PayPal Holdings Inc (PYPL) Q3 2018 Earnings Conference Call Transcript
PayPal Holdings Inc (NASDAQ: PYPL)Q3 2018 Earnings Conference CallOct. 18, 2018, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, ladies and gentlemen, and welcome to PayPal's Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to introduce your host for today's conference, Ms. Gabrielle Rabinovitch, Head of Investor Relations. Please go ahead.
Gabrielle Rabinovitch -- Head of Investor Relations
Thank you, Sherri. Good afternoon and thank you for joining us. Welcome to PayPal Holdings earnings call for the third quarter 2018. Joining me today on the call are Dan Schulman, our President and CEO; John Rainey, our Chief Financial Officer and EVP, Global Customer Operations; and Bill Ready, our EVP, Chief Operating Officer. We're providing a slide presentation to accompany our commentary. This conference call is also being webcast and both the presentation and call are available through the Investor Relations section of our website.
We will discuss some non-GAAP measures in talking about our Company's performance. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. In addition, management will make forward-looking statements that are based on our current expectations, forecasts and assumptions, and involve risks and uncertainties. These statements include our guidance for fourth quarter and full year 2018, our initial outlook for 2019, our medium-term guidance and the impact and timing of our acquisitions. Our actual results may differ materially from these statements.
You can find more information about risks, uncertainties, and other factors that could affect our results and our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on the Investor Relations section of our website. You should not rely on any forward-looking statements. All information in this presentation is as of today's date, October 18, 2018. We expressly disclaim any obligation to update the information.
With that let me turn the call over to Dan.
Daniel Schulman -- President and Chief Executive Officer
Thank you, Gabrielle and thanks everyone for joining us. PayPal had another excellent quarter with $3.68 billion of revenue growing at 14% on both the spot and currency-neutral basis. Normalizing for the sale of our US consumer credit receivables to Synchrony, revenues grew at 21%. Our non-GAAP operating margin of 21.4% grew 142 basis points from last year, and we delivered $0.58 of non-GAAP EPS, up 26% year-over-year. In short, we continued to drive strong financial performance.
As pleased as I am with our financials, the highlight of the quarter was our growth in net new actives and engagement. We drove a record 9.1 million net new active accounts, surpassing 254 million customer accounts by the end of the quarter. We added 34 million net new actives to our platform in the past 12 months, averaging almost 3 million net new customers per month.
During the quarter, we drove 2.5 billion transactions growing 27%. Our engagement per active user increased 9.5% to 36.5 times per year. A major driver of engagement is the use of mobile devices across our platform, predominantly driven by our market leading checkout conversion rates with One Touch. One Touch continues to expand with 112 million consumers and 10.4 million merchants using One Touch.
In Q3, we saw mobile growth of 45% with approximately $57 billion of mobile volume processed in the quarter. Mobile checkout now represents 40% of our total payment volume. Customer choice also continues to yield a meaningful lift in our engagement metrics. Today, nearly all of our customers have choice available to them, and more than 55 million PayPal customers have actively used choice in some 200 markets.
Another very important outcome of choice was that it enabled PayPal to develop deep partnerships throughout our ecosystem. In just over two years, we've signed over 35 partnerships with some of the world's largest and most influential brands in finance, technology, and commerce. Today I'm very pleased to announce that we've signed a multi-multifaceted partnership agreement with American Express. As one of the leading brands in the world, it always made sense that PayPal and American Express would become strategic partners.
Steve Squeri and his team have been great to work with and I'm very pleased with the comprehensive nature of our partnership going forward. Over the next several quarters, PayPal will have enhanced access to American Express as a payment option in our wallet. The agreement will allow PayPal to access American Express tokens and enables a deep integration of our Venmo and PayPal P2P capabilities within the Amex platform.
Additionally, PayPal and American Express consumers will be able to use their American Express reward points to pay for their purchases at millions of PayPal merchants around the world. Over the next year we will roll out these capabilities to our mutual customers and we are pleased to begin what will be an important relationship for both companies.
With this agreement, we now have strategic relationships in place with all of the major card networks. Not only have these partnerships redefined our competitive landscape, they've also created new and unique commerce experiences for our mutual customers around the world.
Most of you on the call know that we also recently announced a significant and growing partnership with Walmart. Working together Walmart and PayPal have developed innovative new product experiences to create a more affordable and convenient way for the unbanked segment of customers to more efficiently manage and move their money and as a result, empowering more people to gain access to the digital economy.
As part of this deep collaboration PayPal money services will be available at all Walmart locations in the US, beginning in November. Using the PayPal mobile app, customers can easily load cash into their PayPal balance and for the first time, customers can withdraw money from their PayPal balance at Walmart retail stores and Walmart money centers across the country.
