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PayPal Holdings, Inc. (PYPL - Free Report) reported non-GAAP earnings of 88 cents per share in first-quarter 2022, in line with the Zacks Consensus Estimate. Further, the figure declined 28% on a year-over-year basis and 20.7% from the prior quarter.
Net revenues of $6.5 billion exhibited year-over-year growth of 8% on an FX-neutral basis and 7% on a reported basis. Further, the figure surpassed the Zacks Consensus Estimate of $6.42 billion.
However, the top line decreased 6.3% sequentially.
Growing transaction and other value-added services’ revenues drove year-over-year revenue growth in the reported quarter. Also, accelerating U.S. revenues contributed well.
The strong performance by Venmo was another positive. The growing total payment volume (“TPV”), courtesy of increasing net new active accounts, drove the results.
However, declining international revenues were concerning.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
By Type: Transaction revenues amounted to $5.9 billion (93% of net revenues), up 7% from the year-ago quarter. Other value-added services generated revenues of $485 million (accounting for 7% of net revenues), up 18% year over year.
By Geography: Revenues from the United States totaled $3.7 billion (57% of net revenues), up 20% on a year-over-year basis. International revenues were $2.8 billion (43% of revenues), down 5% from the prior-year quarter.
Key Metrics to Consider
PayPal witnessed year-over-year growth of 9% in total active accounts, with 2.4 million net new active accounts in the reported quarter. The total number of active accounts was 429 million in the quarter under review.
The total number of payment transactions was 5.2 billion, up 18% on a year-over-year basis.
The company’s payment transactions per active account were 47 million, which improved 11% from the year-ago quarter.
TPV amounted to $322.98 billion for the reported quarter, reflecting year-over-year growth of 13% on a spot rate basis and 15% on a currency-neutral basis.
Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $57.8 billion of TPV, rising 12% on a year-over-year basis.
Operating Details
PayPal’s operating expenses were $5.8 billion in the first quarter, up 15.6% from the prior-year quarter. As a percentage of net revenues, the figure expanded 630 basis points (bps) on a year-over-year basis.
Non-GAAP operating margin was at 20.7%, contracting 700 bps from the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2022, cash equivalents and investments were $7.9 billion, down from $9.5 billion as of Dec 31, 2021.
PayPal had a long-term debt balance of $8.2 billion at the end of the first quarter compared with $8.05 billion at the end of the fourth quarter.
The company generated $1.2 billion of cash from operations, down from $1.8 billion in the previous quarter.
Free cash flow was $1.1 billion in the reported quarter compared with $1.6 billion in the prior quarter.
The company returned $1.5 billion to shareholders by repurchasing 11 million shares.
Guidance
For second-quarter 2022, PayPal expects year-over-year revenue growth of 9% on a current spot rate and a currency-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $7.03 billion.
Non-GAAP earnings are expected to be 86 cents per share. The Zacks Consensus Estimate for earnings is pegged at $1.11 per share.
For 2022, PayPal has revised its guidance for year-over-year revenue growth to 11-13% on both spot rate and currency-neutral basis, which was previously pegged at 15-17%. The Zacks Consensus Estimate for 2022 revenues is pegged at $29.24 billion.
It revised non-GAAP earnings guidance downward from $4.60-$4.75 per share to $3.81-$3.93 per share. The Zacks Consensus Estimate for the same is pegged at $4.61 per share.
TPV for 2022 is likely to exhibit growth of 13-15% on a spot rate basis and 15-17% on a currency-neutral basis. Previously, TPV growth was projected at 19-22% on a spot rate basis and 21-23% on an FX-neutral basis.
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PayPal (PYPL) Q1 Earnings Meet, Revenues Beat Estimates
PayPal Holdings, Inc. (PYPL - Free Report) reported non-GAAP earnings of 88 cents per share in first-quarter 2022, in line with the Zacks Consensus Estimate. Further, the figure declined 28% on a year-over-year basis and 20.7% from the prior quarter.
Net revenues of $6.5 billion exhibited year-over-year growth of 8% on an FX-neutral basis and 7% on a reported basis. Further, the figure surpassed the Zacks Consensus Estimate of $6.42 billion.
