PayPal Holdings (PYPL) 10-K risk factor changes: FY2018 vs FY2017

The second section, captioned “Risks Related to [removed: the Separation and] Our [removed: Operation as an Independent Publicly Traded Company,”] [added: Separation from eBay”] discusses some of the risks relating to our separation [added: from eBay in July 2015] into an independent publicly traded company.

You should carefully review all of these sections [removed: for important information regarding risks and uncertainties that affect us,] in addition to the other information appearing in this Annual Report on Form 10-K, including our consolidated financial statements and related [removed: notes.][added: notes, for important information regarding risks and uncertainties that affect us.]

If any of the following risks actually [removed: occurs,] [added: occur,] our business, financial condition, results of operations, and future prospects could be materially and adversely affected.

Risk Factors That May Affect Our Business, Results of [removed: Operations] [added: Operations,] and Financial Condition

[removed: Substantial] [added: We face substantial] and increasingly intense competition worldwide in the global payments [removed: industry may harm our business.][added: industry.]

[removed: The global payments industry is highly competitive, and we] [added: We] compete against a wide range of businesses, [removed: some of which] [added: including businesses that] are larger than we are, have a [added: more] dominant and secure position, or offer other products and services to consumers and merchants that we do not [removed: offer.][added: offer, as well as smaller companies that may be able to respond more quickly to regulatory and technological changes.]

The global payments industry is [added: highly competitive,] rapidly changing, highly [removed: innovative] [added: innovative,] and increasingly subject to regulatory scrutiny.

Competition may also intensify as businesses [removed: against which we compete or merchants] enter into business combinations and alliances, and established companies in other segments expand to become competitive with [added: different aspects of] our business.

Competition for relationships with these partners is intense and there can be no assurance that we will be able to continue to establish, [removed: grow] [added: grow,] or maintain these partner relationships.

| • | issuers of stored value [added: products] targeted at online payments; |

Some of these competitors have larger customer bases, volume, scale, resources, and market share than we do, which may provide [added: them] significant competitive advantages.

They may devote greater resources to the development, promotion, and sale of products and services, and they may offer lower prices or more effectively introduce their own innovative programs, [removed: products] [added: products,] and services that adversely impact our growth.

| • | ability to attract, [removed: retain] [added: retain,] and engage both merchants and [removed: consumers;] [added: consumers with our two-sided platform;] |

| • | ability to demonstrate [removed: that] [added: to] merchants [removed: will] [added: that they may] achieve incremental sales by [added: using and] offering [removed: PayPal services;] [added: our services to consumers;] |

| • | consumer confidence in [added: the] safety and security of transactions on our Payments Platform, including the ability for consumers to use [removed: PayPal] [added: our] products and services without sharing their financial information with the merchant or [removed: the] [added: any other] party they are paying; |

| • | simplicity [added: and transparency] of our fee structure; |

| • | ability to develop [added: products and] services across multiple commerce channels, including mobile [removed: payments] [added: payments, credit products,] and payments at the retail point of sale; |

| • | customer [removed: service;] [added: service experience;] |

| • | brand [removed: recognition;] [added: recognition and preference;] |

| • | the [removed: technology-] [added: technology] and [removed: payment-agnostic] [added: payment agnostic] nature of our Payments Platform; |

If we are not able to differentiate our products and services from those of our competitors, drive value for our customers, or effectively align our resources with our goals and objectives, we may not be able to compete effectively [removed: against our competitors.][added: in the market.]

It is difficult for us to forecast [added: accurately] the level or source of our revenues or [removed: earnings accurately.][added: earnings.]

Uncertainty about global and regional economic events and conditions may result in consumers and businesses postponing or lowering spending in response [removed: to tighter credit, higher unemployment, financial market volatility, fluctuations in foreign currency exchange rates and interest rates, government austerity programs, negative financial news, declines in income or asset values, and] [added: to, among] other [removed: factors.][added: factors:]

These and other global and regional economic events and [removed: conditions] [added: conditions, including Brexit,] could have a material adverse impact on the demand for our products and services, including a reduction in the volume and size of transactions on our Payments Platform.

In addition, any financial turmoil affecting the banking system or financial markets could cause additional consolidation of the financial services industry, significant financial service institution failures, new or incremental tightening in the credit markets, low liquidity, and extreme volatility or distress in the fixed income, credit, [removed: currency] [added: currency,] and equity markets, which could have a material adverse impact on our business.

Rapid, significant, and disruptive technological changes impact the industries in which we operate, including developments in payment card tokenization, [added: cryptocurrencies,] mobile, social commerce (i.e., ecommerce through social networks), authentication, virtual currencies (including distributed ledger [added: and blockchain] technologies), and NFC and other proximity payment [removed: devices,] [added: technology,] such as contactless payments.

[removed: We] [added: As a result, we expect new services and technologies to continue to emerge and evolve, and we] cannot predict the effects of technological changes on our business.

In addition to our own initiatives and innovations, we rely in part on third parties, including some of our competitors, for the development of and access to new [added: or evolving] technologies.

We pay transaction fees when consumers fund payment transactions using credit cards, lower fees when consumers fund payments with debit cards, and nominal fees when consumers fund payment transactions by electronic transfer of funds from bank accounts, or from an existing PayPal account balance or through our PayPal [removed: Credit] [added: branded consumer credit] products.

An increase in the portion of our payment volume funded using payment cards or in fees associated with our funding mix, or other events or developments that make it more difficult [added: or costly for us to fund transactions with lower-cost funding options, could materially and adversely affect our financial performance and significantly harm our business.]

While we anticipate that these and similar strategic partnerships we may enter into in the future will result in an increase in the number of transactions and transaction volume that we process, we also anticipate that a greater percentage of customer transactions will be executed using a payment card, which would likely increase the transaction costs associated with our funding mix, which could adversely affect our [removed: business and] [added: business,] results of [removed: operations.][added: operations, and profitability.]

Our business involves the collection, storage, [removed: processing] [added: processing,] and transmission of customers’ personal data, including financial information and information about how they interact with our Payments Platform.

In addition, a significant number of our customers authorize us to bill their payment [removed: card] [added: cards] or bank accounts directly for all transaction and other fees charged by us.

An increasing number of organizations, including large [removed: merchants and] [added: merchants,] businesses, [removed: other large] technology companies, [added: and] financial institutions, [removed: and] [added: as well as] government institutions, have disclosed breaches of their information security systems, some of which have involved sophisticated and highly targeted attacks, including on their [removed: websites] [added: websites, mobile applications,] and infrastructure.

The techniques used to obtain unauthorized, [removed: improper] [added: improper,] or illegal access to our systems, our data or customers' data, disable or degrade service, or sabotage systems are constantly [removed: evolving,] [added: evolving and have become increasingly complex and sophisticated,] may be difficult to detect quickly, and often are not recognized [added: or detected] until [added: after they have been] launched against a target.

[removed: Unauthorized] [added: We expect that unauthorized] parties [removed: may] [added: will continue to] attempt to gain access to our systems or facilities through various means, including hacking into our systems or facilities or those of our customers, [removed: partners] [added: partners,] or vendors, or attempting to fraudulently induce [removed: (often] [added: (for example,] through spear phishing attacks) our employees, customers, partners, [removed: vendors] [added: vendors,] or other users of our systems into disclosing user names, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems.

Although we have developed systems and processes designed to protect our data and customer data and to prevent data loss and other security breaches, and expect to continue to expend significant resources to bolster these protections, [added: there can be no assurance that] these security measures [removed: cannot] provide absolute security.

[removed: Our] [added: We have experienced from time to time, and may experience in the future, breaches of our] security measures [removed: may also be breached] due to human error, malfeasance, system errors or vulnerabilities, or other irregularities.

In addition, any cyberattacks or data security breaches affecting companies that we acquire or our customers, [removed: partners] [added: partners,] or vendors (including data center and cloud computing providers) could have similar negative effects.

See Note [removed: 3—"Business Combinations,"] [added: 4—“Business Combinations,”] Note [removed: 4—"Goodwill] [added: 5—“Goodwill] and Intangible [removed: Assets"] [added: Assets”] and Note [removed: 13—"Commitments] [added: 13—“Commitments] and [removed: Contingencies"] [added: Contingencies”] to our consolidated financial statements for disclosure relating to the suspension of operations of TIO Networks [removed: ("TIO")] [added: (“TIO”)] (which we acquired in July 2017) as part of an [removed: ongoing] investigation of security vulnerability of the TIO platform.

| • | ability to assist merchants in complying with payments-related laws and regulations ; |

| • | tighter credit, |

| • | higher unemployment, |

| • | consumer debt levels or reduced consumer confidence. |

| • | financial market volatility, |

| • | changes and uncertainties related to government fiscal and tax policies, including increased duties, tariffs, or other restrictions, |

| • | the inability of the U.S. Congress to enact a budget in a fiscal year, another sequestration, and/or another shutdown of the U.S. government, |

| • | government austerity programs, and |

| • | other negative financial news or macroeconomic developments. |

See also the risk factor captioned, “The United Kingdom's departure from the EU could adversely affect us.”

These third parties may restrict or prevent our access to, or utilization of, those technologies, as well as their platforms or products.

In addition, we may not be able to accurately predict which technological developments or innovations will become widely adopted and how those technologies may be regulated.

Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition.

Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, phishing and social engineering schemes, could compromise the confidentiality, availability, and integrity of the data in our systems.

Actual or perceived breaches of our security could, among other things:

| • | interrupt our operations, |

| • | result in our systems or services being unavailable, |

| • | result in improper disclosure of data, |

| • | materially harm our reputation and brands, |

| • | result in significant regulatory scrutiny and legal and financial exposure, |

| • | cause us to incur significant remediation costs, |

| • | lead to loss of customer confidence in, or decreased use of, our products and services, |

| • | divert the attention of management from the operation of our business, |

| • | result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to them or claims by them, and |

| • | adversely affect our business and results of operations. |

We may also be directly liable to the payment card networks for rule violations.

Our operations process a significant volume and dollar value of transactions on a daily basis.

See also the risk factor captioned, “Global and regional economic conditions could harm our business.”

In March 2017, the U.K. government initiated the exit process under Article 50 of the Treaty on European Union, which commenced a two-year period expiring on March 29, 2019, after which time the U.K. is expected to leave the EU in the absence of any effective extension to the Article 50 period.

Political negotiations are underway; however, there is a significant lack of clarity over the terms of the U.K.'s exit from the EU and the terms of the U.K.'s future relationship with the EU.

The U.K.'s financial service regulators are implementing Temporary Permission Regimes that are expected to be put in place by the U.K.'s government to support European Economic Area (“EEA”) financial services firms in continuing to conduct business in the U.K. should the U.K. exit the EU without an agreement.

Brexit could also trigger a general deterioration in credit conditions, a downturn in consumer sentiment and overall negative economic growth.

Any of these scenarios could have an adverse effect on our business or our customers.

In addition, Brexit could lead to legal uncertainty and increased complexity for financial services firms as national laws and regulations in the U.K. start to diverge from EU laws and regulations.

These and other factors related to Brexit could, individually or in the aggregate, have a material adverse impact on our business, financial condition, and results of operations.

Our business is subject to extensive government regulation and oversight.

| • | banking, |

| • | credit, |

| • | deposit taking, |

| • | cross-border and domestic money transmission, |

| • | other providers of online and mobile account-based payments; |

| • | mobile payment services between bank accounts; |

Our failure to compete effectively against any of the foregoing competitive threats could materially and adversely harm our business.

or costly for us to fund transactions with lower-cost funding options, could materially and adversely affect our financial performance and significantly harm our business.

Our business is subject to cyberattacks and security and privacy breaches.

Actual or perceived breaches of our security could interrupt our operations, result in our systems or services being unavailable, result in improper disclosure of data, materially harm our reputation and brands, result in significant regulatory scrutiny and legal and financial exposure, cause us to incur significant remediation costs, lead to loss of customer confidence in, or decreased use of, our products and services, divert the attention of management from the operation of our business, result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to them or claims by them, and adversely affect our business and results of operations.