Additionally, customers can use the PayPal Cash Mastercard to shop in-store, on mobile and online at Walmart as well as withdraw cash at the register or from Walmart's ATM locations nationwide. And this is just the beginning. We are currently working hand in hand with the Walmart team to introduce even more capabilities in the future. Walmart and PayPal share the belief that managing and moving money should be affordable, accessible, efficient and secure for all segments of our population. And while digital and mobile commerce continues to grow at remarkable rates, there are tens of millions of people that still do not have access to the benefits of the digital economy. This partnership which leverages and combines the unique strengths of both our companies is aimed at addressing that issue.
We also continued to grow our partnerships around the globe. For instance, we are pleased to announce that we have finalized a strategic partnership with Itau Unibanco one of the largest banks in Brazil. With this agreement, we had another major issuing partner in Latin America to help drive digital spend and improve convenience for our joint customers.
We continue to work closely with our large merchant partners. We've recently struck a comprehensive strategic agreement with Chevron to improve the payment experience at its gas stations in the US. Together, we plan to launch a new mobile payment app in early 2019 that will reduce the amount of time that a customer spends at the pump. This is yet another example of how we are using PayPal's extensive platform capabilities to help our partners create differentiated customer experiences. Chevron joins the list of our existing partnerships in this industry, including Shell, BP and ExxonMobil.
In addition to all the progress we've made in forging new partnerships, this was an extremely busy period for our product development teams as we brought several new products to market and we saw significant advances across a wide array of Venmo monetization efforts.
I am especially pleased with the strong overall momentum surrounding Venmo. For the third quarter in a row, Venmo posted yet again another record for net new actives. This is driving accelerating network effects as volume grew 78% to $16.7 billion with an annualized run rate now approaching $70 billion. And while it is still early, our monetization efforts appear to be reaching a tipping point. 24% of Venmo users have now participated in a monetizable action. This is up from 17% one quarter ago and 13% in May of this year. Pay with Venmo monthly active users increased approximately 185% month-over-month in September versus August.
And across the Uber and Uber Eats apps, we saw more than 300% month-over-month volume growth in September versus August. Our Venmo card is also off to a strong start with approximately 320% month-over-month growth in monthly active users from August to September. Notably, the two top purchase categories since launch for our card are supermarkets and restaurants. These daily use cases demonstrate how we are rapidly gaining omnichannel ubiquity and becoming a part of our Venmo customers' everyday spend. Finally last month alone we processed over $1 billion in instant transfer volume on the Venmo platform alone.
In summary, I couldn't be more pleased with the customer adoption across our Venmo initiatives. This quarter we addressed one of the biggest issues facing small businesses, the amount of time it takes for them to access cash from their sales. The launch of Funds Now gives PayPal merchants who are in good standing access to their sales within minutes at no extra costs. By eliminating holds, delays and reserves, we are providing our merchants immediate access to the funds they need to invest back into their business, pay their bills and service their customers. We aspire to set a new standard in payments that immediate access to fund should be the norm rather than the exception for small businesses in good standing. We are pleased to say that over 1 million merchants across the globe are already taking advantage of Funds Now.
Another way we're helping merchants to expand their sales opportunities is through the roll-out of PayPal Checkout with Smart Payment Buttons. The new PayPal Checkout improves the purchase experience by dynamically presenting the most relevant payment methods to each shopper. Including PayPal, PayPal credit, Venmo and a wide range of alternative payment methods around the world. This means businesses don't need to clutter their checkout pages and shoppers see the options they would be most likely to use, which is proven to increase conversion for our merchant customers and we're currently deploying this innovative checkout experience globally.
A little more than a year ago, we acquired Swift Financial to bolster the financing options for small and mid-sized businesses. Our PayPal business financing solutions, which includes PayPal Working Capital and PayPal business loans provided our customers more than $1 billion in funding last quarter. This more than doubles the $480 million in funding in the same period last year. We believe we are now one of the top 5 providers of working capital to small businesses in the US. We will continue to leverage acquisitions to strengthen our two-sided platform and maintain our position as the leading global open platform for digital payments. Last month, we closed our acquisition of iZettle, strengthening our global platform capabilities and in-store presence.
We believe this acquisition provides significant value for our small business merchants as we expand our point of sale capabilities globally. We expect to close the acquisition of Hyperwallet this quarter and we are excited to extend its enhanced global payout capabilities through our marketplace customers.
Before I turn the call over to John for more details on our financial results, I want to say how proud I am of the PayPal team and their efforts to provide ever increasing value for our customers. As proof of that, Interbrand recently announced that PayPal had increased its brand value by 22% in the last year, making us one of the top six fastest growing brands in the world. These kinds of results are what creates sustainable and long-term value for our shareholders.
And with that, I'll turn the call over to John.
John Rainey -- Chief Financial Officer & Executive Vice President of Global Customer Operations
Thanks, Dan. PayPal had another solid quarter in Q3, both financially and operationally. Our targeted growth strategies and investments to strengthen both the merchant and consumer sides of our platform continue to drive strong financial results. Our consistent growth in active accounts, payment volume, engagement in revenue demonstrate the power and resiliency of our business. In addition, our growth in operating income, while at the same time delivering operating margin expansion highlights the scalability of our model. In the third quarter, we not only expanded our operating margin, but also reinvested to grow users, volume and revenue.
