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6,200 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Yes. And Andrew, good morning. Just to add on there with respect to the U.S., we did see sequential improvement in branded checkout in the U.S. in the fourth quarter. And that was about three points of growth quarter-over-quarter really due to market dynamics, but also specific key vertical exposure around travel, crypto, gaming, et cetera. Alex mentioned we are still early in the ramp of our modern checkout experience, and that is certainly something that as we get into '25, we are very, very focused on. Our biggest priorities are really around innovation, driving those improvements in checkout experience. And you mentioned also giving consumers more reasons to choose. So some of the things we've done throughout the year around really improving the app experience, adding rewards, adding different elements to how people can find contacts and things like that, all of that is around engaging the consumer in a different way. And as we talk about internally, really getting the flywheel continuing to move between our consumers and our merchant experience. So from a 2025 guide perspective, we still expect branded checkout TPV to grow about mid-single digits and to have consistent growth from last year into this year with some acceleration with our initiatives, initiatives on top of that.
Operator: The next question comes from Ramsey El-Assal with Barclays. Your line is open.
Ramsey El-Assal : Hi, thank you for taking my question this morning. As expected, unbranded volumes decelerated again as you pursue the price-to-value strategy. Can you give us your updated thoughts on your sort of confidence level, timing and toolkit to reaccelerate unbranded volume growth at the higher baseline profitability levels as we move forward here? |
6,201 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Yes. Let me just touch on -- thanks for the question, Ramsey. And let me touch on just how we're -- how these conversations are evolving. So first, again this has been our strategy throughout the year. I'm encouraged to see just another quarter of branded/unbranded Braintree contribution to TM dollar growth. The conversations are continuing to be strategic in nature, which is exciting for us. We are having not just processing conversations, but now they are sort of evolving into two steps. One is the value-added services that we are bringing to market. I mentioned some of these FX-as-a-Service, Risk-as-a-Service, chargeback automation, orchestration all of these are things that we are now able to price to value and monetize, as part of a best-in-class unbranded offering. In addition, though, we are really starting to differentiate ourselves in these conversations by being able to bring customers to the conversation. And so again, as I sit down with CEOs of some of our largest customers and really talk about what are their greatest needs, it goes well beyond just processing. It really goes to how do we bring more customers to bear. And this is really the first time that we are leveraging the two-sided network that PayPal has and being able to say, hey we have hundreds of millions of consumers around the world. We now have an ads platform, we have reward platforms. We have the ability to enable our unbranded processing customers to create rewards and offers inside of our PayPal app to be able to drive additional growth for them. And so these become really fun conversations, to be honest, because we are now having holistic, not just processing but end-to-end, how do we leverage their marketing dollars, how do we leverage their ability to acquire customers in our two-sided network. |
6,202 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Yes. And with respect to forward trends on this, we do expect similar dynamics in the next few quarters, some volatility. I mean, this is not something that just happens in a perfect line. And we still do have some large agreements over the next couple of years that we will work our way through. But the revenue growth should build as we lap some of the larger agreements fluffing-off over time. For 2025, we expect the renegotiations to be about a 5-point revenue growth headwind. But the other important point here is that it's a 1-point accretive on the TM dollars growth in 2025. So I think an important dynamic there that as you mentioned, we are very intentionally driving.
Operator: The next question comes from Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg : Good morning guys. I just wanted to come back to the branded TPV topic. I think you mentioned U.S. accelerated 3 points in the quarter, if I caught that right. I guess that would imply international slowed. So perhaps you can quantify that and then maybe give us a sense of how that mid-single digit global branded volume outlook for '25 splits between U.S. and non-U.S. And just a little bit of color on how the transaction margin profile differs between U.S. and international branded. Thanks guys.
Jamie Miller : Good morning Jason. With respect to international, we are still in a very strong market position there and we continue to take share internationally. We had less than a full point international pullback. Just some softness in Europe is what I would say. And when you look at the split, international to U.S., both in the TPV line and in the TM line, it is really 50-50. And from a margin perspective, it is slightly healthier outside the U.S. but it's very much in-line.
Operator: The next question comes from Tien-Tsin Huang with JPMorgan. Your line is open. |
6,203 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: The next question comes from Tien-Tsin Huang with JPMorgan. Your line is open.
Tien-Tsin Huang : Hi good morning. Thanks for the update. Just on grow Venmo. Can you just -- I know you'll talk a lot about it on February 25, but is it more about user growth, new products or ARPU from existing products expanding? Just curious what the algorithm is there. If you don't mind, a quick clarification. The step-up in CapEx in 2025, is that more of a one-time issue? Is it a sustainable level for you to consider? Thanks. |
6,204 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Hi, Tien-Tsin, let me hit Venmo and then hand it over to Jamie. So on Venmo, and again, we will -- it will be exciting to see you all at Investor Day and we'll certainly dive deep on Venmo. But really, it is both customer growth as well as monetization growth. Again, we are excited. Venmo is the #1 P2P platform in the U.S. We saw MAAs continue to grow to $63 million by the end of this year. We are seeing TPV continue to grow up 10%, hitting double digits really for the first-time in I think, seven, eight quarters, up to $76 billion. So really exciting to see the continuation of growth and active users. In terms of our focus on monetization again, we've been consistent. This is about proven levers of debit card MAA growth, which was up 32%; and Pay with Venmo MAA growth, which was up 22%. The reason this is important is we've seen that debit card MAA delivers average revenue per account 4 times, when they adopt our debit card, and Pay with Venmo average revenue per account is up 3 times. And just as a reminder, we are in single-digit penetration across both of those products across the base. And so as we continue to grow customers, we are growing active customers and we are starting to grow penetration of monetizable elements. So this is exciting for us. We also will just continue to focus on innovation. I think we are just scratching the surface of a very engaged, highly valuable demographic. We've rolled-out new innovations like scheduled send and gifting and groups and direct deposits to bring more money into the ecosystem. But the team is a really, really exciting road map for '25, as we start to really think about what are the other needs -- once this money is in the ecosystem of Venmo. What are the other needs that our customers have to be able to enable them to be able to spend in an omnichannel way and obviously move money across each other. So exciting about what Venmo will have, and we've built a very good baseline of monetization throughout '24, which sets us up well for '25. |
6,205 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Good. And then with respect to CapEx, we are seeing, over the next two years, an increase in the program to about $200 million to $300 million. And it relates to tech infra build-out and data center build-out in connection with both platform consolidation and a few other things. But after the two years, it should come down.
