Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019.



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to .

Commission file number 001-36859

PayPal Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)



Delaware			47-2989869
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
2211 North First Street	San Jose	California	95131
(Address of Principal Executive Offices)			(Zip Code)

(408) 967-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	PYPL	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes☐ No ☒

As of July 19, 2019, there were 1,176,675,415 shares of the registrant’s common stock, $0.0001 par value, outstanding, which is the only class of common or voting stock of the registrant issued.

PayPal Holdings, Inc.

TABLE OF CONTENTS



			Page Number
Part I.	Financial Information		4
	Item 1.	Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Income	5
		Condensed Consolidated Statements of Comprehensive Income	6
		Condensed Consolidated Statements of Stockholders’ Equity	7
		Condensed Consolidated Statements of Cash Flows	9
		Notes to Condensed Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
	Item 4.	Controls and Procedures	53
Part II.	Other Information		54
	Item 1.	Legal Proceedings	54
	Item 1A.	Risk Factors	54
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
	Item 3.	Defaults Upon Senior Securities	62
	Item 4.	Mine Safety Disclosures	62
	Item 5.	Other Information	62
	Item 6.	Exhibits	62
Index to Exhibits			63
Signatures			64

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PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

PayPal Holdings, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS



	June 30, 2019			December 31, 2018
	(In millions, except par value)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,909		$	7,575
Short-term investments	3,506			1,534
Accounts receivable, net	379			313
Loans and interest receivable, net of allowances of $222 and $172 as of June 30, 2019 and December 31, 2018, respectively	3,166			2,532
Funds receivable and customer accounts	23,573			20,062
Prepaid expenses and other current assets	902			947
Total current assets	36,435			32,963
Long-term investments	2,278			971
Property and equipment, net	1,720			1,724
Goodwill	6,236			6,284
Intangible assets, net	699			825
Other assets	1,023			565
Total assets	$	48,391		$	43,332
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	199		$	281
Notes payable	2,499			1,998
Funds payable and amounts due to customers	25,073			21,562
Accrued expenses and other current liabilities	2,022			2,002
Income taxes payable	54			61
Total current liabilities	29,847			25,904
Deferred tax liability and other long-term liabilities	2,405			2,042
Total liabilities	32,252			27,946
Commitments and Contingencies (Note 13)
Equity:
Common stock, $0.0001 par value; 4,000 shares authorized; 1,177 and 1,174 shares outstanding as of June 30, 2019 and December 31, 2018, respectively	—			—
Preferred stock, $0.0001 par value; 100 shares authorized, unissued	—			—
Treasury stock at cost, 99 and 91 shares as of June 30, 2019 and December 31, 2018, respectively	(6,216		)	(5,511		)
Additional paid-in-capital	15,010			14,939
Retained earnings	7,373			5,880
Accumulated other comprehensive income (loss)	(28		)	78
Total equity	16,139			15,386
Total liabilities and equity	$	48,391		$	43,332

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PayPal Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(In millions, except per share data)
	(Unaudited)
Net revenues	$	4,305		$	3,857	$	8,433	$	7,542
Operating expenses:
Transaction expense	1,627			1,362		3,176		2,637
Transaction and loan losses	318			334		659		639
Customer support and operations	399			338		787		680
Sales and marketing	356			307		685		588
Technology and development	483			441		994		889
General and administrative	419			387		838		734
Restructuring and other charges	(2		)	116		71		269
Total operating expenses	3,600			3,285		7,210		6,436
Operating income	705			572		1,223		1,106
Other income (expense), net	238			37		437		51
Income before income taxes	943			609		1,660		1,157
Income tax expense	120			83		170		120
Net income	$	823		$	526	$	1,490	$	1,037

Net income per share:
Basic	$	0.70		$	0.44	$	1.27	$	0.87
Diluted	$	0.69		$	0.44	$	1.25	$	0.86

Weighted average shares:
Basic	1,175			1,187		1,173		1,190
Diluted	1,187			1,202		1,188		1,209

