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PayPal Released 2019 Q3 Earnings Report – Beating Wall Street Estimates

PayPal Holdings, Inc. announced third-quarter results for the period ended September 30, 2019 topping Wall Street estimates.

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“We had an excellent quarter financially and operationally, reporting 19% revenue growth, more than 200 basis points of operating margin expansion, accelerating TPV growth and nearly 10 million net new active accounts. This quarter we also announced that we will be the first foreign payments platform to be licensed to provide online payment services in China, a very significant development that has the potential to meaningfully expand our addressable market.”

Dan Schulman, President and CEO of PayPal

Financial Highlights for Third-Quarter 2019

  • Revenue of $4.38 billion; growing 19% on both a spot and foreign currency-neutral (FX-neutral or FXN) basis.
  • GAAP operating income of $0.7 billion, increasing 42%; non-GAAP operating income of $1.03 billion, increasing 30%.
  • GAAP operating margin of 15.9% with non-GAAP operating margin of 23.4%.
  • GAAP tax rate of 4.5%; non-GAAP tax rate of 11.1%.
    • Adjusting for net unrealized losses from strategic investments, GAAP tax rate of 10.3%; non-GAAP tax rate of 13.5%.
  • GAAP EPS of $0.39, increasing 7%; non-GAAP EPS of $0.61, increasing 5%.
    • Q3-19 EPS includes a negative impact of $0.15 from net unrealized losses on strategic investments in MercadoLibre (NASDAQ: MELI) and Uber (NASDAQ: UBER).
    • Excluding the impact of these net unrealized losses, GAAP EPS of $0.54, increasing 48%; non-GAAP EPS of $0.76 increasing 31%.
  • Cash flow from operations of $1.1 billion with free cash flow of $923 million.
  • Repurchased approximately 3.26 million shares of common stock, returning $350 million to stockholders.
  • Accessed public debt markets for the first time and raised $5.0 billion in senior fixed rate notes. PayPal used a portion of the proceeds to repay outstanding borrowings on its 364-day term loan credit facility of $2.5 billion and plans to use the remainder of the proceeds consistent with its capital allocation priorities.

Operating Highlights for Third-Quarter 2019

  • 9.8 million net new active accounts, bringing total active accounts to 295 million accounts, up 16%.
  • 3.1 billion payment transactions, up 25%.
  • $179 billion in total payment volume (TPV), up 25%, or 27% on an FX-neutral basis.
  • 39.8 payment transactions per active account on a trailing twelve month basis, up 9%.

PayPal’s Key Business Drivers

  • Merchant Services volume grew 31% on an FX-neutral basis.
  • eBay Marketplaces volume declined 3% on an FX-neutral basis versus growth of 3% in Q3-18 and represented 8% of TPV for the quarter versus 11% a year ago.
  • Person-to-Person (P2P) volume grew 39% to $51 billion and represented 28% of TPV.
  • Venmo processed more than $27 billion of TPV in the third quarter, growing 64%.

PayPal’s Platform Initiatives

In September, PayPal announced its plans to acquire a 70% equity interest in Guofubao Information Technology Co., Ltd. (GoPay), a holder of a payment business license in China.

Upon closing, PayPal will be the first foreign payments company to be licensed to provide online payment services in China.

The transaction is expected to close in the fourth quarter of 2019 and is subject to customary closing conditions.

In October, PayPal and Synchrony announced an agreement to expand and extend their strategic consumer credit relationship.

As part of the agreement, Synchrony will become the exclusive issuer of a Venmo co-branded consumer credit card, which is expected to launch in the second half of 2020.

Complete PayPal Holdings, Inc. 2019 Financial Report for Q3

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