		24,527
Accrued expenses and other current liabilities	2,276			2,087			Accrued expenses and other current liabilities	2,119		2,087
Income taxes payable	139			73			Income taxes payable	327		73
Total current liabilities	27,449			26,919			Total current liabilities	33,729		26,919
Deferred tax liability and other long-term liabilities	2,839			2,520			Deferred tax liability and other long-term liabilities	2,819		2,520
Long-term debt	7,967			4,965			Long-term debt	8,934		4,965
Total liabilities	38,255			34,404			Total liabilities	45,482		34,404
Commitments and Contingencies (Note 13)							Commitments and Contingencies (Note 13)
Equity:							Equity:
Common stock, $0.0001 par value; 4,000 shares authorized; 1,173 shares outstanding as of both March 31, 2020 and December 31, 2019	—			—
Common stock, $0.0001 par value; 4,000 shares authorized; 1,173 shares outstanding as of both June 30, 2020 and December 31, 2019							Common stock, $0.0001 par value; 4,000 shares authorized; 1,173 shares outstanding as of both June 30, 2020 and December 31, 2019	—		—
Preferred stock, $0.0001 par value; 100 shares authorized, unissued	—			—			Preferred stock, $0.0001 par value; 100 shares authorized, unissued	—		—
Treasury stock at cost, 113 and 105 shares as of March 31, 2020 and December 31, 2019, respectively	(7,672		)	(6,872		)
Treasury stock at cost, 114 and 105 shares as of June 30, 2020 and December 31, 2019, respectively							Treasury stock at cost, 114 and 105 shares as of June 30, 2020 and December 31, 2019, respectively	(7,892)		(6,872)
Additional paid-in-capital	15,501			15,588			Additional paid-in-capital	15,914		15,588
Retained earnings	8,258			8,342			Retained earnings	9,788		8,342
Accumulated other comprehensive income (loss)	(120		)	(173		)	Accumulated other comprehensive income (loss)	(170)		(173)
Total PayPal Stockholders’ equity	15,967			16,885			Total PayPal Stockholders’ equity	17,640		16,885
Noncontrolling interest	44			44			Noncontrolling interest	44		44
Total equity	16,011			16,929			Total equity	17,684		16,929
Total liabilities and equity	$	54,266		$	51,333		Total liabilities and equity	$	63,166	$	51,333


	Three Months Ended March 31,							Six Months Ended June 30,
	2020			2019				2020		2019
	(In millions)							(In millions)
	(Unaudited)							(Unaudited)
Cash flows from operating activities:							Cash flows from operating activities:
Net income	$	84		$	667		Net income	$	1,614	$	1,490
Adjustments:							Adjustments:
Transaction and credit losses	591			341			Transaction and credit losses	1,031		659
Depreciation and amortization	293			230			Depreciation and amortization	590		458
Stock-based compensation	283			247			Stock-based compensation	635		470
Deferred income taxes	(79		)	74			Deferred income taxes	31		35
Unrealized losses (gains) on strategic investments	151			(180		)
Unrealized gains on strategic investments							Unrealized gains on strategic investments	(739)		(398)
Other	(32		)	(44		)	Other	(27)		(92)
Changes in assets and liabilities:							Changes in assets and liabilities:
Accounts receivable	77			(96		)	Accounts receivable	47		(66)
Changes in loans and interest receivable held for sale, net	—			4			Changes in loans and interest receivable held for sale, net	—		4
Accounts payable	(21		)	(3		)	Accounts payable	(48)		(49)
Income taxes payable	51			14			Income taxes payable	114		(7)
Other assets and liabilities	106			(227		)	Other assets and liabilities	639		(303)
Net cash provided by operating activities	1,504			1,027			Net cash provided by operating activities	3,887		2,201
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property and equipment	(206		)	(218		)	Purchases of property and equipment	(399)		(357)
Proceeds from sales of property and equipment	119			—			Proceeds from sales of property and equipment	120		—
Changes in principal loans receivable, net	(386		)	(357		)	Changes in principal loans receivable, net	3		(732)
Purchases of investments	(3,593		)	(8,138		)	Purchases of investments	(14,844)		(13,191)
Maturities and sales of investments	5,511			6,028			Maturities and sales of investments	9,793		10,537
Acquisitions, net of cash and restricted cash acquired	(3,612		)	—			Acquisitions, net of cash and restricted cash acquired	(3,612)		—
Funds receivable	(401		)	(2,175		)	Funds receivable	(1,134)		(2,214)
Net cash used in investing activities	(2,568		)	(4,860		)	Net cash used in investing activities	(10,073)		(5,957)
Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from issuance of common stock	1			7			Proceeds from issuance of common stock	71		74
Purchases of treasury stock	(800		)	(756		)	Purchases of treasury stock	(1,000)		(756)
Tax withholdings related to net share settlements of equity awards	(402		)	(309		)	Tax withholdings related to net share settlements of equity awards	(421)		(449)
Borrowings under financing arrangements	3,000			—			Borrowings under financing arrangements	6,966		500
Repayments under financing arrangements							Repayments under financing arrangements	(3,000)		—
Funds payable and amounts due to customers	457			2,560			Funds payable and amounts due to customers	5,918		3,129
Other financing activities	(15		)	—			Other financing activities	(15)		—
Net cash provided by financing activities	2,241			1,502			Net cash provided by financing activities	8,519		2,498
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(178		)	1			Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(72)		(1)
Net change in cash, cash equivalents, and restricted cash	999			(2,330		)	Net change in cash, cash equivalents, and restricted cash	2,261		(1,259)
Cash, cash equivalents, and restricted cash at beginning of period	15,743			13,233			Cash, cash equivalents, and restricted cash at beginning of period	15,743		13,233
Cash, cash equivalents, and restricted cash at end of period	$	16,742		$	10,903		Cash, cash equivalents, and restricted cash at end of period	$	18,004	$	11,974