Before I go into our financial results, I'd like to provide a few highlights from the quarter. As a reminder, the sale of our US consumer credit receivables to Synchrony closed in early July. Where relevant, I will provide normalized results for comparability. In addition our acquisition of iZettle closed in late September. Our Q3 operating metrics and financial results include no impact from this transaction. Revenue grew approximately 21% in Q3, adjusting for the sale of our US consumer credit portfolio. Operating income grew 22% with 142 basis points of operating margin expansion. Non-GAAP earnings per share grew 26%. And on a normalized basis, we generated $0.21 of free cash flow for every dollar of revenue.
Turning to our financial performance for the quarter, total payment volume was $143 billion, an increase of 24% at spot and 25% on a currency neutral basis. In comparison to the third quarter of 2017, on a spot basis, we experienced more than 5 points of pressure from the lapping of TIO Networks and as a result of the stronger dollar. US payment volume growth was 27% and international payment volume growth was 22% on a currency neutral basis. Merchant services volume was $127 billion, growing 28% on a currency neutral basis, and volume associated with eBay grew 3%. For the quarter, eBay related volume represented 11% of volume on our platform down from 20% three years ago. This is a continuation of a multi-year trend. And this quarter, our merchant services volume grew more than eight times faster than our eBay marketplaces volume. P2P volume, which is part of merchant services, grew 50% to $36 billion and represented approximately 25% of total payment volume versus 21% last year.
We ended the quarter with 254 million active customer counts, adding 9.1 million net new customer accounts. Q3 represents the fourth consecutive quarter with 15% growth in total active accounts, demonstrating the success of our customer-centric model and the continued demand for our industry-leading payment solutions. Account growth in the third quarter was driven by core PayPal followed by Venmo.
In the third quarter, we continued to see strong momentum and engagement on our platform. Payment transactions per active account increased 9.5% to 36.5% versus 33.3% in the third quarter last year and transactions grew 27% to 2.5 billion. Over the last 12 months we have processed more than 9.2 billion transactions. Revenue in the third quarter increased 14% on both the spot and currency-neutral basis to $3.7 billion. However, this growth was affected by the sale of our US consumer credit receivables to Synchrony which had about a 7 point impact. Adjusting for the sale, revenue growth would have been approximately 21% in line with the third quarter last year. On a spot basis, transaction revenue grew 17% in the quarter, and revenue from other value-added services declined 11%.
I'd like to give additional color on the trends in transaction revenue growth. In comparison to Q3 '17 the stronger US dollar, softness in our eBay business, and the lapping of TIO Networks affected our year-over-year revenue comparisons. While the stronger dollar and ongoing pressure on our eBay Marketplaces business had an impact on our quarterly results, our diversified portfolio both from a geographic and a product perspective, allowed us to continue to deliver solid revenue growth. The 11% year-over-year decline in revenue from other value-added services was a result of the sale of the US consumer credit receivables portfolio to Synchrony. This overall decline was partially offset by solid growth in both our merchant working capital and international consumer credit businesses.
For the third quarter, our transaction take rate was 2.34% a decline of 14 basis points from last year. Approximately two-thirds of the change in transaction take rate was related to growth in P2P. The remainder was related to slower growth in eBay and lower cross-border volume. In Q3, total take rate was 2.58% versus 2.81% in Q3 '17. The sale of the US consumer credit portfolio resulted in a 16 basis point reduction in total take rate. This was the largest single driver of the overall decline and reduces comparability to prior periods. We expect this impact to continue for the next three quarters.
Volume-based expenses increased 13% in Q3 to $1.7 billion. Transaction expense was $1.4 billion and represented 96 basis points as a rate of TPV, which was flat to last year and a 2 basis point improvement sequentially. Transaction loss was $259 million or 18 basis points as a rate of TPV versus 19 basis points in Q3 '17 and Q2 '18. Improvements in both core and Venmo helped to drive these results.Loan loss was $36 million or 3 basis points as a rate of TPV down 75% year-over-year, again due to the sale of the US consumer credit portfolio.
Transaction margin dollars grew 14% to $2 billion with the transaction margin rate of 55%. Non-transaction related expenses grew 9% in the third quarter to $1.2 billion. As a percentage of total revenue, these expenses leveraged 130 basis points versus the third quarter last year. Normalizing for acquisitions and cost directly related to the sale to Synchrony, non-transaction related expenses grew approximately 6% year-over-year. Again, this demonstrates our sustainability to scale our platform at a low marginal cost. This performance drove 22% growth in operating income and a 142 basis points of operating margin expansion. We continue to balance delivering operating margin expansion with reinvesting back into the business to further strengthen our platform and competitive positioning. Solid top line growth in conjunction with OpEx discipline resulted in 26% growth in non-GAAP EPS to $0.58.