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PayPal Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)
	(Unaudited)
Net income	$	823		$	526		$	1,490		$	1,037
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation	9			(29		)	(58		)	(27		)
Unrealized gains (losses) on investments, net	10			5			21			(10		)
Tax (expense) benefit on unrealized gains (losses) on investments, net	(4		)	(1		)	(6		)	3
Unrealized gains (losses) on hedging activities, net	(18		)	233			(64		)	215
Tax (expense) benefit on unrealized gains (losses) on hedging activities, net	—			(3		)	1			(3		)
Other comprehensive income (loss), net of tax	(3		)	205			(106		)	178
Comprehensive income	$	820		$	731		$	1,384		$	1,215

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PayPal Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY



	Common Stock Shares		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Equity
	Common Stock Shares		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Equity
	(In millions)
	(Unaudited)
Balances at December 31, 2018	1,174		$	(5,511	)	$	14,939		$	78		$	5,880	$	15,386
Adoption of leases standard	—		—			—			—			3		3
Net income	—		—			—			—			667		667
Foreign currency translation	—		—			—			(67		)	—		(67		)
Unrealized gains on investments, net	—		—			—			11			—		11
Tax expense on unrealized gains on investments, net	—		—			—			(2		)	—		(2		)
Unrealized losses on hedging activities, net	—		—			—			(46		)	—		(46		)
Tax benefit on unrealized losses on hedging activities, net	—		—			—			1			—		1
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes	6		—			(302		)	—			—		(302		)
Common stock repurchased	(8	)	(705		)	(45		)	—			—		(750		)
Stock-based compensation	—		—			256			—			—		256
Balances at March 31, 2019	1,172		$	(6,216	)	$	14,848		$	(25	)	$	6,550	$	15,157
Net income	—		—			—			—			823		823
Foreign currency translation	—		—			—			9			—		9
Unrealized gains on investments, net	—		—			—			10			—		10
Tax expense on unrealized gains on investments, net	—		—			—			(4		)	—		(4		)
Unrealized losses on hedging activities, net	—		—			—			(18		)	—		(18		)
Tax benefit on unrealized losses on hedging activities, net	—		—			—			—			—		—
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes	5		—			(73		)	—			—		(73		)
Common stock repurchased	—		—			—			—			—		—
Stock-based compensation	—		—			235			—			—		235
Balances at June 30, 2019	1,177		$	(6,216	)	$	15,010		$	(28	)	$	7,373	$	16,139

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PayPal Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)



	Common Stock Shares		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Equity
	Common Stock Shares		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Equity
	(In millions)
	(Unaudited)
Balances at December 31, 2017	1,200		$	(2,001	)	$	14,314		$	(142	)	$	3,823	$	15,994
Net income	—		—			—			—			511		511
Foreign currency translation	—		—			—			2			—		2
Unrealized losses on investments, net	—		—			—			(15		)	—		(15		)
Tax benefit on unrealized losses on investments, net	—		—			—			4			—		4
Unrealized losses on hedging activities, net	—		—			—			(18		)	—		(18		)
Tax benefit on unrealized losses on hedging activities, net	—		—			—			—			—		—
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes	7		—			(226		)	—			—		(226		)
Common stock repurchased	(24	)	(1,810		)	(15		)	—			—		(1,825		)
Stock-based compensation	—		—			214			—			—		214
Balances at March 31, 2018	1,183		$	(3,811	)	$	14,287		$	(169	)	$	4,334	$	14,641
Net income	—		—			—			—			526		526
Foreign currency translation	—		—			—			(29		)	—		(29		)
Unrealized gains on investments, net	—		—			—			5			—		5
Tax expense on unrealized gains on investments, net	—		—			—			(1		)	—		(1		)
Unrealized gains on hedging activities, net	—		—			—			233			—		233
Tax expense on unrealized losses on hedging activities, net	—		—			—			(3		)	—		(3		)
Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes	7		—			(67		)	—			—		(67		)
Common stock repurchased	(6	)	(500		)	—			—			—		(500		)
Stock-based compensation	—		—			214			—			—		214
Balances at June 30, 2018	1,184		$	(4,311	)	$	14,434		$	36		$	4,860	$	15,019