Supplemental cash flow disclosures:							Supplemental cash flow disclosures:
Cash paid for interest	$	11		$	20		Cash paid for interest	$	78	$	45
Cash paid for income taxes, net	$	30		$	22		Cash paid for income taxes, net	$	70	$	176

The below table 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:							The below table 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	$	7,854		$	4,515		Cash and cash equivalents	$	6,353	$	4,909
Short term investments	17			15			Short term investments	18		12
Funds receivable and customer accounts	8,871			6,373			Funds receivable and customer accounts	11,633		7,053
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	16,742		$	10,903		Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	18,004	$	11,974



	Unrealized Gains (Losses) on Cash Flow Hedges		Unrealized Gains (Losses) on Investments		Foreign Currency Translation Adjustment (“CTA”)			Net InvestmentHedge CTA Gain (Loss)			Estimated Tax Benefit (Expense)			Total
	(In millions)
Beginning balance	$	6	$	2	$	(150	)	$	(31	)	$	—		$	(173	)
Other comprehensive income (loss) before reclassifications	186		15		(171		)	71			(6		)	95
Less: Amount of gain reclassified from accumulated other comprehensive income (“AOCI”)	42		—		—			—			—			42
Net current period other comprehensive income (loss)	144		15		(171		)	71			(6		)	53
Ending balance	$	150	$	17	$	(321	)	$	40		$	(6	)	$	(120	)



☒			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


	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



	(In millions)
Goodwill	$	2,959
Customer lists and user base	115
Marketing related	30
Developed technology	572
Total intangibles	$	717
Accounts receivable, net	55
Deferred tax liabilities, net	(76		)
Other net liabilities	(18		)
Total purchase consideration	$	3,637



	March 31, 2020								December 31, 2019
	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	$	1,205	$	(713	)	$	492	6	$	1,114	$	(700	)	$	414	7
Marketing related	321		(247		)	74		3	294		(239		)	55		3
Developed technology	999		(388		)	611		3	445		(343		)	102		3
All other	433		(241		)	192		7	436		(229		)	207		7
Intangible assets, net	$	2,958	$	(1,589	)	$	1,369		$	2,289	$	(1,511	)	$	778



	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	(In millions)
Lease expense
Operating lease expense	$	38		$	34
Sublease income	(1		)	(2		)
Total lease expense cost	$	37		$	32

Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	35		$	31
Right-of-use assets obtained in exchange for new operating lease liabilities	$	244		$	5

	Balance at March 31, 2020			Balance at December 31, 2019
	(In millions, except weighted-average figures)
Operating lease right-of-use assets	$	687		$	479
Other current lease liabilities	122			104
Operating lease liabilities	608			403
Total operating lease liabilities	730			507
Weighted-average remaining lease term—operating leases	7.3 years			5.8 years
Weighted-average discount rate—operating leases	4		%	5		%



