PayPal Holdings, Inc. (NASDAQ:PYPL) Q3 2018 Earnings Conference Call Transcript

Oct 18, 2018 • 05:00 pm ET

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PayPal Holdings, Inc. (NASDAQ:PYPL) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
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 IR. Please go ahead.

Executive
Gabrielle Rabinovitch

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 CFO and EVP, Global Customer Operations; and Bill Ready, our EVP, COO. 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.

(Forward-Looking Cautionary Statements)

With that let me turn the call over to Dan.

Executive
Dan Schulman

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