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PayPal Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Six Months Ended June 30,
	2019			2018
	(In millions)
	(Unaudited)
Cash flows from operating activities:
Net income	$	1,490		$	1,037
Adjustments:
Transaction and loan losses	659			639
Depreciation and amortization	458			365
Stock-based compensation	470			410
Deferred income taxes	35			89
Cost basis adjustments to loans and interest receivable held for sale	—			244
Unrealized gains on strategic investments	(398		)	(31		)
Other	(92		)	(10		)
Changes in assets and liabilities:
Accounts receivable	(66		)	1
Changes in loans and interest receivable held for sale, net	4			(2,268		)
Accounts payable	(49		)	(17		)
Income taxes payable	(7		)	(14		)
Other assets and liabilities	(303		)	(766		)
Net cash provided by (used in) operating activities	2,201			(321		)
Cash flows from investing activities:
Purchases of property and equipment	(357		)	(376		)
Changes in principal loans receivable, net	(732		)	1,000
Purchases of investments	(13,191		)	(10,616		)
Maturities and sales of investments	10,537			9,669
Acquisitions, net of cash and restricted cash acquired	—			(16		)
Funds receivable	(2,214		)	902
Net cash (used in) provided by investing activities	(5,957		)	563
Cash flows from financing activities:
Proceeds from issuance of common stock	74			78
Purchases of treasury stock	(756		)	(2,325		)
Tax withholdings related to net share settlements of equity awards	(449		)	(372		)
Borrowings under financing arrangements	500			2,075
Repayments under financing arrangements	—			(1,076		)
Funds payable and amounts due to customers	3,129			1,078
Net cash provided by (used in) financing activities	2,498			(542		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1		)	(63		)
Net change in cash, cash equivalents, and restricted cash	(1,259		)	(363		)
Cash, cash equivalents, and restricted cash at beginning of period	13,233			8,285
Cash, cash equivalents, and restricted cash at end of period	$	11,974		$	7,922

Supplemental cash flow disclosures:
Cash paid for interest	$	45		$	26
Cash paid for income taxes, net	$	176		$	180

The below table reconciles cash, cash equivalents, and restricted cash as reported in the condensed consolidated balance sheet to the total of the same amounts shown in the condensed consolidated statement of cash flows:
Cash and cash equivalents	$	4,909		$	2,840
Short term investments	12			16
Funds receivable and customer accounts	7,053			5,066
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$	11,974		$	7,922

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Note 1—Overview and Summary of Significant Accounting Policies

Overview and Organization

PayPal Holdings, Inc. (“PayPal,” the “Company,” “we,” “us,” or “our”) was incorporated in Delaware in January 2015 and is a leading technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy. Our goal is to enable our consumers and merchants to manage and move their money anywhere in the world, anytime, on any platform, and using any device. We also facilitate person-to-person payments through our PayPal, Venmo, and Xoom products. Our combined payment solutions, including our PayPal, PayPal Credit, Braintree, Venmo, Xoom, and iZettle products, comprise our proprietary Payments Platform.

We operate globally and in a rapidly evolving regulatory environment characterized by a heightened regulatory focus on all aspects of the payments industry. That focus continues to become even more heightened as regulators on a global basis focus on important issues such 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. New or changing laws and regulations, including the way laws and regulations are interpreted and implemented, as well as increased penalties and enforcement actions related to non-compliance could have a material adverse impact on our business, results of operations, and financial condition. Therefore, we monitor these areas closely to design compliant solutions for our customers who depend on us.

Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the financial statements of PayPal and our wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Investments in entities where we have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investee’s results of operations is included in other income (expense), net on our condensed consolidated statements of income and our investment balance is included in long-term investments on our condensed consolidated balance sheets. Investments in entities where we do not have the ability to exercise significant influence over the investee are accounted for at fair value or cost minus impairment, if any, adjusted for changes resulting from observable price changes, which are included in other income (expense), net on our condensed consolidated statements of income. Our investment balance is included in long-term investments on our condensed consolidated balance sheets.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) filed with the Securities and Exchange Commission.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the condensed consolidated financial statements for interim periods. Certain amounts for prior years have been reclassified to conform to the financial statement presentation as of and for the three and six months ended June 30, 2019.