	Unrealized Gains (Losses) on Cash Flow Hedges			Unrealized Gains (Losses) on Investments			Foreign CTA			Estimated Tax Benefit (Expense)			Total
	(In millions)
Beginning balance	$	182		$	(13	)	$	(93	)	$	2		$	78
Other comprehensive income (loss) before reclassifications	6			11			(67		)	(1		)	(51		)
Less: Amount of gain reclassified from AOCI	52			—			—			—			52
Net current period other comprehensive income (loss)	(46		)	11			(67		)	(1		)	(103		)
Ending balance	$	136		$	(2	)	$	(160	)	$	1		$	(25	)



Details about AOCI Components	Amount of Gains (Losses) Reclassified from AOCI				Affected Line Item in the Statement of Income
	Three Months Ended March 31,
	2020		2019
	(In millions)
Gains on cash flow hedges—foreign exchange contracts	$	42	$	52	Net revenues
Unrealized (losses) gains on investments	—		—		Other income (expense), net
	$	42	$	52	Income before income taxes
	—		—		Income tax expense
Total reclassifications for the period	$	42	$	52	Net income


	June 30, 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	$	7,503	$	13	$	—	$	7,516
Foreign government and agency securities	1,355		3		—		1,358
Corporate debt securities	1,478		1		—		1,479
Short-term investments:
U.S. government and agency securities	2,255		—		—		2,255
Foreign government and agency securities	1,211		1		—		1,212
Corporate debt securities	1,980		4		—		1,984
Long-term investments:
U.S. government and agency securities	100		—		—		100
Foreign government and agency securities	75		—		—		75
Corporate debt securities	357		2		—		359
Total available-for-sale debt securities⁽²⁾	$	16,314	$	24	$	—	$	16,338


	December 31, 2019										December 31, 2019⁽¹⁾
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value				Gross Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
	(In millions)										(In millions)
Funds receivable and customer accounts:									Funds receivable and customer accounts:
U.S. government and agency securities	$	4,996	$	—	$	—	$	4,996	U.S. government and agency securities		$	4,996			$	—			$	—			$	4,996
Foreign government and agency securities	1,392		—		—		1,392		Foreign government and agency securities		1,392				—				—				1,392
Corporate debt securities	2,112		—		—		2,112		Corporate debt securities		2,112				—				—				2,112
Short-term investments:									Short-term investments:

Foreign government and agency securities	533		—		—		533		Foreign government and agency securities		533				—				—				533
Corporate debt securities	1,955		—		—		1,955		Corporate debt securities		1,955				—				—				1,955
Long-term investments:									Long-term investments:
U.S. government and agency securities	140		—		—		140		U.S. government and agency securities		140				—				—				140
Foreign government and agency securities	207		—		—		207		Foreign government and agency securities		207				—				—				207
Corporate debt securities	676		2		—		678		Corporate debt securities		676				2				—				678
Total available-for-sale debt securities⁽¹⁾⁽²⁾	$	12,011	$	2	$	—	$	12,013	$	12,011			$	2			$	—			$	12,013


	June 30, 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	$	2,614	$	—	$	—	$	—	$	2,614	$	—
Foreign government and agency securities	457		—		—		—		457		—
Corporate debt securities	169		—		—		—		169		—
Short-term investments:
U.S. government and agency securities	1,615		—		—		—		1,615		—
Foreign government and agency securities	35		—		—		—		35		—
Corporate debt securities	131		—		—		—		131		—
Long-term investments:


Corporate debt securities	114		—		2		—		116		—
Total available-for-sale debt securities	$	5,135	$	—	$	2	$	—	$	5,137	$	—



	March 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	$	500	$	—		$	—	$	—	$	500	$	—
Foreign government and agency securities	422		(1		)	—		—		422		(1		)
Corporate debt securities	769		(4		)	—		—		769		(4		)
Short-term investments:
Foreign government and agency securities	55		—			—		—		55		—
Corporate debt securities	759		(5		)	—		—		759		(5		)
Long-term investments:
Corporate debt securities	297		(8		)	3		—		300		(8		)
Total available-for-sale debt securities	$	2,802	$	(18	)	$	3	$	—	$	2,805	$	(18	)


	March 31, 2020					June 30, 2020
	Amortized Cost		Fair Value			Amortized Cost		Fair Value
	(In millions)					(In millions)
One year or less	$	9,407	$	9,429	One year or less	$	15,291	$	15,312
After one year through five years	1,260		1,255		After one year through five years	1,021		1,024
After five years through ten years	3		3		After five years through ten years	2		2
Total	$	10,670	$	10,687	Total	$	16,314	$	16,338


