PayPal(US:PYPL)2024-07-30 20:52Part I. Financial Information Financial Statements This section presents PayPal's unaudited condensed consolidated financial statements for the periods ended June 30, 2024, providing a comprehensive overview of the company's financial position and performance Condensed Consolidated Balance Sheets As of June 30, 2024, total assets increased to $84.0 billion from $82.2 billion, while total liabilities rose to $63.4 billion from $61.1 billion, and stockholders' equity slightly decreased to $20.6 billion Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $84,016 | $82,166 | | Cash and cash equivalents | $7,701 | $9,081 | | Funds receivable and customer accounts | $38,727 | $38,935 | | Loans and interest receivable, net | $3,954 | $2,509 | | Total Liabilities | $63,394 | $61,115 | | Funds payable and amounts due to customers | $41,727 | $41,935 | | Long-term debt, net | $9,727 | $9,676 | | Total Stockholders' Equity | $20,622 | $21,051 | Condensed Consolidated Statements of Income (Loss) Net revenues increased 8% to $7.9 billion in Q2 2024 and 9% to $15.6 billion in H1 2024, driving double-digit growth in operating income and diluted EPS Q2 2024 vs Q2 2023 Income Statement (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $7,885 | $7,287 | +8% | | Operating Income | $1,325 | $1,133 | +17% | | Net Income | $1,128 | $1,029 | +10% | | Diluted EPS | $1.08 | $0.92 | +17% | H1 2024 vs H1 2023 Income Statement (in millions, except per share data) | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $15,584 | $14,327 | +9% | | Operating Income | $2,493 | $2,132 | +17% | | Net Income | $2,016 | $1,824 | +11% | | Diluted EPS | $1.90 | $1.62 | +17% | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $20.6 billion at June 30, 2024, primarily due to $3.0 billion in common stock repurchases, partially offset by $2.0 billion in net income - Total equity decreased to $20.6 billion at June 30, 2024, from $21.1 billion at December 31, 20238 - During the six months ended June 30, 2024, the company repurchased common stock for a total of $3.0 billion ($1.51 billion in Q1 and $1.52 billion in Q2)8 - Net income of $2.0 billion for the six months ended June 30, 2024, increased retained earnings and partially offset the impact of stock repurchases8 Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $3.4 billion in H1 2024, while investing activities used $3.7 billion and financing activities used $2.2 billion, primarily due to stock repurchases Six Months Ended June 30 - Cash Flow Summary (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,442 | $970 | | Net cash (used in) provided by investing activities | $(3,667) | $1,593 | | Net cash used in financing activities | $(2,162) | $(6,054) | | Net change in cash, cash equivalents, and restricted cash | $(2,476) | $(3,541) | - The company repurchased $3.0 billion of treasury stock in the first six months of 2024, compared to $3.0 billion in the same period of 202310 Notes to Condensed Consolidated Financial Statements These notes detail PayPal's accounting policies and financial results, covering revenue, crypto assets, fair value, derivatives, loan portfolio, debt, legal matters, stock repurchases, and restructuring charges - Revenue from U.S. markets increased to $9.0 billion in H1 2024 from $8.4 billion in H1 2023, with transaction revenues remaining the dominant source of income, growing to $14.2 billion in H1 20242627 - The company holds crypto assets for customers, recognizing a safeguarding liability and a corresponding asset, which grew to $2.43 billion as of June 30, 2024, from $1.24 billion at year-end 20234546 - In May 2024, PayPal issued $1.3 billion in new fixed-rate notes, bringing total outstanding principal on term debt to $11.8 billion as of June 30, 2024114117 - The company is cooperating with a subpoena from the SEC's Division of Enforcement received in November 2023 related to the PayPal USD stablecoin132 - A global workforce reduction initiated in Q1 2024 resulted in restructuring charges of $258 million for the first six months of the year153 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, highlighting 8% revenue growth driven by 11% TPV increase, improved operating margin, and capital allocation priorities including $3.0 billion in H1 2024 stock repurchases Key Performance Metrics (in billions/millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Payment Volume (TPV) | $417 | $377 | +11% | | Payment Transactions | 6.6 | 6.1 | +8% | | Active Accounts | 429 | 431 | -0.5% | | Payment Transactions per Active Account | 60.9 | 54.7 | +11% | - Revenue growth of 8% in Q2 2024 was primarily driven by an 11% growth in TPV163 - Operating margin improved to 17% in Q2 2024 from 16% in Q2 2023, reflecting operating efficiencies partially offset by higher transaction expenses164 - The company repurchased approximately $3.0 billion of its common stock in the first six months of 2024, with $7.9 billion remaining available under the current authorization242 - A global workforce reduction initiated in Q1 2024 is expected to reduce annualized employee-related costs by approximately $565 million212 Quantitative and Qualitative Disclosures About Market Risk This section details PayPal's exposure to market risks, including interest rate, foreign currency, and equity investment risks, and the impact of hypothetical adverse changes on its financial position - A hypothetical 100 basis point increase in interest rates would decrease the fair value of the company's cash equivalents and available-for-sale debt securities by approximately $103 million as of June 30, 2024248 - The company is generally a net receiver of foreign currencies, and after considering foreign currency exchange contracts, a hypothetical 10% adverse change in all foreign currency rates would have a net negative impact on income before taxes of approximately $20 million as of June 30, 2024257 - Strategic investments totaled $1.9 billion as of June 30, 2024, where a hypothetical 10% adverse change in their carrying value would result in a decrease of approximately $185 million258 Controls and Procedures As of June 30, 2024, the CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that as of June 30, 2024, the company's disclosure controls and procedures were effective259 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting260 Part II. Other Information Legal Proceedings This section incorporates by reference detailed discussions of ongoing legal and regulatory matters from Note 13 of the financial statements - The report incorporates information from "Note 13—Commitments and Contingencies—Litigation and Regulatory Matters" to describe ongoing legal proceedings261 Risk Factors This section supplements existing risk factors, highlighting increasing cyberattack sophistication, evolving privacy regulations, risks related to credit products, and growing scrutiny of ESG matters - Highlights the constant evolution and increasing sophistication of cyberattacks, including hacking, ransomware, and social engineering, as a significant threat to the business263264 - Discusses the complex and changing regulatory environment for privacy and data protection, including the proliferation of new state-level laws in the U.S. and reliance on mechanisms like SCCs for international data transfers268269270 - Details risks specific to its credit products, such as reliance on unaffiliated financial institutions in the U.S., regulatory uncertainty around the "valid-when-made" doctrine, and the risk of increased customer defaults in a worsening economic environment271272273274 - Acknowledges increasing stakeholder focus on ESG matters, noting that failure to meet expectations or comply with new regulations could harm reputation and business operations277278 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity, including $1.5 billion in Q2 2024 repurchases and $7.9 billion remaining under the current authorization Stock Repurchase Activity (Q2 2024) | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | 8.2 | $64.73 | | May 2024 | 8.8 | $63.56 | | June 2024 | 6.6 | $62.17 | | Total Q2 2024 | 23.6 | - | - As of June 30, 2024, approximately $7.9 billion remained available for repurchase under the authorized stock repurchase program282 Defaults Upon Senior Securities The company reports no defaults upon senior securities - None283 Mine Safety Disclosures This item is not applicable to the company - Not applicable283 Other Information The company reports no other information for this period - None283 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and other corporate documents - Lists exhibits filed with the report, including CEO and CFO certifications (Exhibits 31.01, 31.02, 32.01, 32.02) and iXBRL data files (Exhibit 101)285 Signatures - The report was duly signed on July 30, 2024, by Alex Chriss (President, CEO, and Director), Jamie Miller (EVP, CFO), and Christopher Natali (VP, Chief Accounting Officer)286