Second Quarter 2021 Results San Jose, California, July 28, 2021 PAYPAL HOLDINGS, INC. (NASDAQ: PYPL) Q2’21: TPV reaches $311 billion with more than 400 million active accounts • Total Payment Volume (TPV) of $311 billion, growing 40%, and 36% on an FX-neutral basis (FXN); net revenue of $6.24 billion, growing 19%, and 17% on an FXN basis • GAAP EPS of $1.00 compared to $1.29 in Q2’20, and non-GAAP EPS of $1.15 compared to $1.07 in Q2’20 • 11.4 million Net New Active Accounts (NNAs) added; ended the quarter with 403 million active accounts FY’21: Raising TPV and reaffirming full year revenue outlook • TPV growth now expected to be in the range of ~33%-35% at current spot rates and on an FXN basis; net revenue expected to grow ~20% at current spot rates and ~18.5% on an FXN basis, to ~$25.75 billion • GAAP EPS expected to be ~$3.49 compared to $3.54 in FY’20; non-GAAP EPS expected to grow ~21% to ~$4.70 • 52-55 million NNAs expected to be added in FY’21 President and CEO Dan Schulman USD $ USD $ YoY Change YoY Change EPS $1.00 (23%) $1.15 8% GAAP Non-GAAP Net Revenues $6.24B 17%* $6.24B 17%* Operating Income $1.13B 19% $1.65B 11% Q2’21 Highlights * On an FXN basis; on a spot basis net revenues grew 19% On the heels of a record year, we continued to drive strong results in the second quarter, reflecting some of the best performance in our history. Our platform now supports 403 million active accounts, with an annualized TPV run rate of approximately $1.25 trillion. Clearly PayPal has evolved into an essential service in the emerging digital economy.”
Q 2 20 21 R esults 2 Key Operating and Financial Metrics Q2’21: Another quarter of strong revenue growth • Net revenue of $6.24 billion, growing 19%, and 17% on an FXN basis • GAAP operating margin of 18.1%, flat to the prior year period; non- GAAP operating margin of 26.5%, declining 171 basis points • GAAP EPS of $1.00, down 23%; non-GAAP EPS of $1.15, up 8% • GAAP and non-GAAP EPS include an approximate $0.11 benefit from the release of credit reserves compared to an approximate $0.07 negative impact from increased credit provisioning in Q2’20 • GAAP EPS also includes a net unrealized gain of $0.20 on PayPal’s strategic investment portfolio compared to a $0.58 net unrealized gain in Q2’20 Financial Highlights 1. On an FXN basis; on a spot basis TPV grew 40% and net revenues grew 19% 2. Net unrealized gains on PayPal’s strategic investment portfolio favorably impacted EPS by $0.20 in Q2’21, compared to a favorable impact of $0.58 in Q2’20 3. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section titled “Non-GAAP Measures of Financial Performance” and the subsequent tables at the end of this press release 4. Reflects the impact of reclassification as described in our Form 8-K filed with the Securities and Exchange Commission (“SEC”) on February 3, 2021 Net New Active Accounts GAAP2 / Non-GAAP EPS3 GAAP Q2’20 $1.29 Q2’21 $1.00 (23%) Q2’20 $1.07 Q2’21 $1.15 Non-GAAP +8% Operating Cash Flow4 / Free Cash Flow3,4 Q2’20 $1.77B Q2’21 $1.31B Operating Cash Flow (26%) Q2’20 $1.58B Q2’21 $1.06B Free Cash Flow (33%) Total Payment Volume Q2’20 $222B Q2’21 $311B +36%1 Net Revenues Q2’20 $5.26B Q2’21 $6.24B +17%1 Q2’21 11.4M Q2’20 21.3M (47%) PayPal sits at the intersection of transformative secular tailwinds and is uniquely positioned to address the massive opportunity in digital payments. We are reporting another strong quarter — indicative of the strength, diversification, and breadth of our two-sided platform.” CFO and EVP Global Customer Operations John Rainey
Balance Sheet and Liquidity Strong balance sheet and cash flow • Cash, cash equivalents, and investments totaled $19.4 billion as of June 30, 2021 • Debt totaled $8.9 billion as of the end of the second quarter • Generated cash flow from operations of $1.31 billion, declining 26%, and free cash flow of $1.06 billion, declining 33% • In Q2’21, PayPal repurchased approximately 765,000 shares of common stock, returning $200 million to stockholders Delivering new experiences and advancing the merchant value proposition • Launched PayPal Zettle in the U.S., a digital point-of-sale solution enabling small businesses to seamlessly sell across in- person and online channels • Expanded ‘Buy Now, Pay Later’ offerings in key international markets, launching Pay in 4 in Australia and announcing the upcoming expansion