	June 30, 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⁾	$	1,065	$	—	$	1,065
Short-term investments⁽²⁾:

U.S. government and agency securities	2,255		—		2,255
Foreign government and agency securities	1,212		—		1,212
Corporate debt securities	1,984		—		1,984

Total short-term investments	$	5,451	$	—	$	5,451
Funds receivable and customer accounts⁽³⁾:
Cash and cash equivalents	1,419		—		1,419
U.S. government and agency securities	7,516		—		7,516
Foreign government and agency securities	3,208		—		3,208
Corporate debt securities	1,630		—		1,630
Total funds receivable and customer accounts	$	13,773	$	—	$	13,773
Derivatives	135		—		135
Long-term investments^(2),(4):
U.S. government and agency securities	100		—		100
Foreign government and agency securities	75		—		75
Corporate debt securities	359		—		359
Marketable equity securities	2,041		2,041		—
Total long-term investments	$	2,575	$	2,041	$	534
Total financial assets	$	22,999	$	2,041	$	20,958
Liabilities:
Derivatives	$	55	$	—	$	55


	Balance Sheet Location	March 31, 2020		December 31, 2019			Balance Sheet Location	June 30, 2020		December 31, 2019
		(In millions)						(In millions)
Derivative Assets:						Derivative Assets:
Foreign currency exchange contracts designated as hedging instruments	Other current assets	$	168	$	45	Foreign currency exchange contracts designated as hedging instruments	Other current assets	$	70	$	45
Foreign currency exchange contracts designated as hedging instruments	Other assets (non-current)	22		1		Foreign currency exchange contracts designated as hedging instruments	Other assets (non-current)	7		1
Foreign currency exchange contracts not designated as hedging instruments	Other current assets	176		89		Foreign currency exchange contracts not designated as hedging instruments	Other current assets	58		89
Total derivative assets		$	366	$	135	Total derivative assets		$	135	$	135

Derivative Liabilities:						Derivative Liabilities:
Foreign currency exchange contracts designated as hedging instruments	Other current liabilities	$	—	$	58	Foreign currency exchange contracts designated as hedging instruments	Other current liabilities	$	11	$	58
Foreign currency exchange contracts designated as hedging instruments	Other long-term liabilities	—		13		Foreign currency exchange contracts designated as hedging instruments	Other long-term liabilities	8		13
Foreign currency exchange contracts not designated as hedging instruments	Other current liabilities	209		51		Foreign currency exchange contracts not designated as hedging instruments	Other current liabilities	36		51
Total derivative liabilities		$	209	$	122	Total derivative liabilities		$	55	$	122


	June 30, 2020						December 31, 2019
	Amortized Cost Basis Revolving		Percent		Amortized Cost Basis Revolving		Percent
	(In millions, except percentages)
Current	$	1,448	97.7	%	$	1,279	96.7	%
30-59 days	7		0.5	%	15		1.1	%
60-89 days	6		0.4	%	9		0.7	%
90-179 days	21		1.4	%	19		1.5	%
Total consumer loans and interest receivable^{(1), (2), (3)}	$	1,482	100.0	%	$	1,322	100.0	%



	March 31, 2020									March 31, 2019
	Consumer Loans Receivable			Interest Receivable			Total Allowance⁽¹⁾			Consumer Loans Receivable			Interest Receivable			Total Allowance⁽¹⁾
	(In millions)
Beginning balance	$	49		$	8		$	57		$	27		$	3		$	30
Adjustment for adoption of credit losses accounting standard	24			4			28			—			—			—
Provisions	98			20			118			1			2			3
Charge-offs	(21		)	(4		)	(25		)	(9		)	(1		)	(10		)
Recoveries⁽²⁾	9			—			9			10			—			10
Ending balance	$	159		$	28		$	187		$	29		$	4		$	33


	June 30, 2020										June 30, 2019
	Consumer Loans Receivable		Interest Receivable		Total Allowance⁽¹⁾		Consumer Loans Receivable		Interest Receivable		Total Allowance⁽¹⁾
	(In millions)
Beginning balance	$	49	$	8	$	57	$	27	$	3	$	30
Adjustment for adoption of credit losses accounting standard	24		4		28		—		—		—
Provisions	226		47		273		6		4		10
Charge-offs	(42)		(7)		(49)		(17)		(3)		(20)
Recoveries⁽²⁾	15		—		15		18		—		18
Ending balance	$	272	$	52	$	324	$	34	$	4	$	38