Any changes in interchange fees and assessments could increase our operating costs and reduce our operating income.

From time to time, the networks have alleged that various aspects of our business model violate these operating rules.

impossible to predict or eliminate the effects of this exposure.

In March 2017, the U.K. invoked Article 50 of the Treaty on European Union, which triggered a two-year period, with extension subject to unanimous consent by the other EU member states, during which the U.K. government will negotiate its withdrawal agreement with the EU.

Any of the effects of Brexit described above and others that we cannot anticipate could adversely affect our business, results of operations, financial condition and cash flows.

The legal and regulatory requirements applicable to us are extensive, complex, frequently changing, and increasing in number, and may impose overlapping and/or conflicting requirements or obligations.

Financial and political events have increased the level of regulatory scrutiny on the payments industry, and regulatory agencies may view matters or interpret laws and regulations differently than they have in the past and in a manner adverse to our business.

In Australia, we serve our customers through PayPal Australia Pty.

Ltd. (“PayPal Australia”), which is licensed by the Australian Securities and Investments Commission as a provider of a non-cash payment product and by the Australian Prudential Regulation Authority as a purchased payment facility provider, which is a type of authorized depository institution.

Accordingly, PayPal Australia is subject to significant fines or other enforcement action if it violates the product disclosure, reporting, anti-money laundering, capital requirements, privacy, corporate governance or other requirements imposed on Australian depository institutions.

In Hong Kong, we serve our customers through PayPal Hong Kong Limited (“PayPal Hong Kong”), which is licensed by the Hong Kong Monetary Authority as an issuer of stored value facility (“SVF Licensee”).

unaffiliated merchants, at ATMs and/or for person-to-person transfers, including certain digital wallets.

We are evaluating the final rule and its requirements.

Furthermore, compliance with economic and trade sanctions in force in one jurisdiction may conflict with the laws and regulations of other jurisdictions in which we operate and can expose us to the risk of fines, sanctions and penalties.

As of December 2017, PayPal (Europe)’s home state, Luxembourg, had not yet implemented all of the provisions of the Fourth Anti-Money Laundering Directive and there is uncertainty as to the exact requirements with which PayPal (Europe) will be required to comply.

EU institutions are also proposing changes to the Fourth Anti-Money Laundering Directive which could be even more stringent.

Privacy and data protection laws may be interpreted and applied inconsistently from country to country and impose inconsistent or conflicting requirements.

Complying with varying jurisdictional requirements could increase the costs and complexity of compliance or require us to change our business practices in a manner adverse to our business, and violations of privacy and data protection-related laws may expose us to significant damage awards, fines and other penalties that could, individually or in the aggregate, materially harm our business and reputation.

In 2016, the EU adopted a comprehensive overhaul of its data protection regime from the current national legislative approach to a single European Economic Area Privacy Regulation, the General Data Protection Regulation (“GDPR”), which comes into effect in May 2018.

We are evaluating the rule and its requirements.

Data protection, privacy and information security have become the subject of increasing public, media, regulatory and legislative concern.

We post on our websites and applications our privacy policies and practices regarding the collection, use and disclosure of user data.

As noted above, we are also subject to the possibility of security and privacy breaches, which themselves may result in a violation of privacy laws.

On November 16, 2017, we announced an arrangement under which Synchrony Bank will acquire the U.S. consumer credit receivables portfolio held by us and certain of our affiliates, which totaled approximately $6.4 billion in receivables as of December 31, 2017.

The transaction is expected to be completed during the third quarter of 2018, subject to certain closing conditions.

The transaction may not close within the expected timeframe or at all.

Under our expanded program agreement with Synchrony Bank, at the closing of the

Our business may be impacted by political events, war, terrorism, public health issues, natural disasters and other business interruptions.

In 2015, we increased the scope of our buyer protection program to cover digital goods and intangible goods and services.

Upon PayPal becoming an independent publicly traded company in July 2015, we extended our protection programs in several countries to cover certain customers’ purchases on eBay, and our costs associated with these programs have therefore increased.

In

judgments, fines or penalties or to settle claims or proceedings, any of which could materially and adversely affect our business.

result in substantial monetary penalties and other sanctions, adversely impact our ability to do business in certain jurisdictions, and harm our business.

Business decisions or other

These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” [removed: “plan”] [added: “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,”] and other similar expressions.

Risk Factors” of this Annual Report on Form 10-K, as well as in our consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the [removed: SEC.][added: Securities and Exchange Commission (“SEC”).]

We do not intend, and undertake no [removed: obligation,] [added: obligation except as required by law,] to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances.

For additional information, see “Note [removed: 1—Overview] [added: 5—Goodwill] and [removed: Summary of Significant Accounting Policies”] [added: Intangible Assets”] to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Our goal is to [removed: increase] [added: enable] our [removed: relevance for] consumers and merchants to manage and move their money anywhere in the world, anytime, on any [removed: platform] [added: platform,] and using any device.

Our combined payment solutions, including our PayPal, PayPal Credit, Braintree, Venmo, Xoom, and [removed: Paydiant] [added: iZettle] products, compose our proprietary Payments Platform.

That focus continues to become even more heightened as regulators on a global basis focus on such important issues as countering terrorist financing, anti-money laundering, [removed: privacy] [added: privacy, cybersecurity,] and consumer protection.

[removed: Non-compliance with] [added: New or changing] laws and regulations, [added: including how such laws and regulations are interpreted and implemented, as well as] increased penalties and enforcement actions related to non-compliance, [removed: changes in laws and regulations or their interpretation, and the enactment of new laws and regulations applicable to us] could have a material adverse impact on our business, results of [removed: operations] [added: operations,] and financial condition.

Therefore, we monitor these areas closely to [removed: ensure] [added: design] compliant solutions for our customers who depend on us.

The United Kingdom [removed: ("U.K.")] [added: (“U.K.”)] held a referendum in June 2016 in which a majority of voters approved an exit from the European Union [removed: ("EU") (“Brexit”).][added: (“EU”) (commonly referred to as “Brexit”).]

Brexit could adversely affect U.K., regional (including European) and worldwide economic and market [removed: conditions] [added: conditions,] and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the British Pound and Euro.

In [added: 2018,] 2017, [removed: 2016] and [removed: 2015,] [added: 2016,] net revenues generated from our U.K. operations constituted 11%, [removed: 12%] [added: 11%] and [removed: 13%,] [added: 12%,] respectively, of total net revenues.

In [added: 2018,] 2017, [removed: 2016] and [removed: 2015,] [added: 2016,] net revenues generated from the EU (excluding the U.K.) constituted [removed: approximately] [added: less than] 20% of total net revenues.

Information security risks for global payments and technology companies [added: like us] have significantly increased in recent years.

[removed: Although we are not aware of any material impacts relating to cyberattacks or other information security breaches on our Payments Platform, we] [added: We] are not immune to these risks and there can be no assurance that we will not suffer such losses in the future.

Risk Factors” under the [removed: caption—“Our business is subject to cyberattacks] [added: caption—“Cyberattacks] and security [added: vulnerabilities could result in serious harm to our reputation, business] and [removed: privacy breaches.”][added: financial condition.”]

The following table provides a summary of our consolidated [removed: operating results] [added: GAAP financial measures] for the years ended December 31, [added: 2018,] 2017, [removed: 2016] and [removed: 2015:][added: 2016:]

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | |

| Net revenues | $ | [removed: 13,094] [added: 15,451] | | | $ | [removed: 10,842] [added: 13,094] | | | $ | [removed: 9,248] [added: 10,842] | | | [removed: 21] [added: 18] | % | | [removed: 17] [added: 21] | % |

| Operating expenses | [removed: 10,967] [added: 13,257] | | | | [removed: 9,256] [added: 10,967] | | | | [removed: 7,787] [added: 9,256] | | | | [removed: 18] [added: 21] | % | | [removed: 19] [added: 18] | % |

| Operating income | [removed: 2,127] [added: 2,194] | | | | [removed: 1,586] [added: 2,127] | | | | [removed: 1,461] [added: 1,586] | | | | [removed: 34] [added: 3] | % | | [removed: 9] [added: 34] | % |

| Operating margin | [removed: 16] [added: 14] | | % | | [removed: 15] [added: 16] | | % | | [removed: 16] [added: 15] | | % | | | | | | |

| Income tax expense | [removed: 405] [added: 319] | | | | [removed: 230] [added: 405] | | | | [removed: 260] [added: 230] | | | | [removed: 76] [added: (21] | [removed: %] [added: )%] | | [removed: (12] [added: 76] | [removed: )%] [added: %] |

| Effective tax rate | [removed: 18] [added: 13] | | % | | [removed: 14] [added: 18] | | % | | [removed: 17] [added: 14] | | % | | | | | | |

| Net income | $ | [removed: 1,795] [added: 2,057] | | | $ | [removed: 1,401] [added: 1,795] | | | $ | [removed: 1,228] [added: 1,401] | | | [removed: 28] [added: 15] | % | | [removed: 14] [added: 28] | % |

| Net income per diluted [removed: share(1)(2)] [added: share] | $ | [removed: 1.47] [added: 1.71] | | | $ | [removed: 1.15] [added: 1.47] | | | $ | [removed: 1.00] [added: 1.15] | | | [removed: 28] [added: 16] | % | | [removed: 15] [added: 28] | % |

| Net cash provided by operating [removed: activities] [added: activities(1)] | $ | [removed: 2,531] [added: 5,483] | | | $ | [removed: 3,158] [added: 2,531] | | | $ | [removed: 2,546 | | | (20 | )% | | 24] [added: 3,158] | [removed: %] |

All amounts in tables are rounded to the nearest [removed: millions,] [added: million,] except as otherwise noted.

Net revenues increased [removed: $2.3] [added: $2.4] billion, or [removed: 21%,] [added: 18%,] in [removed: 2017] [added: 2018] and [removed: $1.6] [added: $2.3] billion, or [removed: 17%,] [added: 21%,] in [removed: 2016.][added: 2017.]

The [removed: increases were] [added: increase was] primarily driven by growth in TPV (as defined below under “Net Revenues”) of 27% in [removed: 2017] [added: 2018] and [removed: 26%] [added: 27%] in [removed: 2016.][added: 2017.]

[removed: Net] [added: In 2017, net] revenues from our [removed: recent] acquisitions of TIO and Swift were not material.

Total operating expenses increased [removed: $1.7] [added: $2.3] billion, or [removed: 18%,] [added: 21%,] in [removed: 2017] [added: 2018] and [removed: $1.5 billion] [added: $1.7 billion,] or [removed: 19%] [added: 18%,] in [removed: 2016.][added: 2017.]

The increase in [added: total operating expense in] 2017 was due primarily to an increase in transaction expense, sales and marketing, general and administrative, product development, and restructuring and other charges.

Operating income increased [removed: $541] [added: $67] million, or [removed: 34%,] [added: 3%,] in [removed: 2017] [added: 2018] and [removed: $125] [added: increased $541] million, or [removed: 9%] [added: 34%] in [removed: 2016.][added: 2017.]

Operating income increased in [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] due primarily to the increase in net revenues, [removed: partially] offset by the growth in operating expenses.

[removed: TIO and Swift] [added: Our acquisitions in 2017] collectively had a negative impact [added: of four percentage points on] our 2017 growth rate [removed: of four percentage points.][added: in operating income.]

Our operating margin was [added: 14%,] 16%, [removed: 15%] and [removed: 16%] [added: 15%] in [added: 2018,] 2017, [removed: 2016] and [removed: 2015,] [added: 2016,] respectively.

Operating margin in 2017 was negatively impacted by growth in our transaction [removed: expense] [added: expense,] which increased 32% in [removed: 2017 compared to 2016,] [added: 2017,] compared to net [removed: revenues] [added: revenues,] which increased 21% in the same period, as well as restructuring expense of $40 million incurred in 2017.

These impacts [added: in 2017] were offset by operating efficiencies in our business, and a [removed: one time] [added: one-time] benefit of $322 million pertaining to reversal of allowances related to loans and interest receivables due to the designation as held for sale of our U.S. consumer credit [removed: portfolio.][added: portfolio in November 2017.]

