Q2 2016 Highlights
PayPal continued to execute on its growth strategy, further building on strong performance, and
announced a landmark deal with Visa which could signal a strategic shift for the digital brand, but
introduces some uncertainty.
Strong Second Quarter Results
PayPal Operating Metrics (Trailing Twelve Months)
Q2 2016 Metrics (YoY changes)
■■ Usage: 29 payments per account per year, up 13%
■■ Transactions: 1.4B, up 25%
■■ Revenue: $2.65B, up 19% (FX neutral)
■■ Margin: Take rate (transaction margin) down 33 bps to 3.07% due
to lower FX and growth of P2P, Braintree, and larger merchants;
non-GAAP operating margin down 271 bps to 19.9%
■■ Profit: $495M, up 27%
■■ Mobile: $24B, up 56%, now accounting for 28% of TPV versus
26% in the first quarter
Outlook / Guidance
■■ 2016 Revenue: Raise FY to $10.75-$10.85B (19-20% growth), Q3
to $2.6-$2.67B (19-21% growth)
■■ 2016 EPS: Raise FY to $1.47-$1.50 (18% growth)
■■ Funding Costs: No change for 2H16, but will evaluate impact of
Visa partnership on 2017+
Active Accounts (MM)
1
Growth YoY
TPV2 ($B)
Growth YoY
Take Rate3
Q1’16
Q2’16
169
173
179
184
188
11%
10%
11%
11%
11%
$67
$70
$82
$81
$86
19%
20%
23%
29%
29%
3.40%
3.24%
3.14%
3.14%
3.07%
PayPal Credit Update
Payment
Volume ($B)
PPC
Receivables ($B)
PPWC
Receivables ($B)
$6
$5
$4
$3
$2
■■ P2P: $4B in volume, up 141%
■■ Pay with Venmo: Pilot expanded to 3.5M
users and 11 merchants in Q2 ‘16 then
subsequently to all (est. 8-15M) users in
July, list pricing similar to PayPal
$1
$0
Note: Third-party investors now own $0.9 billion of PPC receivables and the total amount of
receivables in Q2’16 including managed assets is $5.4 billion.
■■ Cards on File: 309M, up 101%
■■ PayPal remains committed to the UK, which generated 12% of
revenue in 2Q 2016
■■ PayPal claims its exposure to GBP and EUR is hedged
■■ PayPal’s Luxembourg banking subsidiary supports its European
operations, including the UK. PayPal implied it will establish a UK
bank if necessary
Q4’15
Active Accounts; includes Xoom users. 2 Total Payment Volume, the total dollar volume of payments, net of
reversals, completed through PayPal Platform (incl. PayPal Credit, Venmo, and Braintree) per PayPal definition.
3
Take Rate is the revenue generated as a percentage of TPV earned through PayPal and Braintree.
■■ One Touch: Now enables an 87%
conversion rate for 25M consumers and
2M merchants
Views on Brexit
Q3’15
1
Progress Across Products
■■ Footprint: Now available in 53 countries
■■ Mobile: 70% of transfers now originate
via mobile
Q2’15
■■ PayPal Credit (PPC) steady at 2% of TPV
■■ PayPal Working Capital (PPWC) has advanced $2 billion to
90,000 merchants since inception
■■ Credit quality steady and portfolio performance in line with
expectations; however, late-stage delinquency roll rate worsened,
increasing charge offs 0.2% to 6.3% due to collections strategy
tests to be reversed in 2H 2016
■■ Designated 20% ($800M) of European customer balances to fund
European PPC loans
■■ Management indicated they continue to evaluate “asset-light”
strategies with respect to PayPal Credit
Source: Commentary and data from PayPal 2Q16 earnings call, press releases, and website; Venmo user estimate from Piper Jaffray.
For more information, please contact: John Grund, Partner, [email protected], or Ben Brown, Manager, [email protected].
U.S. Headquarters
European Office
Three Park Place, Suite 200 l Annapolis, Maryland 21401
P: 410.855.8500 l [email protected]
PayPal: Q2 2016 Highlights
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