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PayPal Reports Fourth Quarter and Full Year 2019 Results

Q4 2019 Revenue grew 17% to $4.96 billion ; 18% FX-neutral revenue growth

Q4 2019 GAAP EPS of $0.43 with non-GAAP EPS of $0.86

SAN JOSE, Calif. , Jan. 29, 2020 /PRNewswire/ -- Global technology platform and digital payments leader PayPal Holdings, Inc. (NASDAQ: PYPL) today announced fourth quarter and full year results for the period ended December 31, 2019.

"PayPal delivered strong results in 2019, achieving many records including revenue, net income and operating margin performance.  We added 37.3 million net new active accounts, bringing total active accounts to 305 million, up 14% year over year.  In Q4 alone, we processed nearly $200 billion of TPV and engagement grew 10% to 40.6 transactions per active account. We strengthened our value proposition for consumers and merchants, expanded our international scope and scale, and announced transformative strategic acquisitions, investments and commercial partnerships," said Dan Schulman , President and CEO of PayPal.

Financial highlights for fourth quarter 2019

  • Revenue of $4.96 billion ; growing 17% on a spot basis and 18% on a foreign currency-neutral (FX-neutral or FXN) basis.
  • GAAP operating income of $0.8 billion , increasing 34%; non-GAAP operating income of $1.2 billion , increasing 28%.
  • GAAP operating margin of 16.1% with non-GAAP operating margin of 23.6%.
  • GAAP EPS of $0.43 , decreasing 13%; non-GAAP EPS of $0.86 , increasing 24%.
  • Cash flow from operations of $1.3 billion with free cash flow of $1.1 billion .
  • Repurchased approximately 2.9 million shares of common stock, returning $305 million to stockholders.

Operating highlights for fourth quarter 2019

  • 9.3 million net new active accounts, bringing total active accounts to 305 million accounts, up 14%.
  • 3.5 billion payment transactions, up 21%.
  • $199 billion in total payment volume (TPV), up 22% on a spot and FX-neutral basis.

Financial highlights for full year 2019

  • Revenue of $17.77 billion ; growing 15% on a spot and FX-neutral basis.
  • GAAP operating income of $2.7 billion , increasing 24%; non-GAAP operating income of $4.1 billion , increasing 23%.
  • GAAP operating margin of 15.3% with non-GAAP operating margin of 23.2%.
  • GAAP EPS of $2.07 , increasing 21%; non-GAAP EPS of $3.10 , increasing 28%.
  • Cash flow from operations of $4.6 billion with free cash flow of $3.9 billion .
  • Repurchased approximately 14 million shares of common stock, returning $1.4 billion to stockholders.

Operating highlights for full year 2019

  • 37.3 million net new active accounts, bringing total active accounts to 305 million accounts, up 14%.
  • 12.4 billion payment transactions, up 25%.
  • $712 billion in total payment volume (TPV), up 23%, or 25% on an FX-neutral basis.
  • 40.6 payment transactions per active account on a trailing twelve months basis, up 10%.

PayPal's key business initiatives

In November, PayPal announced its agreement to acquire Honey Science Corporation, a rapidly-growing technology platform for shopping and rewards, for approximately $4 billion.  This transaction, which closed in January 2020 , is expected to transform the shopping experience for PayPal's consumers while increasing sales and customer engagement for merchants.

Following a strategic investment in March 2019 , PayPal executed a commercial agreement with MercadoLibre in December.  This agreement will allow PayPal and MercadoLibre to jointly leverage their scale and capabilities to strengthen both companies' networks.

In December, PayPal completed its acquisition of a 70% equity interest in Guofubao Information Technology Co., Ltd. (GoPay), following approval of the transaction by the People's Bank of China in September 2019 . With the completion of this deal, PayPal became the first foreign payments platform licensed to provide online payment services in China.

In January 2020 , PayPal announced a strategic partnership with UnionPay International (UPI) whereby both companies will work together to better serve joint consumers and merchants. As part of this partnership, UPI will support PayPal's merchant and consumer initiatives in China and PayPal will support UPI acceptance globally where PayPal is accepted, providing UPI consumers more choice when shopping.

Fourth Quarter 2019 Financial and Operating Highlights


Fourth Quarter

(presented in millions, except per share data and percentages)

2019

2018

YoY Growth

FX-Neutral
YoY Growth

Total Payment Volume (TPV)

$

199,404


$

163,648


$

35,756


22

%

22

%

GAAP






Net revenues

$

4,961


$

4,226


$

735


17

%

18

%

Operating margin

16.1

%

14.2

%

**

196

bps

N/A


Effective tax rate

40.6

%

14.9

%

**

25.7

pts

N/A


Net income

$

507


$

584


$

(77)


(13)

%

N/A


Earnings per diluted share

$

0.43


$

0.49


$

(0.06)


(13)

%

N/A


Net cash provided by operating activities

$

1,264


$

1,134


$

130


11

%

N/A


Non-GAAP






Net revenues

$

4,961


$

4,226


$

735


17

%

18

%

Operating margin

23.6

%

21.6

%

**

204

bps

N/A


Effective tax rate

17.2

%

17.7

%

**

(0.5

pts)

N/A


Net income

$

1,017


$

824


$

193


23

%

N/A


Earnings per diluted share

$

0.86


$

0.69


$

0.17


24

%

N/A


Free cash flow

$

1,090


$

910


$

180


20

%

N/A





** Not meaningful.

Cash, Cash Equivalents, and Investments  - PayPal's cash, cash equivalents, and investments totaled $13.6 billion as of December 31, 2019.