Operator: The next question comes from Darrin Peller with Wolfe Research. Your line is open.
Darrin Peller : Yeah. Thanks guys. Jamie, I think you said you would expect stable branded growth through '25, based on what you're -- what's built into your outlook. You guys have initiatives now where 25% of your checkout experience is on the more modern checkout, which I know has kind of ramped through the end of last year and were there now, and so it should impact, I think. The debit card is more further out. Marketing has been more substantial. I guess I'm just curious when those initiatives you think would have a more material impact. Or are they embedded in your outlook that they could have an impact on branded acceleration as the year progresses? Are you just building in uncertainty around things like international, maybe Germany or any other softness? And then just my one quick follow-on would be the exit rate of transaction margin growth ex flows, I think 6%, in the context of this 6% branded. So I'm just curious, when you think of your forecast, is there anything about this fourth quarter growth rate that was unsustainable other than maybe leap year? Otherwise, you're 5%, and I think you've added 5% plus, so it we may capture that. Thanks guys. |
6,206 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Yes. So first, let us talk about the branded checkout growth in 2025. You were specifically asking about initiatives. And as Alex mentioned, we've got 25% of our U.S. TPV flowing through the most modern checkout experiences at this point. That is something that we expect to scale as we get into '25. And in addition, we are going global with that as well. So to your point, we do expect some impact from that to start to flow through. And we have embedded some of that in our guide, and we expect it to build over time. Having said that, we also think we've prudently planned here. And I wouldn't say, we've explicitly put an overlay for European softness in there. Having said that, we've left ourselves room for to navigate different things because as we roll this out, the impact of how this will flow through may be uneven as we see it. And then Darrin remind me of your second question? It was on TM, but I didn't pick up the exact question you were asking.
Darrin Peller : Growth rate, you're at 6% already without any acceleration in the underlying KPI despite all the initiatives you've done. And you're guiding 5% plus -- I guess, 5% plus, right from a non-float impacted. So just making sure there is nothing unsustainable in Q4's exit rate that should inform you on '25's growth. |
6,207 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Yes. When you look at '25 from a TM perspective, there is probably two things to think about that are headwinds to 2025 TM. The first is we expect transaction loss to normalize as we get into the year. We had a full point benefit of that in '24 and -- or a full basis point benefit. And when we get into 2025, we expect about 0.5 basis point headwind. And really, we are growing products that should carry with it a higher transaction loss rate. And then you mentioned the 6%. I would talk a little bit, even though around interest rates. When you look at total all-in TM, we are expecting about $150 million of interest rate headwind on all-in TM there, too. But when you look at the underlying profile of TM which really revolved around branded checkout, Braintree, Venmo, credit, I mean all of those things are things that we believe are durable it is clearly diverse and things that we fully expect to continue as we get into '25 and beyond. |
6,208 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: And Darrin, I just -- I want to pile on to Jamie's comments as well because I think it is really important to set our branded checkout strategy in context. First, as Jamie said, and I think we've been consistent throughout the year, we are excited about the innovations. I think we've been pretty prudent in the way that we have looked at a forward guide. We want to see the results before we tell you they're coming. But if I just step back and think about the strategy, think about what we did in '24, we really worked on innovation and what I would call just fixing the basics of branded checkout. As I described earlier, an improved product now in the hands of customers on both desktop and mobile, and we are now starting to see that scale as you mentioned, up to 25%. And we'll continue to scale that throughout the quarter and the rest of '25. We've expanded to check out to guest checkout, which we weren't playing in before. And now we are starting to bring in new users through our Fastlane product, which again needs to continue to scale and will scale over the next few years. But we now have innovation in market that is best-in-class to go after the guest checkout experience. We expanded to off-line. So now we are playing in an omnichannel world where it is not just branded, but we're seeing off-line commerce that we didn't see before. And it's driving habituation. Our debit card users are transacting twice as much as just a branded user and driving 20% higher average revenue per active. So we are just starting to put together a holistic strategy here that's beyond just a single button experience, but really starting to engage our growing customer base -- our growing monthly active customer base in a holistic way, where we really can be their commerce partner going forward.
Operator: The next question comes from Timothy Chiodo with UBS. Your line is open. |
6,209 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: The next question comes from Timothy Chiodo with UBS. Your line is open.
Timothy Chiodo: Great. Thank you for taking the question. So in the past, and when we talked about the mix within the branded checkout, we typically talked about it being very skewed to discretionary and to goods. And in prior periods of strong discretionary growth during 2020, 2021, the branded checkout button grew in-line if not faster, depending on the metric or the industry data that you are looking at. The growth was better than the industry. Could you maybe talk a little bit about how that mix might have evolved, if at all? And if we were to expect a better period of discretionary spend, should we see another period of the branded checkout button growing in line, if not faster, than the industry?
Jamie Miller: Good morning Tim. So when you look at the composition of our verticals now, I would say that one of the things we've done a really nice job of in the last couple of years is really expanding to services. And when you look at some of the dynamics that you might have seen three years or four years ago, when you shift to now, we are just more balanced across different verticals. And I mentioned some of the growth in a few of the areas, but services in particular is one that has been a larger space. So I expect the dynamic to be more muted with respect to that discretionary side of it, on the good side of it.