We ended the quarter with cash, cash equivalents and investments of $10.5 billion and short-term borrowings of $2 billion. On a reported basis, our free cash flow was $4.4 billion. Adjusting for the Synchrony proceeds, our free cash flow in the third quarter was $772 million. This equates to $0.21 of free cash flow for every dollar of revenue. Our business delivers strong growth, robust profitability, and consistent free cash flow. This enables us to make significant organic and inorganic investments for our future growth, while at the same time returning cash to our shareholders. In May, we announced our plans to return approximately 40% to 50% of free cash flow to shareholders over the next five years. In Q3, we returned $600 million and year-to-date we have returned nearly $3 billion.
I would now like to discuss our updated guidance for the fourth quarter of 2018 and the full year as well as our initial thoughts on 2019. For the fourth quarter, we expect revenue in the range of $4.195 billion to $4.275 billion or 13% to 15% growth on a currency neutral basis. Normalizing for the US credit receivable sell the implied revenue growth rate would be 20% to 22% for the fourth quarter. This guidance incorporates approximately $30 million of impact from changes in foreign currency and our later close in Q4 than we previously expected for the Hyperwallet acquisition as well as anticipated softness in our eBay Marketplaces business.
We are raising our non-GAAP earnings per share to be in the range of $0.65 to $0.67. Our EPS expectations, include a higher than normal below the line benefit. We are electing to opportunistically reinvest some of this benefit back into the business, which will offset some of the natural leverage we realize from efficiencies of scale. We believe this is the right decision to drive long-term value for PayPal. For full-year revenue guidance, we are raising the low end and maintaining the high end of our previous range which absorbs the $30 million headwind from US dollar strength and the Hyperwallet timing.
We now expect 2018 revenue to be in the range of $15.42 billion to $15.5 billion or 17% to 18% growth on a currency neutral basis. Normalizing for the sale to Synchrony, the implied revenue growth rate would be approximately 21% for the full year. We are raising our non-GAAP earnings per share guidance to $2.38 to $2.40. In addition, given the strong free cash flow we have generated all year as well as the Synchrony proceeds, we now expect free cash flow for the full year to exceed $4.5 billion.
We are still in our planning process for 2019. But I'd like to provide you with an initial framework for how we're thinking about our business next year. We expect revenue to grow approximately 17% on a currency neutral basis. This growth rate reflects the reduction in other value-added services revenue in the first half of 2019 as a result of the sale of the US consumer credit portfolio. Normalizing for this, our expectation is that revenue would be growing in the range of 20% to 21%.
In addition, we expect non-GAAP EPS to grow approximately 20%. This outlook incorporates our integration plans for the four acquisitions we have announced this year. Normalizing for this, we would expect our EPS to grow approximately 23%. Next year, we expect our 2018 acquisitions to contribute approximately 1.5 points of growth to revenue and $0.08 to $0.10 of dilution to earnings per share. And in 2020, we expect these acquisitions to be accretive to our earnings.
As we reflect on the first three quarters of 2018, we're very encouraged by our performance and the opportunities ahead. Already this year, we have announced approximately $2.7 billion in acquisitions, returned approximately $3 billion in cash to shareholders, delivered operating margin expansion and significantly improved the overall growth profile of our business. We are innovating at scale and introducing great payment experience for our consumers and merchants. The sustained momentum we see in the business gives us confidence to invest in high potential areas such as Venmo, global expansion, in store strategies and PayPal business loans.
We're extremely pleased with our progress. I want to close by thanking all of PayPal's customers and our colleagues worldwide for making this another strong quarter.
With that, let me turn it back over to the operator for questions. Thank you.
Questions and Answers:
Operator
Thank you. (Operator Instructions) Our first question comes from Bryan Keane with Deutsche Bank.
Bryan Keane -- Deutsche Bank -- Analyst
Hi guys, congrats on the solid results here.
Daniel Schulman -- President and Chief Executive Officer
Thank you, Bryan.
Bryan Keane -- Deutsche Bank -- Analyst
Wanted to ask about eBay. I know they announced the Managed Payments initiative. And it doesn't look like PayPal is featured as a payment option. So trying to figure out what's the impact the PayPal's model. I mean, I guess what we're trying to get at is is figure out how much the weakness in eBay is due to the run rate of core eBay volumes, first volumes coming off of PayPal in payments to other providers?
Daniel Schulman -- President and Chief Executive Officer
Thanks, Bryan. It's Dan. I'll take a crack at that and then turn it over to John and Bill if they've got anything else to add to it. So first of all eBay's performance on our platform had nothing to do with intermediated payments. They announced publicly -- I think they had $20 million of TPV that moved to intermediated payments. We don't even see that as a rounding on our results. So intermediated payments has just started off for them, no impact on their performance on our platform. So let me take a step back and talk to you a little bit about what I see going forward.
