2019 Full Year Guidance Affirms October 2018 Preliminary Outlook – Paypal
Full Year 2018 GAAP EPS of $1.71, increasing 16%; non-GAAP EPS of $2.42, increasing 28%
17% growth in active accounts, ending the year with 267 million active accounts
Record 13.8 million net new active accounts added in Q4 2018; 2.9 million added from 2018 acquisitions
SAN JOSE, Calif.–(BUSINESS WIRE)–Jan. 30, 2019– Global technology platform and digital payments leader PayPal Holdings, Inc. (NASDAQ: PYPL) today announced fourth quarter and full year results for the period ended December 31, 2018.
“In 2018 we set new benchmarks for the company for revenue, net new active accounts and engagement across our platform. We launched new products, strengthened existing relationships, and entered into new strategic partnerships with some of the biggest and most influential global brands in technology, retail, and finance. We greatly expanded our global reach, serving 267 million customer accounts, including 21 million merchant accounts. We believe 2019 will be another strong year for us, and we intend to build on our strengths to extend our leadership as the leading open digital payments platform.” said Dan Schulman, President and CEO of PayPal.
Financial highlights for fourth quarter 2018
- Revenue of $4.23 billion
- GAAP revenue growth of 13% on both a spot and foreign currency-neutral (FX-neutral or FXN) basis.
- Non-GAAP revenue growth of 14% on both a spot and FX-neutral basis.
- The completion of the sale of the U.S. consumer credit receivables portfolio to Synchrony in July 2018 negatively affected revenue growth by approximately seven percentage points.
- GAAP operating margin of 14.2% with non-GAAP operating margin of 21.6%.
- GAAP EPS of $0.49, versus Q4 2017 GAAP EPS of $0.50. GAAP EPS in Q4 2017 benefited by approximately $0.10 from held for sale accounting treatment related to the sale of the U.S. consumer credit receivables portfolio and the Tax Cuts and Jobs Act of 2017.
- Non-GAAP EPS grew 26% to $0.69. Acquisitions in 2018 resulted in $0.02 of dilution in the fourth quarter.
Operating highlights for fourth quarter 2018
- 13.8 million net new active accounts, versus an increase of 8.7 million in Q4 2017. 2.9 million net new active accounts added from the acquisitions of Hyperwallet and iZettle.
- 2.9 billion payment transactions, up 28%.
- $164 billion in total payment volume (TPV), up 23%, or 25% on an FX-neutral basis.
- 36.9 payment transactions per active account on a trailing twelve months basis, up 9%.
Financial highlights for full year 2018
- Revenue of $15.45 billion
- GAAP revenue growth of 18% on a spot basis and 17% on a FX-neutral basis.
- Non-GAAP revenue growth of 18% on both a spot and FX-neutral basis.
- The completion of the sale of the U.S. consumer credit receivables portfolio to Synchrony in July 2018 negatively affected revenue growth by approximately three and a half percentage points.
- GAAP operating margin of 14.2% with non-GAAP operating margin of 21.7%.
- GAAP EPS of $1.71, increasing 16%; non-GAAP EPS of $2.42, increasing 28%.
Operating highlights for full year 2018
- Active accounts of 267 million, up 17% with growth of 38.7 million net new active accounts.
- 9.9 billion payment transactions, up 27%.
- $578 billion in total payment volume (TPV), up 27%, or 26% on an FX-neutral basis.
- 36.9 payment transactions per active account on a trailing twelve months basis, up 9%.
PayPal’s key business drivers
- PayPal processed $164 billion in TPV in the fourth quarter, representing growth of 23%, or 25% on an FX-neutral basis.
- Merchant Services volume grew 29% on an FX-neutral basis in the fourth quarter.
- eBay Marketplaces volume growth was flat to Q4 2017 on an FX-neutral basis, and represented 10% of overall TPV for the quarter versus 13% a year ago.
- Person-to-Person (P2P) volume grew 46% to more than $39 billion, and represented 24% of TPV in the fourth quarter. In 2018, P2P volume grew 49% to approximately $139 billion.
- Venmo processed approximately $19 billion of TPV in the fourth quarter, growing 80%. In 2018, Venmo processed $62 billion of TPV.