Long-Term Debt - PayPal's long-term debt totaled $5.0 billion as of December 31, 2019.

2020 Financial Guidance

Full year 2020 revenue and earnings guidance

  • PayPal expects revenue to grow approximately 17 - 18% at current spot rates and approximately 18 - 19% on an FX-neutral basis, to a range of $20.8 - $21.0 billion .
  • PayPal expects GAAP earnings per diluted share in the range of $1.84 - $1.95 and non-GAAP earnings per diluted share in the range of $3.39 - $3.46 .

First quarter 2020 revenue and earnings guidance

  • PayPal expects revenue to grow 16 - 17% at current spot rates and 17 - 18% on an FX-neutral basis, to a range of $4.78 - $4.84 billion .
  • PayPal expects GAAP earnings per diluted share in the range of $0.16 - $0.21 and non-GAAP earnings per diluted share in the range of $0.76 - $0.78 .

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 fourth quarter and full year 2019 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 measures to their most directly comparable GAAP measures, can be accessed through the company's Investor Relations website at https://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 ( https://investor.paypal-corp.com ), its PayPal Stories Blog ( https://www.paypal.com/stories/us ), Twitter handles (@PayPal and @PayPalNews), LinkedIn page ( https://www.linkedin.com/company/paypal ), Facebook page ( https://www.facebook.com/PayPalUSA/ ), YouTube channel ( https://www.youtube.com/paypal ) , Dan Schulman's LinkedIn profile ( https://www.linkedin.com/in/dan-schulman/ ) , John Rainey's LinkedIn profile ( www.linkedin.com/in/john-rainey-pypl ) and Dan Schulman's Facebook page ( https://www.facebook.com/DanSchulmanPayPal/ ) as a means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD. The information that is posted through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to PayPal's press releases, filings with the Securities and Exchange Commission ("SEC"), public conference calls, and webcasts.

About PayPal

PayPal has remained at the forefront of the digital payment revolution for more than 20 years. By leveraging technology to make financial services and commerce more convenient, affordable, and secure, the PayPal platform is empowering more than 300 million consumers and merchants in more than 200 markets to join and thrive in the global economy. For more information, visit paypal.com.

Presentation

All growth rates represent year-over-year comparisons, except as otherwise noted. FX-neutral results are calculated by translating the current period local currency results by the prior period exchange rate. FX-neutral growth rates are calculated by comparing the current period FX-neutral results with the prior period 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 and rates may not sum or recalculate using the rounded dollar amounts provided.

Non-GAAP financial measures

This press release includes financial measures defined as "non-GAAP financial measures" by the SEC including: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin, non-GAAP effective tax rate, free cash flow, and adjusted free cash flow. For an explanation of the foregoing non-GAAP measures, please see "Non-GAAP Measures of Financial Performance" included in this press release. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, see "Non-GAAP Measures of Financial Performance," "Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin," "Reconciliation of GAAP Net Income to Non-GAAP Net Income, GAAP Diluted EPS to Non-GAAP Diluted EPS and GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate," and "Reconciliation of Operating Cash Flow to Free Cash Flow and Adjusted Free Cash Flow."

