PayPal Q1: Venmo Users Hit 40M, Payments Volume Dips

Venmo took center stage during PayPal’s Q1 2019 earnings report as PayPal CEO Dan Schulman released user numbers for the first time: 40 million active monthly users, defined as a person whose used the service once in 12 months.

“Venmo continues its significant momentum,” Schulman said on a call with analysts. “As user growth continues to accelerate, merchants are increasingly turning to Venmo as a way to attract a valuable and engaged consumer base.”

That update was a bright spot in a bit of a mixed bag of earnings results. PayPal reported adjusted earnings per share of 78 cents per share, ahead of estimates of 68 cents forecast by analysts pre-release, with revenue roughly in line with estimates of $4.13 billion.

Total payments volume for the quarter, however, was a miss, coming in at $161 billion, instead of the $163 billion analysts expected prior to the release. PayPal’s TPV was up 25 percent year on year.

Part of that dip is the impact of eBay’s decision to intermediate payments on its platform — in combination with slowing sales growth on the eBay platform itself. PayPal’s total payments volume from eBay was down 4 percent, representing less than 10 percent of PayPal’s TPV.  At this time last year, as a point of comparison, eBay represented 12.7 percent of total payment volume. Despite this performance, Schulman reiterated that he expects that PayPal and eBay would continue to have a strategic, and friendly relationship over the longer term.

PayPal now reports a total user base of 277 million accounts — of which 255 million are consumers and 22 million are merchants — a quarter-on-quarter increase of 9.3 million overall. Average transactions per user per active account is now at 38 over a trailing 12-month period, a 9 percent year-on-year increase.

PayPal also issued a second-quarter revenue forecast of $4.3 billion to $4.34 billion and an adjusted EPS outlook of 68 cents to 70 cents. The company raised its full-year EPS outlook from$2.94 to $3.01.

The big story of the day — or at least the story PayPal was most interested in telling during its call with analysts — was the Venmo story.  Apart from giving the first ever peek into monthly active user figures, PayPal further reported that Venmo processed $21 billion in TPV during the first quarter, and is on pace to process $100 million over the course of the year. Total peer-to-peer volume for PayPal — which includes payments made through core PayPal and Venmo — grew 41 percent to $42 billion.

As a point of comparison, Square reported 15 million monthly active users for its Cash App as of December, and Zelle yesterday reported a volume of $39 billion in Q1.

During the call with analysts, Shulman and Chief Operating Officer Bill Ready pointed to Venmo’s growth not only as a P2P payment network, but also as a payment method for its active and deeply enthused customer base, calling out partnerships made in the recent past with Chipotle, Grubhub and Uber, among other merchants. Ready highlighted instant transfers and Venmo’s debit card as bright spots in revenue growth.

“Venmo continues its significant momentum,” Schulman told analysts. “As user growth continues to accelerate, merchants are increasingly turning to Venmo as a way to attract a valuable and engaged consumer base.”

Those partnership are, according to PayPal, key to the monetization plan for Venmo.  Also key to Venmo’s revenue, according to Bill Ready, are instant transfers and its debit card.  What is not on the agenda as of yet, however, are credit card products — despite a Wall Street Journal report to the contrary. While Ready confirmed they see interest across their user base for all kinds of Venmo-connected financial products, there is “nothing beyond the Venmo debit card that we are looking at this time.”

All in, Venmo is on track to log about $300 million in revenue by the end of 2019.

While that is a notable sum, Venmo has yet to become a money-maker for its parent company, and as of this earnings call there is no hard target for that goal.

“We’re certainly pleased with the monetization of Venmo and the rate at which that is progressing,” Ready remarked.

Analysts, however, were not quite as a enthused.  Though PayPal’s stock is up in 2019 by 28 percent overall, it declined 2 percent in after-hours trading on the release of the Q1 numbers.