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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from             to             .
Commission file number 001-36859
   
pypl-20210930_g1.jpg

PayPal Holdings, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware47-2989869
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
2211 North First StreetSan Jose,California95131
(Address of Principal Executive Offices)(Zip Code)
(408) 967-1000
(Registrant’s telephone number, including area code)
  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par value per sharePYPLNASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes No  
As of November 2, 2021, there were 1,174,930,172 shares of the registrant’s common stock, $0.0001 par value, outstanding, which is the only class of common or voting stock of the registrant issued.



PayPal Holdings, Inc.
TABLE OF CONTENTS
Page Number



PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

PayPal Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
2021
December 31,
2020
 (In millions, except par value)
(Unaudited)
ASSETS
Current assets:  
Cash and cash equivalents$7,782 $4,794 
Short-term investments5,510 8,289 
Accounts receivable, net736 577 
Loans and interest receivable, net of allowances of $489 and $838 as of September 30, 2021 and December 31, 2020, respectively
3,713 2,769 
Funds receivable and customer accounts35,104 33,418 
Prepaid expenses and other current assets1,285 1,148 
Total current assets54,130 50,995 
Long-term investments6,753 6,089 
Property and equipment, net1,900 1,807 
Goodwill9,550 9,135 
Intangible assets, net808 1,048 
Other assets1,393 1,305 
Total assets$74,534 $70,379 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$186 $252 
Funds payable and amounts due to customers37,804 35,418 
Accrued expenses and other current liabilities3,554 2,648 
Income taxes payable151 129 
Total current liabilities41,695 38,447 
Deferred tax liability and other long-term liabilities2,800 2,930 
Long-term debt7,949 8,939 
Total liabilities52,444 50,316 
Commitments and contingencies (Note 13)
Equity:
Common stock, $0.0001 par value; 4,000 shares authorized; 1,174 and 1,172 shares outstanding as of September 30, 2021 and December 31, 2020, respectively
  
Preferred stock, $0.0001 par value; 100 shares authorized, unissued
  
Treasury stock at cost, 124 and 117 shares as of September 30, 2021 and December 31, 2020, respectively
(10,380)(8,507)
Additional paid-in-capital16,860 16,644 
Retained earnings15,734 12,366 
Accumulated other comprehensive income (loss)(124)(484)
Total PayPal stockholders’ equity22,090 20,019 
Noncontrolling interest 44 
Total equity22,090 20,063 
Total liabilities and equity$74,534 $70,379 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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4

PayPal Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
 (In millions, except per share data)
(Unaudited)
Net revenues$6,182 $5,459 $18,453 $15,338 
Operating expenses:
Transaction expense 2,564 2,022 7,363 5,604 
Transaction and credit losses268 344 710 1,375 
Customer support and operations504 449 1,543 1,271 
Sales and marketing549 471 1,779 1,256 
Technology and development755 674 2,242 1,910 
General and administrative498 503 1,544 1,501 
Restructuring and other charges1 19 60 95 
Total operating expenses5,139 4,482 15,241 13,012 
Operating income1,043 977 3,212 2,326 
Other income (expense), net122 167 181 880 
Income before income taxes1,165 1,144 3,393 3,206 
Income tax expense78 123 25 571 
Net income$1,087 $1,021 $3,368 $2,635 
Net income per share:
Basic$0.93 $0.87 $2.87 $2.25 
Diluted$0.92 $0.86 $2.84 $2.22 
Weighted average shares:
Basic1,174 1,172 1,174 1,173 
Diluted1,187 1,190 1,187 1,186 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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5

PayPal Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (In millions)
(Unaudited)
Net income $1,087 $1,021 $3,368 $2,635 
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation adjustments (“CTA”)(29)8 (51)(111)
Net investment hedge CTA gain   55 
Unrealized gains (losses) on cash flow hedges, net204 (163)434 (111)
Tax (expense) benefit on unrealized gains (losses) on cash flow hedges, net(7)2 (10)1 
Unrealized (losses) gains on investments, net (12)(17)10 
Tax benefit (expense) on unrealized (losses) gains on investments, net 3 4 (3)
Other comprehensive income (loss), net of tax168 (162)360 (159)
Comprehensive income$1,255 $859 $3,728 $2,476 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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6

