10-QPeriod: Q2 FY2016

PayPal Holdings, Inc. Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 26, 2016For Securities:PYPL

Summary

This filing covers PayPal's second quarter of 2016, marking its first full quarter as an independent public company following its separation from eBay in July 2015. The company demonstrated solid financial performance with net revenues growing 15% year-over-year to $2.65 billion for the quarter, driven by a 28% increase in Total Payment Volume (TPV) to $86.2 billion. Net income saw a modest increase of 6% to $323 million, resulting in diluted EPS of $0.27. Operationally, PayPal continued to expand its user base, with active customer accounts growing 11% to 188 million globally. The company also reported an increase in transaction and loan losses, which management attributes to a higher volume of transactions and a prior year benefit from recoveries related to eBay purchases. Despite increased operating expenses, largely due to costs associated with operating as an independent entity and the acquisition of Xoom, PayPal maintained a strong cash flow generation, with free cash flow reaching $495 million for the quarter.

Financial Highlights

49 data points
Beta

Revenue

$2.65B

Net Income

$323.00M

12.2% Net Margin

EPS (Diluted)

$0.27

Total Assets

$30.63B

Cash & Equivalents

$2.02B

Free Cash Flow

$495.00M

Financial Statements
Beta
Revenue$2.65B
R&D Expenses$209.00M
Operating Expenses$2.28B
Operating Income$371.00M
Net Income$323.00M
EPS (Basic)$0.27
EPS (Diluted)$0.27
Shares Outstanding (Basic)1.21B
Shares Outstanding (Diluted)1.22B

Key Highlights

  • 1Net revenues increased by 15% to $2.65 billion for the three months ended June 30, 2016.
  • 2Total Payment Volume (TPV) grew by 28% to $86.2 billion for the three months ended June 30, 2016.
  • 3Active customer accounts increased by 11% to 188 million globally.
  • 4Net income rose by 6% to $323 million, with diluted EPS of $0.27 for the quarter.
  • 5Operating expenses increased by 20% due to higher costs of operating as an independent company and the Xoom acquisition.
  • 6The company generated $495 million in free cash flow for the quarter.
  • 7PayPal repurchased $896 million of its common stock in the first half of 2016 under its $2 billion repurchase program.

Frequently Asked Questions

The primary driver for the increase in net revenues was a 28% growth in Total Payment Volume (TPV), supported by increased engagement from customers and growth in Braintree products. The acquisition of Xoom also contributed to revenue growth.

Operating expenses increased by 20% primarily due to higher costs associated with operating as an independent public company, increased transaction and loan losses, and expenses related to the acquisition of Xoom.

In January 2016, PayPal's Board of Directors authorized a $2 billion stock repurchase program. In the first six months of 2016, the company repurchased $896 million of its common stock and had $1.1 billion remaining under the program as of June 30, 2016. This program is intended to offset dilution from equity compensation and for opportunistic repurchases.

PayPal manages foreign currency risk through a foreign exchange exposure management program that utilizes foreign currency exchange contracts designated as cash flow hedges. These contracts aim to reduce the volatility of cash flows from forecasted international revenues and expenses. Additionally, other foreign exchange contracts are used to offset risk on assets and liabilities denominated in foreign currencies.