of pay later options in Germany, including more flexible repayment periods • Buy, sell, hold cryptocurrency experiences fully ramped to Venmo users following initial April launch • Acquired Chargehound and Happy Returns, which enhance PayPal’s merchant value proposition by adding capabilities related to chargeback automation and returns solutions • In 2021, PayPal has provided access to ~$1 billion in loans through the U.S. Small Business Administration’s Paycheck Protection Program (PPP) to ~43,000 small businesses, with an average loan size of ~$22,700 Strategic Initiatives and Business Updates “When I ramped up Brooklyn Pasta Lab at the start of the pandemic, nobody wanted to be in contact with anybody. I considered how we were going to accept payments, and automatically thought of Venmo because it was something I was already using with my friends. 90 percent of our payments now come through Venmo, and my Business Profile has helped new customers discover Brooklyn Pasta Lab through their friends’ Venmo feeds.” Founder, Brooklyn Pasta Lab Brooklyn, NY Michael Pini Q2’21: Total active accounts surpass 400 million • 11.4 million NNAs added, bringing total active accounts to 403 million, up 16% • 4.7 billion payment transactions, up 27% • $311 billion in TPV, up 40% on a spot basis, and 36% FXN • Merchant Services volume grew 48% on a spot basis, and 43% FXN, representing 96% of TPV • eBay Marketplaces volume declined (37%) on a spot basis, and (41%) FXN, representing 4% of TPV, compared to 9% in the prior year period • Venmo processed approximately $58 billion in TPV, growing 58% • 43.5 payment transactions per active account on a trailing twelve months basis, growing 11% Operating Highlights Q 2 20 21 R esults 3
Q2’21 Financial and Operating Highlights Total Payment Volume (TPV) Q2 2021 Q2 2020 YoY Growth FXN YoY Growth 18.1% 26.5% (1bp) (171bps) N/A N/A $6,238 $6,238 19% 19% 17% 17% $1,184 $1,362 (23%) 8% N/A N/A $1.00 $1.15 (23%) 8% N/A N/A $1,306 $1,059 (26%) (33%) N/A N/A $310,992 40% 36% 12.7% 14.9% 18.1% 28.2% $5,261 $5,261 $1,530 $1,263 $1.29 $1.07 $1,7721 $1,5791 $221,731 15.0% 12.6% (2.3pts) 2.3pts N/A N/A Net revenues Operating margin Effective tax rate Net income Earnings per diluted share Net revenues Operating margin Effective tax rate Net income Earnings per diluted share Net cash provided by operating activities Free cash flow Presented in millions, except per share data and percentages ** ** $977 $977 ($346) $99 ($0.29) $0.08 ($466) ($520) $89,261 ** ** ** Not meaningful G A A P N on -G A A P 1. Reflects the impact of reclassification as described in our Form 8-K filed with the SEC on February 3, 2021 Recent Acquisitions Curv A leading provider of cloud-based infrastructure for digital asset security, which accelerates and expands PayPal’s initiatives to support cryptocurrencies and digital assets Happy Returns Comprehensive return solutions provider, including software and in- person return bars, which extends PayPal’s commerce platform beyond discovery and payments to the post-purchase experience Chargehound Dispute management platform that automates the chargeback response process for merchants and will expand PayPal’s initiative to externalize its fraud and risk capabilities in a Risk- As-A-Service product portfolio Q 2 20 21 R esults 4
Q 2 20 21 R esults 5 Q3’21 Guidance • PayPal expects net revenue to be in the range of ~$6.15 billion to ~$6.25 billion, representing growth of ~13%-14% at current spot rates • PayPal expects GAAP earnings per diluted share to be ~$0.68, compared to $0.86 in the prior year period, and for non- GAAP earnings per diluted share to be approximately ~$1.07, in-line with the prior year period • GAAP EPS guidance does not include any expectation of net realized and unrealized gains and losses on PayPal’s strategic investment portfolio • In the third quarter of 2020, GAAP EPS included a net gain of $0.13 on PayPal’s strategic investment portfolio • Estimated non-GAAP amounts for the three months ending September 30, 2021 reflect adjustments of approximately $510 million, including estimated stock-based compensation expense and related payroll taxes of approximately $400 million FY’21 Guidance • PayPal expects to add NNAs in the range of 52–55 million • PayPal expects TPV growth to be in the range of ~33%-35% on a spot and FXN basis • PayPal expects