Operator: The next question comes from Sanjay Sakhrani with KBW. Your line is open.
Sanjay Sakhrani: Thank you good morning. Just a follow-up question on the U.S. branded volume. I think, Alex, you mentioned that it exited the quarter at the high point. I mean, is there any color on sort of what that growth rate was and how it trended into this new year quarter-to-date? |
6,210 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Yes. So really, the way I think about branded U.S. is that we have been moving along, and we are obviously very focused on continuing to shift, continuing to impact our U.S. market position. And Alex talked about a lot of the innovation, specifically around mobile and around a couple of other areas that is really focused on driving shifting there. We saw some lapping in the first part of the year. But as we hit third quarter and into fourth quarter in particular, that was pure growth off a base. And that 3 points was reflective of that.
Operator: The next question comes from Colin Sebastian with Baird. Your line is open.
Colin Sebastian: Thanks. And good morning. Maybe turning to the non-transaction expenses for the year. I was just hoping you could maybe expand on, first I guess, the ability to use AI for more operating efficiency. And are those initiatives that are requiring some incremental investment near-term? Or are you already seeing sort of a positive ROI from that? And relatedly, with the focus on scaling innovations and educating consumers, I guess what does that mean specifically in terms of the investments in customer acquisition and rewards that might be impacting margins -- operating margins through the year? Thank you. |
6,211 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Yes. Thank you, Colin. Let me start with AI and then maybe hand it over to Jamie. AI is opening up a huge opportunity for us. First, at our scale, we saw 26 billion transactions on our platform last year. We have a massive data set that we are actively working and investing in to be able to drive our effectiveness and efficiency. Let me break it into a couple of different pieces. First, on the customer-facing side, we're leveraging AI to really become more efficient in our support cases and how we interact with our customers. We see tens of millions of support cases every year, and we've rolled out our PayPal Assistant, which is now really cutting down phone calls and active events that we have. We also are leveraging AI to personalize the commerce journey, and so working with our merchants to be able to understand and create this really magical experience for consumers. When they show up at checkout. It is not just a static button anymore. This really can become a dynamic, personalized button that starts to understand the profile of the consumer, the journey that they've been on perhaps across merchants and be able to enable a reward or a cashback offer in the moment or even a Buy Now, Pay Later offer in a dynamic experience. And so this is all AI-enabled and all things that will generate both efficiency for us from the consumer standpoint, but also drive more branded checkout and more sales for our merchants. In addition, we also are looking at our back office and ensuring that not just on the engineering and employee productivity side, but also in things like our risk decisions. We see billions and billions of risk decisions that often to be honest, we are very manual in the past. We are now leveraging AI to be able to understand globally what are the nature of these risk decisions and how do we automate these across both risk models, as well as even just ensuring that customers get the right response at the right time in an automated fashion. |
6,212 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Yes. And then with respect to scaling consumer and non-transaction OpEx, we increased our marketing spend in 2024 by about $250 million, and we were very focused around really reinvigorating the brand and then really reinforcing the consumer value prop as we did it. And as we get into 2025, we will be increasing marketing slightly. Our total OpEx guide is up low single digits. I would say marketing is up low single digits plus in terms of how we look at it, heavily weighted towards the second quarter, as we really look at the profile throughout the year. But it is been very targeted. And we've seen the results of that starting to come true with consumer MAAs up sequentially. We saw debit card MAAs up sequentially. We are seeing P2P improvement. So there is been a nice kind of flow through of what we've seen. We've got some CAC, or customer acquisition cost, budgeted for this year but we really haven't started deploying that yet. We've been testing that. But the full suite will be things that we'll be looking to deploy as we get into 2025.
Operator: The next question comes from Harshita Rawat with Bernstein. Your line is open.
Harshita Rawat: Hi, good morning. I want to follow-up on Fastlane. You talked about the new merchant wins. Now that the holiday season is over, and the merchants are more open to integrating new solutions, how are those conversations going with large merchants especially because there is also some competitive dynamics there? And then, Alex, you also talked about 75% of Fastlane consumers kind of being new or dormant PayPal users. Can you just remind us about how you are converting those into PayPal users? Thank you. |
6,213 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Yes. Thanks, Harshita. So you are exactly right. So guest checkout, just as a reminder, for Fastlane, this is really six months in the market. So it is still brand new. There are other guest checkout experiences that have been in the market for -- some for many years, one almost up to a decade. And so we are the new entrant, but we are delivering the best converting experience for our merchants. And that's what gets us really excited. As we start to scale our Fastlane experience, we’re still continuing to deliver double-digit lift in conversion for our merchants. And so our focus -- our go-to-market focus has been really on those enterprise merchants, on the largest ones. I mentioned a few on the call, NBCUniversal, Roku, StockX. And this has been obviously set up conversations throughout the holiday season as many of them weren't ready to actually do the integration. But now as we get into '25, it is full steam ahead. Now just as a reminder, as we have these conversations, they’re very excited about the conversion uplift. Guest checkout is also not something that they've spent a lot of time playing around with. So it is not like these merchants have a scrum team sitting there ready to play around with guest checkout. So they're working on their road maps. So the conversations have been great. It is now about getting implementation done. And I do think this will take a number of quarters for us to really scale this out across the merchant base. But the conversations are exciting, merchants are on board, and I think we'll continue to see this scale. To your question on what we are seeing from a customer perspective, again, we -- 25% of Fastlane users that are coming in are new to PayPal. 50% were dormant in the last 12 months. And again, these are customers that are opting into Fastlane at 45% clip. So we are continuing to see customers choosing to, once they go into that guest checkout experience, actually opt into the Fastlane experience. To us, this is just scratching the surface of being able to |
6,214 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | checkout experience, actually opt into the Fastlane experience. To us, this is just scratching the surface of being able to now reinvigorate them. So we started to really ramp up our marketing efforts. It is still early, and it is through both off-line channels, things like e-mail, testing notifications, as well as online through the app to find incentives and reasons for these consumers to be able to reengage in the PayPal experience. The good news is – it is sort of a second bite at the apple, right? They have gone past the branded experience, they've gone through a guest checkout experience. We've accelerated it for them and for merchants. We've created that conversion. And now we can go and remind those consumers what a great experience a cash-back offer, a package tracking offer, a full end-to-end experience they could have gotten through a branded checkout. And we are going to continue to lean into that to reignite those users into being more consistent active users on PayPal. The last thing just that I'd say, as context is our PayPal users that are online don't use PayPal for every single one of their purchases. This is why the omnichannel habituation and just continuing to drive up not just our MAAs but those power users that I talked about that are really using us for all of their purchases, is so important to us. Because we still have users that love PayPal, have an active app, use us but still use us for just a fraction. And so our ability, even through the Fastlane experience to gather those users up and remind them of the benefits of actually going through the branded experience of PayPal, is so important and will ultimately drive to our branded checkout growth. Sarah, we have time for one more question. |
6,215 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Thank you. Our last question comes from the line of Trevor Williams with Jefferies. Your line is open.
