PayPal Holdings, Inc.

Good day, ladies and gentlemen, and welcome to PayPal's third quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. 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 Third 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 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 the fourth quarter and full year 2019, our preliminary outlook for 2020, 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, October 23, 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 on today's call. I'm pleased to report that PayPal had a very strong quarter across all of our key metrics. Revenues grew by 19% on an FX neutral and spot basis to $4.38 billion. Our revenue growth was driven by strong transaction and TPV volumes. For the first time ever, we processed over 1 billion transactions per month in a quarter, up 25% year-over-year to 3.1 billion transactions. TPV growth accelerated 80 basis points from last quarter and was up 27% on an FX-neutral basis to $179 billion. TPV, excluding eBay, grew by 31%, up 240 basis points from Q3 2018. eBay TPV declined by 3%, and now represents just 8% of our total TPV, down approximately 300 basis points from Q3 last year. As of now, our best estimate is that eBay will be approximately 6% of our total TPV at the end of the operating agreement in July 2020. Excluding unrealized losses associated discreetly with our investments in MercadoLibre and Uber, we delivered a very strong 79 cents of non-GAAP EPS as compared to our guidance on a similar basis of 69 to 71 cents. Excluding the mark-to-market changes in our strategic investment portfolio, our non-GAAP EPS grew 31%, driven by a year-over-year expansion of more than 200 basis points in our non-GAAP operating margin to 23.4%. I'm very pleased with the leverage of our operating model and the continued expansion of our operating margins. This leverage drove our largest-ever quarterly EPS overperformance versus our expectations and provides us with increased confidence in our medium-term guidance of 20% EPS growth compounded annually. I'm also very pleased to report strong growth in both net new actives and engagement. We added 9.8 million net new actives in the quarter, a record number for any previous Q3. We now have 295 million active accounts on our platform, up 16% year over year, including over 23 million merchants. We anticipate ending the year at approximately 304 million active accounts above our stated target of 300 million. Engagement continues to consistently increase, growing by 9% to almost 40 transactions per active account. Mobile is a major driver of our growth, with one touch at 172 million consumers and 13.8 million merchants. We are quite focused on growing our value proposition beyond checkout as our consumers look for more reasons to use PayPal as part of their everyday financial lives. I'm quite pleased by the efforts of the PayPal team this quarter, and I'm encouraged by the strength of our business fundamentals. We are focused on executing against our strategic priorities. We've made significant progress in driving forward our pricing initiatives, as well as our product integration with Paymentis, and we now anticipate live, full-stack integration by year-end. Venmo continues to be an incredibly powerful platform for engaging consumers. We processed more than $27 billion in volume for the quarter, growing 64%. That's almost $300 million in payments per day and an annual run rate that now exceeds $100 billion. The Venmo team has made tremendous strides in enhancing the use cases of Venmo, including a recently signed deal with SynchronAid, to provide a Venmo credit card. All of this is producing very strong monetization results. We ended Q3 with Venmo just shy of a $400 million annual revenue run rate. Last year, we acquired HyperWallet, knowing that payouts are a powerful tool for fueling engagement as retailers and marketplaces look for new ways to interact with their customers. One year later, I'm pleased to report that our payouts capabilities are gaining strong traction among leading brands. In the quarter, Travelers Insurance announced customers can now receive insurance claim payments via PayPal. PepsiCo launched its first-ever cash-back loyalty program powered by Venmo and PayPal. Lime, the global scooter rental platform, selected PayPal to facilitate payouts to its network of freelancers. And Epic Games is now using our capabilities for competitive Fortnite players to expedite their prize payout process. This month, we added Venmo as a payout option providing merchants with another powerful way to reach Venmo's highly engaged user base. Credit continues to be another strong driver of engagement on our platform. This quarter, we launched new consumer installment plans in the United States and Germany, which allow PayPal customers to pay for their purchases with easy-to-understand monthly payments. This capability is already leading to incremental sales for our merchants. And we signed a long-term strategic partnership agreement with Citi Australia to develop consumer credit products for PayPal's customers in Australia. We continue to gain strong adoption among merchants around the world in daily spend categories. In the quarter, we further expanded our relationship with Walmart, launching PayPal Checkout as the sole payment solution for its online grocery business in Mexico. In Japan, PayPal is one of the official partners for the Japanese government's initiative to promote cashless payments throughout the country. We made significant strides this quarter with multiple strategic partners to create better experiences for our shared customers. With American Express, we've launched a feature where Amex card members can split a purchase in the Amex app via PayPal or Venmo. We now offer account linking on mobile devices with Capital One and PNC Bank in the United States. We launched instant transfer to bank accounts for Venmo customers through our partnership with JPMorgan Chase, and we launched cashback programs with both Chase and Discover. I'm pleased that we are beginning to see increasing traction with the results of our Pay with Rewards initiative. To date, 6 million consumers are enabled to use eligible rewards points to pay for a purchase. And those customers who are using the rewards currency currently do so nearly 10% of the time, and we are seeing increased engagement and spend as a result. In September, we announced that the People's Bank of China has approved our acquisition of a 70% equity interest in GoPay, a licensed provider of online payment services. We are honored to become the first non-Chinese payments company to be licensed to provide online payment services in China. This is a very significant development for us and has the potential to dramatically expand our total addressable market and our long-term growth prospects. The license enables us to expand upon our relationships with existing partners like China UnionPay and AliExpress, and forge new partnerships with China's financial institutions and technology platforms, allowing us to provide a comprehensive set of differentiated payment solutions to businesses and consumers in China and globally. Our initial focus will be on providing cross-border payment solutions to China's merchants, and consumers, linking China's commerce ecosystem to PayPal's vast two-sided network. The transaction is expected to close in the fourth quarter of 2019 and is subject to customary closing conditions. We will share much more about our plans early next year, but suffice it to say, we are very excited about our growth opportunities as a result of this landmark agreement. Q3 was an important quarter for us and our results demonstrate the strength of our expanding two-sided network. More importantly, I am optimistic about the opportunities in front of us and our ability to shape the financial services landscape. I've been leading the PayPal team for the past five years and I've never seen it more united, focused, and excited about our future. We think the next five years will be as defining and value-creating as the past five. And with that, let me turn the call over to John.