PayPal Holdings, Inc.

Good day, ladies and gentlemen, and welcome to PayPal's second quarter 2019 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct the question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference 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, Cherie. Good afternoon, and thank you for joining us. Welcome to PayPal Holdings Earnings Conference Call for the second quarter 2019. Joining me today on the call are Dan Schulman, our President and CEO, 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 third quarter and full year 2019, our medium-term outlook, and the impact 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, July 24, 2019. We expressly disclaim any obligation to update the information. With that, let me turn the call over to Dan.

Thank you, Gabrielle, and thanks, everyone, for joining us today. I'm pleased to report that PayPal had a solid quarter. In the second quarter, we generated $4.31 billion in revenue. growing 12% year over year on an FX neutral and spot basis, or 19% adjusted for the sale of our consumer credit receivables to Synchronate. For the second quarter, we delivered 86 cents of non-GAAP EPS, which included a 14 cent gain from our strategic investments, including MercadoLibre, Uber, and others. Non-GAAP EPS grew 47% and excluding strategic investments grew by 27%. Our Q2 non-GAAP operating margin increased by approximately 200 basis points year over year to 23.2%. This represents the largest year over year increase in our non-GAAP OI margin since becoming an independent public company four years ago. Another highlight of the quarter was our growth in both net new actives and engagement. We added 9 million net new actives in the quarter, up 17% year over year. We now have 286 million active accounts on our platform. including 23 million merchants, and we remain on pace to exceed 300 million active accounts by the end of the year. Over the past 12 months, we've added 41 million net new actives, a new record for us. Engagement also continues to consistently improve, growing by 9.3%, to 39 transactions per active account. Increasing use of our platform helped to drive 172 billion of TPV in the quarter, up 26% on an FX neutral basis, an increase of approximately 100 basis points from last quarter. Total payment volume excluding eBay grew 30% on an FX neutral basis, up 70 basis points from last quarter, and outpaced the overall payments market as we continue to gain share. eBay Marketplace's TPV once again declined approximately 4% in the quarter, and now represents just 9% of our overall TPV, down nearly 300 basis points from Q2 last year. We processed approximately one billion transactions per month in Q2, up 28% year over year. Mobile TPV grew by 37% to more than 73 billion in Q2. OneTouch, with 149 million consumers and 13 million merchants, remains the clear leader in mobile checkout, with nearly two times the conversion of competing wallets, helping merchants of all sizes increase sales in the competitive omni-channel retail environment. OneTouch now enables over 80% of the Internet Retailer 100 in the U.S. Venmo continues its significant momentum and is well on its way to becoming a daily part of our consumers' financial lives. Venmo total payment volume increased 70% year over year to $24 billion in Q2, and we continue to expect to drive nearly 100 billion in TPV by year end. Venmo continues to significantly grow its revenues with approximately 15 million Venmo users having engaged in a monetizable transaction. With another quarter of outstanding net new active growth, Venmo continues to offer a significant opportunity for merchants to attract a valuable, engaged consumer base. In addition to adding Fandango, Stitch Fix, 1-800-Flowers, Today Tix, and Ticket Network to our growing list of merchant partners, offering Venmo as a way to pay, we continue to enrich the Venmo experience by making it even more engaging and personalized. In the second quarter, we added Bitmojis to the Venmo app, allowing users to include their personalized Bitmoji along with the payment notes of their Venmo transactions. As we work to improve the financial health of hundreds of millions of people across the globe, I'm thrilled that we recently expanded Zoom into 32 new send markets throughout Europe. Customers across Europe can now use Zoom to send money pay bills or reload phones to more than 130 markets internationally. Launching Zoom's full capabilities globally is an important development for us as our upgraded tech platform increasingly allows us to deploy capabilities across multiple countries as opposed to the country by country rollouts we previously deployed. This quarter, we announced the PayPal Commerce Platform, a new solution that will help our merchants drive their sales volumes in the digital commerce era. The PayPal Commerce Platform is designed to meet the specific needs of marketplaces, e-commerce platforms, and crowdfunding sites by bringing together a comprehensive set of technologies, tools, services, and financing solutions for businesses of all sizes. Powered by PayPal's unique two-sided network, the PayPal Commerce Platform gives nearly any business access to a flexible, customizable suite of services that enables global growth, simplifies compliance, provides risk protection, empowers their end-to-end payment capabilities. Our business financing solutions are another way that we're helping businesses grow and achieve their ambitions. This quarter, we began offering our PayPal business loan product to PayPal merchants in Canada, allowing them to access financing to build and sustain their businesses. This follows the expansion of our business financing solutions to Germany in Q4 of 2018, and Mexico earlier this year in partnership with Mexican lending platform, Confio. Since launching our business lending solutions, we've provided access to more than $10 billion in funding through 650,000 loans and cash advances to more than a quarter of a million small businesses around the world. In June, the UK Competition and Markets Authority provided final approval of our acquisition of iZettle. We are now beginning to integrate iZettle's products and teams around the globe, which we expect will significantly strengthen PayPal's in-store presence. Finally, we continue to partner with leading technology platforms and financial institutions to reimagine financial services. We believe that the full potential of FinTech can only be realized through partnerships that leverage the best of our collective assets. In the quarter, we expanded our collaboration with Google to allow businesses to accept PayPal with Google Pay through their apps and websites. This feature is now available in all 24 countries where Google Pay supports PayPal as a payment method. We both solidified and extended our global partnership with Uber and also announced that we intend to explore future commercial payment collaborations, including the development of Uber's digital wallet. As part of this agreement, we invested $500 million in a private placement, and we couldn't be more excited about deepening our relationship with this innovative partner. and we are almost complete with our MercadoLibre commercial agreement. This will significantly deepen our strategic relationship and expand our international scope and scale. We expect this will include integration of PayPal into the MercadoLibre marketplace, open our merchant network through our smart payments button platform to MercadoPago customers, and link our respective consumers together for P2P and international remittances. These developments represent significant milestones on our journey to be the worldwide payments platform of choice, helping to enable global commerce by connecting the world's leading marketplaces and payment networks. These are complex, multifaceted partnerships, and they take multiple quarters to come to fruition. As we've deepened these relationships, we are frequently seeing the opportunity to deploy capabilities well beyond our initial scoping. While the scope expansion has delayed some of our initially planned deployment dates, it bodes well for the ultimate scale of these initiatives. And while these delays have slightly affected our revenue guidance for the year, we remain quite confident that the majority of these will be implemented by year end. We are also raising our EPS guidance for the year and expanding our operating margin. And we are confident in the medium term targets outlined at our investor day last May. We certainly have no shortage of opportunities in front of us, and we look forward to shaping an exciting future with our partners customers, and employees. And with that, I'll turn the call over to John.