Trevor Williams: Great. Thanks a lot. I wanted to go back to Venmo. Jamie, it sounded like next to branded, it was one of the biggest contributors to TM dollar growth in Q4. You guys have given some good stats on attach rate and user growth across the different buckets. But it would be helpful if we could get an updated transaction margin dollar number for Venmo. And then anything more just on the current mix of revenue across the different buckets, debit card, Pay with Venmo, Instant Transfer? And then just how you're thinking about Venmo's contribution to transaction margin dollar growth in '25. Thanks.
Jamie Miller : Yes. So Venmo has been a growing contributor to transaction margin dollar growth. Certainly in '24, it was behind interest branded checkout, Braintree et cetera. As we get into 2025, it continues to grow in terms of its impact on TM which is really great to see. When you look at -- our Venmo TPV was up 10% in the fourth quarter. Our debit card TPV was up 40%. Pay with Venmo was up 50%. P2P was up 8%. So we are really excited about not only the core P2P continued strength but also just the beginnings of the investments we are making in debit and Pay with Venmo which, when we really dig into this, which is really our new Venmo leaders' target in 2025, we are excited about the growth we can drive. When we get to Investor Day at the end of February, we will unpack this with a lot more detail, and we are looking forward to talking to you all there.
Steve Winoker: Alex, any final thoughts?
Alex Chriss : No, just a huge thank you to all of you, and thanks, Steve. I look forward to seeing many of you later this month at our Investor Day on February 25, where we will share our vision for the future and dive into our strategies for medium and long-term growth and what it's going to take to get us there. So take care, everyone. |
6,216 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: This concludes today's conference. Thank you for participating. You may now disconnect. |
6,217 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Good morning, and welcome to PayPal's Third Quarter 2024 Earnings Conference Call. My name is Sarah, and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer. Please go ahead.
Steve Winoker: Thanks, Sarah. Welcome to PayPal's third quarter 2024 earnings call. I'm joined by CEO, Alex Chriss; and CFO, Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings and on our website, those elements may change as the world changes. Now over to you, Alex. |
6,218 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Thanks, Steve, and thank you to everyone for joining us this morning. PayPal had a highly productive third quarter. We made good progress on our continued transformation, while delivering strong operating and financial results. We brought multiple innovations to market, coupled with a significant new marketing campaign and are seeing encouraging early adoption. And we continue to forge important partnerships with leaders in global commerce. We are early in our transformation journey, and we have a lot of work ahead to get to where we want to be. However, I'm proud of what we've been able to achieve in the last year, and it gives me conviction that we're taking the necessary steps to unlock the full potential of PayPal and Venmo over time. We've assembled a world-class leadership team, reignited innovation for our customers and are now moving with clear purpose and increased velocity. We're leaning into our competitive advantage, a two-sided network of hundreds of millions of consumers and tens of millions of merchants around the world to evolve from a set of disparate payment products and point solutions into a powerful commerce platform. As we shift from a payments company to a commerce platform, more of the world's leading commerce players have partnered with us to add value for our mutual customers. In just over two months, we've announced partnerships with Fiserv, Adyen, Amazon, Global Payments and Shopify, and we're actively discussing more collaborations across the industry. These new and expanded relationships are a clear demonstration that our brand, innovations and momentum are resonating. Before we discuss this quarter's details, I'm excited to announce that we will host an Investor Day on February 25 in New York City. We look forward to seeing many of you in person in sharing our team's longer-term strategy, key opportunities, financial and operating targets and how we will get there. Now turning to our Q3 results. Total payment volume grew 9% to $423 billion. We delivered $7.8 billion in |
6,219 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | we will get there. Now turning to our Q3 results. Total payment volume grew 9% to $423 billion. We delivered $7.8 billion in revenue, growing 6% on a currency neutral basis. Transaction margin dollars grew 8% to $3.7 billion and were up 6%, excluding the benefit of interest on customer balances. Our non-GAAP earnings per share increased 22% year-over-year. Importantly, this translated into significant free cash flow. We're proud of these results and have a clear plan to drive continued profitable growth over the long-term. After another strong quarter, we're raising our full year guidance for transaction margin dollars and non-GAAP earnings per share. At the same time, we're continuing to invest in areas that we believe will drive long-term profitable growth. Let me update you on our customer business strategies and the promising early results we're seeing. When I joined, it was clear that we had significant work to do to improve branded checkout. PayPal had fallen behind on innovation, and we had work to do to be more competitive, particularly on mobile devices. In January, we shared new mobile checkout experiences designed to significantly improve conversion. We've completed testing over the past few quarters and are now rolling out to customers new experiences on both desktop and mobile. These new checkout experiences are second to none. When implemented properly, the new product experiences are resulting on average in more than 100 basis points of conversion lift for vaulted checkout and up to 400 basis points of conversion uplift for one-time checkout. We're also seeing a 15% to 20% increase in Buy Now, Pay Later use. These experiences are live on close to 5% of our U.S. checkout traffic today, and we're pushing hard to get them into the hands of more of our merchants throughout the holiday shopping season and into next year. I'm proud of our team's innovation velocity as we reestablish ourselves as the best converting branded experience for consumers and merchants. Continuing in large enterprise. We're |
