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PayPal (PYPL) Q3 Earnings Beat on Rise in Active Accounts
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PayPal Holdings, Inc. (PYPL - Free Report) delivered strong third-quarter 2016 results, surpassing the Zacks Consensus Estimate on both counts.
Earnings of 29 cents per share came ahead of the consensus mark of 27 cents per share. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Revenues of $2.67 billion also exceeded the Zacks Consensus Estimate of $2.65 billion.
The results were driven by continuous strong performance in global payments, both online and mobile.
PayPal ended the third quarter with 192 million active customer accounts. Management sounded upbeat about the pace of execution against the Customer Champion strategy and enhanced value for customers and merchants.
In the quarter, partnership and mobile centrism were PayPal’s top priorities. The company’s ongoing strategic partnerships with Visa and MasterCard offer great flexibility and choice to consumers. Partnerships with Facebook , Apple (A - Free Report) , and Alibaba are also delivering positive results.
The company is also exploring partnerships across multiple original equipment manufacturers (OEM), technology companies, retailers and financial institutions. It has recently partnered with Latitude Financial Services to develop consumer financing products in Australia.
The quarter has witnessed PayPal’s accelerated push into mobile with Venomo continuing to bolster its stake in mobile payments. The company’s mobile payment volume was $26 billion, up 56% and representing 29% of total payment volume (TPV).
Let’s delve deeper into the numbers.
Revenues
Net revenue of $2.67 billion was up 18.1% on a year-over-year basis (up 21% on an Fx-neutral basis).
Transaction revenues of $2.31 billion contributed 87% to total revenue and were up 17% on a year-over-year basis. Other value added services revenues of $0.35 billion contributed the rest and were up 28% year over year.
Geographically, the U.S. contributed 54% to total revenue, up 26% on a year-over-year basis. International revenues contributed 46% and were up 16% year over year.
In the quarter, Merchant Services contributed 84% to overall TPV and increased 34% year over year on an FX-neutral basis. Total TVP was $87 billion that grew 25% year over year on an Fx-neutral basis. The company processed 1.5 billion payment transactions (30 payment transactions per active account), up 24% year over year.
Margins
Adjusted operating expenses of $2.3 billion increased 20.2% from the prior-year quarter and 88.7% sequentially. Operating margin shrank 143 basis points (bps) year over year to 14.5%.
Excluding the impact of intangibles, amortization and other items on a tax-adjusted basis, pro-forma net income came in at $351 million compared with $323 million in the year-ago period. Net income was up 8.67% year over year.
Including the special items, GAAP net income was $323 million (27 cents per share) compared with $301 million (25 cents per share) in the year-ago quarter.
Balance Sheet and Cash Flow
PayPal had a strong balance sheet at the end of the third quarter. Cash and short-term investments balance was $5.09 billion. The company generated $801 million in cash from continuing operations and spent $183 million on capex.
During the quarter, the company returned nearly $50 million to shareholders by repurchasing an additional 1.3 million shares. Year-to-date, Paypal returned nearly $945 million to shareholders by buying back 26 million shares at an average price of $36.37.
The company has no long-term debt.
Outlook
For the fourth quarter of 2016, PayPal expects revenues to grow 16%–19% on an Fx-neutral basis to $2.92 billion – $2.99 billion. The Zacks Consensus Estimate is pegged at $2.98 billion. Non-GAAP earnings are expected within 40 cents–42 cents. The Zacks Consensus Estimate is pegged at 36 cents. GAAP earnings per share are expected in the range of 30 cents – 32 cents.
In 2016, PayPal expects revenues between $10.78 billion and $10.85 billion.
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PayPal (PYPL) Q3 Earnings Beat on Rise in Active Accounts
PayPal Holdings, Inc. (PYPL - Free Report) delivered strong third-quarter 2016 results, surpassing the Zacks Consensus Estimate on both counts.
Earnings of 29 cents per share came ahead of the consensus mark of 27 cents per share. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Revenues of $2.67 billion also exceeded the Zacks Consensus Estimate of $2.65 billion.
The results were driven by continuous strong performance in global payments, both online and mobile.
PayPal ended the third quarter with 192 million active customer accounts. Management sounded upbeat about the pace of execution against the Customer Champion strategy and enhanced value for customers and merchants.
PAYPAL HOLDINGS Price, Consensus and EPS Surprise
PAYPAL HOLDINGS Price, Consensus and EPS Surprise | PAYPAL HOLDINGS Quote
In the quarter, partnership and mobile centrism were PayPal’s top priorities. The company’s ongoing strategic partnerships with Visa and MasterCard offer great flexibility and choice to consumers. Partnerships with Facebook , Apple (A - Free Report) , and Alibaba are also delivering positive results.
The company is also exploring partnerships across multiple original equipment manufacturers (OEM), technology companies, retailers and financial institutions. It has recently partnered with Latitude Financial Services to develop consumer financing products in Australia.
The quarter has witnessed PayPal’s accelerated push into mobile with Venomo continuing to bolster its stake in mobile payments. The company’s mobile payment volume was $26 billion, up 56% and representing 29% of total payment volume (TPV).
Let’s delve deeper into the numbers.
Revenues
Net revenue of $2.67 billion was up 18.1% on a year-over-year basis (up 21% on an Fx-neutral basis).
Transaction revenues of $2.31 billion contributed 87% to total revenue and were up 17% on a year-over-year basis. Other value added services revenues of $0.35 billion contributed the rest and were up 28% year over year.
Geographically, the U.S. contributed 54% to total revenue, up 26% on a year-over-year basis. International revenues contributed 46% and were up 16% year over year.
In the quarter, Merchant Services contributed 84% to overall TPV and increased 34% year over year on an FX-neutral basis. Total TVP was $87 billion that grew 25% year over year on an Fx-neutral basis. The company processed 1.5 billion payment transactions (30 payment transactions per active account), up 24% year over year.
Margins
Adjusted operating expenses of $2.3 billion increased 20.2% from the prior-year quarter and 88.7% sequentially. Operating margin shrank 143 basis points (bps) year over year to 14.5%.
Excluding the impact of intangibles, amortization and other items on a tax-adjusted basis, pro-forma net income came in at $351 million compared with $323 million in the year-ago period. Net income was up 8.67% year over year.
Including the special items, GAAP net income was $323 million (27 cents per share) compared with $301 million (25 cents per share) in the year-ago quarter.
Balance Sheet and Cash Flow
PayPal had a strong balance sheet at the end of the third quarter. Cash and short-term investments balance was $5.09 billion. The company generated $801 million in cash from continuing operations and spent $183 million on capex.
During the quarter, the company returned nearly $50 million to shareholders by repurchasing an additional 1.3 million shares. Year-to-date, Paypal returned nearly $945 million to shareholders by buying back 26 million shares at an average price of $36.37.
The company has no long-term debt.
Outlook
For the fourth quarter of 2016, PayPal expects revenues to grow 16%–19% on an Fx-neutral basis to $2.92 billion – $2.99 billion. The Zacks Consensus Estimate is pegged at $2.98 billion. Non-GAAP earnings are expected within 40 cents–42 cents. The Zacks Consensus Estimate is pegged at 36 cents. GAAP earnings per share are expected in the range of 30 cents – 32 cents.
In 2016, PayPal expects revenues between $10.78 billion and $10.85 billion.
Zacks Rank
Currently, PayPal is a Zacks Rank #4 (Sell) stock. A better-ranked stock in the broader technology sector is Veeco Instruments Inc. (VECO - Free Report) with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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