Reclassifications

Beginning with the first quarter of 2019, we reclassified certain operating expenses within the condensed consolidated statements of income. Prior period amounts have been reclassified to conform to this presentation. These changes have no impact on our previously reported consolidated net income for prior periods, including total operating expenses, financial position, or cash flows for any periods presented.

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The classification changes relate primarily to the combination of costs incurred to develop and operate our Payments Platform into a new caption entitled technology and development. This new caption includes: (a) costs incurred in operating, maintaining, and enhancing our Payments Platform, including network and infrastructure costs, which were previously classified in the customer support and operations caption, and (b) costs incurred in developing new and improving existing products, which were previously classified in the product development caption on our consolidated statements of income. In addition, we have eliminated the presentation of depreciation and amortization expense as a separate financial statement caption by reclassifying these expenses into financial statement captions aligned with the internal organizations that are the primary beneficiaries of the depreciation and amortization of such assets.

The following tables present the effects of the changes on the presentation of these operating expenses to the previously reported condensed consolidated statements of income:



	Three Months Ended June 30, 2018
	(In millions)
	As Previously Reported		Adjustments			Revised

Transaction expense	$	1,362	$	—		$	1,362
Transaction and loan losses	334		—			334
Customer support and operations	357		(19		)	338
Sales and marketing	313		(6		)	307
Product development	255		(255		)	—
Technology and development	—		441			441
General and administrative	368		19			387
Depreciation and amortization	180		(180		)	—
Restructuring and other charges	116		—			116
Total operating expenses	$	3,285	$	—		$	3,285



	Six Months Ended June 30, 2018
	(In millions)
	As Previously Reported		Adjustments			Revised

Transaction expense	$	2,637	$	—		$	2,637
Transaction and loan losses	639		—			639
Customer support and operations	708		(28		)	680
Sales and marketing	598		(10		)	588
Product development	513		(513		)	—
Technology and development	—		889			889
General and administrative	707		27			734
Depreciation and amortization	365		(365		)	—
Restructuring and other charges	269		—			269
Total operating expenses	$	6,436	$	—		$	6,436

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Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses, during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and loan losses, loss contingencies, income taxes, revenue recognition, and the valuation of goodwill and intangible assets. We base our estimates on historical experience and various other assumptions which we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

Leases

We determine whether an arrangement is a lease for accounting purposes at contract inception. Operating leases are recorded as right-of-use (“ROU”) assets, which are included in other assets, and lease liabilities, which are included in accrued expenses and other liabilities and other long-term liabilities on our condensed consolidated balance sheets. As of June 30, 2019, we had no finance leases.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Our leases do not provide an implicit rate; we use an incremental borrowing rate for specific terms on a collateralized basis based on the information available on the commencement date in determining the present value of lease payments. The ROU asset calculation includes lease payments to be made and excludes lease incentives. The ROU asset and lease liability may include amounts attributed to options to extend or terminate the lease when it is reasonably certain we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components. We have elected to apply the practical expedient and account for the lease and non-lease components as a single lease component for all leases. In addition, we have elected the practical expedients related to lease classification, hindsight, and land easement. We apply a single portfolio approach to account for the ROU assets and lease liabilities.

Recent Accounting Guidance

In 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on the measurement of credit losses on financial instruments. Credit losses on loans, trade and other receivables, held-to-maturity debt securities, and other instruments will reflect our current estimate of the expected credit losses and generally will result in the earlier recognition of allowances for losses. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. Additional disclosures will be required, including information used to track credit quality by year of origination for most financing receivables. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We will adopt the new guidance effective January 1, 2020. We are required to apply the provisions of this guidance as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted with impairment of available-for-sale debt securities applied prospectively after adoption. We are evaluating the impact of and approach to adopting this new accounting guidance on our condensed consolidated financial statements.