6,220 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | ourselves as the best converting branded experience for consumers and merchants. Continuing in large enterprise. We're making solid progress on our initiative to price our services in a way that reflects the current value we bring to our merchants. This is now the second consecutive quarter in more than two years, that Braintree is meaningfully contributing to transaction margin dollar growth. We're having very constructive conversations with our merchants, focused on ways we can enable strategic growth opportunities that drive long-term upside for both of us. What is different today is that we now have a suite of value added services, including payouts, risk as a service, orchestration, guest checkout and personalization capabilities that help attract new customers and convert them more effectively, in addition to world-class payment processing. We're excited about our progress here as it is key to long-term value creation. Finally, we're pleased with the initial reaction to Fastlane, which targets the 60% of e-commerce purchases made without a branded mark. Since we launched in August, we have over 1,000 merchants using Fastlane to provide a seamless experience to their customers and drive increased conversion. We've also reached a new milestone in our ability to recognize and auto fill information for first-time Fastlane users. In the U.S., 170 million eligible customer profiles on the PayPal platform can now enjoy a seamless guest checkout, the very first time they try Fastlane. The scale of consumers who are primed to spend with PayPal puts us way ahead of other guest checkout solutions, and it is one of the reasons why so many platforms are choosing to partner with us. We can't wait to get Fastlane into the hands of more merchants, not only on Braintree and PPCP, but also through our partnerships with Fiserv, Adyen and Global Payments next year. Moving to small and medium-sized businesses. Last month, we launched PayPal Complete Payments in new geographies, including China and Hong Kong with more market on |
6,221 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Last month, we launched PayPal Complete Payments in new geographies, including China and Hong Kong with more market on the horizon in 2025. In the markets where PPCP is live, we're steadily converting volume from our legacy products with nearly 40% of our SMB processing and checkout volume now on this platform. What is important to remember is that many of these merchants are using PayPal for both branded and unbranded payments, an example of the benefits that come with integrated solutions. PayPal Complete Payments also allows us to work with many small and medium-sized businesses through partner platforms, including Shopify. As we announced in the quarter, PayPal is now an additional processor for Shopify Payments in the U.S. Our branded checkout solutions are now integrated into Shopify Payments, creating a single, unified experience for time constrained business owners to drive operational efficiency. We also recently announced a partnership with Amazon to bring PayPal Checkout to SMBs offering Buy with Prime. Next year, we will expand our work together to give Prime members the option to link their Amazon and PayPal accounts so that consumers can receive Prime shipping benefits when they use PayPal, while shopping with Buy with Prime. While they will take time to realize, there is significant opportunity here and more we can do to better serve the needs of small businesses. For consumers, we're redefining our value proposition with last month's launch of PayPal Everywhere. This initiative builds on PayPal's established brand position as an online shopping powerhouse to position PayPal as the go-to solution for spending, sending and earning rewards whether online or offline. We're doing this through cashback incentives on the PayPal debit card, a marketing campaign with the goal of reintroducing our capabilities to consumers, who may never have thought about PayPal as more than an online payment option. We're starting to shift perceptions of PayPal and beginning to drive adoption of our suite of |
6,222 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | than an online payment option. We're starting to shift perceptions of PayPal and beginning to drive adoption of our suite of complementary products, which all drive back to branded checkout. The broader awareness and perception shift we're aiming for is not going to happen overnight. This is an area where we plan to continue to invest over time. That said, we're seeing early signs that give us confidence our strategy is working. Since we launched PayPal Everywhere, we've added more than 1 million first-time debit card users. As a reminder, we're allowing consumers to pick a cashback category of their choice each month, which is capped at $50 per month. The top three categories, customers are choosing and earning rewards for us so far are groceries, gas and restaurants. What gets me so excited is that we're now seeing customers make daily in-person purchases with their PayPal debit card. In addition, these debit card users are now choosing PayPal branded checkout more frequently when they shop online. Early data from our existing customers shows a 5x increase in total omni spend within the first two weeks of sign-up. We plan to expand the PayPal Everywhere value proposition to Europe next year, incorporating learnings from our U.S. launch. We expect the availability of NFC capabilities will help drive further adoption and use of PayPal. With Venmo, we're making progress in executing our strategy to shift from solely a P2P service to a central part of consumers' financial lives. Our new leadership team is taking a fresh look at Venmo, and we're completely transforming and upgrading the user experience. We know that we inherited one of the strongest P2P brands and see an opportunity to prioritize innovations that unlock Venmo's value. We believe that Venmo will eventually have multiple monetization levers. In the short-term, we see two meaningful contributors. Let me unpack each of them. First is the Venmo debit card, which allows customers to spend with their balance, both online and offline. We're in the early |
6,223 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | First is the Venmo debit card, which allows customers to spend with their balance, both online and offline. We're in the early days of driving adoption, but we're seeing encouraging trends in engagement and monetization. In the quarter, monthly active debit card accounts grew 30% yet again. This is exciting as the average revenue per account is 4 times that of all Venmo accounts. However, only 5% of Venmo active accounts are monthly active Venmo debit card users demonstrating the opportunity ahead of us. The second lever is Pay with Venmo, which provides a seamless way to pay online. The strategy with Pay with Venmo involves both consumer and merchant adoption. On the consumer side, 8% of Venmo active accounts are monthly active Pay with Venmo users, so we have room to grow. Monthly active Pay with Venmo users were up 20% in the quarter, and the average revenue per account is 3 times that of all Venmo accounts. On the merchant side, we will bundle Pay with Venmo with PayPal Checkout in our go-to-market motions to accelerate distribution. With these product improvements in place, we're now leaning into marketing for Venmo for the first-time in years. We will continue to build on this foundation and obsess over consumer needs and our product to fully unlock the brand's long-term potential as a multibillion dollar franchise. I want to thank the PayPal team for their continued commitment to transforming our company and making it even stronger. We've got the right team in place and we're playing to win. With that, over to Jamie. |