net revenue to grow ~20% at current spot rates and ~18.5% on an FXN basis, to ~$25.75 billion • PayPal expects GAAP EPS to be ~$3.49, and non-GAAP EPS to grow ~21% to ~$4.70 • GAAP EPS guidance includes ~$0.11 of net realized and unrealized gains on PayPal’s strategic investment portfolio • In 2020, GAAP EPS included a net gain of ~$1.24 on PayPal’s strategic investment portfolio • Estimated non-GAAP amounts for the twelve months ending December 31, 2021 reflect adjustments of approximately $2.18 billion, including estimated stock-based compensation expense and related payroll taxes of approximately $1.70 billion Please see “Non-GAAP Financial Measures” and “Non-GAAP Measures of Financial Performance” for important additional information. Conference Call and Webcast PayPal Holdings, Inc. will host a conference call to discuss second quarter 2021 results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their most directly comparable GAAP measures, can be accessed through the company’s Investor Relations website at https://investor.pypl.com. In addition, an archive of the webcast will be accessible for 90 days through the same link. Financial Guidance
Q 2 20 21 R esults 6 Presentation All growth rates represent year-over-year comparisons, except as otherwise noted. FXN results are calculated by translating the current period local currency results by the prior period exchange rate. FXN growth rates are calculated by comparing the current period FXN results with the prior period results, excluding the impact from hedging activities. All amounts in tables are presented in U.S. dollars, rounded to the nearest millions, except as otherwise noted. As a result, certain amounts and rates may not sum or recalculate using the rounded dollar amounts provided. Non-GAAP Financial Measures This press release includes financial measures defined as “non-GAAP financial measures” by the SEC including: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin, non-GAAP effective tax rate and free cash flow. For an explanation of the foregoing non-GAAP measures, please see “Non-GAAP Measures of Financial Performance” included in this press release. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non- GAAP financial measures to the most directly comparable GAAP measures, see “Non-GAAP Measures of Financial Performance,” “Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and GAAP Operating Margin to Non-GAAP Operating Margin,” “Reconciliation of GAAP Net Income to Non-GAAP Net Income, GAAP Diluted EPS to Non-GAAP Diluted EPS and GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate,” and “Reconciliation of Operating Cash Flow to Free Cash Flow.” Forward-Looking Statements This press release contains forward-looking statements relating to, among other things, the future results of operations, financial condition, expectations, and plans of PayPal Holdings, Inc. and its consolidated subsidiaries that reflect PayPal’s current projections and forecasts. 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. Forward-looking statements may include, but are not limited to, statements regarding guidance and projected financial results for the third quarter and full year 2021, impact and timing of acquisitions, and the projected future growth of PayPal’s businesses. Forward-looking statements are based upon various estimates and assumptions, as well as information known to PayPal as of the date of this press release, and are inherently subject to numerous risks and uncertainties. Our actual results could differ materially from those estimated or implied by forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the impact of the COVID-19 pandemic, natural disasters or other business interruptions on our business and financial condition, as well as our customers, suppliers, vendors and other business partners; the effect of global and regional political, economic, market, trade and related conditions that affect payments or commerce growth; our ability to compete in markets that are highly competitive and subject to rapid technological change, and to develop new or enhanced products and services on a timely basis; cyberattacks and security vulnerabilities in our products and services and associated impacts; the stability, security and performance of our Payments Platform and Honey Platform; regulatory, antitrust, payment