Net income increased by [removed: $394] [added: $262] million, or [removed: 28%,] [added: 15%,] in [removed: 2017] [added: 2018] and [removed: $173] [added: $394] million, or [removed: 14%,] [added: 28%,] in [removed: 2016.][added: 2017.]

Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “PayPal” refer to PayPal Holdings and its consolidated subsidiaries.

PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy.

We also facilitate person-to-person (“P2P”) payments through our PayPal, Venmo and Xoom products.

For additional information regarding our information security risks, see “Item 1A.

In March 2017, the U.K. government initiated the exit process under Article 50 of the Treaty on European Union, which commenced a two-year period expiring on March 29, 2019, after which time the U.K. is expected to leave the EU in the absence of any effective extension to the Article 50 period.

Political negotiations are underway; however, there is a significant lack of clarity over the terms of the U.K.'s exit from the EU and the terms of the U.K.'s future relationship with the EU.

The U.K.'s financial service regulators are implementing Temporary Permission Regimes (“TPR”) that are expected to be put in place by the U.K.'s government to support European Economic Area (“EEA”) financial service firms in continuing to conduct business in the U.K. should the U.K. exit the EU without an agreement.

The final TPR rules are expected to be published in the first quarter of 2019 and will come into effect when the U.K. leaves the EU.

Accordingly, we may need to adjust our business to comply with additional legal and regulatory requirements if accessing the TPR.

We are currently unable to determine the impact that Brexit will have on our business, as any impact will depend, in part, on the outcome of tariff, trade, regulatory, and other negotiations.

Approximately 31% and 30% of our gross loans and interest receivables as of December 31, 2018 and 2017, respectively, were generated from our U.K. operations.

Approximately 7% and 5% of our gross loans and interest receivables as of December 31, 2018 and 2017, respectively, were generated from the EU (excluding the U.K.) operations.

Net revenues from our acquisitions completed in 2018 and 2017 collectively contributed approximately one percentage point to the growth rate in 2018.

The increase from the impact of acquisitions was offset by a decrease in interest and fee income due to the sale of our U.S. consumer credit receivables portfolio to Synchrony Bank in July 2018, which resulted in a negative impact of approximately four percentage points to the net revenues growth rate in 2018.

The increase in 2018 was due primarily to an increase in transaction expense, general and administrative, transaction and loan loss, sales and marketing, and restructuring and other expenses.

Operating expenses related to our acquisitions completed in 2018 and 2017 collectively contributed approximately three percentage points to the growth rate in total operating expenses in 2018.

In March 2018, management decided to wind down TIO's operations.

Our acquisitions completed in 2018 and 2017 collectively had a negative impact of approximately seven percentage points to the 2018 growth rate in operating income.

Operating margin in 2018 was negatively impacted by growth in our transaction expense, which increased 26% in 2018, compared to net revenues, which increased 18% in the same period, as well as the negative impact of acquisitions.

These impacts in 2018 were partially offset by operating efficiencies in our business.

The increase in net income in 2018 was attributable to an increase in operating income of $67 million and an increase in other income (expense), net of $109 million, which was driven by unrealized gains on equity investments and an increase in interest income, partially offset by an increase in interest expense.

The increase in net income was further impacted by a decrease in income tax expense of $86 million, primarily driven by a reduction in net tax expense recognized with respect to the Tax Act, partially offset by an increase in tax expense due to the increase in operating income and other income (expense), net.

(1) The year ended December 31, 2018 includes a positive impact of approximately $1.4 billion due to the completion of the sale of our US consumer credit receivables portfolio in July 2018.

The year ended December 31, 2017 includes a negative impact of approximately $1.3 billion due to the change in presentation of the U.S. consumer credit receivables portfolio subsequent to its designation as held for sale in November 2017.

| | 2018 | | | | 2017 | | |

Due to the diversification of PayPal’s business through strategic partnerships, new products, and acquisitions, in the first quarter of 2018, we updated our definitions of “active accounts” and “total payment volume (TPV)” as described below.

Active Accounts: An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our Payments Platform, not including gateway-exclusive transactions, within the past 12 months.

The definition of active accounts has been expanded to include payments made or outstanding balances held on our co-branded credit card program.

The definition has also been expanded to include accounts from our platform access partners.

A platform access partner is a third party whose customers are provided access to PayPal’s Payments Platform through such third party’s login credentials.

This expanded definition captures uniquely identifiable accounts for which PayPal receives economic benefits for completed transactions processed on behalf of customers who have established a relationship with PayPal.

Total Payment Volume: The value of payments, net of reversals, successfully completed on our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

The definition of TPV has been expanded to include PayPal’s diversification into new partner payment solutions such as certain tokenized transactions and contextual commerce which expand our opportunities for growth.

The revised definition also captures TPV from our merchant debit card program.

Due to their inclusion in TPV, revenues from these transactions were reclassified from “other value added services” to “transaction revenues” with no change to “total net revenues.”

These revisions also impacted previously reported results for other non-financial key performance metrics, including number of payment transactions and payment transactions per active account.

Prior period metrics have been revised in this filing to conform to the new definitions.

| Transaction revenues | $ | 13,709 | | | $ | 11,501 | | | $ | 9,585 | | | 19 | % | | 20 | % |

| Net revenues | $ | 15,451 | | | $ | 13,094 | | | $ | 10,842 | | | 18 | % | | 21 | % |

Current year acquisitions did not have a material impact on the growth rate of transaction revenues; however, they contributed approximately 2.9 million new active accounts during the year.

Separation from eBay Inc.

On September 30, 2014, eBay Inc. (“eBay”) announced its intent to separate its payments business into an independent, publicly traded company.

To accomplish this separation, in January 2015, eBay incorporated PayPal Holdings, Inc. (“PayPal Holdings”) which is now the parent of PayPal, Inc. and holds directly or indirectly all of the assets and liabilities associated with PayPal, Inc. In June 2015, the board of directors of eBay approved the separation (the “separation”) of eBay's payments business through the distribution (the “distribution”) of 100% of the outstanding common stock of PayPal Holdings to eBay's stockholders.

PayPal Holdings' registration statement on Form 10, as amended, was declared effective by the U.S. Securities and Exchange Commission on June 29, 2015.

On July 17, 2015 (the “distribution date”), PayPal Holdings became an independent publicly traded company through the pro rata distribution by eBay of 100% of the outstanding common stock of PayPal Holdings to eBay stockholders.

Each eBay stockholder of record as of the close of business on July 8, 2015 received one share of PayPal Holdings common stock for every share of eBay common stock held on the record date.

Approximately 1.2 billion shares of PayPal Holdings common stock were distributed on July 17, 2015 to eBay stockholders.

PayPal Holdings' common stock began “regular way” trading under the ticker symbol “PYPL” on the NASDAQ Stock Market on July 20, 2015.

Prior to the separation, eBay transferred substantially all of the assets and liabilities and operations of eBay's payments business to PayPal Holdings, which was completed in June 2015 (the “capitalization”).

The consolidated financial statements prior to the capitalization were prepared on a stand-alone basis and were derived from eBay's consolidated financial statements and accounting records.

The consolidated financial statements reflect our financial position, results of operations, comprehensive income and cash flows as our business was operated as part of eBay prior to the capitalization.

Following the capitalization, our consolidated financial statements include the accounts of PayPal Holdings and its wholly-owned subsidiaries.

The consolidated financial position, results of operations and cash flows as of dates and for periods prior to the separation may not be indicative of what our financial position, results of operations and cash flows would have been as a separate stand-alone entity during the periods presented, nor are they indicative of what our financial position, results of operations and cash flows may be in the future.

Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “PayPal” refer to PayPal Holdings and its consolidated subsidiaries or, in the case of information as of dates or for periods prior to the separation, the consolidated entities of the payments business of eBay, including PayPal, Inc. and certain other assets and liabilities that had been historically held at the eBay corporate level but were specifically identifiable and attributable to the payments business.

Our vision is to democratize financial services, as we believe that managing and moving money is a right for all people, not just the affluent.

In March 2017, the U.K. government gave formal notice of its intention to leave the EU and started the process of negotiating the future terms of the U.K.'s relationship with the EU.

See “Item 1A.

(1) On July 17, 2015, the distribution date, eBay stockholders of record as of the close of business on July 8, 2015 received one share of PayPal common stock for every share of eBay common stock held as of the record date.

(2) The weighted average number of common shares outstanding for diluted earnings per share for the year ended December 31, 2015 was based on the number of common shares distributed on July 17, 2015 for the period prior to distribution and the weighted average number of common shares outstanding for the period beginning after the distribution date.

Net revenues from Xoom (acquired in November 2015) contributed two percentage points to the 2016 growth rate.

The increase in total operating expense in 2016 was due primarily to an increase in transaction expense and transaction and loan losses which increase with TPV and higher customer support and operations, general and administrative expenses, and depreciation and amortization incurred to operate as an independent public company, partially offset by a decrease in restructuring expense.

Xoom operating expenses contributed three percentage points to the 2016 growth rate.

Xoom negatively impacted our 2016 growth rate by four percentage points.

Operating margin decreased in 2016 due primarily to growth in our transaction expense and transaction and loan losses, which together increased 30% in 2016 compared to 2015.

The increase in net income in 2016 was attributable to an increase in operating income of $125 million, a decrease in income tax expense of $30 million and an increase in other income (expense), net of $18 million.

During each of these periods, U.K. was the only country, other than the United States, where we generated more than 10% of total net revenues in.

Revenue description

We earn revenue primarily by processing customer transactions on our Payments Platform and from other value added services.

| | |

| --- | --- |

| Transaction revenues | $ | 11,402 | | | $ | 9,490 | | | $ | 8,128 | | | 20 | % | | 17 | % |

Xoom transaction revenues contributed two percentage points to the 2016 growth rate.

| Active customer accounts(1) | 227 | | | | 197 | | | | 179 | | | | 15 | % | | 10 | % |

| Number of payment transactions(2) | 7,606 | | | | 6,129 | | | | 4,928 | | | | 24 | % | | 24 | % |

| Total TPV(4) | $ | 451,265 | | | $ | 354,014 | | | $ | 281,764 | | | 27 | % | | 26 | % |

(1) An active customer account is a registered account that successfully sent or received at least one payment or payment reversal through our Payments Platform, excluding transactions processed through our gateway and Paydiant products, in the past 12 months.

The percentage growth in transaction revenues was lower than the percentage growth in TPV and payment transactions in 2016 primarily due to a higher proportion of P2P transactions (including our Venmo products) for which we earn lower rates, and a higher portion of TPV generated by large merchants who generally pay lower rates with higher transaction volume.

Swift revenues contributed approximately three percentage points to the 2017 growth rate.

In addition, we will earn a profit share on the portfolio of consumer receivables owned by Synchrony Bank.

Growth in net revenues from other value added services in 2016 was due primarily to interest and fee income earned on our PayPal Credit loans receivable portfolio.

Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as interest rates, foreign currency exchange [removed: rates] [added: rates,] and [removed: equity price] [added: investment] risk.

We are exposed to interest rate risk relating to our investment portfolio and from interest-rate sensitive assets underlying the customer balances we hold on our consolidated balance [removed: sheet] [added: sheets] as customer accounts.

As of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] approximately [removed: 39%] [added: 78%] and [removed: 25%,] [added: 39%,] respectively, of our total [added: cash,] cash [added: equivalents,] and investment portfolio was held in cash and cash equivalents.

The assets underlying the customer balances we hold on our consolidated balance [removed: sheet] [added: sheets] as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, U.S. and foreign government and agency [removed: securities] [added: securities,] and corporate debt securities.

In the fourth quarter of 2017, we entered into an unsecured $3.0 billion, 364 day delayed-draw term loan credit facility, which [removed: is] [added: was] available in up to three borrowings [removed: ("2017] [added: (“2017] Credit [removed: Agreement").][added: Agreement”).]

[removed: The company maintains] [added: We also maintain] uncommitted credit facilities in various regions throughout the [removed: world, aggregating to] [added: world with borrowing capacity of] approximately [removed: $250 million.][added: $300 million in the aggregate.]

