6 Key Metrics From PayPal Holdings Inc.'s Big Third Quarter
PayPal's (NASDAQ: PYPL) breakneck growth continued in its third quarter, exceeding analysts' estimates. Management called the quarter "one of its strongest" since splitting off from eBay in 2015. Revenue surged 21% year over year and EPS climbed 17%. In other words, PayPal crushed it.
Here's a close look at some of the key metrics from the quarter.
PayPal's non-GAAP EPS, which the company believes is a more accurate representation of the trajectory of its regular operational profitability than GAAP EPS, climbed 31% year over year to $0.46. The figure easily beat analysts' consensus estimate for non-GAAP EPS of $0.43.
PayPal expects this momentum to continue. It provided a strong fourth-quarter outlook, forecasting non-GAAP EPS during the quarter to be in the range of $0.50 to $0.52 -- higher than Q3 and up from $0.42 in the fourth quarter of 2016.
PayPal now has 218 million active customer accounts, up from 192 million in the year-ago quarter. It added a record 8.2 million active customer accounts during the quarter, up from the 6.5 million it added in the second quarter of 2017.
PayPal processed 1.9 billion payment transactions during the quarter. Not only is this higher than the 1.8 billion payment transactions PayPal processed in its second quarter, but it marks an acceleration in year-over-year payment transaction growth. Payment transactions during the third quarter were up 26% year over year. In Q2, they were up 23% year over year.
Mobile played a key role in PayPal's strong revenue growth during the quarter. Total payment volume on mobile was $40 billion, up 54% year over year. About 35% of payment volume came through a mobile device, PayPal said.
While it represented a smaller portion of PayPal's total payment volume, person-to-person (P2P) payments are becoming increasingly important to PayPal. P2P payments increased 47% year over year to $24 billion. Thanks to this growth, P2P payments now account for 21% of PayPal's total payment volume.
Investors expect more strong growth from PayPal's P2P payment volume in the coming quarters, as one of this segment's catalysts is growing extremely rapidly. Total payment volume from Venmo during the quarter increased 93% year over year to $9 billion. Furthermore, in the trailing 12 months, Venmo's total payment volume increased 106% compared to the same period last year.
It's encouraging to see Venmo growing so strongly, as PayPal announced earlier this week that Venmo is now accepted as a payment option at 2 million U.S. merchants. Significant P2P adoption of the payment service bodes well for PayPal's move to expand Venmo.
PayPal's cash and cash equivalents climbed to $7.1 billion during the quarter, up from $6.4 billion in the year-ago quarter. The company's cash position was helped by $814 million of free cash flow during the quarter, up from free cash flow of $618 million in the year-ago quarter.
After results this strong, it's not surprising that management increased its outlook for full-year non-GAAP EPS. PayPal said it now expects full-year non-GAAP EPS to be between $1.86 and $1.88. Previously management had expected full-year non-GAAP EPS in the range of $1.80 to $1.84.
PayPal CEO Dan Schulman was optimistic about the company's continued growth potential. "As the world rapidly accelerates to digital payments, we have a tremendous opportunity in front of us," he said.
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