PayPal Holdings, Inc.

Good afternoon, my name is Buena and I will be your conference operator today. At this time, I would like to welcome everyone to PayPal Holdings Earnings Conference Call for the second quarter 2021. 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pan key. Thank you. I would now like to introduce your host for today's call, Ms. Gabriela Rabinovich, Vice President, Corporate Finance and Investment Relations. Please go ahead.

Thank you, Buena. Good afternoon, and thank you for joining us. Welcome to PayPal's earnings conference call for the second quarter of 2021. Joining me today on the call are Dan Schulman, our President and CEO, and John Raining, 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 on our Investor Relations website. In discussing our company's performance, we will refer to some non-GAAP measures. 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 2021. 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 our Investor Relations website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, July 28, 2021. 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 today. I'm pleased to say that on the heels of a record year, our Q2 results once again reflect some of the best performance in our history on both an absolute and a relative basis. It is now clear that customers around the world have embraced all forms of digital payments. even in regions where in-person activities are returning towards pre-pandemic levels. In this new normal, PayPal serves as an essential and trusted platform for both consumers and merchants across all forms of commerce, payments, and basic financial services. As a result, we hit a new milestone in Q2, surpassing $300 billion of TPV for the first time in our history, growing 40% on a spot basis to $311 billion with an annualized run rate of approximately $1.25 trillion. This is even more notable given that eBay's TPV on our platform declined by 37%. eBay exited the quarter at under 4% of our volume, and we expect their TPV will approach 2.5% of our total volumes by year end. Excluding eBay, our volumes grew by a remarkable 48% on a spot basis. Our active accounts now exceed 400 million, up 16% to 403 million. We added 11.4 million net new active accounts in the quarter, including an additional 1.5 million merchant accounts. That brings our total merchant count to 32 million. We still expect to end the year at the higher end of our previous guidance of 52 to 55 million net new active accounts. Transactions in the quarter grew by 27% to 4.74 billion. And even as our net new actives continue to show strong growth, Our transactions for active account accelerated 11% in the quarter to 43.5 times as our consumers engaged more frequently across our growing suite of services. We grew our revenues by 19% to $6.24 billion. This growth comes even as we lap strong results from last year and absorbed 811 basis points of revenue pressure from eBay, as their revenues on our platform declined 51% in Q2. Excluding eBay, our revenues grew at approximately 32%. we now expect that ebay will be essentially 100 complete with their migration to manage payments by the end of the third quarter we are maintaining our full year guidance despite the fact that this accelerated ramp puts an additional 100 basis points of revenue pressure in 2021 the good news is that this pressure begins to ease in q4 and obviously positions us for accelerated revenue growth in 2022. Finally, we delivered non-GAAP EPS of $1.15, even as we continue to invest heavily in our growth initiatives. Venmo continued its strong performance in Q2 with $58 billion in TPV, up 58% year-over-year with over 76 million active accounts. Revenue growth accelerated to almost 70% in Q2, our highest growth rate in the past year, fueled by Venmo's product diversification strategy. More than 500,000 customers have established new business profiles on Venmo, with more than 300,000 created in Q2 alone. Pay with Venmo revenues grew by 183% year over year. We're also seeing strong adoption and trading of crypto on Venmo. In this quarter, we expanded the Venmo value proposition to allow merchants and consumers to pay for goods and services and receive buyer and seller protections for commerce transactions. This has been a very successful feature on PayPal's P2P services, and we expect it will be widely adopted on Venmo. I'm pleased to report that the initial version of our new Consumer Wallet Super App is code complete, and we are now beginning to slowly ramp. In the next several months, we plan to be fully ramped in the U.S. with a host of products and services across payments, basic consumer financial services, and commerce and shopping tools launching every quarter. New features will include high yield savings, early access to direct deposit funds, new and improved bill pay functionality, messaging capabilities outside of P2P to enable family and friend communications, as well as additional crypto capabilities and customized deals and offers. Each wallet will be unique. driven by our advanced AI and machine learning capabilities in order to enhance each customer's experiences and opportunities. As I previously mentioned, 32 million merchants now rely on PayPal. They trust that our scale, security, tools, and resources will help them to grow their businesses in today's rapidly emerging digital economy. PayPal is the only payments company to offer features like global seller protection and fraud prevention services at no additional cost. We are one of a few payments companies to allow consumers to use cryptocurrency as a funding source to check out on our platform. Our buy now, pay later offering comes at no additional cost to merchants while boosting their conversion rates and increasing cart sizes by 39%. And we continue to expand our product differentiation through recent acquisitions like ChargeHound and HappyReturns that will drive additional value to both consumers and merchants post a sales transaction. Our announced pricing adjustments in the U.S. align our pricing with the value we deliver, while giving us flexibility to aggressively compete in full-stack processing and at point-of-sale checkout. We continue to see strong demand for our in-store services, with approximately 1.3 million merchants now accepting our QR codes, and continued momentum and excitement across our large enterprise merchants. In fact, every 20 seconds, a new merchant signs up to use our QR codes. It's also very encouraging to see that consumers who use our QR codes spend more TPV, in fact, 19% more TPV on the PayPal platform. Our in-store efforts will no doubt be a multi-year journey, but these trends reinforce our conviction to be a seamless omni-channel wallet. In Q2, our overall in-store efforts across QR and cards equaled $6.8 billion in TPV, up 39% year over year. Our in-store suite of services continues to expand with the launch of PayPal Zettel in the U.S. As in Europe, PayPal now offers small businesses in the U.S. an integrated commerce solution that not only helps them to accept payments in-store with the Zettel card reader, but also helps them to manage sales and inventory across their various channels all in one place. Our Buy Now, Pay Later product continues its strong growth and is proving to be extremely popular for consumers and merchants alike. Since launch, we have processed over $3.5 billion in TPV, with more than 1.5 billion of that TPV in Q2 alone. Approximately 650,000 merchants have customers who use our Buy Now, Pay Later capabilities, and 40,000 have positioned Buy Now, Pay Later upstream on their product pages. Over 7 million consumers have transacted more than 20 million times with our Buy Now, Pay Later product. Australia is now fully deployed and off to a strong start, with additional countries in Europe slated to roll out later this year. Our employees customers and government officials expect PayPal to be a role model and a responsible corporate citizen. I am proud to say that we are delivering on our commitments to advance social justice and racial equity. Over the past year, we have committed all of the $535 million we pledged towards advancing racial economic equality. And we recently launched a new $100 million commitment focused on women's economic empowerment. These efforts are a direct reflection of our values and our belief that PayPal must be part of a solution that drives a better future for all of us. I'd like to thank our employees for their passion and their never-ending commitment for shaping a new and inclusive financial services system. We are entering a new era, and we couldn't be more excited to help drive an emerging digital future where all small businesses and consumers can participate and thrive in a post-pandemic world. And with that, let me turn the call over to John.