Strong Venmo And QR Code Payments Growth Help PayPal Score Record Q2 Earnings

In an earnings season defined by diminished expectations amid the worldwide economic shutdown, PayPal not only beat analysts’ expectations Wednesday (July 29) but enjoyed a record quarter. And the company credited its Venmo peer-to-peer (P2P) payments platform and QR code-based contactless-payments system for a big part of that success.

“In the midst of the COVID-19 pandemic, digital payments have become more important and essential than ever,” CEO and President Dan Schulman said in announcing the results. “Our record performance in the second quarter — our strongest quarter ever — reaffirms the relevance of PayPal in the unfolding digital future. We’re committed to supporting our consumers and merchants as they work to safely navigate this new reality.”

PayPal said that in addition to the overall company’s record performance, Venmo put up all-time-best numbers as well. Total payment volume rose 52 percent to $37 billion, while active users grew by 8 million to north of 60 million.

Chief Financial Officer John Rainey said the past several months have seen Venmo users evolve an entirely new set of use cases on the platform, which has really “immigrated its relevance and importance” to the user base.

And although PayPal offered no update on Venmo’s revenues, Rainey did call out the platform’s “multifaceted approach” to monetization. He said that includes the addition of direct deposit, an increase in businesses taking payments through the platform and the planned launch of a Venmo card later this year. Rainey said PayPal is also continuing efforts “around expanding the Pay with Venmo in an eCommerce setting.”

CEO Schulman added that “I would not underestimate how zealous the customers of Venmo are about living their financial life on the platform. Each of these capabilities — whether it be direct deposit, business profiles, the credit card and a number of other things that we’ll be adding — we think will rapidly be adopted.”

“The new use cases we are seeing are so interesting,” Schulman said. “Millennials are now eating at home or doing fitness classes through streaming, and going to concerts and other entertainment venues online. And we’re seeing all of that reflected in the usage of Venmo. This has been our best quarter, and we plan to continue to invest in building out Venmo because it’s got a really bright future and is really a crown jewel of ours.”

He added that the rising trend toward digitization is unlikely to reverse, given that some 70 percent of consumers still report concerns about shopping in person. Schulman said PayPal’s focus is on continuing to build its functionality for both in-store and online commerce transactions in light of that.

“The world has moved to a digital-first economy and I don’t think there is any going back,” Schulman said. “Even when consumers are going back to somewhat-normal activities like eating out at restaurants or shopping in grocery stores, the level of eCommerce penetration is still much, much higher than what we saw pre-COVID-19. I think that is a fairly good indication of the trends going for the rest of the year and beyond.”

Schulman said those changing trend lines are guiding PayPal’s efforts to push touchless payments forward. PayPal has started rolling out its QR code-based touchless payment solutions to small and micro merchants across 28 countries. And the firm is also seeing considerable penetration for the solution among more than 100 large U.S. and European enterprise merchants, he said.

“This isn’t just about payment or just about scanning a QR code,” Schulman said. “This is about the value proposition around that, and being able to use your wallet and fully tap any of the funding instrument — including your rewards points — in a way that [will] work with any handset.”

All told, PayPal posted a second-quarter net income of $1.53 billion ($1.29 a share), up from $823 million (69 cents a share) a year earlier. Adjusted earnings per share came in at $1.07 a share from 71 cents a year earlier. That was well ahead of analysts’ consensus forecasts of 87 cents a share, according to MarketWatch.

Revenue increased year on year to $5.26 billion from a previous $4.31 billion. That also beat analysts’ consensus estimates of $4.99 billion.

PayPal’s total payment volume likewise hit $222 billion from $172 billion at this time last year, easily beating the $210 billion forecast by analysts.

The company was also unusual this earnings season in that it offered predictions for the rest of 2020. PayPal forecast 30 percent growth in total payment volume for the third quarter, along with 25 percent growth in revenue on a currency-neutral basis and 25 percent growth in adjusted earnings per share.

The company also offered a new forecast for 2020 as a whole after pulling its prior one earlier in the year due to pandemic-related uncertainties. PayPal is now expecting total payment volume to grow in the high-20s percentage-wise, along with 22 percent growth in currency-neutral revenue and about 25 percent growth in adjusted EPS.