News from the Wire

PayPal posts strong Q3 2016

Friday, October 21, 2016 — 15:31:08 (EDT)

San Jose, Calif., Oct. 21, 2016 -- Global technology platform and digital payments leader PayPal Holdings, Inc. (Nasdaq: PYPL) today announced strong third quarter results for the period ended September 30, 2016. For the quarter, PayPal deepened engagement on its platform, advanced its commitment to customer choice, gained share, continued its strong momentum in mobile payments, expanded its customer base and delivered innovative products.

Financial highlights for the third quarter include:

• Revenue growth of 18% to $2.667 billion, or 21% on a foreign currency neutral (FX-neutral) basis
• GAAP operating margin of 13% with non-GAAP operating margin of 18%
• GAAP earnings per diluted share (EPS) growth of 8% to $0.27, non-GAAP EPS growth of 14% to $0.35
• Operating cash flow of $801 million, free cash flow of $618 million

Operating highlights for the third quarter include:

• Active customer accounts of 192 million, up 11% with growth of 19 million active customer accounts
• 1.5 billion transactions processed, up 24%
• 30 payment transactions per active account on a trailing twelve months basis, up 13%
• $87 billion in total payment volume (TPV), up 25%, or 28% on an FX-neutral basis

“We are pleased to have delivered another quarter of strong results. The opportunities for PayPal to grow and gain share have never been greater. We are executing against our strategic plan with intensity and speed, and we are committed to seizing the opportunities in front of us by truly embracing the mantle of “Customer Champion.” We are further expanding the ubiquity and value of the PayPal brand and moving deliberately towards achieving our vision of becoming an everyday, essential financial service for people around the world,” said Dan Schulman, President and CEO of PayPal.

Advancing Customer Choice and Increasing Customer Engagement

PayPal continues to improve the customer experience on its platform by providing differentiated value to both consumers and merchants. In the quarter, PayPal made meaningful progress in offering customer choice in its online and mobile checkout experiences to enhance how customers in the U.S. can send money, shop, and pay with PayPal. These customers are now able to set their preferred funding type in their PayPal Wallet to sources other than their PayPal balance, giving them the option to pay by default with their favorite debit card, credit card, or bank account.

In the third quarter, the company processed 1.5 billion payment transactions, which translates to 30 payment transactions per active account on a trailing twelve months basis, a 13% increase from a year ago. Customers are engaged at higher levels than ever before. PayPal’s focus on customer choice is designed to deliver exceptional customer experiences to increase engagement on the PayPal platform.

The move to customer choice is also allowing PayPal to forge valuable, new strategic partnerships across the ecosystem. During the quarter, PayPal announced major agreements with Visa and Mastercard. In addition, as an extension of previous agreements with Alibaba, PayPal launched the first stages of becoming a payment option on Alibaba’s global retail marketplace, AliExpress.

Gaining Market Share and Growing Mobile Payments

In the third quarter, PayPal gained market share and extended its leadership position. PayPal processed $87 billion in TPV, representing growth of 25%, or 28% on an FX-neutral basis, which was faster than the growth rate of e-commerce. Merchant Services TPV grew 32%, or 34% on an FX-neutral basis, and represented 84% of overall TPV for the quarter. PayPal processed nearly $26 billion in mobile payment volume, up 56%, representing 29% of TPV for the quarter. Venmo, the company’s social payments platform, processed $4.9 billion of TPV, up 131%.

PayPal added notable new merchants to the platform, ending the quarter with 15 million active merchant accounts. The list of leading brands choosing PayPal now includes H&M in four European countries, Costco de Mexico, Yelp, and Yandex Direct.

PayPal demonstrated another strong quarter of customer acquisition, adding new consumers and merchants to the platform. The company grew its active customer accounts by 11%, ending the quarter with 192 million active customer accounts.

Delivering Innovative Product Experiences - One Touch and Xoom

As of the third quarter, more than 32 million active consumer accounts and four million active merchant accounts have opted in to One Touch. By the end of 2016, PayPal expects more than five million active merchant accounts to be offering One Touch to more than 36 million active consumer accounts.

PayPal will also now allow customers to link their PayPal and Xoom accounts, giving PayPal customers access to their funding sources within Xoom. PayPal’s U.S. customers will be able to send funds to 10 new markets and get access to new services in the more than 50 countries that Xoom supports. Xoom also recently added a “request” feature, allowing remittances to become a two-way interaction between senders and receivers for the first time with Xoom. Third Quarter 2016 Financial Highlights (presented in millions, except per share data and percentages)

2016 / 2015 / YoY Growth / FX-Neutral YoY Growth Total Payment Volume (TPV) $87,403 / $69,738 / $17,665 / 25% / 28%

GAAP Net revenues $2,667 / $2,258 / $409 / 18% / 21% Net income $323 / $301 / $22 / 7% / N/A Earnings per diluted share $0.27 / $0.25 / $0.02 / 8% / N/A

Non-GAAP Net revenues $2,667 / $2,258 / $409 / 18% / 21% Net income $425 / $377 / $48 / 13% / N/A Earnings per diluted share $0.35 / $0.31 / $0.04 / 14% / N/A

Other Selected Financial and Operational Results

Operating Margin - GAAP operating margin for the third quarter of 2016 decreased to 13.0%, compared to 14.6% for the same period last year. Non-GAAP operating margin decreased to 18.4%, compared to non-GAAP operating margin of 19.9% for the same period last year.