So I think that PayPal and eBay are going to continue to be close strategic partners for the foreseeable future. And so why do I say that? I say that because it's not just that we have signed a five-year term with them to display PayPal branded services on either intermediated payments or that we just signed a while ago a comprehensive seven-year deal to provide eBay shoppers with PayPal credit offers. Those things are just deals that we've done with eBay. The most important thing is that our mutual sellers and merchants demand it, the consumers that we have the sellers that eBay and PayPal share demand to have PayPal. Their sales actually depend on it. And we just put out, Bill I think just published a market research that was done with Ipsos that was a comprehensive study and that study showed what we've been talking about for quite some time. And in the study, it said that consumers on average are 54% more willing to buy when a merchant accepts PayPal. And by the way, that's at the low end of that. That goes up when it's a cross-border transaction, when it's mobile, when it's unfamiliar brands and if you think about the long tail of eBay merchants. So that 54% is a low number for those. And so you also have 59% of PayPal users who have a banded transaction because PayPal wasn't a checkout option. And so we've got 254 million customers on our platform right now. Imagine if almost 60% of them would abandon a sale because checkout -- PayPal Checkout wasn't available.
And by the way, we've been talking about this for quite some time and if you look at the seller feedback on the eBay seller forum and look at what those sellers are saying, those that have moved over to intermediated payments, you'll see comments from them that their sales have dropped 40% to 60% and they're clamoring to come back to PayPal. So both eBay and PayPal want to serve our mutual customers extremely well. It's a major integration for eBay to put PayPal on. We are committed, both of us, to having PayPal on intermediated payments beginning next year. But we feel really great about growing value proposition that we have and we feel great about the partnership that we'll have with eBay going forward as well.
Anything you want to add, Bill?
William Ready -- Chief Operating Officer, Executive Vice President
I would just add to that eBay has responded to those comments saying that if sellers have issues with the drop in sale they can revert back to PayPal in the near term and in the long term they're working hard to make PayPal available as a payment option and we are working hand in hand with eBay to try to make sure that's available to those customers given the strong demand from customers as Dan was describing.
Operator
Thank you. Our next question comes from Paul Condra with Credit Suisse.
Paul Condra -- Credit Suisse -- Analyst
Hey guys, good afternoon and thanks for taking my question. I just wanted to follow up on Venmo. Could you give us some good updates there? Just could you help us think through the contribution? You mentioned $1 billion instant transfer volume in September. Should we think of that as $1 billion monthly run rate? And then would you say there any other monetization activities that are starting to scale? Just kind of want to make sure I'm thinking about the contribution correctly?
John Rainey -- Chief Financial Officer & Executive Vice President of Global Customer Operations
Sure. Yes, the $1 billion in instant transfer volume was for the month of September and that's been growing nicely. We don't see anything to distort that trend. And instant transfer is one of the monetization initiatives that we see scaling well. As Dan mentioned in his remarks, Pay with Venmo is growing very nicely. Uber, Uber Eats, Grubhub, Eat24, Seamless have all integrated pay with Venmo, that's been growing quite remarkably. I mentioned 185% month-over-month growth on Pay with Venmo and the card seemed 320% month-over-month growth. Those are early, but those are the kinds of rapid growth results that we're seeing with other initiatives on Venmo and so across all three of our major monetization initiatives, instant transfer, Pay with Venmo and other apps like like Uber and Grubhub and the card, we see all of those starting to really scale in a meaningful way.
Daniel Schulman -- President and Chief Executive Officer
And you also saw the number of Venmo customers who have now been in a monetizable act go to 24% up from 17% just one quarter ago. So as I mentioned in my remarks it's still early, obviously, but it looks like we've achieved some kind of tipping point right now and I think both Bill and I are extremely pleased with the results of Venmo.
One other thing that I would just point out is, as I mentioned, it seems repetitive, but we don't take it for granted, for three quarters in a row right now, we've each quarter seen record net new active signing up to Venmo. So not only are you seeing Venmo expand quite rapidly but the percent of people using a monetizable event is going up quite rapidly as well. So you combine all of those things together, you can see why we're quite pleased with the momentum as of now.
Operator
Thank you. Our next question comes from George Mihalos with Cowen.
George Mihalos -- Cowen -- Analyst
Good afternoon, guys. Thanks for taking my questions. Just wanted to ask John, as we look at the initial guide for '19, how are you thinking about pricing broadly across the Company from '18 and '19? I know you're anniversarying some pricing on the cross-border side. And then maybe related to that the shift in Venmo going from operating in the red to going into the black, how should we think about or ball parking, that kind of contribution in the guide? Thank you.
John Rainey -- Chief Financial Officer & Executive Vice President of Global Customer Operations
Sure. So starting with pricing, pricing is something that as we've said before, George, it's not a one-time thing for us, where I've described it in the past as a sugar high where you're trying to monetize something for the next quarter. We take a very long-term perspective to that and there are opportunities every year to look at pricing. And pricing sometimes can mean going out and taking advantage of where you provide significant value in the market and pricing higher. In other cases given the enormous addressable market that we have it can be about capturing market share and be more aggressive on pricing. So that goes both way -- both ways and certainly we have assumptions built into our plans about optimizing pricing in various areas going in 2019. One example of that is the recent announcement that we made about increasing our pricing to be more in line with where the market is on instant transfer. And so that's just one example that we have there related to pricing.