6,224 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Thanks, Alex. Moving to Slide 7. PayPal delivered another strong quarter of results. The underlying stability and consistency of the business is encouraging, and we remain focused on advancing our transformation to drive durable, profitable growth. Change takes time, and we still have a lot of work ahead, but the team is making steady progress on top of an already solid foundation. Looking at the high level financial results in the quarter, revenue increased 6% on both a spot and currency neutral basis. Transaction margin dollars accelerated slightly from the second quarter, in addition to a nearly 3 point benefit from interest on customer balances, branded checkout, Venmo, Braintree, and better transaction loss performance contributed to growth in the quarter. Our focus on price to value is paying off with Braintree again contributing materially to transaction margin dollars even as volume and revenue growth deliberately slows. Non-GAAP earnings per share were $1.20, representing 22% year-over-year growth. Relative to our guidance, outperformance was driven by a number of factors, including continued optimization of transaction loss, Venmo and improvements in credit. Turning to Slide 8. Our operating metrics reflect another quarter of progress. Total active accounts increased by nearly 3 million from the second quarter to 432 million. Monthly active accounts continued to show steady progress, up 2% year-over-year to 223 million with contributions from PayPal consumer accounts and Venmo. Transactions per active account, which is a trailing 12 month number were 61.4 in the third quarter, up 9%. Excluding PSP processing, transactions per active grew 5%. Moving to Slide 9. Total payment volume grew 9% on a spot and currency neutral basis to $423 billion. Looking at the breakdown by product, global branded checkout volumes grew 6% on a currency neutral basis in the third quarter, consistent with the mid-single digit growth we've seen for the last three years. Within branded checkout, we continue to see |
6,225 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | consistent with the mid-single digit growth we've seen for the last three years. Within branded checkout, we continue to see strength across large enterprise platforms, marketplaces and international merchants. As Alex mentioned, our team is hard at work to drive wider coverage of our most modern best-in-class checkout experiences. We are particularly focused on small and medium businesses and mobile, both critically important areas for us to improve our positioning. PSP processing volume grew 11% compared to 19% in the second quarter. As part of our price-to-value strategy, we are moving deliberately and making decisions that prioritize healthy, profitable growth rather than targeting a high proportion of processing volume at low or even negative margins. What this looks like in practice with some of our largest enterprise customers is often a renegotiated agreement that reduces our total share of payment processing to a more balanced level. So for example, from 95% to 75%, but with better economics and with a greater breadth of products and services. This means we are driving Braintree transaction margin dollar improvements and more strategic partnerships, but with lower volume and revenue growth. Moving to more financial detail on Slide 10. Transaction revenue grew 6% on a spot basis to $7.1 billion, driven primarily by Braintree, branded checkout and Venmo. Other value added services revenue in the quarter increased 2% to $780 million, and interest on customer balances continued to be a meaningful tailwind to OVAS and credit revenue was under less pressure compared to the past three quarters. We have now fully lapped the actions taken last year to tighten credit underwriting and reduce on balance sheet risk. We're seeing better performance across the portfolio and have now started to modestly grow merchant originations. We'll continue to prudently manage the portfolio's exposure with the goal of sustaining our balance sheet light business model, while providing our customers with more ways to manage their |
6,226 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | the goal of sustaining our balance sheet light business model, while providing our customers with more ways to manage their cash flow, spending and borrowing needs. Transaction take rate declined by 4 basis points to 1.67% compared to a 3 basis point decline last quarter. Improvements in Braintree and Venmo monetization benefited transaction take rate. These were offset by large enterprise and marketplace growth within branded checkout, foreign exchange and faster payouts growth. Turning to transaction margin dollar growth. As I said earlier, interest on customer balances, branded checkout, Venmo and Braintree were the largest contributors. Results in the quarter continue to benefit from efforts to optimize transaction loss performance with more advanced data analytics and some transaction expense favorability. Non-transaction related operating expenses increased 3% as we continue to actively manage our cost structure while reinvesting in key growth initiatives, including marketing that was deferred from the first half of the year and the rollout of new products and initiatives like PayPal Everywhere. Non-GAAP operating income grew 18% in the quarter to $1.5 billion. Non-GAAP operating margin expanded 194 basis points to 18.8%, benefiting from transaction margin expansion as well as expense leverage. PayPal generated $1.4 billion of free cash flow in the third quarter. We completed $1.8 billion in share repurchases, bringing the total number of share repurchases over the past 12 months to approximately $5.4 billion. Finally, we ended the quarter with $16.2 billion in cash, cash equivalents and investments and $12.4 billion in debt. Moving to guidance on Slide 11 for the fourth quarter and the full year 2024. We continue to assume a relatively consistent macroeconomic and consumer spending environment for the remainder of the year. For the fourth quarter, we expect revenue to grow by a low-single digit percentage. This is directly related to Braintree merchant negotiations and ongoing efforts to drive quality, |
6,227 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | low-single digit percentage. This is directly related to Braintree merchant negotiations and ongoing efforts to drive quality, profitable growth. As I mentioned earlier, this is a deliberate action and a continuation of the strategy we've articulated throughout the year, where we have accepted a lower near-term Braintree revenue profile in exchange for better margins as we have renegotiated agreements. As a result of these efforts, we expect lower Braintree volume and revenue growth in the fourth quarter and through 2025 before reaccelerating from the reset baseline. This is a healthy profitable trade-off for the business that benefits transaction margin dollar growth and build stronger, more strategic relationships. We expect higher non-transaction OpEx growth in the fourth quarter as we have intentionally concentrated more of our discretionary investment spend, particularly in marketing during the back half of the year and in the holiday season. This is strategically timed to support key initiatives, including the go-to-market of new products and innovation, as well as ongoing marketing and brand campaigns for PayPal and Venmo. Due to this timing, we expect fourth quarter non-GAAP EPS to decrease by a low to mid-single digit percentage. 2024's full year non-transaction OpEx growth rate, which we now expect to increase in the low-single digit range is a reasonable way to think about the OpEx profile for the business next year. But like this year, we expect some unevenness in any given quarter. Moving to the full year in more detail. We are raising our guidance for transaction margin dollars and non-GAAP earnings per share. This increase reflects outperformance in the third quarter as well as strategic reinvestments back into growth initiatives. We now expect 2024 non-GAAP EPS to grow in the high-teens and full year transaction margin dollars to increase by a mid-single digit percentage. We have seen steady profitable growth from our branded checkout business, and the teams are advancing our checkout |