Forward-looking statements

This press release contains forward-looking statements relating to, among other things, the future results of operations, financial condition, expectations, and plans of PayPal Holdings, Inc. and its consolidated subsidiaries that reflect PayPal's current projections and forecasts. Forward-looking statements can be identified by words such as "may," "will," "would," "should," "could," "expect," anticipate," "believe," "estimate," "intend," "strategy," "future," "opportunity," "plan," "project," "forecast," and other similar expressions. Forward-looking statements include, but are not limited to, statements regarding projected financial results for the first quarter and full year 2020, impact and timing of acquisitions, and projected future growth of PayPal's businesses. Forward-looking statements are based upon various estimates and assumptions, as well as information known to PayPal as of the date of this press release, and are inherently subject to numerous risks and uncertainties. Accordingly, actual results could differ materially from those predicted or implied by forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the effect of political, business, economic, market, and trade conditions, including any regional or general economic downturn or crisis and any conditions that affect payments or e-commerce growth; fluctuations in foreign currency exchange rates; the competitive, regulatory, payment card association-related and other risks specific to PayPal's payment platform, including the PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle, and other products, especially as PayPal continues to expand geographically, introduce new products and support across technologies and payment methods and as new laws and regulations related to payments and financial services come into effect; the impact of PayPal's customer choice initiatives, including on its funding mix and transaction expense; PayPal's ability to successfully compete in an increasingly competitive environment for its businesses, products, and services, including competition for consumers and merchants and the increasing importance of digital and mobile payments and mobile commerce; the outcome of legal and regulatory proceedings and PayPal's need and ability to manage regulatory, tax and litigation risks as its products and services are offered in more jurisdictions and applicable laws become more restrictive; changes to PayPal's capital allocation or management of operating cash; uncertainty surrounding the implementation and impact of the United Kingdom's formal notification of its intent to withdraw from the European Union; cyberattacks and security vulnerabilities in PayPal products and services that could disrupt business, reduce revenue, increase costs, harm our competitive position or our reputation, or lead to liability; the effect of management changes and business initiatives; any changes PayPal may make to its product and service offerings; the effect of any natural disasters or other business interruptions on PayPal or PayPal's customers; PayPal's ability to timely upgrade and develop its technology systems, infrastructure, and customer service capabilities at reasonable cost; PayPal's ability to maintain the stability, security, and performance of its Payments Platform while adding new products and features in a timely fashion; risks that planned acquisitions will not be completed on contemplated terms, or at all, and that any businesses PayPal may acquire may not perform in accordance with its expectations; and PayPal's ability to profitably integrate, manage, and grow businesses that have been acquired or may be acquired in the future. The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.

More information about factors that could adversely affect PayPal's results of operations, financial condition and prospects, or that could cause actual results to differ from those expressed or implied in forward-looking statements is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in PayPal's most recent annual report on Form 10-K and its subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting PayPal's Investor Relations website at https://investor.paypal-corp.com or the SEC's website at www.sec.gov . All information in this release speaks as of January 29, 2020. For the reasons discussed above, you should not place undue reliance on the forward-looking statements in this press release. PayPal assumes no obligation to update such forward-looking statements.

PayPal Holdings, Inc.




Investor Relations Contacts


Gabrielle Rabinovitch

Akila Moorthy

grabinovitch@paypal.com

amoorthy@paypal.com





Media Relations Contact


Amanda Miller


amandacmiller@paypal.com


408.219.0563


Copyright © 1999-2020 PayPal. All rights reserved. Other company and product names may be trademarks of their respective owners.

 

PayPal Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets




December 31,
2019




December 31,
2018


(In millions, except par value)

ASSETS

Current assets:




Cash and cash equivalents

$

7,349


$

7,575

Short-term investments

3,412


1,534

Accounts receivable, net

435


313

Loans and interest receivable, net

3,972


2,532

Funds receivable and customer accounts

22,527


20,062

Prepaid expenses and other current assets

800


947

Total current assets

38,495


32,963

Long-term investments

2,863


971

Property and equipment, net

1,693


1,724

Goodwill

6,212


6,284

Intangible assets, net

778


825

Other assets

1,292


565

Total assets

$

51,333


$

43,332

LIABILITIES AND EQUITY




Current liabilities:




Accounts payable

$

232


$

281

Short-term debt


1,998

Funds payable and amounts due to customers

24,527


21,562

Accrued expenses and other current liabilities

2,087


2,002

Income taxes payable

73


61

Total current liabilities

26,919


25,904

Deferred tax liability and other long-term liabilities

2,520


2,042

Long-term debt

4,965


Total liabilities

34,404


27,946

Equity:




Common stock, $0.0001 par value; 4,000 shares authorized; 1,173 and 1,174 shares outstanding as of December 31, 2019 and 2018, respectively


Preferred stock, $0.0001 par value; 100 shares authorized, unissued


Treasury stock at cost, 105 and 91 shares as of December 31, 2019 and 2018, respectively

(6,872)


(5,511)

Additional paid-in-capital

15,588


14,939

Retained earnings

8,342


5,880

Accumulated other comprehensive income (loss)

(173)


78

Total PayPal Stockholders' equity

16,885


15,386

Noncontrolling interest

44


Total equity

16,929


15,386

Total liabilities and equity

$

51,333


$

43,332








 

PayPal Holdings, Inc.

Unaudited Condensed Consolidated Statements of Income



Three Months Ended December 31,


Year Ended December 31,


2019


2018


2019


2018


(In millions, except per share amounts)









Net revenues

$

4,961



$

4,226



$

17,772



$

15,451


Operating expenses:








Transaction expense

1,913



1,578



6,790



5,581


Transaction and loan losses

381



340



1,380



1,274


Customer support and operations (1)(2)

438



377



1,615



1,407


Sales and marketing (1)(2)

400



401



1,401



1,314


Technology and development (1)(2)

558



490



2,085



1,831


General and administrative (1)(2)

472



430



1,711



1,541


Restructuring and other charges



12



71



309


Total operating expenses

4,162



3,628



15,053



13,257


Operating income

799



598



...