PayPal Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common Stock SharesTreasury StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income (Loss)
Retained EarningsNoncontrolling InterestTotal 
Equity
 (In millions)
(Unaudited)
Balances at December 31, 20201,172 $(8,507)$16,644 $(484)$12,366 $44 $20,063 
Net income— — — — 1,097 — 1,097 
Foreign CTA— — — (53)— — (53)
Unrealized gains on cash flow hedges, net— — — 198 — — 198 
Tax expense on unrealized gains on cash flow hedges, net— — — (3)— — (3)
Unrealized losses on investments, net— — — (15)— — (15)
Tax benefit on unrealized losses on investments, net— — — 4 — — 4 
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes7 — (870)— — — (870)
Common stock repurchased(5)(1,323)— — — — (1,323)
Stock-based compensation— — 387 — — — 387 
Change in noncontrolling interest— — — — — (44)(44)
Balances at March 31, 20211,174 $(9,830)$16,161 $(353)$13,463 $ $19,441 
Net income— — — — 1,184 — 1,184 
Foreign CTA— — — 31 — — 31 
Unrealized gains on cash flow hedges, net— — — 32 — — 32 
Unrealized losses on investments, net— — — (2)— — (2)
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes2 — 12 — — — 12 
Common stock repurchased(1)(200)— — — — (200)
Stock-based compensation— — 407 — — — 407 
Balances at June 30, 20211,175 $(10,030)$16,580 $(292)$14,647 $ $20,905 
Net income— — — — 1,087 — 1,087 
Foreign CTA— — — (29)— — (29)
Unrealized gains on cash flow hedges, net— — — 204 — — 204 
Tax expense on unrealized gains on cash flow hedges, net— — — (7)— — (7)
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes— — (37)— — — (37)
Common stock repurchased(1)(350)— — — — (350)
Stock-based compensation— — 317 — — — 317 
Balances at September 30, 20211,174 $(10,380)$16,860 $(124)$15,734 $ $22,090 

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7

PayPal Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
Common Stock SharesTreasury StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income (Loss)
Retained EarningsNoncontrolling InterestTotal 
Equity
 (In millions)
(Unaudited)
Balances at December 31, 20191,173 $(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 taxes8 — (382)— — — (382)
Common stock repurchased(8)(800)— — — — (800)
Stock-based compensation— — 295 — — — 295 
Balances at March 31, 20201,173 $(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 taxes1 — 52 — — — 52 
Common stock repurchased(1)(220)— — — — (220)
Stock-based compensation— — 361 — — — 361 
Balances at June 30, 20201,173 $(7,892)$15,914 $(170)$9,788 $44 $17,684 
Net income— — — — 1,021 1,021 
Foreign CTA— — — 8 — — 8 
Unrealized losses on cash flow hedges, net— — — (163)— — (163)
Tax benefit on unrealized losses on cash flow hedges, net— — — 2 — — 2 
Unrealized losses on investments, net— — — (12)— — (12)
Tax benefit on unrealized losses on investments, net— — — 3 — — 3 
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes1 — (41)— — — (41)
Common stock repurchased(2)(350)— — — — (350)
Stock-based compensation— — 375 — — — 375 
Balances at September 30, 20201,172 $(8,242)$16,248 $(332)$10,809 $44 $18,527 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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8

