PayPal reported earnings for the first time following its split with eBay EBAY -0.42% on Wednesday, announcing revenue that was slightly below forecasts while posting a 31% boost in profits. Shares fell more than 5% to $34.67 in after-hours trading.
For the three months ending on Sept. 30, PayPal reported third quarter net income, excluding one-time items associated with the company’s split from eBay, of $377 million, or 31 cents per share. That is compared to a net profit of $288 million, or 24 cents a share, in the same period last year, and comes in higher than the average profit of 29 cents a share that was expected by analysts polled by Yahoo.
“We are operating in a time when change is sweeping through the financial services industry, driven by the rise of mobile technology and the acceleration of money becoming digital,” said PayPal CEO Dan Schulman in a statement.
The San Jose-based company reported net revenue of $2.26 billion, up 15% from sales of $1.98 billion in the second quarter of 2014. That figure came in slightly lower than the average estimate from analysts, who anticipated net revenue to be $2.27 billion.
PayPal’s total payment volume for in the third quarter grew to $69.74 billion from $58.18 billion last year, an increase of 20%. That increase comes in at 27% after removing the effects of foreign currency fluctuations.
Schulman spent much of Wednesday’s earnings call lauding his company’s acquisitions and user growth. In the quarter, PayPal added 4 million customers, taking the company’s total active user base to 173 million. Schulman noted that approximately 13 million of those accounts were associated with merchants.
Acquisitions have also played a role in accelerating PayPal, with Schulman stating that the company would complete its acquisition of international remittance company Xoom before the end of the year. That deal, first announced in July, will cost PayPal $890 million.
Among the company’s fastest developing pieces is its Braintree unit, which was acquired by PayPal for $800 million in 2013. According to Schulman, the mobile-focused payments platform now has 185 million cards on file, up from 56 million two years ago. In September, Braintree said that it was on track to cross $50 billion in authorized payment volume for 2015.
“Braintree’s early bet on mobile is paying off,” Schulman said, also pointing to the success of Venmo. The peer-to-peer payments arm, which was brought into PayPal through the Braintree acquisition, facilitated $2.1 billion in payments in the third quarter, up 200% from the same period last year.
Despite that growth, Schulman did not want his company’s deal-making to be the focal point of the call. “As important as acquisitions are for us, our internal innovation effort will always be our primary focus for value,” he said.
To that end, PayPal’s CEO emphasized the company’s diversification, particularly the growth of PayPal Working Capital, which has extended more than $1 billion in cash advances to 60,000 businesses since its 2013 launch. Schulman also took time on Wednesday to point out new merchant partners including the likes of Macy’s and Latin American mobile provider America Movil.
Wednesday’s earnings report was the first time in 13 years that PayPal reported its financial health as an independent company. It went public in 2002 before eBay acquired the company later that year for $1.5 billion. During its time under eBay’s umbrella, PayPal benefitted heavily from its parent company’s e-commerce activity as the choice payments provider for all transactions. The two separated in July following a heated board battle initiated by activist investor Carl Icahn, who said that PayPal would grow more without its ties to eBay.