Earnings

PayPal Adds 8M Active Users, Grows Mobile Volume 52 Percent 

“I’m pleased to say PayPal had another quarter of great results and we’re off to a great start in the new year,” CEO Dan Schulman noted at the opening of his remarks to investors when reporting 1Q 2018 results and providing insight into the company’s ambitious plans for future growth.

Schulman backed that claim with PayPal’s quarterly and year-on-year increases in transaction volume, active users, mobile transactions, revenue, earnings and its Venmo P2P platform.

By the Numbers

PayPal’s adjusted earnings per share came in at 57 cents, beating analyst forecasts of 54 cents. Revenue for the quarter was $3.69 billion, a 24 percent pick-up year on year – and well ahead of the $3.59 billion expected by analysts.

In terms of users and transactions for Q1, PayPal processed 2.2 billion transactions – a 25 percent increase for a total payments volume (TPV) of $132 billion. The numbers also note that the platform continues to grow, adding 8.1 million new active users during Q1 and growing its total active user base by 35 percent to 235 million total over the last year, while increasing the number of payments transactions per user to 34.7.

PayPal’s Merchant Services TPV grew 30 percent annually, and was 87 percent of overall TPV in Q1 2018 versus 85 percent a year ago. Merchant accounts now top 19 million.

PayPal additionally reported numbers for its P2P payment service, Venmo, which processed $12 billion of TPV for an 80 percent increase over this time last year. All in, P2P payments volume was up 50 percent year-on-year to $30 billion, comprising 23 percent of PayPal’s total transaction volume processes.

PayPal also reported mobile payments volume of $49 billion in Q1, a growth of 52 percent growth year over year. PayPal’s One Touch checkout now counts 92 million consumers and 8.6 million merchants.

On the back of this strong performance, PayPal raised its guidance for the near and full year futures. The company has forecast revenue of $3.78 billion to $3.83 billion for next quarter and annual revenue between $15.2 billion and $15.4 billion, both in line with analysts’ upper-end forecasts.

Beyond the Numbers

“We are clearly transforming from a payments button to an open digital payments platform. By doing so, we are defining our relationship with partners, retailers and consumers,” Schulman told investors after the great number rundown.

PayPal’s great pivot, he noted, has freed the company to expand its ambitions and its range by acting as a trusted partner in the commerce ecosystem. In particular, Schulman called out PayPal’s developing relationship with Visa, with initiatives ranging from enhancing and expanding tokenization to leveraging Visa’s rails to make things like instant payments a possibility for users everywhere.

Schulman was also bullish on the whole about PayPal’s expanding and improving relationship with the card networks and the issuers, as parties are learning to work more efficiently together to unlock digital payments value for consumers.

PayPal’s new partnership with Barclays also got some extensive airplay during the Q1 earnings examination. The pairing will enable Barclays customers in the United States and Britain to use their PayPal accounts on the bank’s online and mobile-based platforms. Meanwhile, Barclays products will be usable within PayPal accounts, complete with all of their rewards offerings. And that, Schulman noted, is at the start of the partnership. Both firms are keyed into finding other ways the companies’ services could be combined, a sentiment echoed by Barclays UK CEO Ashok Vaswani when the pair-up was first announced.

“By joining forces, we can make it much easier for people to manage their money and payments.”

PayPal and eBay also eased some joint anxieties in the 24 hours before earnings went public with the announcement that the two would continue their relationship until July of 2023. Until that time, PayPal customers will be able to pay with a click eBay’s site as always.

Apart from the work being done with others, Schulman also singled out the growing reach of their in-house P2P payments player, Venmo, as one of the firm’s most important core offerings going forward.

“We continue to see record levels of customer acquisition through P2P and Venmo,” he noted. “It continues to gain traction as the preferred way for millennials to manage and use their money. [Venmo] acquired more net new actives in Q1 than in any quarter prior. They are now on a run rate to generate $50 billion TPV in 2018.”

Schulman further noted that Pay With Venmo now has a foothold in two million brands nationwide, and that they are “well on track toward monetizing it” – though he offered little detail on the subject past that.

Analysts were curious about the networks’ recent announcements of the embrace of a universal checkout button, and whether that comes as a threat to the PayPal One Touch button.

Schulman reaffirmed that PayPal’s relationship with the networks “could not be stronger,” as the networks and PayPal were able to find additional synergies between their services. He noted those partnerships are growing.

COO Bill Ready added that it is PayPal’s goal to power the complete move to a digital buy button experience – not only through PayPal and Venmo, but as being one of the “largest providers to other checkout providers.”

“Even as we work with others, we have seen our own buy button proliferate,” Ready remarked.

This change, he noted, has a lot more to do with embracing an EMVCo standard than a meaningful concern for PayPal.

“The One Touch button has grown a lot,” Ready noted, “and we think the more mobile a one-button standard can be, the better that is for every player in the ecosystem.”

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