Borrowings under the [removed: 2017] [added: Amended] Credit Agreement and 2015 Credit Agreement, if any, bear interest at floating rates.

As a result, we [removed: will be] [added: are] exposed to fluctuations in interest rates to the extent of our borrowings.

Accordingly, at December 31, [removed: 2017, $2.0] [added: 2018, $3.0] billion of borrowing capacity was available for the purposes permitted by the [removed: 2017] [added: Amended] Credit Agreement, subject to customary conditions to borrowing.

As of December 31, [removed: 2017,] [added: 2018,] no borrowings or letters of credit were outstanding under the 2015 Credit Agreement or [added: our] uncommitted [added: credit] facilities.

Higher interest rates often lead to higher payment obligations by customers [added: of our credit products] to [removed: us and other] [added: us, or to] lenders under mortgage, credit [removed: card] [added: card,] and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, [removed: charge-offs] [added: charge-offs,] and allowance for loan and interest receivable, which could have an adverse effect on our net income.

A 100 basis point increase in interest rates would not have had a material impact on our financial assets or liabilities at December 31, [removed: 2017] [added: 2018] and [removed: 2016.][added: 2017.]

Foreign Currency [added: Exchange Rate] Risk

We have significant operations internationally that are denominated in foreign currencies, primarily the British Pound, Euro, Australian [removed: Dollar] [added: Dollar,] and Canadian Dollar, subjecting us to foreign currency [added: exchange rate] risk which may adversely impact our financial results.

Our cash flows, results of [removed: operations] [added: operations,] and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities.

We have a foreign [added: currency] exchange exposure management program designed to identify material foreign currency exposures, manage these [removed: exposures] [added: exposures,] and reduce the potential effects of currency fluctuations on our reported consolidated cash flows and results of operations through the execution of foreign currency exchange contracts.

These foreign currency exchange contracts are accounted for as derivative instruments; for additional details related to our foreign currency exchange contracts, please see “Note [removed: 8—Derivative] [added: 10—Derivative] Instruments” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We use foreign [added: currency] exchange forward contracts to protect our forecasted U.S. dollar-equivalent earnings from adverse changes in foreign currency exchange rates.

The [removed: effective portion of the] derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified into [removed: revenue] [added: the financial statement line item] in [added: which] the [added: hedged item is recorded in the] same period the forecasted transaction affects earnings.

If the U.S. dollar weakened by 20% at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately [removed: $536] [added: $707] million and [removed: $341] [added: $536] million lower, respectively.

If the U.S. dollar strengthened by 20% at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately [removed: $536] [added: $707] million and [removed: $341] [added: $536] million higher, respectively.

We have an additional foreign [added: currency] exchange management program whereby we use foreign currency exchange contracts to offset the foreign currency exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.

The foreign currency [added: exchange] gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign currency exchange contracts.

Adverse changes in exchange rates of 20% for all currencies would have resulted in an adverse impact on income before income taxes of approximately [removed: $243] [added: $295] million and [removed: $160] [added: $243] million at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively, without considering the offsetting effect of hedging.

Foreign currency exchange contracts in place as of December 31, [removed: 2016] [added: 2018] would have positively impacted income before income taxes by approximately [removed: $128] [added: $308] million, resulting in a net [removed: negative] [added: positive] impact of approximately [removed: $32] [added: $13] million.

These reasonably possible adverse changes in [removed: currency] exchange rates of 20% were applied to total monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.

As of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] our [removed: cost method] [added: equity] investments totaled [removed: $88] [added: $293] million and [removed: $50] [added: $88] million, respectively, which represented approximately [added: 3% and] 1% of our total cash and investment portfolio [added: at those dates, respectively,] and were [removed: primarily] related to [removed: cost method investments] [added: minority equity interests] in [removed: privately held companies.][added: companies that are not publicly traded.]

As of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] we did not hold any marketable equity instruments.

We review our investments for impairment when events and circumstances indicate a decline in fair value of such assets below carrying [removed: value is other-than-temporary.][added: value.]

Our analysis includes a review of recent operating results and trends, recent sales and acquisitions of the securities in which we have [removed: invested] [added: invested,] and other publicly available data.

In the fourth quarter of 2018, we entered into an amended and restated credit agreement (“Amended Credit Agreement”), which provides for an unsecured $5.0 billion, 364\-day delayed-draw term loan credit facility, which is available in up to four separate borrowings.

As of December 31, 2018, we had $2.0 billion of borrowings outstanding under the Amended Credit Agreement at a weighted average interest rate of 3.34%.

If we elect to discontinue our cash flow hedges and it is probable that the original forecasted transaction will occur, we continue to report them in AOCI until the forecasted transaction affects earnings at which point we also reclassify the de-designated hedges into earnings.

Gains and losses on derivatives held after we discontinue our cash flow hedges and gains and losses on derivative instruments that are not designated as cash flow hedges are recorded in the same financial statement line item to which the derivative relates.

Investment Risk

We seek to reduce earnings volatility that may result from changes in interest rates.

We classify the assets underlying the customer balances as current based on their purpose and availability to fulfill our direct obligation under amounts due to customers.

As of December 31, 2017, $1.0 billion was outstanding under the 2017 Credit Agreement at an interest rate of 2.78% (one month LIBOR plus a margin of 1.125%).

The ineffective portion of the unrealized gains and losses on these contracts, if any, is recorded immediately in earnings.

Equity Price Risk

Our goal is to [removed: increase] [added: enable] our [removed: relevance for] consumers and merchants to manage and move their money anywhere in the world, anytime, on any platform and using any device.

Our combined payment solutions, including our PayPal, PayPal Credit, Braintree, Venmo, [removed: Xoom,] [added: Xoom] and [removed: Paydiant] [added: iZettle] products, compose our proprietary Payments Platform.

We offer our customers the flexibility to use their [removed: account] [added: accounts] to [removed: both] purchase and receive payment for goods and services, as well as to transfer and withdraw funds.

We enable consumers to [removed: more safely] exchange funds [added: more safely] with merchants using a variety of funding sources, which may include a bank account, a PayPal account balance, a PayPal Credit account, a credit or debit [removed: card] [added: card,] or other stored value products such as coupons and gift cards.

We [removed: generate] [added: earn] revenues [added: primarily] by charging fees for [removed: providing transaction processing] [added: completing payment transactions for our customers] and other payment-related services [added: that are typically] based [removed: primarily] on the volume of activity processed [removed: through] [added: on] our Payments Platform.

[removed: We generally] [added: Generally, we] do not charge consumers to fund or draw from their accounts; however, we generate revenue from consumers on fees charged for foreign currency exchange.

We also earn revenue by providing [added: other] value added services [removed: to consumers and merchants, such as] [added: which comprise revenue earned through partnerships,] our PayPal Credit [removed: and] [added: products, subscription fees,] gateway [removed: services.][added: services, and other services that we provide to our merchants and consumers.]

Our gateway services, which include our Payflow Gateway services and Braintree Gateway services, provide the technology that links a merchant’s website to its processing network and merchant account and [removed: enable] [added: enables] merchants to accept payments online with credit or debit cards.

Our ability to grow revenue is affected by, among other things, consumer spending patterns, merchant and consumer adoption of digital payment methods, the expansion of multiple commerce channels, the growth of mobile devices and merchant and consumer applications on those devices, the growth of consumers globally with [removed: Internet] [added: internet] and mobile access, the pace of transition from cash and checks to digital forms of payment, our share of the digital payments market, and our ability to innovate [added: and bring] new [removed: methods of payment] [added: products and services] that merchants and consumers value.

| • | Growing our [removed: core:] [added: core business:] through expanding our global capabilities, customer base and scale, increasing our customers' use of our products and services by better addressing their everyday needs related to accessing, managing and moving [removed: money] [added: money,] and expanding the adoption of our solutions by new merchants and consumers; |

| • | Expanding our value proposition for customers: by focusing on trust and simplicity, providing risk management and insights from our two-sided Payments [removed: Platform] [added: Platform,] and being technology and platform agnostic; |

| • | Extending through strategic partnerships: by building new strategic partnerships to provide better experiences for our customers, offering greater choice and flexibility, acquiring new [removed: customers] [added: customers,] and reinforcing our role in the ecosystem; and |

| • | Seeking new areas of growth: [added: organically and] through [added: acquisitions in our existing and] new international markets around the world and focusing on innovation both in the digital and [removed: the] physical world. |

[removed: ][added: ]

We measure the relevance of our products [added: and services] to our customers, and therefore the success of our business, through active [removed: customer] accounts, payment [removed: volume] [added: transactions,] and payment [removed: transactions:][added: volume:]

As of December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: 227] [added: 267] million active [removed: customer] accounts across more than 200 markets.

A market is a geographic area or political jurisdiction, such as a country, territory, or protectorate, in which we offer [added: some or all of] our services.

A country, [removed: territory] [added: territory,] or protectorate is identified by a distinct set of laws and regulations.

Number of Payment Transactions: Number of payment transactions is [removed: defined as] the total number of payments, net of payment reversals, successfully completed [removed: through] [added: on] our Payments [removed: Platform, excluding transactions processed through our gateway and Paydiant products.][added: Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.]

Total Payment Volume (“TPV”): TPV is the value of payments, net of [removed: payment] reversals, successfully completed [removed: through] [added: on] our Payments [removed: Platform, excluding transactions processed through our gateway and Paydiant products.][added: Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.]

| • | Two-sided [removed: Platform - our] [added: Platform—our] platform connecting merchants and consumers enables PayPal to offer unique end-to-end product experiences while gaining valuable insights into customer behavior through our data. Our platform provides for simple digital and mobile transactions while being both [removed: brand and] technology [added: and platform] agnostic. |

| • | [removed: Scale - our] [added: Scale—our] global scale allows us to drive organic growth. As of December 31, [removed: 2017,] [added: 2018,] we had [removed: 227] [added: 267] million active [removed: customer] accounts, which included [removed: 18] [added: 21] million active merchant accounts. In [removed: 2017,] [added: 2018,] we processed [removed: $451] [added: $578] billion of TPV in more than 200 markets around the world. |

| • | [removed: Brand - we] [added: Brands—we] have built [removed: a] well-recognized and trusted [removed: brand.] [added: brands.] Our marketing efforts play an important role in building brand visibility, [removed: usage] [added: usage,] and overall preference among customers. |

| • | Risk [removed: Management - our] [added: Management—our] risk management system and tokenization usage are designed to [added: help] keep our customers safe and to [added: help] ensure we process legitimate transactions around the world, while [added: identifying and] reducing illegal, high-risk, or fraudulent transactions. |

| • | [removed: Regulatory \- we] [added: Regulatory—we] believe that our regulatory licenses, which enable us to operate in markets around the world, are a distinct advantage and support business growth. |

Our Payments Platform utilizes a combination of proprietary [removed: technologies] and [removed: services as well as] [added: third-party] technologies and services [removed: provided by third parties] to efficiently and securely facilitate transactions between millions of merchants and consumers worldwide across different channels, markets and networks.

Our Payments Platform connects with financial [removed: institutions] [added: service providers] around the world and allows consumers to make purchases using a wide range of payment methods, regardless of where a merchant is located.

A transaction on our Payments Platform can involve multiple participants in addition to [removed: us] [added: us,] including a merchant, a [removed: consumer] [added: consumer,] and the consumer’s funding source provider.

We have developed intuitive user interfaces, customer [removed: tools on our Payments Platform, transaction processing,] [added: tools,] and [added: transaction completion] database and network applications [added: on our Payments Platform] that help our customers utilize our suite of products and services.

The technology infrastructure supporting our Payments Platform simplifies the storage and processing of large amounts of [removed: data,] [added: data] and facilitates the deployment and operation of large-scale global products and [removed: services and automates much of the administration of large-scale clusters of computers.][added: services.]

Our technology infrastructure [removed: has been] [added: is] designed around industry-standard architectures [added: intended] to reduce downtime in the event of outages or catastrophic occurrences.

Our Payments Platform incorporates multiple layers of [removed: protection, both] [added: protection] for continuity and system redundancy purposes and to help address cybersecurity challenges.