Recently Adopted Accounting Guidance

In 2016, the FASB issued new accounting guidance related to accounting for leases, which requires lessees to recognize lease assets and lease liabilities on the balance sheet for the rights and obligations created by all leases with terms greater than 12 months. As we are not a lessor, other changes in the guidance applicable to lessors do not apply. Additionally, in 2018, the FASB issued codification and targeted improvements to this guidance effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. We adopted the new guidance on January 1, 2019, using a modified retrospective basis and applied the optional practical expedients related to the transition. We recorded $511 million for the ROU assets and $521 million for the lease liabilities associated with our operating leases upon adoption. The adoption of this guidance did not have a significant impact to our consolidated statements of earnings, stockholders’ equity, and cash flows. For additional information, see Note 6—“Leases.”

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There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt, as applicable, and we do not believe any of these accounting pronouncements has had, or will have, a material impact on our condensed consolidated financial statements or disclosures.

Note 2—Revenue

PayPal enables its customers to send and receive payments. We earn revenue primarily by completing payment transactions for our customers on our Payments Platform and from other value added services. Our revenues are classified into two categories, transaction revenues and revenues from other value added services.

Disaggregation of Revenue

We determine operating segments based on how our chief operating decision maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. Our CODM is our Chief Executive Officer, who reviews our operating results on a consolidated basis. We operate in one segment and have one reportable segment. Based on the information provided to and reviewed by our CODM, we believe that the nature, amount, timing, and uncertainty of our revenue and cash flows and how they are affected by economic factors are most appropriately depicted through our primary geographical markets and type of revenue categories (transaction revenues and other value added services). Revenues recorded within these categories are earned from similar services for which the nature of associated fees and the related revenue recognition models are substantially the same.

The following table presents our revenues disaggregated by primary geographical markets and revenues by major products and services:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In millions)
Primary geographical markets
United States (“U.S.”)	$	2,297	$	2,150	$	4,484	$	4,173
United Kingdom (“U.K.”)	454		402		887		794
Other countries⁽¹⁾	1,554		1,305		3,062		2,575
Total revenues⁽²⁾	$	4,305	$	3,857	$	8,433	$	7,542

Types of revenues
Transaction revenues	$	3,878	$	3,318	$	7,609	$	6,515
Other value added services	427		539		824		1,027
Total revenues⁽²⁾	$	4,305	$	3,857	$	8,433	$	7,542

⁽¹⁾No single country included in the other countries category generated more than 10% of total revenue.

⁽²⁾Total revenues include $276 million and $441 million for the three months ended June 30, 2019 and 2018, respectively, and $533 million and $800 million for the six months ended June 30, 2019 and 2018, respectively, which do not represent revenues recognized in the scope of ASC Topic 606, Revenue from contracts with customers. Such revenues relate to interest, fees, and gains earned on loan and interest receivables, net and held for sale portfolio, as well as hedging gains or losses and interest earned on certain PayPal customer balances.

Net revenues are attributed to the country in which the merchant is located, or in the case of a cross-border transaction, may be earned from the country in which the consumer and the merchant respectively reside. Net revenues earned from other value added services are typically attributed to the country in which either the customer or partner reside.

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Note 3—Net Income Per Share

Basic net income per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding for the period. The dilutive effect of outstanding equity incentive awards is reflected in diluted net income per share by application of the treasury stock method. The calculation of diluted net income per share excludes all anti-dilutive common shares.

The following table sets forth the computation of basic and diluted net income per share for the periods indicated:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In millions, except per share amounts)
Numerator:
Net income	$	823	$	526	$	1,490	$	1,037
Denominator:
Weighted average shares of common stock - basic	1,175		1,187		1,173		1,190
Dilutive effect of equity incentive awards	12		15		15		19
Weighted average shares of common stock - diluted	1,187		1,202		1,188		1,209
Net income per share:
Basic	$	0.70	$	0.44	$	1.27	$	0.87
Diluted	$	0.69	$	0.44	$	1.25