PayPal Holdings, Inc.

Good day, ladies and gentlemen, and welcome to PayPal's fourth quarter and full year 2018 earnings conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will be given at that time. If anyone should require assistance during the call, you may press star, then zero on your touchtone telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Ms. Gabrielle Rabinovich, Head of Investor Relations. Please go ahead.

Thank you, Andrew. Good afternoon, and thank you for joining us. Welcome to PayPal Holdings Earnings Conference Call for the fourth quarter and full year 2018. Joining me today on the call are Dan Schulman, our President and CEO, Bill Reddy, our EVP Chief Operating Officer, and John Rainey, our Chief Financial Officer and EVP Global Customer Operations. We're providing a slide presentation to accompany our commentary. This conference call is also being webcast, and both the presentation and call are available through the investor relations section of our website. We will discuss some non-GAAP measures in talking about our company's performance. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. In addition, management will make forward-looking statements that are based on our current expectations forecasts and assumptions, and involve risks and uncertainties. These statements include our guidance for first quarter and full year 2019, our medium-term guidance, and the impact and timing of our acquisitions. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties, and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. filed with the SEC and available on the investor relations section of our website. You should not rely on any forward-looking statements. All information in this presentation is as of today's date, January 30, 2019. We expressly disclaim any obligation to update the information presented today. With that, let me turn the call over to Dan.

