PayPal Holdings, Inc.

Good afternoon. My name is Gabriel, and I will be your conference operator today. At this time, I'd like to welcome everyone to PayPal's Q2 2020 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, simply press the pound key. Ms. Gabriela Rabinovich, please go ahead.

Thank you, Gabriel. Good afternoon and thank you for joining us. Welcome to PayPal Holdings Earnings Conference Call for the second quarter of 2020. Joining me today on the call are Dan Shulman, our President and CEO, and John Rainey, our Chief Financial Officer and EVP Global Customer Operations. Please note that we are taking this call from separate locations. We appreciate your patience as we adjust to these new logistics. 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 on 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. 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 third quarter and full year, as well as 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 place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, July 29, 2020. We expressly disclaim any obligation to update this information. With that, let me turn the call over to Dan.

Thanks, Gabrielle. And thanks, everyone, for joining us on today's call. And I hope that all of you are safe and well. I'm pleased to say that PayPal just had its strongest quarter since becoming an independent public company five years ago. Simply put, our business has never been more relevant and important than it is today. In the midst of the COVID pandemic, we have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business. The world has accelerated from physical to digital across multiple industries, including retail. Merchants are embracing a digital first strategy, and these trends have fueled the rapid rise of digital payments. These are durable and meaningful tailwinds. And we are fortunate to have the scale, scope of services, and brand reputation to capture the benefits of these trends and extend them to our customers. Consumer behavior has shifted in a discontinuous manner, and PayPal clearly has a unique opportunity to accelerate its path to becoming an everyday essential service. The strength that we saw across our business in April continued to gain momentum throughout Q2. Our transactions grew by 26% to 3.7 billion, consistently rivaling the volumes that we usually experience during the five days between Thanksgiving and Cyber Monday. Transactions on our PayPal checkout experiences remained especially strong, growing almost 40% year over year. TPV grew at 30% on an FX neutral basis with a record $222 billion of processed volume in Q2. TPV accelerated throughout the quarter, and June marked our highest growth rate since our separation from eBay. We added a record 21.3 million new customers in the quarter, increasing nearly 140% year over year. To put this in perspective, this quarter's net new actives were greater than our total net new actives in 2016. Nearly 1.7 million merchants signed up for PayPal in Q2, and honey net new actives were nearly three times that of Q1. Importantly, we continue to see increased levels of engagement. Our 10-day adoption rate for our newest cohorts grew by 20 to 30% over last year. And across our PayPal base, our daily active users have accelerated by almost 40% from last year. We ended Q2 with 346 million active accounts and with over 26 million merchant accounts. Given our momentum, I believe that we will add approximately 70 million net new actives this year. These trends drove record financial performance in the quarter. Revenues grew by 25% on an FX neutral basis to $5.26 billion, accelerating after our strong 20% revenue growth in April. This is the first time our quarterly revenues have exceeded $5 billion. Due to the strength of our PayPal branded transactions, our non-GAAP operating margin increased by a record 500 basis points to 28% this quarter. As a result, our non-GAAP EPS grew by 49% year-over-year to $1.07. And all of this led to record free cash flow of $2.2 billion in the quarter, up 112 percent. In the first half of 2020, the penetration of e-commerce as a percentage of retail sales outpaced prior external forecasts by an astonishing three to five years. In this environment, the demand for our products and services has dramatically increased and unleashed multiple opportunities. We are focused on several key initiatives to fully leverage this unique moment in time. First and foremost is our push to accelerate in-store contactless payments. Both consumers and merchants are rapidly moving towards digital payments across their online and offline experiences. This is an existential issue for merchants. who realized that reopening their retail stores depends on touchless forms of payments to keep both their employees and customers safe and healthy. There are numerous market research studies highlighting that consumers no longer want to handle cash or other forms of payments that require any physical touch at checkout. We are significantly investing to accelerate our presence in all forms of omnichannel commerce, from point of sale in store to buy online and pick up in store, order ahead, pay at table, and home delivery. In addition to iZettle, contactless cards, and integration with both Google Pay and Samsung Pay, We announced that our QR code functionality is