We [removed: engage in multiple efforts] [added: have a comprehensive cybersecurity program designed] to protect our technology infrastructure and Payments Platform against these challenges, including regularly testing our systems to address potential vulnerabilities.

We strive to continually improve our technology infrastructure and Payments Platform to enhance the customer experience and to increase efficiency, [removed: scalability] [added: scalability,] and security.

Our combined payment solution capabilities offer our merchants and consumers a broad range of products and services, enabling our merchants to [removed: safely] [added: securely] and simply receive payments from their customers while allowing our consumers to make seamless transactions across different markets and networks.

We partner with our merchants to help grow and expand their businesses by improving sales [removed: conversion,] [added: conversion;] providing global reach, offering alternative payment [removed: methods,] [added: methods;] reducing losses through proprietary protection [removed: programs] [added: programs, providing fraud prevention] and [added: risk management solutions; and] leveraging data analytics.

Merchants can onboard quickly with PayPal and are [added: generally] not required to invest in new or specialized hardware.

[removed: For our standard service, we] [added: We] do not charge merchants setup or recurring [removed: fees.][added: fees for our standard service.]

We offer access to credit products for certain small and medium-sized merchants through [added: our] PayPal Working Capital [removed: and, with the recent acquisition of Swift Financial Corporation ("Swift"), other] [added: and PayPal Business Loan products, which we collectively refer to as our] business [removed: loan products.][added: financing offerings.]

Our PayPal Working Capital product allows businesses to borrow a certain percentage of their annual payment volume [added: processed by PayPal for a fixed fee.]

PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy.

PayPal’s service enables our customers to send and receive payments.

We operate a two-sided network where both merchants and consumers have PayPal accounts with stored balance functionality.

Since PayPal serves as a proprietary payment method that is accepted by merchants, we are more than a connection to third-party payment networks.

Our service enables the completion of payments on our Payments Platform on behalf of our customers.

Active Accounts: An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our Payments Platform, not including gateway-exclusive transactions, within the past 12 months.

A platform access partner is a third party whose customers are provided access to PayPal's Payments Platform through such third party's login credentials.

We generate revenues from merchants primarily by charging fees for completing their payment transactions and other payment-related services.

We believe that our recent acquisition of iZettle in September 2018 will enable us to further expand our in-store presence and strengthen our Payments Platform to help small businesses around the world grow and thrive in an omnichannel retail environment.

iZettle offers a card acceptance service that enables small businesses to take credit and debit card payments, as well as a software solution to record, manage and analyze sales.

iZettle provides in-store capabilities in eleven countries, as well as near-term, in-store expansion opportunities into other existing PayPal markets.

P2P is a significant customer acquisition channel that facilitates organic growth by enabling potential PayPal users to establish active accounts with us at the time they make or receive a P2P payment.

The global payments industry is highly competitive, rapidly changing, highly innovative, and increasingly subject to regulatory scrutiny and oversight.

| • | ability to assist merchants in complying with payments-related laws and regulations ; |

| | |

| --- | --- |

We also have in place an active program to continue to secure and enforce trademarks and domain names that corresponds to our brands in markets of interest.

For example, the EU adopted a comprehensive General Data Protection Regulation (the “GDPR”), which came into effect in May 2018, as supplemented by any national laws (such as in the U.K., the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board,and expanded the scope of the EU data protection law to foreign companies processing personal data of European Economic Area (“EEA”) individuals, imposed a stricter data protection compliance regime, and included new data subject rights (e.g., the right to erasure, commonly known as the “right to be forgotten”).

Our vision is to democratize financial services, as we believe that managing and moving money is a right for all people, not just the affluent.

We operate a two-sided proprietary global technology platform that links our customers, which consist of both merchants and consumers, around the globe to facilitate the processing of payment transactions, allowing us to connect millions of merchants and consumers worldwide.

Active Customer Accounts: An active customer account is a registered account that successfully sent or received at least one payment or payment reversal through our Payments Platform, excluding transactions processed through our gateway and Paydiant products, in the past 12 months.

processed by PayPal for a fee.

Our recent acquisition of Swift also enables us to enhance our underwriting capabilities and strengthen our business financing offerings, helping us to deepen relationships with our existing merchants and expand services to new merchants.

We offer our customers the flexibility to use their account to both purchase and receive payment for goods and services, as well as transfer and withdraw funds.

We enable consumers to more safely exchange funds with merchants using a variety of financial resources, which may include a bank account, a PayPal account balance, a PayPal Credit account, a credit or debit card or other stored value products such as coupons and gift cards.

We generally do not charge consumers to fund or draw from their accounts.

P2P is a significant customer acquisition channel with network effects that helps us to establish relationships with potential PayPal users by allowing them to join our Payments Platform at the time of making or receiving P2P payments, which drives organic growth.

Many payment providers do not offer merchant protection in general, and those that do generally do not provide protection for online or card not present transactions.

We believe that as a result of these

The global payments industry is highly competitive.

transactions, including PayPal.

For example, the EU has adopted a comprehensive General Data Protection Regulation (the "GDPR"), which comes into effect in May 2018 and expands the scope of the EU data protection law to all foreign companies processing personal data of EU residents, imposes a strict data protection compliance regime, and includes new rights.

Financial Information About Segments

We operate in one business segment and have one reportable segment.

See “Note 11—Segment and Geographical Information” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information including certain financial information about our operations in the U.S. and internationally.

Additionally, please see the information in “Item 1A.

Risk Factors” under the caption “Our international operations are subject to increased risks, which could harm our business,” which describes risks associated with our foreign operations.

the NASDAQ Stock Market on July 20, 2015.

For the fiscal year ended December 31, [removed: 2017.][added: 2018.]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Non-accelerated filer | o [removed: (Do not check if a smaller reporting company)] | Smaller reporting company | o |

As of June 30, [removed: 2017,] [added: 2018,] the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately [removed: $64.5] [added: $98.5] billion based on the closing sale price as reported on the NASDAQ Global Select Market.

Portions of the registrant’s definitive proxy statement for its [removed: 2018] [added: 2019] Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.

Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, [removed: 2017.][added: 2018.]

| Item 1. | [removed: [Business](#s4C2A3C208BA55AA5A47E12E65A551820)] [added: [Business](#s8F8469F94DBC5CFC837041177F4FE095)] | [removed: [4](#s4C2A3C208BA55AA5A47E12E65A551820)] [added: [4](#s8F8469F94DBC5CFC837041177F4FE095)] |

| Item 1A. | [Risk [removed: Factors](#s647CCDF77E515F6D92A04A6D665001E8)] [added: Factors](#sE847AF6121E1505487574B26F3EA6050)] | [removed: [11](#s647CCDF77E515F6D92A04A6D665001E8)] [added: [11](#sE847AF6121E1505487574B26F3EA6050)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#sE4ADE6E9F8B15F5A89F090F65A8468AB)] [added: Comments](#sB6429203BE9A520DA4482ECF81CF54CF)] | [removed: [33](#sE4ADE6E9F8B15F5A89F090F65A8468AB)] [added: [36](#sB6429203BE9A520DA4482ECF81CF54CF)] |

| Item 2. | [removed: [Properties](#sF1A09084D4C159A189449639332AC2A6)] [added: [Properties](#s0DCD333C55CD59E8878F84A5BF4C64D4)] | [removed: [33](#sF1A09084D4C159A189449639332AC2A6)] [added: [36](#s0DCD333C55CD59E8878F84A5BF4C64D4)] |

| Item 3. | [Legal [removed: Proceedings](#s85D98F3DF3F559B6A50E603E4F8AB185)] [added: Proceedings](#s68CBF80E4C065C6C86C3679AC541766A)] | [removed: [33](#s85D98F3DF3F559B6A50E603E4F8AB185)] [added: [36](#s68CBF80E4C065C6C86C3679AC541766A)] |

| Item 4. | [Mine Safety [removed: Disclosures](#sF823E3876B7A5EEB84D570253496AF6C)] [added: Disclosures](#sAE0BF7BBCAE45637AB9B06AA21E69A47)] | [removed: [33](#sF823E3876B7A5EEB84D570253496AF6C)] [added: [36](#sAE0BF7BBCAE45637AB9B06AA21E69A47)] |

| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s0686A0AD57DC5089B94B43EA196E2941)] [added: Securities](#s8392E8E4380C5911846DBD7CE2A6E818)] | [removed: [34](#s0686A0AD57DC5089B94B43EA196E2941)] [added: [37](#s8392E8E4380C5911846DBD7CE2A6E818)] |

| Item 6. | [Selected Financial [removed: Data](#sD1D2A1045B14570981590BA9D5A5ECD7)] [added: Data](#s83E27146921957C2AEF207C79C3799A1)] | [removed: [35](#sD1D2A1045B14570981590BA9D5A5ECD7)] [added: [38](#s83E27146921957C2AEF207C79C3799A1)] |

| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s0C12F13AC9105905B611CAE1C7DD8219)] [added: Operations](#s1274EB25AD9F5AD2A0668D612E9B8F65)] | [removed: [36](#s0C12F13AC9105905B611CAE1C7DD8219)] [added: [39](#s1274EB25AD9F5AD2A0668D612E9B8F65)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sCEB8E59AD9FC548DA3FDCF9D12399BCD)] [added: Risk](#s0EEBD8D91FF55E8B84313EB16A7045AC)] | [removed: [60](#sCEB8E59AD9FC548DA3FDCF9D12399BCD)] [added: [62](#s0EEBD8D91FF55E8B84313EB16A7045AC)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#sA669A8A0A4B85EDCBBF1565F268E12D6)] [added: Data](#s4BC8AC4980F257DC850A3A6C5DDC9211)] | [removed: [61](#sA669A8A0A4B85EDCBBF1565F268E12D6)] [added: [63](#s4BC8AC4980F257DC850A3A6C5DDC9211)] |

| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#s444D8D4961B25C2FBD6E778CF8FC6198)] [added: Disclosure](#sD95900048F82587E851CB180D3589D33)] | [removed: [61](#s444D8D4961B25C2FBD6E778CF8FC6198)] [added: [63](#sD95900048F82587E851CB180D3589D33)] |

| Item 9A. | [Controls and [removed: Procedures](#s064E209CF0825F40988C166F0C26FAFE)] [added: Procedures](#s2B9B1FE4DBD8586196ACE1B68D7CF481)] | [removed: [61](#s064E209CF0825F40988C166F0C26FAFE)] [added: [64](#s2B9B1FE4DBD8586196ACE1B68D7CF481)] |

| Item 9B. | [Other [removed: Information](#sD6DD1C5512A85DB8A34A07D1CC699F79)] [added: Information](#sEE394E53A62355A78EB4516A9F6C9835)] | [removed: [62](#sD6DD1C5512A85DB8A34A07D1CC699F79)] [added: [64](#sEE394E53A62355A78EB4516A9F6C9835)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s323A17A5AF2652CC9C899AF522C19C94)] [added: Governance](#s6AD3731EBC0258218A364054EB89417E)] | [removed: [62](#s323A17A5AF2652CC9C899AF522C19C94)] [added: [64](#s6AD3731EBC0258218A364054EB89417E)] |

| Item 11. | [Executive [removed: Compensation](#sDA4D2826B234525FA54D0090EC111893)] [added: Compensation](#s3ED1E0D6B6B851E4B3EB941C582B5F92)] | [removed: [62](#sDA4D2826B234525FA54D0090EC111893)] [added: [64](#s3ED1E0D6B6B851E4B3EB941C582B5F92)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s2E301F9B085059C3B5791344AA906656)] [added: Matters](#sDB64BBAFC44E5A9288A5601E40ED677A)] | [removed: [62](#s2E301F9B085059C3B5791344AA906656)] [added: [64](#sDB64BBAFC44E5A9288A5601E40ED677A)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sFE1EE7BA232E59C5B95886FE21A956C3)] [added: Independence](#s1371B1E81A0654F48EDDE386B5AEC7F8)] | [removed: [62](#sFE1EE7BA232E59C5B95886FE21A956C3)] [added: [64](#s1371B1E81A0654F48EDDE386B5AEC7F8)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s5E982942217E5AE2B52BDC1300327A96)] [added: Services](#sA5C7637BEEA55BDE8CB96625FF0F4717)] | [removed: [62](#s5E982942217E5AE2B52BDC1300327A96)] [added: [65](#sA5C7637BEEA55BDE8CB96625FF0F4717)] |

| Item 15. | [Exhibits, Financial Statement [removed: Schedules](#s28465D74E5A35665A9A3660166B245ED)] [added: Schedules](#s51A30B49A3415E539828A7693E553AAF)] | [removed: [63](#s28465D74E5A35665A9A3660166B245ED)] [added: [65](#s51A30B49A3415E539828A7693E553AAF)] |

For additional information, see “Business—Separation from eBay Inc.” To accomplish this separation, in January 2015, eBay incorporated PayPal Holdings, Inc., which ultimately became the parent of PayPal, Inc. and holds directly or indirectly all of the assets and liabilities associated with PayPal, Inc. Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the [removed: Company”] [added: Company,”] or “PayPal” refer to PayPal Holdings, Inc. and its consolidated subsidiaries or, in the case of information as of dates or for periods prior to our separation from eBay, the consolidated entities of the payments business of eBay, including PayPal, Inc. and certain other assets and liabilities that were historically held at the eBay corporate level, but were specifically identifiable and attributable to the payments business, and references to our “Payments Platform” mean our combined payment solution capabilities, including our PayPal, PayPal Credit, Braintree, Venmo, Xoom, and [removed: Paydiant] [added: iZettle] products.

