PayPal Reports First Quarter 2017 Results and Raises Financial Guidance for Full Year

Global technology platform and digital payments leader PayPal Holdings, Inc. (Nasdaq:PYPL) today announced first quarter results for the period ended March 31, 2017.

Financial highlights for the first quarter include:

• Revenue growth of 17% to $2.975 billion, or 19% on a foreign currency neutral (FX-neutral) basis
• GAAP operating margin down 150 basis points to 14.5% and non-GAAP operating margin expanded 50 basis points to 21.6%
• GAAP earnings per diluted share (EPS) growth of 6% to $0.32, non-GAAP EPS growth of 19% to $0.44
• Operating cash flow of $751 million, free cash flow of $603 million
• $517 million returned to stockholders through stock repurchases

Operating highlights for the first quarter include:

• 6.0 million active customer accounts added, ended the quarter with 203 million active customer accounts, including 16 million merchant accounts
• 1.7 billion payment transactions, up 23%
• 32 payment transactions per active account on a trailing twelve months basis, up 12%
• $99 billion in total payment volume (TPV), up 23%, or 25% on an FX-neutral basis

“With another quarter of strong financial results, we continue to deliver on our vision to democratize financial services for our consumers and drive the global transition from cash to digital payments,” said Dan Schulman, President and CEO of PayPal. “We are deepening our merchant offerings and relationships, and expanding our network of strategic partnerships to make PayPal more available in new contexts and new markets.”

Returning Value to Stockholders with Stock Repurchase

PayPal announced today that its board of directors has authorized a new stock repurchase program, under which the company may repurchase up to $5 billion in outstanding common stock. This program will become effective after completion of the company’s January 2016 stock repurchase program. As of March 31, 2017, approximately $488 million remained available for stock repurchases under this prior authorization.

Strategic Partnerships

PayPal recently announced an expansion of its relationship with Google. PayPal will be available in the Android Pay wallet in the United States and accepted as a way to pay at the millions of retailers that accept Android Pay at the point of sale.

In addition, PayPal announced a partnership agreement with Wells Fargo, adding another issuer to the companies working with PayPal and expanding its services at the point of sale. PayPal also extended its partnership with Visa into the Asia-Pacific region.

Expanding Value Proposition through Product Innovation

PayPal’s mobile-first approach to product development is driving increasing engagement across the platform. In the quarter, 32% of payment volume came through a mobile device and mobile payment volume increased 51% over the same period last year to approximately $32 billion. In addition, Venmo, the company’s social payments platform, processed $6.8 billion of TPV, more than doubling its volume versus the first quarter of 2016.

PayPal finished the quarter with more than 53 million consumer accounts opted in to One Touch. In addition, more than five million merchant customers and 75% of the Internet Retailer 100 now offer One Touch on their mobile and desktop shopping experiences.

In the first quarter, PayPal announced its agreement to acquire TIO Networks Corp. (“TIO”) for approximately $233 million. TIO is a leading multi-channel bill payment processor in North America and processed more than $7 billion in bill payments in its fiscal 2016. The company’s digital platform, and physical network of agent locations make paying bills simpler, faster, and more affordable. By integrating bill payment, PayPal will add another key service to its global payments platform and become a greater part of its consumers’ everyday financial lives. On April 10, 2017 shareholders of TIO approved the acquisition, which is expected to close in the second half of 2017, subject to certain closing conditions.

Cash, Cash Equivalents and Investments – PayPal’s cash, cash equivalents and investments totaled $6.4 billion as of March 31, 2017.

2017 Financial Guidance

Full Year 2017 Revenue and Earnings Raised

• PayPal expects revenue to grow 15 – 17% at current spot rates and 17 – 19% on an FX-neutral basis, to a range of $12.520 – $12.720 billion.
• PayPal expects GAAP earnings per diluted share in the range of $1.28 – $1.33 and non-GAAP earnings per diluted share in the range of $1.74 – $1.79.
• Estimated non-GAAP amounts above for the twelve months ending December 31, 2017, reflect adjustments of approximately $800 – $840 million, primarily representing estimated stock-based compensation expense and related employer payroll taxes in the range of $660 – $690 million.

Second Quarter 2017

• PayPal expects revenue to grow 15% – 17% at current spot rates and 17% – 19% on an FX-neutral basis, to a range of $3.050 – $3.100 billion.
• PayPal expects GAAP earnings per diluted share in the range of $0.30 – $0.32 and non-GAAP earnings per diluted share in the range of $0.41 – $0.43.
• Estimated non-GAAP amounts above for the three months ending June 30, 2017, reflect adjustments of approximately $205 – $220 million, primarily representing estimated stock-based compensation expense and related employer payroll taxes in the range of $180 – $190 million.

Please see “Non-GAAP Financial Measures” and “Non-GAAP Measures of Financial Performance” for important additional information.

Quarterly Conference Call and Webcast

PayPal Holdings, Inc. will host a conference call to discuss first quarter 2017 results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP and non-GAAP pro forma measures to their most directly comparable GAAP measures, can be accessed through the company’s Investor Relations website at https://investor.paypal-corp.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.

PayPal Holdings, Inc. uses its Investor Relations website (https://investor.paypal-corp.com), its PayPal Stories Blog (https://www.paypal.com/stories/us), Twitter handle (@PayPal), LinkedIn page (https://www.linkedin.com/company/paypal), Facebook page (https://www.facebook.com/PayPalUSA/) and YouTube channel (https://www.youtube.com/paypal) as a means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to PayPal’s press releases, SEC filings, public conference calls and webcasts.

About PayPal

Fueled by a fundamental belief that having access to financial services creates opportunity, PayPal (Nasdaq: PYPL) is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy. Our open digital payments platform gives PayPal’s 203 million active account holders the confidence to connect and transact in new and powerful ways, whether they are online, on a mobile device, in an app, or in person. Through a combination of technological innovation and strategic partnerships, PayPal creates better ways to manage and move money, and offers choice and flexibility when sending payments, paying or getting paid. Available in more than 200 markets around the world, the PayPal platform, including Braintree, Venmo and Xoom, enables consumers and merchants to receive money in more than 100 currencies, withdraw funds in 56 currencies and hold balances in their PayPal accounts in 25 currencies. For more information on PayPal, visit https://www.paypal.com/about. For PayPal financial information, visit https://investor.paypal-corp.com.