The FINANCIAL -- SAN JOSE, Calif.--(BUSINESS WIRE)-- Global technology platform and digital payments leader PayPal Holdings, Inc.: PYPL) announced second quarter results for the period ended June 30, 2018.
Financial highlights for second quarter 2018
Revenue growth of 23% to $3.86 billion, or 22% on a foreign currency-neutral (FX-neutral or FXN) basis
GAAP operating margin of 14.8%, with non-GAAP operating margin of 21.3%
GAAP EPS of $0.44, an increase of 29%, with non-GAAP EPS of $0.58, an increase of 28%
Repurchased 6.1 million shares of common stock, returning approximately $500 million to stockholders
Operating highlights for second quarter 2018
7.7 million active accounts added, with net new active accounts up 18%
2.3 billion payment transactions, up 28%
$139 billion in total payment volume (TPV), up 29%, or 27% on an FX-neutral basis
35.7 payment transactions per active account on a trailing twelve months basis, up 9%
"Our customer choice initiatives, partnership strategy and continued focus on being a customer champion are contributing to our sustained strong performance. We are pleased to have announced four acquisitions in the second quarter that advance our merchant value proposition and geographic reach. Our strategic decision to become an open platform committed to partnerships has increased the value that PayPal can offer our customers, both consumers and merchants," said Dan Schulman, President and CEO of PayPal.
PayPal's expanding value proposition
PayPal processed $139 billion in TPV in the second quarter, representing growth of 29%, or 27% on an FX-neutral basis. Merchant Services TPV grew 30% on an FX-neutral basis, and represented 88% of overall TPV for the quarter versus approximately 86% a year ago. eBay Marketplaces volume grew 6% on an FX-neutral basis.
Person-to-Person (P2P) volume grew 50% to more than $33 billion, and represented approximately 24% of TPV in the second quarter. Venmo, the company's social payments platform, processed more than $46 billion of TPV over the past twelve months. In the second quarter, Venmo processed more than $14 billion of TPV, growing 78% over the same period last year.
Driven by strong mobile engagement on its platform, PayPal processed approximately $54 billion in mobile payment volume in the second quarter, representing approximately 49% growth year over year. In the quarter, mobile payment volume represented 39% of overall TPV.
PayPal announced four strategic acquisitions in the second quarter 2018
During the second quarter PayPal announced the acquisitions of iZettle, Hyperwallet, Simility and Jetlore:
In May 2018, PayPal announced the acquisition of iZettle for approximately $2.2 billion in cash. With the acquisition of iZettle, PayPal plans to expand its in-store presence. The acquisition is expected to close in the third quarter of 2018, and is subject to customary closing conditions, including regulatory approval.
In June 2018, PayPal announced the acquisition of Hyperwallet for approximately $400 million in cash. With the acquisition of Hyperwallet, PayPal plans to enhance its payout capabilities, improving its ability to provide an integrated suite of payment solutions to ecommerce platforms and marketplaces around the world. The acquisition is expected to close in the fourth quarter of 2018, and is subject to customary closing conditions, including regulatory approvals.
In June 2018, PayPal announced the acquisition of Simility for approximately $120 million in cash. This transaction closed in July 2018. PayPal acquired Simility to enhance its ability to deliver fraud prevention and risk management solutions to merchants globally.
In May 2018, PayPal announced and closed the acquisition of Jetlore for approximately $16 million in cash. Jetlore is an AI-powered prediction platform used by some of the world's top retailers. PayPal acquired Jetlore to enhance and accelerate PayPal Marketing Solutions, adding new capabilities that continue to expand PayPal's value proposition for merchants beyond the online checkout experience.
PayPal and Synchrony complete U.S. consumer credit receivables sale
PayPal also announced the closing of its consumer credit receivables transaction with Synchrony in July 2018. Under the terms of the transaction, and related transactions with unaffiliated third parties, Synchrony acquired $7.6 billion in receivables, including PayPal's U.S. consumer credit receivables portfolio, which totaled $6.8 billion at the time of closing, and approximately $0.8 billion in participation interests in receivables held by unaffiliated third parties. PayPal received approximately $6.9 billion in total consideration at closing. The expanded agreement with Synchrony Bank for both the U.S. PayPal Credit online consumer financing program and the U.S. PayPal-branded consumer credit card program allows PayPal to collaborate with an industry leader to enrich and expand PayPal's consumer credit offerings.
$10 billion stock repurchase authorization
PayPal announced today that its board of directors has authorized a new stock repurchase program, under which the company may repurchase up to $10 billion in outstanding common stock. This program will become effective after completion of the company's previously announced $5 billion stock repurchase program, of which $2.7 billion remained available as of June 30, 2018.
Cash, Cash Equivalents and Investments - PayPal's cash, cash equivalents and investments totaled $6.3 billion as of June 30, 2018.
Short-Term Borrowings - PayPal's notes payable totaled $2.0 billion as of June 30, 2018.
All metrics are presented consistent with the updated definitions in the Form 8-K filed on April 10, 2018.
Cash flow from operations and free cash flow in the second quarter of 2018 reflect the impact of held for sale accounting. Adjusting for the impact of held for sale accounting of $907 million on the U.S. consumer credit portfolio, free cash flow in the quarter would have been $737 million. In addition, cash flow from operations and free cash flow in the second quarter of 2018 reflect the impact of the first annual cash tax payment of $125 million relating to the transition tax under the U.S. Tax Cut and Jobs Act of 2017.
2018 Financial Guidance
Full year 2018 revenue and earnings guidance
PayPal raises revenue and non-GAAP EPS guidance for full year 2018.
PayPal expects revenue to grow 17 - 19% at current spot rates and 16 - 18% on an FX-neutral basis, to a range of $15.30 - $15.50 billion. As previously disclosed, full year 2018 revenue guidance includes an expected impact related to the sale of U.S. consumer credit receivables to
Synchrony Financial of approximately 3.5 percentage points for full year 2018.
PayPal expects GAAP earnings per diluted share in the range of $1.44 - $1.51 and non-GAAP earnings per diluted share in the range of $2.32 - $2.35.
Estimated non-GAAP amounts above for the twelve months ending December 31, 2018, reflect adjustments of approximately $1.37 - $1.47 billion, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $885 - $915 million.
Estimated GAAP and non-GAAP results include the expected impact of completed acquisitions and acquisitions that have been announced and are expected to close before the end of 2018.
Third quarter 2018 revenue and earnings guidance
PayPal expects revenue to grow 12% - 13% at current spot rates and 12% - 13% on an FX-neutral basis, to a range of $3.62 - $3.67 billion.
PayPal expects GAAP earnings per diluted share in the range of $0.31 - $0.34 and non-GAAP earnings per diluted share in the range of $0.53 - $0.55.
Estimated non-GAAP amounts above for the three months ending September 30, 2018, reflect adjustments of approximately $320 - $360 million, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $210 - $220 million.
Estimated GAAP and non-GAAP results include the expected impact of completed acquisitions and acquisitions that have been announced and are expected to close before the end of the third quarter of 2018.