On Venmo, as we said this is -- it's hard not to be excited about some of the growth numbers that we're talking about today and the fact that each of the last three quarters we've seen a record number of net new customers come to the platform, but this is a long game. And we're not going to -- we're going to be measured in terms of our approach to this make sure that we optimize for the experience and profitability will certainly come. We've got a good history here in terms of what happened with PayPal as that moved from P2P to being able to monetize that in ways where one can shop at a merchant. And so that is a transition that will take place in a couple of years, not a couple of quarters. And so we expect to see improvement in our Venmo economics next year and each year thereafter.
Operator
Thank you. Our next question comes from Tien-tsin Huang with JPMorgan.
Tien-tsin Huang -- JPMorgan -- Analyst
Thank you and thanks for the 2019 framework, it's encouraging. Just maybe on that just a fairly steady EPS growth for 2019 adjusting for the acquisitions. Despite some eBay degradation that you talked about and perhaps in cross border too, I'm not sure maybe you want to comment on your outlook for cross border specifically, but I'm curious just in the aggregate what's maybe getting better, what are some of the key offsets that have given you confidence to achieve that steady EPS growth in '19?
John Rainey -- Chief Financial Officer & Executive Vice President of Global Customer Operations
Sure, I'll start and Dan or Bill can jump in as well. 2019, there's a lot of things in store as we've sort of enter this next chapter post our previous relationship with eBay. And so excited about the partnership opportunities that are out there. We're excited about integrating some of the acquisitions that we've had and potential ones in the future and what that can mean to make our platform even better than it is today.
As we look at parts of the P&L and the effect on sort of achieving that guidance into next year we certainly expect to continue to realize operating leverage in our business. Tien-tsin, I didn't talk about this in my prepared remarks, but we often talk about the marginal economics of our business. In this most recent quarter, for every dollar -- incremental dollar of revenue that we brought in our non-volume related cost only went up $0.10. That is a model for scaling a platform and as we've said before, we think that we can continue to do that. With respect to cross border, that's an area that if you look at it in terms of the percentage of total volume for PayPal, it's down slightly from where it was in the previous quarter. That's in part because of mix in our business, as we see things like Venmo growing more, Braintree growing more.
But I think that the takeaway from this is that if you were to go back three or four years ago when we were more of just a button on a marketplace we were very dependent or I should say our profitability was very concentrated in certain areas. And what you're seeing us evolve into as a platform is we have a much more diversified portfolio, both regionally, as well as product wise where we're monetizing a lot of other aspects of our business that we haven't before. And so despite the fact that cross-border, which is a lucrative part of our business is a smaller overall piece of our portfolio and eBay you can say the same thing about, you're seeing us expand our operating margin and continuing to grow earnings at a mid 20% growth rate. So we're very excited about that. And that gives us confidence going into 2019.
Daniel Schulman -- President and Chief Executive Officer
Now, I'd just add one or two things on top of that. You saw this quarter us adding for the first time ever over 9 million net new active accounts and interestingly at the same time engagement growing by 9.5%. For those of you look carefully at our engagement numbers, which I know many of you do, that's the highest percentage gain we've had in probably two years or so. And three years ago, we guided like 3 million to 5 million net new actives per quarter. We took that up last year to 6 million to 8 million. We are clearly at the very high end of that and we see that continuing as we look forward as well. And when you have your net new actives growing by 30 million, 35 million a year and year engagement growing by 8% to 10%, that bodes well as we look forward. And I would say some of the new products and services that Bill and the team are introducing or have introduced into the market, some of the new partnerships that are just coming under way right now, we feel pretty good about our position in the digital payments ecosystem right now.
Operator
Our next question comes from James Faucette with Morgan Stanley.
James Faucette -- Morgan Stanley -- Analyst
Great. Thank you very much. I wanted to circle back to the Venmo commentary, particularly Dan your comments of feeling that you're at a tipping point there. I'm just wondering if you can give us a little color on how we should think about efforts to drive increased acceptance of Venmo and where we may see some evidence of that. And I guess dovetailing with that is that with kind of the new instant transfer fee structure, how should we -- like what should we be anticipating in terms of contribution to moving the monetization of Venmo forward from that particular initiative? Thank you.
Daniel Schulman -- President and Chief Executive Officer
Yeah, you bet. I'd just say, first of all, again it's early but substantial progress and the numbers we gave were months-over-month numbers, not year-over-year, but month-over-month growth numbers. So you can see the acceleration that's happening. We have a very strong pipeline of large merchants, the merchants you might expect who are lining up to integrate Pay with Venmo buttons. We also obviously are rolling out these Smart Payment Button capabilities into PayPal Checkout, where if it is a Venmo customer, we will dynamically present a Pay with Venmo button and so you'll start to see that also accelerating quite a bit. And then if you look across the monetizable services that we're offering, all of those services are benefits to the Venmo consumer and I think that's a really important point. Venmo consumer doesn't think about engaging in a monetizable act.
