Global technology platform and digital payments leader PayPal Holdings, Inc. (PYPL) today announced fourth quarter and full year results for the period ended December 31, 2016.
Throughout 2016, 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 fourth quarter include:
- Revenue growth of 17% to $2.981 billion, or 19% on a foreign currency neutral (FX-neutral) basis
- GAAP operating margin of 15% with non-GAAP operating margin of 21%
- GAAP earnings per diluted share (EPS) growth of 7% to $0.32, non-GAAP EPS growth of 17% to $0.42
- Operating cash flow of $923 million, free cash flow of $771 million
Operating highlights for the fourth quarter include:
- Growth of 5.4 million active customer accounts in the quarter
- 1.8 billion payment transactions, up 23%
- $99 billion in total payment volume (TPV), up 22%, or 25% on an FX-neutral basis
Financial highlights for full year 2016 include:
- Revenue growth of 17% to $10.842 billion, or 21% on an FX-neutral pro forma basis
- GAAP operating margin of 15% with non-GAAP operating margin of 20%
- GAAP EPS growth of 15% to $1.15, non-GAAP EPS growth of 17% on a pro forma basis to $1.50
- Operating cash flow of $3.2 billion, free cash flow of $2.5 billion
Operating highlights for full year 2016 include:
- Active customer accounts of 197 million, up 10% with growth of 18 million active customer accounts
- 6.1 billion payment transactions, up 24%
- 31 payment transactions per active account on a trailing twelve months basis, up 13%
- $354 billion in TPV, up 26%, or 28% on an FX-neutral basis
"I’m pleased to report that PayPal ended 2016 with another strong quarter of financial results. We extended our industry leadership by generating 18 million active customer accounts, with greater engagement than ever before. We innovated across our merchant and consumer value propositions and extended our lead in mobile payments," said Dan Schulman, President and CEO of PayPal. "In the past year, we transformed our market opportunity with a series of strategic partnerships with networks, financial institutions, technology companies, and mobile carriers. We accomplished all of this by putting our customers first, in everything we do. At the end of a landmark year for PayPal, we feel well positioned to deliver sustainable and profitable growth in 2017 and beyond."
New Strategic Partnerships
In the fourth quarter, PayPal announced partnership agreements with Citi, the largest global credit card issuer, and Fidelity National Information Services (FIS), which represents thousands of financial institutions. The agreements with Citi and FIS further PayPal's commitment of choice and flexibility for its customers and PayPal plans to roll out new experiences with these partners and others throughout 2017 to drive incremental digital spend.
In January 2017, PayPal announced a strategic agreement with Discover Financial Services, a major issuer of credit products in the U.S., designed to deliver greater choice to customers. The new agreement will make it easier for PayPal customers to find and choose Discover as a funding option within the PayPal wallet, and let eligible customers pay with their Discover Cashback Bonus.
Extending Leadership in Mobile
PayPal processed $99 billion in TPV in the fourth quarter, representing growth of 22%, or 25% on an FX-neutral basis. Merchant Services TPV grew 27%, or 30% on an FX-neutral basis, and represented 84% of overall TPV for the quarter. PayPal processed $31 billion in mobile TPV, up 53%, representing 31% of TPV for the quarter. Venmo, the company’s social payments platform, processed $5.6 billion of TPV, up 126%.
The 2016 holiday season demonstrated how consumers around the world are moving to mobile, as shopping becomes simpler and faster on smaller screens with mobile-optimized experiences. In the five days between Thanksgiving and Cyber Monday, PayPal processed more than $2 billion in mobile payments, and mobile accounted for one-third of overall TPV during this period.
Expanding Value Proposition through Product Innovation
One Touch, PayPal’s fastest mobile checkout experience, continues to experience strong adoption. One Touch offers merchants significantly better conversion rates by making it faster and simpler for their customers to pay online and with mobile devices, in a single click. PayPal ended the year with more than five million active merchant accounts offering One Touch to more than 40 million active consumer accounts in all of PayPal’s markets.
In the fourth quarter, Xoom added Japan to the growing list of countries where people can receive remittances from their loved ones in the United States. In 2016, Xoom continued to grow its global footprint and expanded the list of countries that can receive Xoom payments from 41 to 56.
Other Selected Financial and Operational Results
Operating Margin - GAAP operating margin for the fourth quarter of 2016 decreased to 15.4%, compared to 16.1% for the same period last year. Non-GAAP operating margin remained flat at 20.8%, compared to the same period last year.
Taxes - GAAP effective tax rate for the fourth quarter of 2016 was 16.8%, compared to 12.2% for the fourth quarter of 2015. Non-GAAP effective tax rate was 18.5%, compared to the non-GAAP effective tax rate of 17.8% for the fourth quarter of 2015.
Cash Flow - PayPal generated $923 million of operating cash flow and $771 million of free cash flow during the fourth quarter of 2016.
Cash, Cash Equivalents and Investments - PayPal’s cash, cash equivalents and investments totaled $6.5 billion at December 31, 2016.
2017 Financial Guidance
Full Year 2017
- PayPal expects revenue to grow 15 - 17% at current spot rates and 17 - 19% on an FX-neutral basis, to a range of $12.450 - $12.650 billion.
- PayPal expects GAAP earnings per diluted share in the range of $1.26 - $1.31 and non-GAAP earnings per diluted share in the range of $1.69 - $1.74.
- Estimated non-GAAP amounts above for the twelve months ending December 31, 2017, reflect adjustments of approximately $720 - $760 million, primarily representing estimated stock-based compensation expense and related employer payroll taxes in the range of $620 - $650 million.
First Quarter 2017
- PayPal expects revenue to grow 14% - 16% at current spot rates and 16% - 18% on an FX-neutral basis, to a range of $2.900 - $2.950 billion.
- PayPal expects GAAP earnings per diluted share in the range of $0.31 - $0.33 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 March 31, 2017, reflect adjustments of approximately $155 - $170 million, primarily representing estimated stock-based compensation expense and related employer payroll taxes in the range of $135 - $145 million.