6,228 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | percentage. We have seen steady profitable growth from our branded checkout business, and the teams are advancing our checkout initiatives. I'm encouraged by the rollout of innovation, the initial impact of our price-to-value strategy, ongoing product enhancements in areas like Venmo and P2P and the customer response to the launch of PayPal Everywhere. As we move into the fourth quarter and beyond, we expect to continue making progress, but there are a few factors to keep in mind. Through the first three quarters of the year, growth in interest on customer balances and improvements to transaction loss were an approximately 4 point percentage benefit to transaction margin dollars. Beginning in the fourth quarter, we expect minimal benefit from growth and interest on customer balances and then a headwind beginning in 2025 due to interest rate cuts. We're also planning for some normalization and transaction losses as we roll out new products. We now expect full year non-transaction operating expenses to increase in the low-single digit range with ongoing cost efficiency helping to fund our strategic growth investments. As we move into next year, our focus will be on striking the right balance between investment and productivity, seeking to largely fund long-term investments through savings generated from better deployment of tech and automation. We continue to expect 2024 free cash flow of approximately $6 billion and continue to plan for $6 billion of share buyback this year. In closing, I'd like to thank the PayPal team for their ongoing dedication as we drive meaningful change to strengthen our foundation for profitable growth. We are continuing to execute and we're making good progress and we're excited to share more with you at our Investor Day in February. With that, back to you, Alex. |
6,229 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Today, I am more confident than ever about our future. We have a durable and differentiated market position and a strong brand that we continue to aggressively invest in. PayPal has a massive global opportunity. We have the right team in place to harness that opportunity and we are firing on all cylinders. It's an enviable position, and we're ready to make the most of it to drive value for our customers and shareholders, as we head into the holiday season and 2025. Overall, this was a good quarter for PayPal. We are confident in our strategy and ability to execute going into the holiday season and 2025. Steve, let's go to Q&A.
Steve Winoker: Open the line, I ask everyone in the queue to consider your fellow analysts and ask just one question, so we can get to as many people as possible. Sarah, please open the line.
Operator: Thank you. [Operator Instructions] Your first question comes from the line of Darrin Peller with Wolfe Research. Your line is open.
Darrin Peller: Hey, guys. Thanks and nice results on gross profit in the quarter. Look, unbranded decelerated as expected. It looks like you've been able to successfully meet that with strong pricing for value. So maybe, Alex, if you could just start by touching on the customer response to the pricing changes and what you're bringing to the table? And then just maybe perhaps touch on the deceleration, again, embedded in fourth quarter margin growth along with how we should think about the exit rate into '25. Jamie, that was helpful color, but any more just in terms of the dynamics and what gives you conviction in the sustainability to the underlying trends? Thanks, guys. |
6,230 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Why don't I start with the second part of your question, Darrin. Good morning. And then Alex can talk about merchant response. So when we look at transaction margin dollars, as you mentioned, we're really excited about our momentum throughout 2024. And maybe I'll pause and just talk for a second about third quarter transaction margin and then talk about the comparative to fourth quarter. And what's important here is, we did have benefit from interest income in the third quarter. It was about 3 points. But more importantly, we have really good underlying growth drivers. Branded checkout TPV was up 6%, profitably growing transaction margin. It was our second quarter with Braintree contributing nicely to transaction margin dollars growth. So just continued progress there, which has been great. And then Venmo monetization, and Alex mentioned a couple of the data points on the call that, that's really starting to move along. And it's early days, but we're starting to see that become very consistent as it rolls through transaction margin dollars. So all of that consistent trends into fourth quarter. But what we've see in fourth quarter that is a little bit different is that, number one, interest income, it's been a benefit all year, that is going to be a meaningfully lower tailwind in fourth quarter. I'm planning on less than 1 point of contribution to transaction margin dollar growth in the fourth quarter. So really relatively immaterial. And then we're also planning for transaction loss normalization as well. We're launching new products, and we also have some lower fraud recoveries just on a comparative basis. So if I pull up for fourth quarter, we're really looking at low to mid-single digit transaction margin dollar growth for the fourth quarter. Quarter's off to a good start. But the most important holiday weeks are ahead of us, but the consumer feels strong at this point. And then if I pull to '25, I think the thing to think about is, when we look at '25, ex-interest income, we expect transaction |
6,231 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | And then if I pull to '25, I think the thing to think about is, when we look at '25, ex-interest income, we expect transaction margin dollars to grow at least as fast as 2024 on that same basis. |
6,232 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Great. Thanks, Jamie. And Darrin, just to hit on the merchant response. I've personally been involved in a number of these conversations and I'd characterize them as very healthy and very strategic. As Jamie described in her remarks, a lot of this is, us really laying out our strategy to be focused on profitable revenue growth. And sometimes that comes with a relook at our contracts and a relook at the partnership, but I’d say we're bringing more to the table now. And so the conversations we're having with these merchants is, we're innovating, we're bringing Fastlane, we're bringing ads platform. We're bringing additional value-added services that allow us to have a healthier, stronger conversation about where we're going. So it's not that all the merchants were excited to have the conversations, but they understand where we're coming from and we're bringing more to the table. And again, I feel like, as we’ve talked about, we are really focused on building durable growth levers and making sure that we have these conversations with merchants and getting back into a healthy place is a big part of that conversation.