December 31, 2019
(In millions, except percentages)
Within Original Expected Repayment Period			30 - 59 Days Greater			60 - 89 Days Greater			90 - 180 Days Greater			180+ Days			Total Past Original Expected Repayment Period			Total
$	2,523		$	115		$	61		$	100		$	17		$	293		$	2,816
89.6		%	4.1		%	2.1		%	3.6		%	0.6		%	10.4		%	100		%



	March 31, 2020									March 31, 2019
	Merchant Loans and Advances			Interest and Fees Receivable			Total Allowance			Merchant Loans and Advances			Interest and Fees Receivable			Total Allowance
	(In millions)
Beginning balance	$	171		$	20		$	191		$	115		$	15		$	130
Adjustment for adoption of credit losses accounting standard	165			17			182			—			—			—
Provisions	243			24			267			54			6			60
Charge-offs	(78		)	(8		)	(86		)	(37		)	(3		)	(40		)
Recoveries	3			—			3			3			—			3
Ending balance	$	504		$	53		$	557		$	135		$	18		$	153


		Balance at June 30, 2020
	Maturities	Amount		Effective Interest Rate
		(in millions)
September 2019 debt issuance of $5.0 billion:
Fixed-rate 2.200% notes	9/26/2022	$	1,000	2.39%
Fixed-rate 2.400% notes	10/1/2024	1,250		2.52%
Fixed-rate 2.650% notes	10/1/2026	1,250		2.78%
Fixed-rate 2.850% notes	10/1/2029	1,500		2.96%

May 2020 debt issuance of $4.0 billion:
Fixed-rate 1.350% notes	6/1/2023	$	1,000	1.55%
Fixed-rate 1.650% notes	6/1/2025	1,000		1.78%
Fixed-rate 2.300% notes	6/1/2030	1,000		2.39%
Fixed-rate 3.250% notes	6/1/2050	1,000		3.33%
Total term debt		$	9,000

Unamortized premium (discount) and issuance costs, net		(66)


Total carrying amount of term debt		$	8,934


	Employee Severance and Benefits and Other Associated Costs
	(In millions)
Accrued liability as of January 1, 2020	$	9
Charges	55
Payments	(25)
Accrued liability as of June 30, 2020	$	39


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
	(In millions)
Unfavorable impact to net revenues (exclusive of hedging impact)	$	(74)	$	(124)
Hedging impact	33		75
Unfavorable impact to net revenues	(41)		(49)
Favorable impact to operating expense	38		75
Net (unfavorable) favorable impact to operating income	$	(3)	$	26


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	(In millions)
Unfavorable impact to net revenues (exclusive of hedging impact)	$	(93)	$	(209)
Hedging impact	58		110
Unfavorable impact to net revenues	(35)		(99)
Favorable impact to operating expense	50		112
Net favorable impact to operating income	$	15	$	13



	Three Months Ended March 31, 2020
	(In millions)
Unfavorable impact to net revenues (exclusive of hedging impact)	$	(50	)
Hedging impact	42
Unfavorable impact to net revenues	(8		)
Favorable impact to operating expense	37
Net favorable impact to operating income	$	29



	Three Months Ended March 31, 2019
	(In millions)
Unfavorable impact to net revenues (exclusive of hedging impact)	$	(116	)
Hedging impact	52
Unfavorable impact to net revenues	(64		)
Favorable impact to operating expense	62
Net unfavorable impact to operating income	$	(2	)


•	~~Number of payment transactions~~ are the total number of payments, net of payment reversals, successfully completed on our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.


•	~~Number of payment transactions per active account~~reflects the total number of payment transactions within the previous 12-month period, divided by active accounts at the end of the period. The number of payment transactions per active account provides management with insight into the number of times a customer is engaged in payments activity on our Payments Platform in a given period.


•	~~TPV~~ ~~is the value of payments, net of payment reversals, successfully completed on our Payments Platform, or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.~~


	June 30,
	2020		2019
Percent of consumer loans and interest receivables current^{(1), (2)}	97.7	%	97.1	%
Percent of consumer loans and interest receivables > 90 days outstanding^{(1), (2), (3)}	1.4	%	1.3	%
Net charge off rate⁽⁴⁾	4.9	%	3.5	%