They think about how can I use my Venmo card to spend offline, have that come right back into my Venmo feed, share, split those purchases and it's a value-add for them. Being able to take your Venmo balance and be able to spend on online merchants or on Uber, that's a value-add for them, just as it is to be able to instantly gain access to their balances is a value-add to them as well. And so the more services we put out there and we've been careful to be sure that the services we put out are real value-added services, but the more we put out, the more Venmo customers use and start to engage with that.
I mentioned that you're seeing Venmo customers engage in groceries, and restaurants, these are everyday types of activities and we're really just becoming an embedded part of our Venmo customers' digital financial services life. There are other things that we're looking at going forward, but we're really pleased with the efforts we have so far and very pleased with the momentum. Bill, anything you'd add on the that?
William Ready -- Chief Operating Officer, Executive Vice President
I would just add to that that in addition to Dan's point there around how simple we're making it for merchants to add a dedicated Pay with Venmo through things like smart payment buttons, the integrations we've done like with Uber, for example, we're seeing tremendous growth that we are quite pleased with, but they're quite pleased with it as well. They're seeing it's really driving engagement on the platform and the usage of Venmo is outpacing their own expectations, which are certainly quite high given how rapidly they grow. So as we continue to make merchants happy with the engagement we're driving to them, as Dan said, we're seeing a lot of merchants really line up for that, but we're providing multiple ways for users to get great new experiences, and to make money by providing them great new experience whether it's Pay with Venmo, the card or things like instant cash out. So all of those together are really bringing great value to the user and great growth in the monetization for us.
Operator
Thank you. Our next question comes from Lisa Ellis with MoffettNathanson.
Lisa Ellis -- MoffettNathanson, LLC -- Analyst
Hi, good afternoon guys. Dan, this one is for you on the topic of partnerships, so -- which is one of the topics of the day. You have a history of converting would-be enemies into friends or at least frenemies. And I'm wondering if you can comment on two groups out there that are sort of in that category, the large global merchant acquirers and then also the Chinese digital wallets. As you think about partnerships, is there a path to converting those players, do you see a partnership path with PayPal?
Daniel Schulman -- President and Chief Executive Officer
Yeah. Lisa, I also consider you to be one of those partners that also turned into a friend as well. So, obviously as we've moved toward customer choice and as we've moved to being an open platform, our ability to nab partner, it's just night and day difference from where we were two years ago. I talked about 35, I think we've done 37 major partnerships in the last two years. And as you know, we started to work with and partner with some of the leading Chinese players today, whether that be Ali (ph) with their international merchants, I think we're -- PayPal is now on over 50,000 of their merchants being accepted or allowing PayPal consumers outside of China to purchase from Chinese merchants. We support some 300,000 Chinese merchants who have the PayPal mark on them today enabling consumers outside of China to purchase from those merchants. And we're looking at doing the opposite with people like Baidu and others where Chinese consumers can seamlessly pay (ph) and buy at PayPal merchants outside of China. So we think that we can facilitate cross border for all of those players in China and in other countries.
In terms of merchant acquirers, we have a long history actually of partnering with merchant acquirers, very close partners with First Data, again number of years ago, there is First Data against PayPal. That is not the case anymore. We work hand in hand together. And so, Bill, do you want to add to that?
William Ready -- Chief Operating Officer, Executive Vice President
Wells Fargo, Chase, I mean, there's a number of major merchant acquirers that we work with. We bring in tremendous amounts of volume and it's another example, as Dan was describing, of how we're able to partner with others in the ecosystem as we've made our platform more open and have really gotten focused on how we can provide value to customers in partnership with others and acquirers are certainly one of those constituents that we work closely with.
Operator
Thank you. Our next question comes from Darrin Peller with Wolfe Research.
Daniel Schulman -- President and Chief Executive Officer
Hi Darrin.
Darrin Peller -- Wolfe Research -- Analyst
Hey guys, thanks, hey. Let me just start off. I mean, first you have 9.1 million active accounts net new this quarter annualizing 36 million I guess per year. First of all, is there any reason why this quarter was unusual in terms of seasonality, or is that now obviously better than 30 million run rate you had, call it, a year ago? And then just the follow-up is, just on the (inaudible) line it was much higher than I know we and the Street were. If you can give us a little more color if that's either -- whether it's Synchrony revenue share or it's all the great stuff in Venmo we're seeing that'd be great. Thanks guys.
Daniel Schulman -- President and Chief Executive Officer
Yeah, so first of all on the net new actives, nothing unusual in the quarter. As John mentioned in his remarks, nothing from iZettle acquisition that came in there. That was 9.1 million accounts that came in naturally. I'd be remiss to say, we also have over 20 million merchants now on the platform too and that's growing quite nicely. So, we projected being about $30 million we thought this year, we will clearly be over that and we see no reason for these types of numbers to be our new run rate going forward.
