Global technology platform and digital payments leader PayPal Holdings, Inc. (NASDAQ:PYPL) today announced third quarter results for the period ended September 30, 2017.

Financial highlights for the third quarter include:

  • Revenue growth of 21% to $3.239 billion, or 22% on a foreign currency neutral (FX-neutral) basis
  • GAAP operating margin of 13.1% and non-GAAP operating margin of 19.9%
  • GAAP earnings per diluted share (EPS) growth of 17% to $0.31, non-GAAP EPS growth of 31% to $0.46
  • Operating cash flow of $1.006 billion, free cash flow of $841 million, up 36%

Operating highlights for the third quarter include:

  • 8.2 million active customer accounts added, with net new actives up 88%
  • 218 million active customer accounts, with more than 17 million merchant accounts
  • 1.9 billion payment transactions, up 26%
  • 32.8 payment transactions per active account on a trailing twelve months basis, up 9%
  • $114 billion in total payment volume (TPV), up 30%, or 29% on an FX-neutral basis

“PayPal delivered one of its strongest quarters since becoming an independent company. Putting our customers first in everything we do, enhancing our suite of products and services, and partnering with some of the world’s most popular brands are delivering tangible results,” said Dan Schulman, President and CEO of PayPal. “In addition to our solid financial performance, we also reported record customer growth with the addition of 8.2 million net new actives. As the world rapidly accelerates to digital payments, we have a tremendous opportunity in front of us.”

PayPal’s Expanding Value Proposition

PayPal processed $114 billion in TPV in the quarter. Approximately 35% of payment volume came through a mobile device and mobile payment volume increased 54% over the same period last year to approximately $40 billion.

Person-to-Person (P2P) volume grew 47% to $24 billion, and represented approximately 21% of TPV. Venmo, the company’s social payments platform, processed approximately $30 billion of TPV over the past twelve months, growing 106% over the same period last year. In the third quarter, Venmo processed approximately $9 billion of TPV, growing 93% over the same period last year.

PayPal continues to build on its partnership strategy to extend the relevance of its platform and add value for its consumers and merchants. During the quarter, PayPal announced a partnership with Skype to allow users in 22 countries to send money to other Skype users with PayPal via their Skype mobile app. PayPal also announced the expansion of its partnership with Mastercard into Canada, Europe, Latin America and the Caribbean and the Middle East and Africa.

In the third quarter, PayPal closed the acquisition of Swift Financial, a leading provider of working capital solutions to small businesses in the U.S. The previously announced acquisition of TIO Networks also closed during the quarter.

Third Quarter 2017 Financial and Operating Highlights
Third Quarter
  FX-Neutral YoY
(presented in millions, except per share data and percentages) 2017 2016 YoY Growth Growth
Total Payment Volume (TPV) $114,045 $87,403 $26,642 30% 29%
GAAP
Net revenues $3,239 $2,667 $572 21% 22%
Operating margin 13.1% 13.0% ** 0bps N/A
Effective tax rate 15.7% 10.3% ** 547bps N/A
Net income $380 $323 $57 18% N/A
Earnings per diluted share $0.31 $0.27 $0.04 17% N/A
Net cash provided by operating activities $1,006 $801 $205 26% N/A
Non-GAAP
Net revenues $3,239 $2,667 $572 21% 22%
Operating margin 19.9% 18.4% ** 157bps N/A
Effective tax rate 16.9% 15.3% ** 158bps N/A
Net income $560 $425 $135 32% N/A
Earnings per diluted share $0.46 $0.35 $0.11 31% N/A
Free cash flow $841 $618 $223 36% N/A
** Not meaningful.

Cash, Cash Equivalents and Investments – PayPal’s cash, cash equivalents and investments totaled $7.1 billion as of September 30, 2017.

Full Year 2017 Revenue and Earnings Guidance

  • PayPal expects revenue to grow 19 – 20% at current spot rates and 20 – 21% on an FX-neutral basis, to a range of $12.920 – $12.980 billion.
  • PayPal expects GAAP earnings per diluted share in the range of $1.34 – $1.36 and non-GAAP earnings per diluted share in the range of $1.86 – $1.88.
  • Estimated non-GAAP amounts above for the twelve months ending December 31, 2017, reflect adjustments of approximately $890 – $905 million, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $730 – $740 million.

Fourth Quarter 2017 Revenue and Earnings Guidance

  • PayPal expects revenue to grow 20% – 22% at current spot rates and 20% – 22% on an FX-neutral basis, to a range of $3.570 – $3.630 billion.
  • PayPal expects GAAP earnings per diluted share in the range of $0.37 – $0.39 and non-GAAP earnings per diluted share in the range of $0.50 – $0.52.
  • Estimated non-GAAP amounts above for the three months ending December 31, 2017, reflect adjustments of approximately $225 – $240 million, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $205 – $215 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 third 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 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/), YouTube channel (https://www.youtube.com/paypal), Dan Schulman’s LinkedIn profile (https://www.linkedin.com/in/dan-schulman/) and Dan Schulman’s Facebook profile (https://www.facebook.com/DanSchulmanPayPal/) 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 218 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.

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