PayPal Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30,
 20212020
 (In millions)
(Unaudited)
Cash flows from operating activities:
Net income$3,368 $2,635 
Adjustments to reconcile net income to net cash provided by operating activities:
Transaction and credit losses710 1,375 
Depreciation and amortization939 888 
Stock-based compensation1,058 999 
Deferred income taxes(175)(6)
Net gains on strategic investments(336)(973)
Other 92 10 
Changes in assets and liabilities:
Accounts receivable(155)7 
Accounts payable(50)(93)
Income taxes payable18 (115)
Other assets and liabilities (892)(220)
Net cash provided by operating activities4,577 4,507 
Cash flows from investing activities:
Purchases of property and equipment(695)(640)
Proceeds from sales of property and equipment3 120 
Changes in principal loans receivable, net(643)523 
Purchases of investments(30,905)(28,333)
Maturities and sales of investments30,390 19,733 
Acquisitions, net of cash and restricted cash acquired(469)(3,609)
Funds receivable(37)(1,078)
Net cash used in investing activities(2,356)(13,284)
Cash flows from financing activities:
Proceeds from issuance of common stock90 72 
Purchases of treasury stock(1,873)(1,370)
Tax withholdings related to net share settlements of equity awards(978)(463)
Borrowings under financing arrangements 6,966 
Repayments under financing arrangements (3,000)
Funds payable and amounts due to customers2,575 7,940 
Other financing activities (15)
Net cash (used in) provided by financing activities(186)10,130 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (106)26 
Net change in cash, cash equivalents, and restricted cash 1,929 1,379 
Cash, cash equivalents, and restricted cash at beginning of period 18,040 15,743 
Cash, cash equivalents, and restricted cash at end of period$19,969 $17,122 
Supplemental cash flow disclosures:
Cash paid for interest$121 $91 
Cash paid for income taxes, net$436 $444 
The table below reconciles cash, cash equivalents, and restricted cash as reported in the condensed consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents$7,782 $6,112 
Short-term investments23 23 
Funds receivable and customer accounts12,164 10,987 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$19,969 $17,122 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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9

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 to improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes around the world. 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 when sending payments or getting paid. 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, Zettle, and Hyperwallet products and services, comprise our proprietary Payments Platform.

We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry, including countering terrorist financing, anti-money laundering, privacy, cybersecurity, and consumer protection. 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 changes to their interpretation and implementation, 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. We monitor these areas closely and are focused on designing compliant solutions for our customers.

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. The noncontrolling interest reported in the prior period was a component of equity on our condensed consolidated balance sheets and represented the equity interests not owned by PayPal and was recorded for consolidated entities we controlled and of which we owned less than 100%. Noncontrolling interest was not presented separately on our condensed consolidated statements of income as the amount was 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. 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 investment, and re-evaluate if certain events occur, whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine an investment is a VIE, we then assess if we are the primary beneficiary, which would require consolidation. As of September 30, 2021, no VIEs qualified for consolidation as the structures of these entities do not provide us with the ability to direct activities that would significantly impact their economic performance. The carrying value of our investments that are VIEs is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our condensed consolidated balance sheets. Our maximum exposure to loss, which represents funded commitments and any future funding commitments, was $195 million and $105 million as of September 30, 2021 and December 31, 2020, respectively.

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, 2020 (the “2020 Form 10-K”) filed with the Securities and Exchange Commission on February 5, 2021.

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10

PayPal Holdings, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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 all interim periods presented. Certain amounts for prior years have been reclassified to conform to the financial statement presentation as of and for the three and nine months ended September 30, 2021.
Reclassifications

Beginning with the fourth quarter of 2020, we reclassified certain cash flows related to customer balances from cash flows from operating activities to cash flows from investing activities and cash flows from financing activities within the condensed consolidated statements of cash flows. Prior period amounts have been reclassified to conform to the current period presentation. These changes had no impact on our previously reported consolidated net income, financial position, net change in cash, cash equivalents, and restricted cash, or total cash, cash equivalents, and restricted cash as reported on our condensed consolidated statements of cash flows.

The current period presentation classifies all changes in funds receivable and customer accounts and funds payable and amounts due to customers consistently on our condensed consolidated statement of cash flows as cash flows from investing activities and cash flows from financing activities, respectively, regardless of which product the cash flows relate to on our Payments Platform. The current period presentation provides a more meaningful representation of the cash flows related to the movement of customer funds due to the restrictions on and use of those funds.