PayPal’s Second-Quarter 2018 Results
Earlier today, we announced our results for the second quarter of 2018. I’m pleased to share that PayPal had another strong quarter. As I said at our Investor Day in May, I believe PayPal’s greatest potential lies ahead of us, and the moves we made this past quarter position us to win in multiple segments of our total addressable market. At the same time, we also continue to produce consistent and strong quarterly financial results.
Delivering Strong Financial Results*
- We generated $3.86 billion of revenue, growing at 23% on a spot basis, and 22% on a currency-neutral basis.
- We delivered $820 million in non-GAAP operating income, up 24% year over year, with non-GAAP operating margin of 21.3%, an expansion of 25 basis points from last year.
- As a result, we delivered $0.58 of non-GAAP EPS, up 28% year over year.
Driving Customer Growth and Engagement
- We added 7.7 million net new actives with new user growth up 18% year over year. This brings our total active accounts to 244 million.
- Engagement on our platform increased 9% to just under 36 times per year, up from 33 a year ago.
- For the first half of the year, our net new active accounts equaled almost 16 million, and we anticipate adding more than 30 million net new active accounts for the year.
Extending our Mobile Leadership
- Our mobile growth in Q2 was 49%, with almost $54 billion of mobile volume processed. Mobile checkout now represents 39% of our total payment volume.
- Venmo also continued its impressive growth by processing $14.2 billion in payment volume, an increase of 78% year over year. And Venmo net new actives hit another all-time record high in Q2, as its network effect and value proposition continue to strongly resonate.
- We continue to make good progress with our Pay with Venmo service. Since launch, 17% of Venmo users have engaged in a monetized experience. In the quarter, we were pleased to add Uber and Uber Eats to the list of major brands offering distinct Venmo buttons to their customers.
- One Touch is the fastest adopted product in our history, and has now crossed 100 million consumers, with nearly 102 million consumers opted in and 9.5 million merchants offering One Touch. Furthermore, 84% of the IR 100 now offers One Touch.
Our continued customer growth and engagement is driven in part by the success of three important areas of focus – our customer choice initiatives, our partnership strategy and our focus on always being a customer champion.
Today almost 85% of our active customers have Choice available to them and more than 45 million PayPal customers have adopted Choice. We anticipate Choice will be live in more than 200 markets by year-end. Since we implemented Choice, calls per transaction into our contact centers are now at the lowest level in the last seven years.
In addition to improving the customer experience on our platform, Choice has also unleashed productive relationships with key strategic partners across the globe.
- We increased our presence in the UK, South Korea, and India through partnerships with Santander, Clydesdale, ShinhanCard, and HDFC Bank.
- Our relationship with Google continues to deliver more streamlined payment experiences. We announced this quarter that users in the U.S. who add PayPal to any one of Google’s services will soon be able to pay across the Google ecosystem anywhere that PayPal is offered as a payment method.
- We strengthened our partnership with eBay. We signed an agreement to extend our longstanding consumer financing offer to eBay’s marketplace. With this agreement, eBay will continue to accept and promote PayPal Credit through 2025.
This was also a busy period on the acquisition and strategic investment fronts. Some highlights include:
Acquisitions
- In May, we announced our intention to acquire iZettle, a leading small business omni-commerce platform in Europe and Latin America. This acquisition, which is expected to close in late Q3 2018, will significantly expand our international and in-store presence, and is strategically aligned with our desire to be a one-stop, full-service solutions provider. The closing is subject to customary closing conditions, including regulatory approval.
- Also in May, we announced the acquisition of Jetlore, an AI-powered prediction platform used by some of the world’s top retailers including Uniqlo and Nordstrom. With Jetlore’s talented team, and their AI-powered technology, we plan to enhance and accelerate PayPal Marketing Solutions, adding new capabilities that continue to expand our value proposition for merchants beyond the online checkout experience.
- In June, we announced our intention to acquire Hyperwallet, a leading global payouts platform that enables localized, multi-currency payment distribution in more than 200 countries and territories. Combining Hyperwallet’s powerful payouts solutions with PayPal’s scale and platform capabilities will bring increased value to our customers, particularly in the growing sharing economy. The closing is subject to customary closing conditions, including regulatory approval.
- Earlier this month, we completed the acquisition of Simility, a company that helps prevent fraud and manage risk in real time through advanced machine learning, big data analytics and data visualization capabilities. While PayPal already provides leading-edge fraud management to our merchants, we believe this acquisition will provide PayPal merchants the ability to more actively manage and control their fraud exposure. We believe this will naturally lead to increased sales volumes for our merchants.
Strategic Investments
- In May, we announced our participation in a $125 million round of investment in Pine Labs, one of India’s leading point-of-sale solution providers. Pine Labs offers POS devices that accept credit and debit cards, mobile wallets, and services that run on India’s Unified Payments Interface, a government-backed system that allows for instant bank-to-bank transfers. This investment comes on the heels of PayPal launching domestic operations in India and will further our presence in one of the most important markets in the world.
- And, last week, we announced a strategic investment in PPRO. This investment, combined with a comprehensive commercial agreement, provides us the ability to extend more than 100 alternate payment methods to our merchant and marketplace customers.
The combination of these acquisitions and investments significantly enhances the breadth of services we can offer to consumers, merchants and online marketplaces. PayPal is committed to being a comprehensive digital payments platform, offering complete solutions to our customers as the world rapidly digitizes across both retail and financial services.
This was a truly remarkable quarter for PayPal, with teams across the globe delivering meaningful results, and intensifying our focus on our customers. We successfully completed our transaction with Synchrony to free up cash for strategic and high value opportunities. We brought innovative and differentiated products and services to our customers. We expanded our relationships with key strategic partners, and we continue discussions with many others around the world. I’d like to thank the PayPal team for their tremendous commitment to our customers and shareholders.
*Non-GAAP operating income, operating margin and earnings per share are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see https://investor.paypal-corp.com/financial_history.cfm
Dan Schulman, President and CEO, PayPal