card association-related and other risks specific to our business, products and services; our ability to detect and prevent fraud; the impact of complex and changing laws and regulations worldwide, which expose us to potential liabilities, increased costs, and other adverse effects on our business; our ability to manage regulatory and litigation risks, and the outcome of legal and regulatory proceedings; fluctuations in foreign currency exchange rates; changes in tax rates and exposure to additional tax liabilities; changes to our capital allocation, management of operating cash or incurrence of indebtedness; our ability to timely upgrade and develop our technology systems, infrastructure and customer service capabilities; our ability to successfully identify, manage, and integrate any existing and potential acquisitions; and our ability to attract, hire, and retain highly qualified personnel. The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or contemplated after the date hereof. More information about factors that could adversely affect PayPal’s results of operations, financial condition and prospects, or that could cause actual results to differ from those expressed or implied in forward-looking statements is included under the captions “Risk Factors”, “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of
Q 2 20 21 R esults 7 © 2021 PayPal Holdings, Inc. All rights reserved. Other company and product names may be trademarks of their respective owners. Operations” in PayPal’s most recent annual report on Form 10-K and its subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting PayPal’s Investor Relations website at https://investor.pypl.com or the SEC’s website at www. sec.gov. All information in this release speaks as of July 28, 2021. For the reasons discussed above, you should not place undue reliance on the forward-looking statements in this press release. PayPal assumes no obligation to update such forward-looking statements. Disclosure Channels PayPal Holdings, Inc. uses its Investor Relations website (https://investor.pypl.com), the PayPal Newsroom (https://newsroom. paypal-corp.com/), PayPal Stories Blog (https://www.paypal.com/stories/us), Twitter handles (@PayPal and @PayPalNews), LinkedIn page (https://www.linkedin.com/company/paypal), Facebook page (https://www.facebook.com/PayPalUSA/), YouTube channel (https://www.youtube.com/paypal), Dan Schulman’s LinkedIn profile (https://www.linkedin.com/in/dan-schulman/), John Rainey’s LinkedIn profile (www.linkedin.com/in/john-rainey-pypl), Dan Schulman’s Facebook page (https://www. facebook.com/DanSchulmanPayPal/) and Dan Schulman’s Instagram page (https://www.instagram.com/dan_schulman/) as a means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD. The information that is posted through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to PayPal’s press releases, filings with the SEC, public conference calls, and webcasts. Investor Relations Contacts Gabrielle Rabinovitch grabinovitch@paypal.com Jesse Kreger jkreger@paypal.com Media Relations Contacts Amanda Miller amandacmiller@paypal.com Josh Criscoe jcriscoe@paypal.com
PayPal Holdings, Inc. Unaudited Condensed Consolidated Balance Sheets June 30, 2021 December 31, 2020 (In millions, except par value) ASSETS Current assets: Cash and cash equivalents $ 5,745 $ 4,794 Short-term investments 6,650 8,289 Accounts receivable, net 693 577 Loans and interest receivable, net 3,283 2,769 Funds receivable and customer accounts 35,670 33,418 Prepaid expenses and other current assets 1,190 1,148 Total current assets 53,231 50,995 Long-term investments 6,968 6,089 Property and equipment, net 1,848 1,807 Goodwill 9,564 9,135 Intangible assets, net 920 1,048 Other assets 1,285 1,305 Total assets $ 73,816 $ 70,379 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 260 $ 252 Funds payable and amounts due to customers 38,370 35,418 Accrued expenses and other current liabilities 2,489 2,648 Income taxes payable 149 129 Total current liabilities 41,268 38,447 Deferred tax liability and other long-term liabilities 2,698 2,930 Long-term debt 8,945 8,939 Total liabilities 52,911 50,316 Equity: Common stock, $0.0001 par value; 4,000 shares authorized; 1,175 and 1,172 shares outstanding as of June 30, 2021 and December 31, 2020, respectively — — Preferred stock, $0.0001 par value; 100 shares authorized, unissued — — Treasury stock at cost, 123 and 117 shares as of June 30, 2021 and December 31, 2020, respectively (10,030) (8,507) Additional paid-in-capital 16,580 16,644 Retained earnings 14,647 12,366 Accumulated other comprehensive income (loss) (292) (484) Total PayPal stockholders’ equity 20,905 20,019 Noncontrolling interest — 44 Total equity 20,905 20,063 Total liabilities and equity $ 73,816 $ 70,379 Q 2 20 21 R esults 8