Dan Bauschelman Thank you, Gabrielle, and thanks, everyone, for joining us on today's call. I'm pleased to report that PayPal had another strong quarter ending 2018 with a record-breaking growth across a number of key customer and financial metrics. Our transformation into an open digital payments platform is clearly resonating with our customers. PayPal continues to benefit from increasing tailwinds as cash continues to digitize and more and more aspects of our lives move to mobile. Our ability to leverage these trends is reflected in both our current results and our forward looking guidance for 2019. In 2018, we set new benchmarks in terms of spot revenue growth, net new active accounts, and engagement across our platform. We developed industry defining products, acquired leading edge capabilities, strengthened existing partnerships, and entered into new strategic relationships with some of the biggest and most influential global brands in technology, retail, and finance. We aspire to be the de facto operating system for mobile and digital commerce around the world, creating value for all of our partners and customers across the entire payments ecosystem. And each year, we make substantial progress towards that goal. Let's start with our numbers. In 2018, we delivered $15.45 billion in revenue, up 18 percent on a spot basis and FX neutral basis, or 21 percent normalizing for the sale of our U.S. consumer credit receivables. That represents our highest annual spot revenue growth rate since separation. Revenues in 2018 associated with eBay grew 4%, while merchant services grew 22%, more than five times that of eBay. In the fourth quarter, we generated $4.23 billion of revenue, growing 14% or 21% normalized. This is the first time in our history that we surpassed $4 billion of revenue in a single quarter. And we achieved this milestone despite strong headwinds from slower than expected eBay volume growth and greater than forecasted FX pressures. For 2018, our overall payment volume grew 26% on a currency neutral basis to $578 billion. We processed just shy of 10 billion transactions in the year. For the quarter, our TPV, excluding eBay, grew 29% on an FX-neutral basis, significantly outpacing the market as we continue to gain share. In the quarter, eBay had zero growth in its volume, and it exits 2018 representing just 10% of our overall TPV, down 300 basis points year-over-year. Our strong revenue growth and disciplined OpEx spend combined to drive a 28% year-over-year increase in 2018 non-GAAP earnings per share of $2.42. In Q4, we delivered 69 cents of non-GAAP EPS, up 26%. As we mentioned last quarter, we invested some of our below the line EPS benefits to drive customer acquisition, and that clearly paid off. One of the clear highlights of Q4 is our net new active number. We added a record 13.8 million net new active accounts to our platform, up 58% year over year. Approximately 2.9 million of these net new actives came from our acquisitions, with almost 11 million net new actives driven organically, the best quarterly organic net new active number in PayPal's history. We added 39 million net new actives for the year, another all-time record for us. We now have 267 million active accounts on our platform with approximately 246 million consumers shopping at more than 21 million merchants. We are targeting more than 300 million active accounts on our platform by the end of 2019. Even with this acceleration in net new actives, we continue to grow our customer engagement. Engagement grew by 9% to almost 37 transactions per active account. This drove 164 billion in TPV in the quarter, up 25% on an FX neutral basis, and is our first quarter to ever exceed $150 billion of TPV. Mobile continues to drive our growth with $67 billion of mobile TPV in Q4 alone, representing 41% of our total TPV. OneTouch, with its market-leading checkout conversion rates, continues to grow with over 123 million consumers and 11 million merchants opted in. Venmo continued its strong momentum this holiday season. We are witnessing significant increases in monetized volume growth and monthly active users. This quarter, we drove $19 billion in payment volume through Venmo, an increase of 80% year-over-year. For the full year, Venmo's volume increased 79%, with $62 billion in payment volume processed. And we are on pace for Venmo to drive almost $100 billion in TPV in 2019. For the last two consecutive quarters, Venmo's TPV surpassed the volume of TPV we processed from eBay. Pay with Venmo continues to attract new partners, including Shopify, Hulu, BigCommerce, and Jay-Z's Tidal Music Service. The total number of Venmo users who have made a monetizable transaction is now 29%, reflecting a steady month-over-month increase. The Venmo card continues to gain significant traction. Instant transfer revenues continue to increase. And as a result, Our Venmo initiatives have produced a revenue run rate going into 2019 that now exceeds $200 million, with revenues being equally split between instant cash out and other monetizable services. I couldn't be more pleased with our revenue trends and the numerous incremental growth opportunities we see for Venmo. Braintree has continued to grow impressively, demonstrating its market leadership since our acquisition five years ago. Last month, we announced the Braintree platform had processed over $500 billion in authorized payment volume since 2014, with more than 6 billion transactions last year alone. We added KFC Australia, Krispy Kreme, Deutsche Telekom, Deutsche Post, Live Nation Ticketmaster, Acer Computers, and TripAdvisor experiences to its platform, joining a powerful list of leading mobile apps using Braintree, such as Uber, Wish, Box, Facebook, and Airbnb. PayPal's opportunities to expand internationally continue to grow, with our global FI, tech, and merchant partnerships continuing to multiply. Two countries I'd like to highlight are India and Japan. In India, we have benefited from strong consumer demand since we went live in late 2017. In 2019, we will continue to invest in frictionless experiences for everyday payments by Indian consumers. We are expanding our merchant and financial institution partnerships throughout the country's ecosystem, bringing a truly global platform experience to India's consumers and merchants. I'm also pleased with our progress in Japan. We've launched a suite of services that unlocks the network effects of the PayPal platform for merchants and consumers there. For the consumer, this includes one-touch payment buyer protection, and instant bank funding. Japanese merchants also benefit from instant settlement as well as the increase in customer acquisition and conversion we see in other countries around the world from OneTouch. We have also added ANA Airlines, the largest airline in Japan, to our growing merchant base. We've now secured partnerships with over 20 top-tier global financial institutions, including eight of the top 10 banks in the U.S. In 2018, we saw nearly 40 bank-led marketing campaigns that encouraged their customers to pay with PayPal. One of the most exciting features to come out of our financial institution relationships is enabling our mutual consumers to use their credit card reward points as a tender type in the PayPal wallet. I'm pleased to announce that we launched this capability with Citi and Discover at the end of Q4 and plan to roll this out to multiple partners in 2019, including Chase, Amex, and Barclaycard. It's been estimated that nearly 10 billion of reward points go unused every year in the U.S. alone. Helping to address that issue is a huge opportunity for consumers and is yet another way that our two-sided platform is connecting consumers and merchants in unique and powerful ways. I'd like to now turn the call over to Bill, who will provide additional color on some of our other recent partnerships.