William Ready -- Chief Operating Officer, Executive Vice President
Yeah, and I would just add to that we started seeing increased consumer adoption, going back a couple of years and we started getting these questions of is that sustainable and for the last two years, you've seen us continue to drive significant improvements in net new actives and part of that is that there's not been any one silver bullet to what's bringing those new users to the platform. It's a combination of great checkout experiences with things like PayPal One Touch, P2P, Choice, all these things together are bringing more and more users onto the platform deepening engagement with them through being a great digital engagement channel with card issuers and others. It's the composite effect of all of these things together. And so as Dan said there's nothing that we see slowing that down. It's something that we think is a new normal for us in terms of the way that we're driving increased engagement and increased new users to the platform.
Daniel Schulman -- President and Chief Executive Officer
And Darrin on other value-added services, there's two -- three things probably that are influencing that in rough order of significance. First would be we're seeing great growth in our merchant working capital business. Recall we've got the acquisition of Swift and we're just really pleased with how that's performing, really good growth there. Second thing that I would call out is while we sold the US consumer credit portfolio, we still have an international consumer credit portfolio and that is performing very well in the entities where we've launched that. And then lastly, I would say that the profit sharing arrangement we have with Synchrony, we still receive economic benefit paying upon the performance of that US consumer credit portfolio and we're very pleased with that, and I would venture to say Synchrony is very pleased with how that's performing as well.
Gabrielle Rabinovitch -- Head of Investor Relations
Thanks. Operator, we have time for one more question.
Operator
Final question comes from Heath Terry with Goldman Sachs.
Daniel Schulman -- President and Chief Executive Officer
Hi, Heath.
Heath Terry -- Goldman Sachs -- Analyst
Thanks. Dan, as has been pointed out earlier, you guys have had a lot of success over the last couple of years in signing partnerships and bringing a lot of partners onto the platform. I guess it's probably too much to ask to try and kind of quantify the impact of those partnerships or how much of an impact you've seen on TPV or revenue as it relates to those. But curious if just qualitatively you can try and give us a sense of the impact that you've seen there. And then as it relates to the Walmart and Amex deals that have been signed, how you would sort of scale those deals relative to what we've seen from partnerships thus far, what kind of potential do you think those two deals have?
Daniel Schulman -- President and Chief Executive Officer
So I'd say just in general, we've announced quite a number of partnerships over the past couple of years. These partnerships take multiple quarters before they start to come up to speed, some of them a year plus. And so I would say we are still quite early in the impact that we are seeing from all of those partnerships. And so just from a qualitative perspective, we're beginning to see some nice momentum. But I would say, it's very, very early days. One example of that would be rewards points. We've got maybe four or so issuers now, major issuers who are going to be putting their rewards points onto the PayPal platform. We're going to be a platform that aggregates all of those that users of our mutual customers can take those reward points, turn them into FIAC (ph) currency, use their rewards points and a combination of any other financial instrument they have on board to make purchases at basically 20 million merchants across the world. It's the first time that we are giving that kind of utility.
And the American Express announcement, they're one of the, if not the leader in rewards points and having their rewards points come onto the platform and their customers being able to use them at PayPal merchants and the only place where they can use them at all of those different merchants, right, Amex has only integrated into a couple of merchants right now to be able to use reward points. Those are all things that are coming in the future.
And I would say, Walmart has a tremendous amount of potential for us. It's the largest retailer, one of the largest marketplaces and with a lot of aspirations and we have a quite good relationship with them and a growing relationship with them. And as you see almost every quarter we announce new partnerships and some of them can be quite large and my anticipation as we look out over the next several quarters that you'll see more of those come on to play as well. This is a ongoing part of our strategy is to be a great partner and to be the underlying platform and the largest digital distribution channel for a lot of our partners. And so we're seeing a good deal of success right now but still, I would say very early innings for us in terms of what they could be and will become for us.
Okay. Operator, thank you. Everybody, thank you for joining us. We look forward to talking to you over the hours and days and months ahead, so thank you very much everyone for joining us today. Bye-bye.
Operator
This concludes today's Q&A session. Ladies and gentlemen, thank you for participating in today's conference call. This concludes the program. You may now disconnect. Everyone have a great afternoon.
Duration: 63 minutes
Call participants:
Gabrielle Rabinovitch -- Head of Investor Relations
Daniel Schulman -- President and Chief Executive Officer
John Rainey -- Chief Financial Officer & Executive Vice President of Global Customer Operations
Bryan Keane -- Deutsche Bank -- Analyst
William Ready -- Chief Operating Officer, Executive Vice President
Paul Condra -- Credit Suisse -- Analyst
George Mihalos -- Cowen -- Analyst
Tien-tsin Huang -- JPMorgan -- Analyst
James Faucette -- Morgan Stanley -- Analyst
Lisa Ellis -- MoffettNathanson, LLC -- Analyst
Darrin Peller -- Wolfe Research -- Analyst
Heath Terry -- Goldman Sachs -- Analyst
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