Q 2 20 21 R esults 9 PayPal Holdings, Inc. Unaudited Condensed Consolidated Statements of Income Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (In millions, except per share data) Net revenues $ 6,238 $ 5,261 $ 12,271 $ 9,879 Operating expenses: Transaction expense 2,524 1,843 4,799 3,582 Transaction and credit losses 169 440 442 1,031 Customer support and operations (1) 521 423 1,039 822 Sales and marketing (1) 628 414 1,230 785 Technology and development (1) 746 631 1,487 1,236 General and administrative (1) 522 512 1,046 998 Restructuring and other charges 1 47 59 76 Total operating expenses 5,111 4,310 10,102 8,530 Operating income 1,127 951 2,169 1,349 Other income (expense), net 229 848 59 713 Income before income taxes 1,356 1,799 2,228 2,062 Income tax expense (benefit) 172 269 (53) 448 Net income $ 1,184 $ 1,530 $ 2,281 $ 1,614 Net income per share: Basic $ 1.01 $ 1.30 $ 1.94 $ 1.38 Diluted $ 1.00 $ 1.29 $ 1.92 $ 1.36 Weighted average shares: Basic 1,174 1,173 1,174 1,173 Diluted 1,186 1,184 1,188 1,185 (1) Includes stock-based compensation as follows: Customer support and operations 77 64 149 116 Sales and marketing 48 47 96 86 Technology and development 147 133 286 246 General and administrative 129 116 248 203 $ 401 $ 360 $ 779 $ 651 Q 2 20 21 R esults 9
Q 2 20 21 R esults 10 PayPal Holdings, Inc. Unaudited Condensed Consolidated Statements of Cash Flows Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (In millions) Cash flows from operating activities(1): Net income $ 1,184 $ 1,530 $ 2,281 $ 1,614 Adjustments to reconcile net income to net cash provided by operating activities: Transaction and credit losses 169 440 442 1,031 Depreciation and amortization 316 297 616 590 Stock-based compensation 390 352 758 635 Deferred income taxes (103) 110 (103) 31 Net gains on strategic investments (283) (888) (163) (764) Other 26 3 77 (2) Changes in assets and liabilities: Accounts receivable (15) (30) (112) 47 Accounts payable 75 (27) 41 (48) Income taxes payable 53 63 20 114 Other assets and liabilities (506) (78) (793) (55) Net cash provided by operating activities 1,306 1,772 3,064 3,193 Cash flows from investing activities(1): Purchases of property and equipment (247) (193) (468) (399) Proceeds from sales of property and equipment 1 1 1 120 Changes in principal loans receivable, net (391) 389 (316) 3 Purchases of investments (9,265) (11,251) (20,240) (14,844) Maturities and sales of investments 8,965 4,282 18,683 9,793 Acquisitions, net of cash and restricted cash acquired (469) — (469) (3,612) Funds receivable 307 (758) 127 (1,145) Net cash used in investing activities (1,099) (7,530) (2,682) (10,084) Cash flows from financing activities(1): Proceeds from issuance of common stock 87 70 89 71 Purchases of treasury stock (200) (200) (1,523) (1,000) Tax withholdings related to net share settlements of equity awards (77) (19) (940) (421) Borrowings under financing arrangements — 3,966 — 6,966 Repayments under financing arrangements — (3,000) — (3,000) Funds payable and amounts due to customers (7) 6,097 3,004 6,623 Other financing activities — — — (15) Net cash (used in) provided by financing activities (197) 6,914 630 9,224 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 8 106 (34) (72) Net change in cash, cash equivalents, and restricted cash 18 1,262 978 2,261 Cash, cash equivalents, and restricted cash at beginning of period 19,000 16,742 18,040 15,743 Cash, cash equivalents, and restricted cash at end of period $ 19,018 $ 18,004 $ 19,018 $ 18,004 Supplemental cash flow disclosures: Cash paid for interest $ 97 $ 67 $ 109 $ 78 Cash paid for income taxes, net $ 293 $ 40 $ 380 $ 70 (1) Reflects the impact of reclassification as described in our Form 8-K filed with the SEC on February 3, 2021. Q 2 20 21 R esults 10