now available across 28 countries for small and micro merchants. And we are working with leading retailers throughout the US and Europe to aggressively roll out an integrated point of sale QR solution beginning this quarter with expansion plan throughout the year. For instance, We are working with CVS Pharmacy to enable PayPal and Venmo QR codes for payment at their cash registers. And we expect a full national rollout to their 8,200 standalone store locations by the end of the year. Our merchants and our consumers want us to expand in-store and we will not let this opportunity pass us by. The rollout of QR functionality will also accelerate our Venmo monetization efforts. Venmo also had a very strong Q2 with record NNAs and an active base that now exceeds 60 million consumers. In Q2, Venmo grew its TPV by 52% to almost $37 billion. Revenues continue to outperform our expectations with year-over-year growth rates of greater than 60% during the first three weeks of July. We are seeing substantial increases in the use of Venmo as the pandemic continues on, as more consumers turn to Venmo to live their financial lives, including adoption of direct deposit functionality, and later this year, the Venmo credit card. We recently introduced business profiles, a unique new way for consumers and merchants to connect on Venmo and exchange goods and services with the same protections enjoyed by PayPal customers. These initiatives will drive significant additional value to Venmo users and consequently drive new vectors of monetization. We are also expanding functionality beyond OmniCheckout in both our PayPal and Venmo digital wallets. We will roll out additional services over the next several quarters, including bill pay, subscriptions and rewards management, shopping tools from Honey, and new forms of credit and budgeting tools, to name just a few. Our goal is to meaningfully expand the range of services provided inside our wallets. We believe these and other actions will bring us closer to having a full set of capabilities for consumers to use on a daily basis. A rapidly increasing scale makes us highly relevant to merchants of all sizes and provides us with large sets of data to offer customized services and solutions. Over the last few years, we have developed, acquired, and grown a strong and diverse portfolio of capabilities that address many of the current needs of our merchants. These range from end-to-end digital payment processing to sophisticated risk management and shopping tools that ultimately help to drive increased sales and engagement so that our merchants can thrive in the era of digital commerce. And it's the combination of these assets together that provides unique competitive differentiation for our enterprise merchants, channel partners, and small business customers. Providing merchants with a comprehensive, consistent, simple, and unified experience remains a guiding principle for us as we continue to add new products and services. And as is evident by the number of merchants signing up for PayPal, our integrated platform has never been more relevant or needed. We continue to extend our platform capabilities around the world. We recently entered into an important commercial relationship with Go-Jek, a leader in mobile commerce in Southeast Asia with 170 million users. In Brazil and Mexico, PayPal is available as a payment option in the Mercado Pago online checkout for shoppers. And PayPal is now available for cross-border transactions on Mercado Libre. And we continue to build our team and capabilities in China as we integrate with our GoPay platform, partner with China UnionPay, and other leading Chinese players. COVID-19 was not the only set of issues we addressed this quarter. As all of you know, we are witnessing an outpouring of emotion and determination to address centuries of systemic racism. In June, we announced a comprehensive $530 million commitment to support black and minority businesses and to fight economic inequality. We felt it was necessary to not just condemn racism, but to commit to doing the necessary work over the long term to help create a more socially just society. Even as we navigate these unprecedented times as a business, we have the ability to act in a way that clearly represents our values, especially around inclusion. We still have lots of work to do, but we are fully committed to a future where all people can live with dignity and respect. This is also a special quarter for PayPal because it marks our fifth anniversary as an independent, publicly traded company. During that time, we've dramatically expanded our platform capabilities, value proposition, geographic footprint, and our market leadership. However, I believe the next five years will bring about even greater opportunities. We have an ambitious vision for PayPal to be a central player in the future of the digital economy. I'm confident we can drive towards that goal. We have a solid track record and an unwavering dedication to delivering essential, differentiated, and best-in-class services to merchants and consumers. This is our time and we intend to seize the moment Our products and services have never been more important, and we are ready and well positioned to capture the opportunities that lie ahead of us. And with that, I'll now turn the call over to John. John?