However, the top line decreased 6.3% sequentially.
Growing transaction and other value-added services’ revenues drove year-over-year revenue growth in the reported quarter. Also, accelerating U.S. revenues contributed well.
The strong performance by Venmo was another positive. The growing total payment volume (“TPV”), courtesy of increasing net new active accounts, drove the results.
However, declining international revenues were concerning.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote
Top Line in Detail
By Type: Transaction revenues amounted to $5.9 billion (93% of net revenues), up 7% from the year-ago quarter. Other value-added services generated revenues of $485 million (accounting for 7% of net revenues), up 18% year over year.
By Geography: Revenues from the United States totaled $3.7 billion (57% of net revenues), up 20% on a year-over-year basis. International revenues were $2.8 billion (43% of revenues), down 5% from the prior-year quarter.
Key Metrics to Consider
PayPal witnessed year-over-year growth of 9% in total active accounts, with 2.4 million net new active accounts in the reported quarter. The total number of active accounts was 429 million in the quarter under review.
The total number of payment transactions was 5.2 billion, up 18% on a year-over-year basis.
The company’s payment transactions per active account were 47 million, which improved 11% from the year-ago quarter.
TPV amounted to $322.98 billion for the reported quarter, reflecting year-over-year growth of 13% on a spot rate basis and 15% on a currency-neutral basis.
Notably, year-over-year growth in TPV was primarily driven by robust Venmo, which accounted for $57.8 billion of TPV, rising 12% on a year-over-year basis.
Operating Details
PayPal’s operating expenses were $5.8 billion in the first quarter, up 15.6% from the prior-year quarter. As a percentage of net revenues, the figure expanded 630 basis points (bps) on a year-over-year basis.
Non-GAAP operating margin was at 20.7%, contracting 700 bps from the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2022, cash equivalents and investments were $7.9 billion, down from $9.5 billion as of Dec 31, 2021.
PayPal had a long-term debt balance of $8.2 billion at the end of the first quarter compared with $8.05 billion at the end of the fourth quarter.
The company generated $1.2 billion of cash from operations, down from $1.8 billion in the previous quarter.
Free cash flow was $1.1 billion in the reported quarter compared with $1.6 billion in the prior quarter.
The company returned $1.5 billion to shareholders by repurchasing 11 million shares.
Guidance
For second-quarter 2022, PayPal expects year-over-year revenue growth of 9% on a current spot rate and a currency-neutral basis. The Zacks Consensus Estimate for revenues is pegged at $7.03 billion.
Non-GAAP earnings are expected to be 86 cents per share. The Zacks Consensus Estimate for earnings is pegged at $1.11 per share.
For 2022, PayPal has revised its guidance for year-over-year revenue growth to 11-13% on both spot rate and currency-neutral basis, which was previously pegged at 15-17%. The Zacks Consensus Estimate for 2022 revenues is pegged at $29.24 billion.
It revised non-GAAP earnings guidance downward from $4.60-$4.75 per share to $3.81-$3.93 per share. The Zacks Consensus Estimate for the same is pegged at $4.61 per share.
TPV for 2022 is likely to exhibit growth of 13-15% on a spot rate basis and 15-17% on a currency-neutral basis. Previously, TPV growth was projected at 19-22% on a spot rate basis and 21-23% on an FX-neutral basis.
Zacks Rank and Stocks to Consider
Currently, PayPal carries a Zacks Rank #3 (Hold).
Investors interested in the broader technology sector can consider stocks like Jabil (JBL - Free Report) , Jack Henry & Associates (JKHY - Free Report) , and Broadcom (AVGO - Free Report) . While Jabil currently sports a Zacks Rank #1 (Strong Buy), Jack Henry & Associates and Broadcom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Jabil has gained 5.5% over a year. The long-term earnings growth rate for JBL is currently projected at 12%.
Jack Henry & Associates has gained 16.9% over a year. The long-term earnings growth rate for JKHY is currently projected at 17%.
Broadcom has gained 20% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.5%.