Dear Stockholders, Customers, Colleagues, and Partners:
It is a great pleasure to write the 2016 Annual Report stockholder letter, following the completion of PayPal’s first full calendar year as an independent, publicly-traded company.
In many ways, it was a remarkable year for PayPal. We grew our business significantly. For the year, we recorded $10.84 billion in revenue, an increase of 17 percent, or 21 percent calculated on an FX-neutral basis. Total payment volume grew 26 percent, or 28 percent calculated on an FX-neutral basis, to $354 billion. Operating cash flow for the year totaled $3.2 billion, and free cash flow [1] was $2.5 billion. We processed 6.1 billion transactions, up 24 percent. And, we were proud to return approximately $1.0 billion to our stockholders during the year through our share repurchase program. Over the course of 2016, our share price increased 9%.
These are solid results and a good reflection of what we achieved last year. But an even better measure of our success was the continued growth in the number of customers who use our services. In 2016, we added 18 million net new active customer accounts, to end the year with 197 million active customer accounts. We are also proud to see that customers are using PayPal more frequently. During 2016, transactions per active account increased 13 percent from 27 to 31.
These accomplishments were fueled by our powerful technology platform, innovative products, trusted brand, and network of strategic partnerships across the ecosystem. We believe that with these same assets PayPal can help to democratize financial services for hundreds of millions of people. It is our fundamental belief that we can deliver strong financial results while we also make a difference in the world. Our mission inspires our employees; it strengthens the relationship that our customers have with our brand; and it drives our everyday action.
Being a Customer Champion
Being a customer champion is much more than just a slogan for us. It is a recognition that to maximize our vast opportunity, we must put our customers at the center of everything we do. We know that to achieve our goals, we must deliver products that help consumers achieve their dreams and that enable merchants to prosper.
An essential part of being a customer champion is providing our customers the freedom and flexibility to use PayPal wherever they want – in stores, in apps, on websites – and to have the flexibility to pay the way they choose. We believe this approach to our business model will have a positive impact on our competitive position by paving the way for us to forge a series of landmark partnerships.
As I write this letter, we have entered into new strategic agreements with major financial institutions, global technology leaders, leading mobile carriers and credit card networks. We believe that these partnerships significantly expand PayPal’s opportunities for delivering sustainable, profitable growth. We expect to continue to pursue additional strategic agreements in the years ahead.
Leading the Transition to Mobile Commerce
When we completed the process of separation from eBay in July 2015, many people thought of PayPal as the button they clicked when paying for online purchases. In the eighteen months since then, PayPal has become increasingly more central to how our customers use mobile technology to manage and move their money in their everyday lives. In 2016, we processed two billion mobile payment transactions representing $102 billion in mobile payment volume, an increase of 55%.
This impressive growth is driven by the innovation of our products, which provide our customers more powerful solutions in the palms of their hands. Our One Touch solution, which makes mobile shopping simpler on smaller screens is the most rapidly adopted PayPal product in history. As of year-end, more than 40 million active consumer accounts and more than five million active merchant accounts in 140 countries utilize One Touch. Venmo, which both Time Magazine and Fortune named one of the best apps of the year, processed $17.6 billion of peer-to-peer payments in 2016, an increase of 135 percent. And Xoom, our mobile-first remittances service which makes it easy, efficient and cost-effective for people to send their loved ones money internationally, is now available in more than 50 countries and is becoming tightly integrated as a core part of the PayPal consumer experience.
A Commitment to Improving People’s Lives
In 2016, we extended the company’s innovation in mobile and digital payments, upgraded our technology platform, made significant investment in our compliance programs, launched innovative products, and forged multiple landmark strategic partnerships. Our ultimate goal is to succeed as a business in a way that brings value and benefit to people’s lives and helps merchants thrive.
I’m honored to lead a company that is guided by such a clear and inspiring mission. It’s a privilege to work with a group of people who, united by a common set of values, are committed to making a difference in the lives of families and communities around the world. We head into 2017 proud of what we have accomplished so far, confident about our prospects for future growth, and excited to tackle the hard work ahead.
None of this would be possible without our employees, customers, partners, and stockholders. We greatly appreciate your support and look forward to building on our success in the years ahead.
Thank you.
Notes:
[1] Free cash flow is a non-GAAP financial measure. Please see PayPal’s Annual Report on Form 10-K for the year ended December 31, 2016 for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.