PayPal owns or has rights to use the trademarks, service [removed: marks] [added: marks,] and trade names that it uses in conjunction with the operation of its business.

Some of the more important trademarks that PayPal owns or has rights to use that appear in this Annual Report on Form 10-K include: PayPal®, PayPal Credit®, Braintree, Venmo, [added: Xoom] and [removed: Xoom,] [added: iZettle,] which may be registered or trademarked in the United States and other jurisdictions.

Each trademark, trade [removed: name] [added: name,] or service mark of any other company appearing in this Annual Report on Form 10-K is, to PayPal’s knowledge, owned by such other company.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or [removed: intentions (such] [added: intentions, such] as those relating to future business, future results of operations or financial condition, new or planned features or services, or management [removed: strategies).][added: strategies.]

You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” [removed: “plan”] [added: “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,”] and other similar expressions.

We do not intend, and undertake no [removed: obligation,] [added: obligation except as required by law,] to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances.

10-K 1 pypl201810-k.htm 10-K

\[x\]

As of January 31, 2019, there were 1,173,209,367 shares of common stock outstanding.

| Item 16. | [Form 10-K Summary](#s91506cbae2eb47309abc421d19d706ba) | [122](#s91506cbae2eb47309abc421d19d706ba) |

10-K 1 pypl201710-k.htm 10-K

Yes \[x\] No \[ \]

(Check one):

As of February 2, 2018, there were 1,200,160,405 shares of common stock outstanding.

We use the properties for executive and administrative offices, data centers, product development [removed: offices] [added: offices,] and customer service offices.

As of December 31, [removed: 2017,] [added: 2018,] our owned and leased properties provided us with aggregate square footage as follows:

| Total facilities | 2.3 | | | [removed: 1.6] [added: 2.1] | | | [removed: 3.9] [added: 4.4] | |

We own a total of [removed: 22] [added: approximately 106] acres of [removed: land] [added: land, with approximately 85 acres] in the U.S. Our corporate headquarters are located in San Jose, California and occupy approximately 0.7 million of owned square feet.

| Owned facilities | 1.1 | | | 0.2 | | | 1.3 | |

| Leased facilities | 1.2 | | | 1.9 | | | 3.1 | |

| Owned facilities | 1.2 | | | — | | | 1.2 | |

| Leased facilities | 1.1 | | | 1.6 | | | 2.7 | |

[removed: Price Range of] Common Stock

PayPal common stock is quoted on the NASDAQ Stock Market under the ticker symbol “PYPL.” [removed: The following table sets forth the range of high and low per share market prices as reported for each period indicated:]

As of [removed: February 2, 2018,] [added: January 31, 2019,] there were approximately [removed: 3,905] [added: 3,824] holders of record of our common stock.

The actual number of stockholders is significantly greater than this number of record holders, and includes stockholders who are beneficial [removed: owners,] [added: owners] but whose shares are held in street name by brokers and other nominees.

In [removed: January 2016,] [added: April 2017,] our Board of Directors authorized a stock repurchase program that [removed: provided] [added: provides] for the repurchase of up to [removed: $2] [added: $5] billion of our common stock, with no expiration from the date of authorization.

In [removed: April 2017,] [added: July 2018,] our Board of Directors authorized an additional stock repurchase program that provides for the repurchase of up to [removed: $5] [added: $10] billion of our common stock, with no expiration from the date of authorization.

This program became effective [added: in December 2017] upon completion of [removed: the January 2016] [added: a previous] stock repurchase program.

[removed: The] [added: Our] stock repurchase programs are intended to offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, may also be used to make opportunistic repurchases of our common stock to reduce outstanding share count.

Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions [added: including accelerated share repurchase agreements] or other means at times and in such amounts as management deems [removed: appropriate] [added: appropriate,] and will be funded from our [removed: working capital] [added: cash from operations] or other financing alternatives.

[removed: However,] [added: Moreover,] any stock repurchases are subject to market conditions and other uncertainties and we cannot predict if or when any stock repurchases will be made.

[removed: Moreover, we] [added: We] may terminate our stock repurchase programs at any time without notice.

The stock repurchase activity under our stock repurchase programs during the three months ended December 31, [removed: 2017] [added: 2018] is summarized as follows:

| | (In millions, except per share amounts) | | | | | | | | | | | | | [removed: |]

This program will become effective upon completion of the April 2017 stock repurchase program.

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | |

| | Total number of shares purchased | | | Average price paid per share(1) | | | | Total number of shares purchased as part of publicly announced plans or programs | | | Approximate dollar value of shares that may yet be purchased under the plans or programs | | |

| October 1, 2018 through October 31, 2018 | — | | | $ | — | | | — | | | $ | 12,074 | |

| November 1, 2018 through November 30, 2018 | 1.1 | | | $ | 84.21 | | | 1.1 | | | 11,980 | | |

| December 1, 2018 through December 31, 2018 | 6.0 | | | $ | 84.18 | | | 6.0 | | | 11,474 | | |

| | 7.1 | | | | | | | 7.1 | | | $ | 11,474 | |

No activity has occurred to date under the July 2018 repurchase program.

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | 2017 | | | | | | | | 2016 | | | | | | |

| | High | | | | Low | | | | High | | | | Low | | |

| First Quarter | $ | 43.80 | | | $ | 39.02 | | | $ | 41.75 | | | $ | 30.52 | |

| Second Quarter | $ | 55.14 | | | $ | 42.06 | | | $ | 41.49 | | | $ | 34.00 | |

| Third Quarter | $ | 65.24 | | | $ | 52.83 | | | $ | 41.30 | | | $ | 35.72 | |

| Fourth Quarter | $ | 79.39 | | | $ | 63.69 | | | $ | 44.52 | | | $ | 38.06 | |

We did not repurchase any shares of our common stock in 2015.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Shares Repurchased | | | Average Price Paid per Share(1) | | | | Value of Shares Repurchased | | | | Remaining Amount Authorized for Repurchases | | |

| Period ended October 31, 2017 | — | | | — | | | | — | | | | $ | 5,299 | |

| Period ended November 30, 2017 | — | | | — | | | | — | | | | $ | 5,299 | |

| Period ended December 31, 2017 | 4.0 | | | $ | 74.30 | | | $ | 300 | | | $ | 4,999 | |

| | 4.0 | | | | | | | $ | 300 | | | | | |

These repurchased shares of common stock were recorded as treasury stock and were accounted for under the cost method.

No repurchased shares of common stock have been retired.

PayPal derived the selected consolidated income statement data for the years ended December 31, [added: 2018,] 2017, [removed: 2016] and [removed: 2015] [added: 2016] and the selected consolidated balance sheet data as of December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] as set forth below, from its audited consolidated financial statements, which are included in “Item 15.

PayPal derived the selected consolidated income statement data for the years ended December 31, [removed: 2014] [added: 2015] and [removed: 2013] [added: 2014] and selected consolidated balance sheet data as of December 31, [removed: 2015] [added: 2016, 2015,] and 2014 from audited consolidated financial statements not included in this Annual Report on Form 10-K.

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Net revenues | $ | [removed: 13,094] [added: 15,451] | | | $ | [removed: 10,842] [added: 13,094] | | | $ | [removed: 9,248] [added: 10,842] | | | $ | [removed: 8,025] [added: 9,248] | | | $ | [removed: 6,727] [added: 8,025] | |

| Operating income | [removed: 2,127] [added: 2,194] | | | | [removed: 1,586] [added: 2,127] | | | | [removed: 1,461] [added: 1,586] | | | | [removed: 1,268] [added: 1,461] | | | | [removed: 1,091] [added: 1,268] | | |

| Net income | [removed: 1,795] [added: 2,057] | | | | [removed: 1,401] [added: 1,795] | | | | [removed: 1,228] [added: 1,401] | | | | [removed: 419] [added: 1,228] | | | | [removed: 955] [added: 419] | | |

| Basic | $ | [removed: 1.49] [added: 1.74] | | | $ | [removed: 1.16] [added: 1.49] | | | $ | [removed: 1.00] [added: 1.16] | | | $ | [removed: 0.34] [added: 1.00] | | | $ | [removed: 0.78] [added: 0.34] | |

| Diluted | $ | [removed: 1.47] [added: 1.71] | | | $ | [removed: 1.15] [added: 1.47] | | | $ | [removed: 1.00] [added: 1.15] | | | $ | [removed: 0.34] [added: 1.00] | | | $ | [removed: 0.78] [added: 0.34] | |

| Basic | [removed: 1,203] [added: 1,184] | | | | [removed: 1,210] [added: 1,203] | | | | [removed: 1,222] [added: 1,210] | | | | [removed: 1,218] [added: 1,222] | | | | 1,218 | | |

| Diluted | [removed: 1,221] [added: 1,203] | | | | [removed: 1,218] [added: 1,221] | | | | [removed: 1,229] [added: 1,218] | | | | [removed: 1,224] [added: 1,229] | | | | 1,224 | | |

| Total assets | $ | [removed: 40,774] [added: 43,332] | | | $ | [removed: 33,103] [added: 40,774] | | | $ | [removed: 28,881] [added: 33,103] | | | $ | [removed: 21,917] [added: 28,881] | | | $ | [removed: 19,160] [added: 21,917] | |

| Total long-term liabilities | [removed: 1,917] [added: 2,042] | | | | [removed: 1,513] [added: 1,917] | | | | [removed: 1,505] [added: 1,513] | | | | [removed: 386] [added: 1,505] | | | | [removed: 509] [added: 386] | | |

Basic and diluted net income per share for the [removed: years] [added: year] ended December 31, [removed: 2014, and 2013 were] [added: 2014 was] calculated using the number of common shares distributed on July 17, 2015.

PayPal derived the selected consolidated balance sheet data as of December 31, 2013 from PayPal’s underlying financial records, which were derived from the financial records of eBay.

The audited consolidated financial statements covering the years ended December 31, [added: 2018,] 2017, [removed: 2016] and [removed: 2015] [added: 2016] and accompanying notes listed in Part IV, Item 15(a)(1) of this Annual Report on Form 10‑K are included elsewhere in this report.

Based on the evaluation of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), our principal executive officer and our principal financial officer have concluded that as of December 31, [removed: 2017,] [added: 2018,] the end of the period covered by this report, our disclosure controls and procedures were effective.

Based on its evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2017.][added: 2018.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2017] [added: 2018] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K.

None.

Not applicable.

Incorporated by reference from our Proxy Statement for our [removed: 2018] [added: 2019] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2017.][added: 2018.]