Q 2 20 21 R esults 11 PayPal Holdings, Inc. Unaudited Summary of Consolidated Net Revenues Our revenues are classified into the following two categories: • Transaction revenues: Net transaction fees charged to merchants and consumers on a transaction basis primarily based on the volume of activity, or Total Payment Volume (“TPV”), completed on our Payments Platform, including our core PayPal, PayPal Credit, Braintree, Venmo, Xoom, Zettle, and Hyperwallet products and services. We earn additional fees on transactions where we perform currency conversion, when we enable cross- border transactions (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their debit card or bank account, to facilitate the purchase and sale of cryptocurrencies, and other miscellaneous fees. • Revenues from other value added services: Net revenues derived primarily from revenue earned through partnerships, referral fees, subscription fees, gateway fees, and other services we provide to our merchants and consumers. We also earn revenues from interest and fees earned primarily on our portfolio of loans receivable, and interest earned on certain assets underlying customer balances. Net Revenues by Type Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (In millions, except percentages) Transaction revenues $ 5,797 $ 5,621 $ 5,682 $ 5,076 $ 4,945 Current quarter vs prior quarter 3 % (1) % 12 % 3 % 17 % Current quarter vs prior year quarter 17 % 33 % 25 % 28 % 28 % Percentage of total 93 % 93 % 93 % 93 % 94 % Revenues from other value added services 441 412 434 383 316 Current quarter vs prior quarter 7 % (5) % 13 % 21 % (22) % Current quarter vs prior year quarter 40 % 2 % 2 % (9) % (26) % Percentage of total 7 % 7 % 7 % 7 % 6 % Total net revenues $ 6,238 $ 6,033 $ 6,116 $ 5,459 $ 5,261 Current quarter vs prior quarter 3 % (1) % 12 % 4 % 14 % Current quarter vs prior year quarter 19 % 31 % 23 % 25 % 22 % Net Revenues by Geography Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (In millions, except percentages) U.S. net revenues $ 3,272 $ 3,063 $ 3,073 $ 2,820 $ 2,651 Current quarter vs prior quarter 7 % — % 9 % 6 % 7 % Current quarter vs prior year quarter 23 % 24 % 18 % 21 % 15 % Percentage of total 52 % 51 % 50 % 52 % 50 % International net revenues 2,966 2,970 3,043 2,639 2,610 Current quarter vs prior quarter — % (2) % 15 % 1 % 21 % Current quarter vs prior year quarter 14 % 38 % 29 % 29 % 30 % (FXN) Current quarter vs prior year quarter 10 % 35 % 29 % 30 % 36 % Percentage of total 48 % 49 % 50 % 48 % 50 % Total net revenues $ 6,238 $ 6,033 $ 6,116 $ 5,459 $ 5,261 Current quarter vs prior quarter 3 % (1) % 12 % 4 % 14 % Current quarter vs prior year quarter 19 % 31 % 23 % 25 % 22 % (FXN) Current quarter vs prior year quarter 17 % 29 % 23 % 25 % 25 % Q 2 20 21 R esults 11
Q 2 20 21 R esults 12 PayPal Holdings, Inc. Unaudited Supplemental Operating Data Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (In millions, except percentages) Active accounts(1) 403 392 377 361 346 Current quarter vs prior quarter 3 % 4 % 4 % 4 % 7 % Current quarter vs prior year quarter 16 % 21 % 24 % 22 % 21 % Number of payment transactions(2) 4,735 4,371 4,408 4,013 3,742 Current quarter vs prior quarter 8 % (1) % 10 % 7 % 15 % Current quarter vs prior year quarter 27 % 34 % 27 % 30 % 26 % Payment transactions per active account(3) 43.5 42.2 40.9 40.1 39.2 Current quarter vs prior quarter 3 % 3 % 2 % 2 % (1) % Current quarter vs prior year quarter 11 % 7 % 1 % 1 % — % TPV(4) $ 310,992 $ 285,447 $ 277,072 $ 246,691 $ 221,731 Current quarter vs prior quarter 9 % 3 % 12 % 11 % 16 % Current quarter vs prior year quarter 40 % 50 % 39 % 38 % 29 % (FXN) Current quarter vs prior year quarter 36 % 46 % 36 % 36 % 30 % Transaction Expense Rate(5) 0.81 % 0.80 % 0.84 % 0.82 % 0.83 % Transaction and Credit Loss Rate(6) 0.05 % 0.10 % 0.13 % 0.14 % 0.20 % Transaction Margin(7) 56.8 % 57.8 % 55.9 % 56.7 % 56.6 % Amounts in the table are rounded to the nearest million, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided. (1) An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our Payments Platform or through our Honey Platform, not including gateway-exclusive transactions, within the past 12 months. (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. (3) 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. (4) 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. (5) Transaction expense rate is calculated by dividing transaction expense by TPV. (6) Transaction and credit loss rate is calculated by dividing transaction and credit losses by TPV. (7) Transaction margin is total revenue less transaction expense and transaction and credit loss, divided by total revenue. Q 2 20 21 R esults 12
