Paypal Profit Rises as User Growth and Volume Hit Milestones -- Update
July 26 2017 - 8:50PM
Dow Jones News
By Peter Rudegeair
PayPal Holdings Inc. said Wednesday that new milestones reached
in user growth and payment volume helped boost its second-quarter
profit by 27%.
The San Jose, Calif.-based payments company reported a quarterly
profit of $411 million, or 34 cents a share. That compares with a
profit of $323 million, or $0.27 a share, in the same period of
2016. Excluding certain items, the company's per-share earnings
rose to 46 cents, above the estimate of analysts polled by Thomson
Reuters.
A flurry of deals that PayPal reached with banks, technology
firms and credit-card companies to expand its reach resulted in its
total payment volume exceeding $100 billion for the first time in
the second quarter. Active customer accounts increased by a net of
6.5 million to 210 million, the largest quarterly gain since PayPal
split from eBay Inc. two years ago.
New partnerships the company announced on Wednesday include one
with Baidu Inc. that would allow 100 million users of the Chinese
search giant's mobile wallet to shop at PayPal merchants outside of
China. A separate deal announced Wednesday will make it easier for
Bank of America Corp.'s customers to add their credit cards to
PayPal accounts.
"It's hard to overstate the difference in the relationships we
now have with companies across multiple sectors who many have once
viewed as potential competitors," PayPal Chief Executive Dan
Schulman said on a conference call with analysts.
As part of some of these agreements, PayPal agreed not to
default users into funding their PayPal transactions with the
cheapest option to the company, usually a bank transfer. As a
result of that decision and overall growth in payment volumes,
PayPal's transaction expense increased in the second quarter by
nearly one-third to $1.06 billion.
The share of revenue PayPal takes from each transaction fell to
2.58% from 2.69% a year ago. A doubling in transaction volume that
was processed by Venmo, PayPal's digital person-to-person payments
service, accounted for much of that decline. Venmo handled $8
billion in volume during the second quarter, but the unit doesn't
charge users anything for the majority of those transactions.
Over all, second-quarter revenue rose 18% to $3.14 billion. That
was above the $3.09 billion that analysts were expecting.
Revenue from PayPal's lending activities and its other
value-added services rose 18% from a year earlier to $387 million;
the company's consumer-loan portfolio expanded by around 31% to
$5.5 billion. PayPal has been weighing a sale of that portfolio to
free up cash.
Mr. Schulman said in an interview that he is encouraged with
discussions with potential buyers and companies that would fund
PayPal loans in the future. He didn't, though, provide a time frame
of when any new strategy would be enacted.
Shares in PayPal increased around 2% in aftermarket trading.
Since the start of the year, PayPal shares have risen 49%, compared
with an 11% rise in the S&P 500 index.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
July 26, 2017 20:35 ET (00:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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