Incorporated by reference from our Proxy Statement for our [removed: 2018] [added: 2019] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2017.][added: 2018.]

Incorporated by reference from our Proxy Statement for our [removed: 2018] [added: 2019] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2017.][added: 2018.]

Incorporated by reference from our Proxy Statement for our [removed: 2018] [added: 2019] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2017.][added: 2018.]

Incorporated by reference from our Proxy Statement for our [removed: 2018] [added: 2019] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2017.][added: 2018.]

| [Report of Independent Registered Public Accounting [removed: Firm](#s63C4CE8197465605AFAB655EC0E07331)] [added: Firm](#s47C126FEE1195F7594CE7AF7EEC6DD92)] | [removed: [64](#s63C4CE8197465605AFAB655EC0E07331)] [added: [66](#s47C126FEE1195F7594CE7AF7EEC6DD92)] |

| [Consolidated Balance [removed: Sheets](#sF64ADE16292350FE8103AE9C2AFCC4DA)] [added: Sheets](#s74FC64C0248454E3A0658E88CF0A28D4)] | [removed: [66](#sF64ADE16292350FE8103AE9C2AFCC4DA)] [added: [68](#s74FC64C0248454E3A0658E88CF0A28D4)] |

| [Consolidated Statements of [removed: Income](#s49F2DA295447541DB22604F91837FCA6)] [added: Income](#sE19CFD879C995C57AD3FC697E87C1C89)] | [removed: [67](#s49F2DA295447541DB22604F91837FCA6)] [added: [69](#sE19CFD879C995C57AD3FC697E87C1C89)] |

| [Consolidated Statements of Comprehensive [removed: Income](#sBDEFD2BA77435678A021D4A33B78B64B)] [added: Income](#s2DB2B715C886518298166E9FFC8CB35A)] | [removed: [68](#sBDEFD2BA77435678A021D4A33B78B64B)] [added: [70](#s2DB2B715C886518298166E9FFC8CB35A)] |

| [Consolidated Statements of Stockholders' [removed: Equity](#sA30908F4E0B058659FA61F413A83CB5D)] [added: Equity](#s5B43C85EA3C25E7EADE3E77CACA96222)] | [removed: [69](#sA30908F4E0B058659FA61F413A83CB5D)] [added: [71](#s5B43C85EA3C25E7EADE3E77CACA96222)] |

| [Consolidated Statements of Cash [removed: Flows](#sC5A1EBB01B3A509BBAAC50DB968116C0)] [added: Flows](#s6782C61728055058BF0AF51E8FBBB5E9)] | [removed: [70](#sC5A1EBB01B3A509BBAAC50DB968116C0)] [added: [72](#s6782C61728055058BF0AF51E8FBBB5E9)] |

| [Notes to Consolidated Financial [removed: Statements](#s0F615025EB0E5E8D9307AEDBFC006ED4)] [added: Statements](#sFE71A0974EF650DEBED748BD65D94771)] | [removed: [72](#s0F615025EB0E5E8D9307AEDBFC006ED4)] [added: [74](#sFE71A0974EF650DEBED748BD65D94771)] |

| [Schedule II—Valuation and Qualifying [removed: Accounts](#sDA5193A326A05E7B851A48E3595B6AEA)] [added: Accounts](#sBA5B75D156E855B0805FDB138EC7F1E3)] | [removed: [119](#sDA5193A326A05E7B851A48E3595B6AEA)] [added: [121](#sBA5B75D156E855B0805FDB138EC7F1E3)] |

| [3. Exhibits Required by Item 601 of Regulation [removed: S-K](#s2D5EBB6D13D953FF9D357A2EFEC20CAE)] [added: S-K](#sA144EF13F7FC5BE586CD3AB7DDF8D937)] | |

We have audited the accompanying consolidated balance sheets of PayPal Holdings, Inc. and its subsidiaries [added: (the “Company”)] as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, [removed: 2017] [added: 2018] appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended December 31, [removed: 2017] [added: 2018] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) [removed: ("PCAOB")] [added: (PCAOB)] and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

| | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Cash and cash equivalents | $ | [added: 7,575 | | | $ |] 2,883 | | | $ | 1,590 | |

| Short-term investments | [removed: 2,812] [added: 1,534] | | | | [removed: 3,385] [added: 2,812] | | |

| Accounts receivable, net | [removed: 283] [added: 313] | | | | [removed: 214] [added: 283] | | |

| Loans and interest receivable, net of allowances of [removed: $129] [added: $172] in [removed: 2017] [added: 2018] and [removed: $339] [added: $129] in [removed: 2016] [added: 2017] | [removed: 1,314] [added: 2,532] | | | | [removed: 5,348] [added: 1,314] | | |

| Loans and interest receivable, held for sale | [removed: 6,398] [added: —] | | | | [removed: —] [added: 6,398] | | |

| Funds receivable and customer accounts | [removed: 18,242] [added: 20,062] | | | | [removed: 14,363] [added: 18,242] | | |

| Prepaid expenses and other current assets | [removed: 713] [added: 947] | | | | [removed: 833] [added: 713] | | |

| Total current assets | [removed: 32,645] [added: 32,963] | | | | [removed: 25,733] [added: 32,645] | | |

| Long-term investments | [removed: 1,961] [added: 971] | | | | [removed: 1,539] [added: 1,961] | | |

| Property and equipment, net | [removed: 1,528] [added: 1,724] | | | | [removed: 1,482] [added: 1,528] | | |

| Goodwill | [removed: 4,339] [added: 6,284] | | | | [removed: 4,059] [added: 4,339] | | |

| Intangible assets, net | [removed: 168] [added: 825] | | | | [removed: 211] [added: 168] | | |

| Other assets | [removed: 133] [added: 565] | | | | [removed: 79] [added: 133] | | |

| Total assets | $ | [removed: 40,774] [added: 43,332] | | | $ | [removed: 33,103] [added: 40,774] | |

| Accounts payable | $ | [removed: 257] [added: 281] | | | $ | [removed: 192] [added: 257] | |

| Notes payable | [removed: 1,000] [added: 1,998] | | | | [removed: —] [added: 1,000] | | |

| Funds payable and amounts due to customers | [removed: 19,742] [added: 21,562] | | | | [removed: 15,163] [added: 19,742] | | |

| Accrued expenses and other current liabilities | [removed: 1,781] [added: 2,002] | | | | [removed: 1,459] [added: 1,781] | | |

| Income taxes payable | [removed: 83] [added: 61] | | | | [removed: 64] [added: 83] | | |

| Total current liabilities | [removed: 22,863] [added: 25,904] | | | | [removed: 16,878] [added: 22,863] | | |

| Deferred tax liability and other long-term liabilities | [removed: 1,917] [added: 2,042] | | | | [removed: 1,513] [added: 1,917] | | |

| Total liabilities | [removed: 24,780] [added: 27,946] | | | | [removed: 18,391] [added: 24,780] | | |

| Common stock, $0.0001 par value; 4,000 shares authorized; [removed: 1,200] [added: 1,174] and [removed: 1,207] [added: 1,200] shares outstanding as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively | — | | | | — | | |

| Treasury stock at cost, [removed: 47] [added: 91] and [removed: 27] [added: 47] shares as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively | [removed: (2,001] [added: (5,511] | | ) | | [removed: (995] [added: (2,001] | | ) |

| Additional paid-in-capital | [removed: 14,314] [added: 14,939] | | | | [removed: 13,579] [added: 14,314] | | |

| Other income (expense), net | 182 | | | | 73 | | | | 45 | | |

| Net income | $ | 2,057 | | | $ | 1,795 | | | $ | 1,401 | |

| Tax expense on unrealized gains on investments, net | — | | | — | | | | — | | | | (1 | | ) | | — | | | | (1 | | ) |

| Net income | — | | | — | | | | — | | | | — | | | | 2,057 | | | | 2,057 | | |

| Common stock repurchased | (44 | ) | | (3,510 | | ) | | (15 | | ) | | — | | | | — | | | | (3,525 | | ) |

| Balances at December 31, 2018 | 1,174 | | | $ | (5,511 | ) | | $ | 14,939 | | | $ | 78 | | | $ | 5,880 | | | $ | 15,386 | |

| Net income | $ | 2,057 | | | $ | 1,795 | | | $ | 1,401 | |

| Other | (172 | | ) | | (25 | | ) | | (24 | | ) |

| Funds receivable | 1,146 | | | | (1,605 | | ) | | (1,081 | | ) |

| Repayments under financing arrangements | (1,115 | | ) | | (980 | | ) | | (21 | | ) |

| Net change in cash, cash equivalents, and restricted cash | 4,948 | | | | 2,166 | | | | (708 | | ) |

| Cash, cash equivalents, and restricted cash at end of period | $ | 13,233 | | | $ | 8,285 | | | $ | 6,119 | |

| The below table reconciles cash, cash equivalents, and restricted cash as reported in the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows: | | | | | | | | | | | |

| Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows | $ | 13,233 | | | $ | 8,285 | | | $ | 6,119 | |

PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy.

That focus continues to become even more heightened as regulators on a global basis focus on such important issues as countering terrorist financing, anti-money laundering, privacy, cybersecurity, and consumer protection.

Some of the laws and regulations to which we are subject were enacted recently, and the laws and regulations applicable to us, including those enacted prior to the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation.

Therefore, we monitor these areas closely to design compliant solutions for our customers who depend on us.

For such investments, our share of the investee's results of operations is included in other income (expense), net on our consolidated statements of income and our investment balance is included in long-term investments on our consolidated balance sheets.

Investments in entities where we do not have the ability to exercise significant influence over the investee are accounted for at cost minus impairment, if any, and are adjusted for changes resulting from observable price changes, which are included in other income (expense), net on our consolidated statements of income and our investment balance is included in long-term investments on our consolidated balance sheets.

Our equity investments consist primarily of minority equity interests in companies that are not publicly traded where we do not have the ability to exercise significant influence, or have control over the investee, and are reported in long-term investments on our consolidated balance sheets.

For our equity investments that do not have a readily determinable fair value, we measure these equity investments at cost minus impairment, if any, and adjust for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”).

All gains and losses on these investments, realized and unrealized, are recognized in other income (expense), net on our consolidated statements of income.

Our investments where we have the ability to exercise significant influence, but not control, over the investee are accounted for as equity method investments, are reported in long-term investments on our consolidated balance sheets and our share of the investee's results of operations is included in other income (expense), net.

PayPal earns a revenue share on the portfolio of consumer receivables owned by Synchrony Bank, which includes both the sold and newly generated receivables, and it is recorded in revenue from other value added services on our consolidated financial statements.

This transaction was accounted for as a true sale based on our determination that it met all the necessary criteria for such accounting, including legal isolation for transferred assets, ability of the transferee to pledge or exchange the transferred assets without constraint, and the transfer of control.

We also concluded that our continuing involvement in the revenue share arrangement does not invalidate this determination.

For these arrangements, gains or losses on the sale of the participation interest were not material as the carrying amount of the participation interest sold approximated the fair value at time of transfer.

For our PPWC product, there is a general requirement that at least 10% of the original amount of the loan or advance plus the fixed fee must be repaid every 90 days.

For our PPBL product, we receive fixed periodic payments over the contractual term of the loan which generally ranges from 3 to 12 months.

Bankrupt accounts are charged off within 60 days for merchants and 90 days for consumers after receipt of notification of bankruptcy.

As of December 31, 2018, the cumulative amount approved by management to be designated for credit activities aggregated to $1.5 billion and represented approximately 26% of European customer balances potentially available for corporate use by us as determined by applying financial regulations maintained by the CSSF.

On the date PayPal’s management designates the European customer balances held in our Luxembourg banking subsidiary to be used to extend credit, the balances are classified as cash and cash equivalents and no longer classified as customer accounts in our consolidated balance sheets.

No additional amount has been designated for corporate usage by management during the year ended December 31, 2018.

In addition, a portion of our customers' funds are settled directly to their bank account.

These funds are also classified as funds receivable and funds payable and arise due to the time required to initiate collection from and clear transactions through external payment networks.