Q 2 20 21 R esults 13 PayPal Holdings, Inc. Non-GAAP Measures of Financial Performance To supplement the company’s condensed consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP operating income, non-GAAP operating margin, non- GAAP effective tax rate, and free cash flow. These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the company’s results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the company’s results of operations in conjunction with the corresponding GAAP measures. Reconciliation of all non-GAAP measures to the most directly comparable GAAP measures can be found in the subsequent tables included in this press release. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and its prospects for the future. Specifically, the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses, as the case may be, that may not be indicative of its core operating results and business outlook. In addition, because the company has historically reported certain non-GAAP results to investors, the company believes that the inclusion of non-GAAP measures provides consistency in the company’s financial reporting. For its internal budgeting process, and as discussed further below, the company’s management uses financial measures that do not include stock-based compensation expense, employer payroll taxes on stock-based compensation, amortization or impairment of acquired intangible assets, impairment of goodwill, restructuring-related charges, certain other gains, losses, benefits, or charges that are not indicative of the company’s core operating results, and the income taxes associated with the foregoing. In addition to the corresponding GAAP measures, the company’s management also uses the foregoing non-GAAP measures in reviewing the financial results of the company. The company excludes the following items from non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP operating income, non-GAAP operating margin, and non-GAAP effective tax rate: Stock-based compensation expense and related employer payroll taxes. This consists of expenses for equity awards under our equity incentive plans. We exclude stock-based compensation expense from our non-GAAP measures primarily because they are non-cash expenses. The related employer payroll taxes are dependent on our stock price and the timing and size of exercises and vesting of equity awards, over which management has limited to no control, and as such management does not believe it correlates to the operation of our business. Amortization or impairment of acquired intangible assets, impairment of goodwill, and transaction expenses from the acquisition or disposal of a business. We incur amortization or impairment of acquired intangible assets and goodwill in connection with acquisitions and may incur significant gains or losses or transactional expenses from the acquisition or disposal of a business and therefore exclude these amounts from our non-GAAP measures. We exclude these items because management does not believe they are reflective of our ongoing operating results. Restructuring. These consist of expenses for employee severance and other exit and disposal costs. The company excludes significant restructuring charges primarily because management does not believe they are reflective of ongoing operating results. Gains and losses on strategic investments. We record gains and losses on our strategic investments related to our interest in companies over which we have limited control and visibility. We exclude such gains and losses in full because we lack control over the operations of the investee and the related gains and losses are not indicative of our ongoing operating results. Certain other significant gains, losses, benefits, or charges that are not indicative of the company’s core operating results. These are significant gains, losses, benefits, or charges during a period that are the result of isolated events or transactions which have not occurred frequently in the past and are not expected to occur regularly in the future. The company excludes these amounts from its non-GAAP results because management does not believe they are indicative of our current or ongoing operating results. Tax effect of non-GAAP adjustments. This adjustment is made to present stock-based compensation and the other amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income. Free cash flow represents operating cash flows less purchases of property and equipment. The company uses free cash flow as a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property, buildings, and equipment, which can then be used to, among other things, invest in the company’s business, make strategic acquisitions and investments, and repurchase stock. