PayPal Finish 2021 With Strong Q4 Results But Offers Weak Outlook For 2022

PayPal is the first of the big eCommerce companies that we monitor, to report their Q4 financial results for 2021. Unsurprisingly it has been a very strong quarter for the company which tops off an impressive year that saw strong growth and a record number of new products and initiatives released to the market.

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In PayPal’s Q3 financial results they did a good job of managing expectations. Noting that the record-breaking year of 2020 was not sustainable and to re-evaluate targets for Q4. It turns out this was a wise move as the Q4 actual results align very well with what they predicted in Q3.

“2021 was one of the strongest years in PayPal’s history. We reached $1.25 trillion in TPV and launched more products and experiences than ever before. The future is moving in our direction, and we are investing in our consumer and merchant capabilities to seize the opportunity in front of us.”

Dan Schulman, President and CEO, PayPal

PayPal ended the year in perhaps one of the strongest places they have ever been. eBay is representing around just 3% of total revenue for the company, and they are by far the most widely accepted digital wallet with 76% of market share. Apple Pay is second with 27% for reference.

“Our 2021 results built upon the prior year’s record-setting performance. We are in a much stronger competitive position than we were two years ago and remain focused on innovating at scale and advancing our leadership in digital payments.”

John Rainey, CFO and EVP of Global Customer Operations, PayPal

PayPal Stock Dives 25%!

PayPal’s results have not been met favourably by the market however. At the time of writing the PayPal stock price is down 25% since the release of the Q4 results. Analysts again have been put off by PayPal’s apparent conservative approach to their 2022 forecast, with one saying that the company now had to “show me rather than tell me”. There is still some underlying optimism for the company especially around the Venmo Amazon deal that was announced last year which could be the shining star of PayPal’s 2022.

Below you can find the key highlights for the PayPal Q4 2021 financial results. If you are interested you can check out the full release with balance sheets and cash flow statements here.

PayPal Q4 2021 Financial Highlights

• Revenue of $6.9 billion, growing 13% on a spot and FXN basis
• Excluding eBay, revenue grew 22% on a spot basis
• GAAP operating margin of 15.2%, declining 57 basis points; non-GAAP operating margin of 21.8%, declining 291 basis points
• GAAP EPS of $0.68, down 49%; non-GAAP EPS of $1.11, up 4%
• GAAP EPS includes a net gain of $0.60 in Q4’20 and a net loss of
• $0.18 in Q4’21 on PayPal’s strategic investment portfolio

FY’21: Revenue increased 18% with ex-eBay growth of 29%

• Revenue of $25.4 billion, growing 18% on a spot basis and 17% FXN
• Excluding eBay, revenue grew 29% on a spot basis
• GAAP operating margin of 16.8%, up 147 basis points; non-GAAP operating margin of 24.8%, down 27 basis points
• GAAP EPS of $3.52 down 1%; non-GAAP EPS of $4.60, up 19%
• GAAP EPS includes a net gain of approximately $1.24 in FY’20 and
• $0.06 in FY’21 on PayPal’s strategic investment portfolio

Operating Highlights

• 9.8 million NNAs (Net New Active Accounts) added, bringing total active accounts to 426 million, up 13%
• 5.3 billion payment transactions, up 21%
• $339.5 billion in TPV, up 23% on a spot and FXN basis
• Volume excluding eBay grew 27% on a spot basis and 28% FXN, representing more than 97% of TPV
• Venmo processed approximately $60.6 billion in TPV, growing 29%

FY’21: $1.25 trillion in TPV with >19 billion transactions

• 48.9 million NNAs added, bringing total active accounts to 426 million accounts, up 13%
• 19.3 billion payment transactions, up 25%
• $1.25 trillion in TPV, up 33% on a spot basis and 31% FXN
• Volume excluding eBay grew 38% on a spot basis and 36% FXN
• Venmo processed approximately $230.1 billion in TPV, growing 44%

Balance Sheet & Liquidity

• Cash, cash equivalents, and investments totaled $16.3 billion as of December 31, 2021
• Debt totaled approximately $9.0 billion as of December 31, 2021
• In Q4’21, generated cash flow from operations of $1.8 billion, growing 31%, and free cash flow of $1.6 billion, growing 38%. In FY’21, generated cash flow from operations of $6.3 billion, growing 8%, and free cash flow of $5.4 billion, growing 9%
• In Q4’21, repurchased approximately 8.0 million shares of common stock, returning $1.5 billion to stockholders. In FY’21, repurchased approximately 15.4 million shares of common stock, returning $3.4 billion to stockholders

Strategic Initiatives & Business Updates

• Expanded the reach of global Pay Later offerings, including launching Pay in 3 in Italy and Spain and powering a Pay Later checkout button for Wix eCommerce merchants. Pay Later TPV during “Cyber 5” was nearly 4x the prior year’s volume
• Strengthened in-store and omnichannel offering for merchants with the launch of the Zettle terminal for SMBs in the UK, Sweden, and Germany
• Introduced Honey to the Netherlands and expanded shopping rewards with cash back through PayPal – a new option for US customers to redeem Honey Gold rewards points earned while shopping online
• Set a new record on Giving Tuesday (November 30, 2021), processing more than $188 million in donations to nonprofits and causes, and expanded Give at Checkout to Italy and Spain

Financial Guidance ’22

Q1’22 Revenue and Earnings Guidance

• Revenue expected to grow ~6% on a spot and FXN basis
• Revenue excluding eBay expected to grow ~14%
• GAAP earnings per diluted share of ~$0.50, compared to $0.92 in the prior-year period, and for non-GAAP earnings per diluted share of ~$0.87, compared to $1.22 in the prior-year period
• In the first quarter of 2021, GAAP EPS included a net unrealized loss of ~$0.09 on strategic investments
• In the first quarter of 2021, GAAP and non-GAAP EPS included ~$0.06 benefit from credit loss reserve releases
• Estimated non-GAAP amounts for the three months ending March 31, 2022, reflect adjustments of approximately $590 million, including estimated stock-based compensation expense and related payroll taxes of approximately $470 million

FY’22 Revenue and Earnings Guidance

• TPV expected to grow ~19%-22% at current spot rates and ~21%-23% on an FXN basis
• Revenue expected to grow ~15%-17% on a spot and FXN basis
• Revenue excluding eBay expected to grow ~19%-21%
• GAAP earnings per diluted share expected to be in the range of ~$2.97-$3.15 compared to $3.52 in FY’21, and non-GAAP earnings per diluted share to be in the range of ~$4.60-$4.75, compared to $4.60 in FY’21
• In 2021, GAAP earnings per diluted share included approximately ~$0.06 of net gains on strategic investments
• In 2021, GAAP and non-GAAP EPS included ~$0.21 benefit from credit loss reserve releases
• Estimated non-GAAP amounts for the twelve months ending December 31, 2022, reflect adjustments of approximately $2.4 billion, including estimated stock-based compensation expense and related payroll taxes of approximately $1.9 billion