These funds are classified differently on our consolidated statement of cash flows as operating activities based on the nature of this activity.

Beginning in 2018, we evaluate the effectiveness of our foreign currency exchange contracts on a quarterly basis by comparing the critical terms of the derivative instruments with the critical terms of the forecasted cash flows of the hedged item and if the critical terms are the same we conclude the hedge will be perfectly effective.

Prior to and during 2018, we evaluated the effectiveness of some of our foreign currency exchange contracts on a monthly basis by comparing the change in the fair value of the derivative instruments with the change in the fair value of the forecasted cash flows of the hedged item.

We do not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.

February 7, 2018

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | As of December 31, | | | | | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balances at December 31, 2014 | 1,218 | | | $ | — | | | $ | — | | | $ | 8,138 | | | $ | 110 | | | $ | — | | | $ | 8,248 | |

| Net income | — | | | — | | | | — | | | | 560 | | | | — | | | | 668 | | | | 1,228 | | |

| Net transfers from eBay | — | | | — | | | | — | | | | 4,143 | | | | — | | | | — | | | | 4,143 | | |

| Reclassification of net parent investment in connection with separation | — | | | — | | | | 12,841 | | | | (12,841 | | ) | | — | | | | — | | | | $ | — | |

| Receivable from eBay | — | | | | — | | | | 121 | | |

| Payable to eBay | — | | | | — | | | | (217 | | ) |

| Cash flows from investing activities: | | | | | | | | | | | |

| Notes payable and receivable from eBay | — | | | | — | | | | 575 | | |

| Cash flows from financing activities: | | | | | | | | | | | |

| Contribution from eBay | — | | | | — | | | | 3,858 | | |

| Net increase (decrease) in cash and cash equivalents | 1,293 | | | | 197 | | | | (808 | | ) |

Our vision is to democratize financial services, as we believe that managing and moving money is a right for all people, not just the affluent.

Government regulation impacts key aspects of our business.

We are subject to regulations that affect the payments industry in the markets in which we operate.

On July 17, 2015 (the “distribution date”), PayPal became an independent publicly traded company through the pro rata distribution by eBay Inc. (“eBay”) of 100% of the outstanding common stock of PayPal to eBay stockholders (which we refer to as the “separation” or the “distribution”).

Each eBay stockholder of record as of the close of business on July 8, 2015 received one share of PayPal common stock for every share of eBay common stock held on the record date.

Approximately 1.2 billion shares of PayPal common stock were distributed on July 17, 2015 to eBay stockholders.

PayPal's common stock began “regular way” trading under the ticker symbol “PYPL” on the NASDAQ Stock Market on July 20, 2015.

Prior to the separation, eBay transferred substantially all of the assets and liabilities and operations of eBay's payments business to PayPal, which was completed in June 2015 (the “capitalization”).

The consolidated financial statements prior to the capitalization were prepared on a stand-alone basis and were derived from eBay's consolidated financial statements and accounting records.

The consolidated financial statements reflect our financial position, results of operations, comprehensive income and cash flows as our business was operated as part of eBay prior to the capitalization.

Following the capitalization, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All periods presented have been accounted for in conformity with U.S. generally accepted accounting principles (“GAAP”).

For periods prior to the capitalization, the consolidated financial statements include expenses associated with real estate and information technology that were previously allocated to the payments business of eBay, and additional expenses related to certain corporate functions, including senior management, legal, human resources and finance.

These expenses also include allocations related to stock-based compensation.

The expenses that were incurred by eBay were allocated to us based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of revenue, headcount, or other systematic measure.

We consider the expense allocation methodology and results to be reasonable for all periods presented.

The consolidated financial statements also include certain assets and liabilities that were historically held at the eBay corporate level, but which are specifically identifiable and attributable to us.

The consolidated financial position, results of operations and cash flows of PayPal prior to the distribution may not be indicative of our results had we been a separate stand-alone entity throughout the periods presented, nor are the results stated herein indicative of what the Company’s financial position, results of operations and cash flows may be in the future.

All intercompany transactions and accounts have been eliminated.

Transactions between the Company and eBay are included in these consolidated financial statements for all periods presented.

Beginning with the first quarter of 2016, we reclassified certain operating expenses in our consolidated statements of income to better align our external and internal financial reporting.

None.

Exhibit Index

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| | | | | Incorporated by Reference | |

| Exhibit Number | | Exhibit Description | Filed with this Form 10-K | Form | Date Filed |

| [2.01](http://www.sec.gov/Archives/edgar/data/1633917/000119312515237232/d877527dex21.htm) | | Separation and Distribution Agreement by and between eBay Inc. and PayPal Holdings, Inc. | | 10-12B/A | 6/26/2015 |

| [2.02](http://www.sec.gov/Archives/edgar/data/1633917/000119312517345552/d496328dex21.htm) | | Purchase and Sale Agreement, dated as of November 10, 2017, by and between Synchrony Bank and Bill Me Later, Inc. | | 8-K | 11/16/2017 |

| [2.03](http://www.sec.gov/Archives/edgar/data/1633917/000119312517345552/d496328dex22.htm) | | Purchase and Sale Agreement, dated as of November 10, 2017, by and between Synchrony Bank and PayPal (Europe) SÀ R.L. et CIE, S.C.A. | | 8-K | 11/16/2017 |

| [2.04](http://www.sec.gov/Archives/edgar/data/1633917/000163391718000171/exhibit201bmliamendmentno1.htm) | | Amendment No. 1 to the Purchase and Sale Agreement, dated as of April 12, 2018, by and between Synchrony Bank and Bill Me Later, Inc. | | 10-Q | 7/26/2018 |

| [2.05](http://www.sec.gov/Archives/edgar/data/1633917/000163391718000171/exhibit202luxamendmentno1.htm) | | Amendment No. 1 to the Purchase and Sale Agreement, dated as of April 12, 2018, by and between Synchrony Bank and PayPal (Europe) S.À R.L. et CIE, S.C.A. | | 10-Q | 7/26/2018 |

| [3.01](http://www.sec.gov/Archives/edgar/data/1633917/000163391717000136/exhibit301pphirestatedcert.htm) | | PayPal Holdings, Inc. Restated Certificate of Incorporation | | 10-Q | 7/27/2017 |

| [3.02](http://www.sec.gov/Archives/edgar/data/1633917/000163391719000016/a8-kexhibit31.htm) | | PayPal Holdings, Inc. Amended and Restated Bylaws effective January 17, 2019. | | 8-K | 1/18/2019 |

| [10.01](http://www.sec.gov/Archives/edgar/data/1633917/000119312515257108/d31081dex101.htm) | | Operating Agreement by and among eBay Inc., eBay International AG, PayPal Holdings, Inc., PayPal, Inc., PayPal Pte. Ltd. and PayPal Payments Pte. Holdings S.C.S., dated July 17, 2015. | | 8-K | 7/20/2015 |

| [10.02](http://www.sec.gov/Archives/edgar/data/1633917/000163391716000203/exhibit1003amendmenttooper.htm) | | Amendment, dated June 30, 2016, to the Operating Agreement by and among eBay Inc., eBay International AG, PayPal Holdings, Inc., PayPal, Inc., PayPal Pte. Ltd. and PayPal Payments Pte. Holdings S.C.S, dated July 17, 2015. | | 10-Q | 7/26/2016 |

| [10.03](http://www.sec.gov/Archives/edgar/data/1633917/000119312515257108/d31081dex103.htm) | | Tax Matters Agreement by and between eBay Inc. and PayPal Holdings, Inc., dated July 17, 2015. | | 8-K | 7/20/2015 |

| [10.04](http://www.sec.gov/Archives/edgar/data/1633917/000119312515257108/d31081dex104.htm) | | Employee Matters Agreement by and between eBay Inc. and PayPal Holdings, Inc., dated July 17, 2015. | | 8-K | 7/20/2015 |

| [10.05](http://www.sec.gov/Archives/edgar/data/1633917/000119312515257108/d31081dex105.htm) | | Intellectual Property Matters Agreement by and among eBay Inc., eBay International AG, PayPal Holdings, Inc., PayPal, Inc., PayPal Pte. Ltd. and PayPal Payments Pte. Holdings S.C.S., dated July 17, 2015. | | 8-K | 7/20/2015 |

| [10.06](http://www.sec.gov/Archives/edgar/data/1633917/000119312515257108/d31081dex106.htm) | | Credit and Guarantee Agreement, dated as of July 17, 2015, by and among PayPal Holdings, Inc., PayPal, Inc., JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto. | | 8-K | 7/20/2015 |

| [10.07](http://www.sec.gov/Archives/edgar/data/1633917/000119312517362257/d505202dex101.htm) | | 364-Day Credit and Guarantee Agreement, dated as of December 5, 2017, by and among PayPal Holdings, Inc., PayPal, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. | | 8-K | 12/6/2017 |

| [10.08](http://www.sec.gov/Archives/edgar/data/1633917/000119312518334629/d657460dex101.htm) | | Amended and Restated 364-Day Credit and Guarantee Agreement, dated as of November 26, 2018, among PayPal Holdings, Inc., PayPal, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent | | 8-K | 11/27/2018 |

| [10.09+](http://www.sec.gov/Archives/edgar/data/1633917/000120677416005430/paypal_def14a.htm#d296012a044) | | PayPal Employee Incentive Plan, as amended and restated. | | DEF 14A | 4/14/2016 |

| [10.10+](http://www.sec.gov/Archives/edgar/data/1633917/000163391718000115/exhibit101areiap.htm) | | PayPal Holdings, Inc. Amended and Restated 2015 Equity Incentive Award Plan | | 8-K | 5/25/2018 |

| [10.11+](https://www.sec.gov/Archives/edgar/data/1633917/000163391719000043/amendedandrestateddcp1-10.htm) | | PayPal Holdings, Inc. Amended and Restated Deferred Compensation Plan effective November 6, 2018 | X | | |

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| | | | | Incorporated by Reference | |

| Exhibit Number | | Exhibit Description | Filed with this Form 10-K | Form | Date Filed |

| [10.12+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515227468/d877527dex1022.htm) | | PayPal Holdings, Inc. Change in Control Severance Plan for Key Employees, dated June 16, 2015. | | 10-12B/A | 6/18/2015 |

| [10.13+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515227468/d877527dex1023.htm) | | PayPal Holdings, Inc. SVP and Above Standard Severance Plan, dated June 16, 2015. | | 10-12B/A | 6/18/2015 |

| [10.14](http://www.sec.gov/Archives/edgar/data/1633917/000119312515188285/d877527dex107.htm) | | Form of Indemnity Agreement between PayPal Holdings, Inc. and individual directors and officers. | | 10-12B/A | 5/14/2015 |

| [10.15+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515188285/d877527dex1010.htm) | | Form of Global Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan. | | 10-12B/A | 5/14/2015 |

| [10.16+](http://www.sec.gov/Archives/edgar/data/1633917/000163391717000075/exhibit1001-formofpbrsuagr.htm) | | Form of Global Performance Based Restricted Stock Unit Award Grant Notice and Performance Based Restricted Stock Unite Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan, as amended and restated. | | 10-Q | 4/27/2017 |

| [10.17+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515188285/d877527dex1011.htm) | | Form of Global Notice of Grant of Stock Option and Stock Option Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan. | | 10-12B/A | 5/14/2015 |

| [10.18+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515188285/d877527dex1012.htm) | | Form of Director Annual Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan. | | 10-12B/A | 5/14/2015 |

| [10.19+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515188285/d877527dex1013.htm) | | Form of Electing Director Quarterly Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan. | | 10-12B/A | 5/14/2015 |

| [10.20+](http://www.sec.gov/Archives/edgar/data/1633917/000163391718000115/exhibit102arespp.htm) | | PayPal Holdings, Inc. Amended and Restated Employee Stock Purchase Plan | | 8-K | 5/25/2018 |

| [10.21+](http://www.sec.gov/Archives/edgar/data/1633917/000119312515188285/d877527dex1016.htm) | | Offer Letter dated September 29, 2014 between eBay Inc. and Daniel Schulman. | | 10-12B/A | 5/14/2015 |