Taxes - The GAAP effective tax rate for the third quarter of 2016 was 10.3%, compared to 14.0% for the third quarter of 2015. The non-GAAP effective tax rate was 15.3%, compared to the non-GAAP effective tax rate of 17.7% for the third quarter of 2015.

Cash Flow - PayPal generated $801 million of operating cash flow and $618 million of free cash flow during the third quarter of 2016.

Cash, Cash Equivalents and Investments - PayPal’s cash, cash equivalents and investments totaled $6.4 billion at September 30, 2016.

2016 Financial Guidance

Full Year 2016

• PayPal expects full year 2016 revenue in the range of $10.780 to $10.850 billion.
• PayPal expects revenue to grow 17% at current spot rates and 20% on an FX-neutral basis.
• PayPal expects GAAP earnings per diluted share in the range of $1.13 - $1.15 and non-GAAP earnings per diluted share in the range of $1.48 - $1.50.
• Estimated non-GAAP amounts above for the twelve months ending December 31, 2016, reflect adjustments of approximately $580 - $600 million, primarily including the following items: stock-based compensation expense, employer payroll taxes on stock-based compensation, and amortization of acquired intangible assets.

Fourth Quarter 2016

• PayPal expects revenue to grow 14% - 17% at current spot rates and 16% - 19% on an FX-neutral basis, to a range of $2.920 to $2.990 billion.
• PayPal expects GAAP earnings per diluted share in the range of $0.30 - $0.32 and non-GAAP earnings per diluted share in the range of $0.40 - $0.42.
• Estimated non-GAAP amounts above for the three months ending December 31, 2016, reflect adjustments of approximately $150 - $170 million, primarily including the following items: stock-based compensation expense, employer payroll taxes on stock-based compensation, and amortization of acquired intangible assets.

Guidance for full year 2016 revenue growth rates represent year-over-year comparisons versus non-GAAP pro forma measures. Please see "Non-GAAP Financial Measures" and "Non-GAAP Measures of Financial Performance" for important additional information.

Quarterly Conference Call and Webcast

PayPal Holdings, Inc. will host a conference call to discuss third quarter 2016 results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP and non-GAAP pro forma measures to their most directly comparable GAAP measures, can be accessed through the company's Investor Relations website at investor.paypal-corp.com . In addition, an archive of the webcast will be accessible for 90 days through the same link.

PayPal Holdings, Inc. uses its Investor Relations website (investor.paypal-corp.com ), its PayPal Stories Blog (www.paypal.com/stories/us ), Twitter handle (@PayPal), LinkedIn page (www.linkedin.com/company/paypal ), Facebook page (www.facebook.com/PayPalUSA/ ) and YouTube channel (www.youtube.com/paypal ) as a means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to PayPal’s press releases, SEC filings, public conference calls and webcasts.

About PayPal

At PayPal (Nasdaq:PYPL), we put people at the center of everything we do. Founded in 1998, we continue to be at the forefront of the digital payments revolution. PayPal gives people better ways to manage and move their money, offering them choice and flexibility in how they are able to send money, pay or get paid. We operate an open, secure and technology agnostic payments platform that businesses use to securely transact with their customers online, in stores and increasingly on mobile devices. In 2015, 28% of the 4.9 billion payments we processed were made on a mobile device. With our 192 million active customer accounts, PayPal is a truly global payments platform that is available to people in more than 200 markets, allowing customers to get paid in more than 100 currencies, withdraw funds to their bank accounts in 56 currencies and hold balances in their PayPal accounts in 25 currencies. For more information on PayPal, visit www.paypal.com/about . For PYPL financial information, visit investor.paypal-corp.com .

Presentation

All growth rates represent year-over-year comparisons, except as otherwise noted. FX-neutral results are calculated by translating the current period’s local currency results by the prior period’s exchange rate. FX-neutral growth rates are calculated by comparing the current period's FX-neutral results by the prior period's results, excluding the impact from hedging activities. All amounts in tables are presented in U.S. dollars, rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not sum or recalculate using the rounded dollar amounts provided.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information: bankcardlife.com?orid=33533&opid=1 .

Source: Company press release.