- Strong mobile engagement on PayPal’s platform contributed to approximately $67 billion in mobile payment volume in the fourth quarter, growing approximately 40% year over year. In the fourth quarter, mobile payment volume represented 41% of overall TPV.
Fourth Quarter 2018 Financial and Operating Highlights
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Fourth Quarter |
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| (presented in millions, except per share data and percentages) |
2018 |
2017 |
YoY Growth |
FX-Neutral |
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| Total Payment Volume (TPV)(1) | $ | 163,648 | $ | 132,515 | $ | 31,133 | 23 | % | 25 | % | ||||||||||
| GAAP | ||||||||||||||||||||
| Net revenues | $ | 4,226 | $ | 3,744 | $ | 482 | 13 | % | 13 | % | ||||||||||
| Operating margin | 14.2 | % | 22.5 | % | ** | (837)bps | N/A | |||||||||||||
| Effective tax rate | 14.9 | % | 28.2 | % | ** | (1,337 | )bps | N/A | ||||||||||||
| Net income | $ | 584 | $ | 620 | $ | (36 | ) | (6 | %) | N/A | ||||||||||
| Earnings per diluted share | $ | 0.49 | $ | 0.50 | $ | (0.01 | ) | (3 | %) | N/A | ||||||||||
| Net cash provided by operating activities | $ | 1,134 | $ | (147 | ) | $ | 1,281 | 871 | % | N/A | ||||||||||
| Non-GAAP | ||||||||||||||||||||
| Net revenues | $ | 4,226 | $ | 3,705 | $ | 521 | 14 | % | 14 | % | ||||||||||
| Operating margin | 21.6 | % | 21.8 | % | ** | (18)bps | N/A | |||||||||||||
| Effective tax rate | 17.7 | % | 19.1 | % | ** | (140)bps | N/A | |||||||||||||
| Net income | $ | 824 | $ | 670 | $ | 154 | 23 | % | N/A | |||||||||||
| Earnings per diluted share | $ | 0.69 | $ | 0.55 | $ | 0.14 | 26 | % | N/A | |||||||||||
| Free cash flow | $ | 910 | $ | (327 | ) | $ | 1,237 | 378 | % | N/A | ||||||||||
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(1) All metrics are presented consistent with the updated definitions in the Form 8-K filed on April 10, 2018. |
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** Not meaningful. |
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Cash, Cash Equivalents and Investments – PayPal’s cash, cash equivalents and investments totaled $10.1 billion as of December 31, 2018.
Short-Term Borrowings – PayPal’s notes payable totaled $2.0 billion as of December 31, 2018.
2019 Financial Guidance
Full year 2019 revenue and earnings guidance
- PayPal expects revenue to grow 16 – 17% at current spot rates and 16 – 17% on an FX-neutral basis, to a range of $17.850 – $18.100 billion. As previously disclosed, full year 2019 revenue growth guidance includes an expected decline of approximately 3.5 percentage points for full year 2019 related to the sale of U.S. consumer credit receivables to Synchrony.
- PayPal expects GAAP earnings per diluted share in the range of $1.83 – $1.93 and non-GAAP earnings per diluted share in the range of $2.84 – $2.91.
- Estimated non-GAAP amounts above for the twelve months ending December 31, 2019, reflect adjustments of approximately $1.30 – $1.40 billion, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $1.05 – $1.11 billion.
- Estimated GAAP and non-GAAP results include approximately 1.5 points of revenue growth and $0.08 to $0.10 of dilution from the acquisitions that closed in 2018.
First quarter 2019 revenue and earnings guidance
- PayPal expects revenue to grow 11 – 12% at current spot rates and 11 – 13% on an FX-neutral basis, to a range of $4.08 – $4.13 billion.
- PayPal expects GAAP earnings per diluted share in the range of $0.42 – $0.45 and non-GAAP earnings per diluted share in the range of $0.66 – $0.68.
- Estimated non-GAAP amounts above for the three months ending March 31, 2019, reflect adjustments of approximately $385 – $415 million, primarily representing estimated stock-based compensation expense and related payroll taxes in the range of $285 – $300 million.
- Estimated GAAP and non-GAAP results include approximately 1.5 points of revenue growth and approximately $0.02 – $0.03 of dilution from the acquisitions that closed in 2018.
Please see “Non-GAAP Financial Measures” and “Non-GAAP Measures of Financial Performance” for important additional information.