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company’s cash balance for the period. In addition to the non-GAAP measures discussed above, the company also analyzes certain measures, including net revenues and operating expenses, on an FX-neutral basis to better measure the comparability of operating results between periods. The company believes that changes in foreign currency exchange rates are not indicative of the company’s operations and evaluating growth in net revenues and operating expenses on an FX-neutral basis provides an additional meaningful and comparable assessment of these measures to both management and investors. FX-neutral results are calculated by translating the current period’s local currency results with the prior period’s exchange rate. FX-neutral growth rates are calculated by comparing the current period’s FX-neutral results by the prior period’s results, excluding the impact from hedging activities. Q 2 20 21 R esults 13
Q 2 20 21 R esults 14 PayPal Holdings, Inc. Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and GAAP Operating Margin to Non-GAAP Operating Margin Three Months Ended June 30, 2021 2020 (In millions, except percentages) (unaudited) GAAP net revenues $ 6,238 $ 5,261 GAAP operating income 1,127 951 Stock-based compensation expense and related employer payroll taxes 417 365 Amortization of acquired intangible assets 109 115 Restructuring (5) 26 Other(1) 6 28 Total non-GAAP operating income adjustments 527 534 Non-GAAP operating income $ 1,654 $ 1,485 GAAP operating margin 18 % 18 % Non-GAAP operating margin 27 % 28 % (1) The three months ended June 30, 2021 includes charges associated with early lease termination. The three months ended June 30, 2020 includes $7 million of additional expenses related to pre-acquisition contingencies of an acquired company identified outside of the measurement period and $21 million of asset impairment charges for right-of-use lease asset and related leasehold improvements in conjunction with exiting certain leased properties. Reconciliation of GAAP Net Income to Non-GAAP Net Income, GAAP Diluted EPS to Non-GAAP Diluted EPS, and GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate Three Months Ended June 30, 2021 2020 (In millions, except per share data and percentages) (unaudited) GAAP income before income taxes $ 1,356 $ 1,799 GAAP income tax expense 172 269 GAAP net income 1,184 1,530 Non-GAAP adjustments to net income: Non-GAAP operating income adjustments (see table above) 527 534 Net gains on strategic investments (283) (888) Other(1) (7) (17) Tax effect of non-GAAP adjustments (59) 104 Non-GAAP net income $ 1,362 $ 1,263 Diluted net income per share: GAAP $ 1.00 $ 1.29 Non-GAAP $ 1.15 $ 1.07 Shares used in GAAP diluted share calculation 1,186 1,184 Shares used in non-GAAP diluted share calculation 1,186 1,184 GAAP effective tax rate 13 % 15 % Tax effect of non-GAAP adjustments to net income 2 % (2) % Non-GAAP effective tax rate 15 % 13 % (1) The three months ended June 30, 2021 includes tax benefit related to the write-off of deferred tax liabilities on strategic investments as a result of acquiring the remaining interest in the investments during the period. The three months ended June 30, 2020 includes tax benefit related to intra-group transfer of intellectual property. Q 2 20 21 R esults 14
Q 2 20 21 R esults 15 PayPal Holdings, Inc. Reconciliation of Operating Cash Flow to Free Cash Flow Three Months Ended June 30, 2021 2020 (In millions/unaudited) Net cash provided by operating activities(1) $ 1,306 1,772 Less: Purchases of property and equipment (247) (193) Free cash flow 1,059 1,579 (1) Reflects the impact of reclassification as described in our Form 8-K filed with the SEC on February 3, 2021. Q 2 20 21 R esults 15