Operator: Your next question comes from the line of Tien-Tsin Huang with JPMorgan. Your line is open.
Tien-Tsin Huang: Hi. Thanks so much. Appreciate all this -- all the data points here. Can you just give us a little bit more detail on the drivers of the more favorable view on transaction margin dollar growth here for the fourth quarter? And would love to hear what might improve and what you're most excited about going into 2025. And I recognize that it's hard to completely offset some of the interest income, but just curious what to be -- what we should be looking here for acceleration in '25? Thank you. |
6,233 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Tien-Tsin, good morning. I really think it gets back to the key themes that we've been seeing all year. We've really focused on durable, profitable growth as we've set the teams up for this year. And part of that gets back to the product innovation and the deep investments we're making in our consumer experience and working with our merchants around branded checkout. The trends on branded have been very consistent throughout this year. And second, and this dovetails with what Alex was just talking about, the focus of the teams around how to really have our Braintree platform be more holistic, really looking at the holistic margin profile and really getting that to a place where we've got a much deeper breadth of value-added services with merchants. I mean, all of those things are things that again, have been growing this year, but the momentum we're seeing now and the visibility into how that continues is just, we just have more confidence and we're more constructive on that today than we were three months ago. And then, Venmo and even P2P, the PayPal peer-to-peer money transfer, those two products are really turning nicely for us. P2P has had a nice turn this year, and we're continuing to see good momentum. And then, when we look at Venmo, the actions of the team to really broaden how we bring this product to our consumers is really real and really rich. And you hear it in some of the data points Alex shared in his prepared remarks. But when you actually look at kind of the activity roll through, Venmo's just a very consistently sticky product for us. So really excited about that. And that's what I see as fourth quarter just continuation and then moving into '25 as well. |
6,234 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah. Just -- Tien-Tsin, just to reinforce what Jamie just talked about, what we talked about with contracts on Braintree, I think that's pretty clear. Venmo, you heard in my remarks, the core drivers that we have, we've now implemented from an innovation perspective. Our Pay with Venmo continued rollout. Our debit card is now embedded in the product. So I feel very good about the durable growth there. Maybe something we haven't connected the dots on well enough is, all of the innovation that we're doing with Fastlane and with PayPal Everywhere and with what I talked about in my remarks on branded checkout, it all comes back to that durable branded checkout growth, right? PayPal Everywhere, we're starting to see real habituation of people not just getting access to the offline checkout, but also now bringing that back into online. So all of this is driving back branded checkout growth. Same with Fastlane, where we're now starting to get more and more users that are just used to seeing the PayPal experience, and we can now market to them to bring them back. So as we move into 2025, I feel like, we are very focused on the core drivers that are important to the business, and we are innovating in the places that matter for our customers and will drive continued durable profitable transaction margin dollar growth into '25 and beyond. |
6,235 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yeah. And maybe, Tien-Tsin, I want to come back and just talk a little bit about interest rates because you mentioned that in your question. And I think, it's probably helpful to table set on that a little bit. So we've talked about transaction margin dollar growth at 8%. When you look at transaction margin dollar growth ex-interest income, which is really a metric we look at just as much as we do the main metric because we think it really represents what we're doing operationally in the business, that measure has been 4% year-to-date this year compared to negative the last couple of years. So when we look at that, really very excited about what we're seeing there. But when we level up and talk about rates, we've had that 3 point benefit this year, fourth quarter. I expect that benefit to be relatively immaterial. The rate cuts that are assumed in the forward curve, let's just pause for a minute on that, our portfolio is about a four month duration. So it just takes time, and it will take time for any particular rate cut to flow through. But the way to think about it when you’re thinking about ‘25 is a 25 basis point rate cut is equivalent to about $40 million of transaction margin. And it depends on timing and when that happens. But if you just said, okay, we’re going to take it down by 100 basis points to 150 basis points next year, it’s about a 1 to 2 point drag on transaction margin dollar growth. So running the business ex-interest income is something we’re going to be very, very focused on, as we go forward.
Operator: Your next question comes from the line of Ramsey El-Assal with Barclays. Your line is open.
Ramsey El-Assal: Hi. Thank you very much for taking my question this morning. Now that you have a larger sample size of Fastlane acceptance in the marketplace, can you update us on the monetization strategy? Help us think through how potentially additive Fastlane take rates might be versus average unbranded volume yields? |
6,236 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah. Let me take the rollout of Fastlane and then, Jamie, if you want to pile on with anything. We are seeing great uptake in Fastlane. I mentioned over 1,000 merchants. We also, as you've seen are starting to bring on additional processors as part of that platform as well. And really, that is the focus of the innovation right now is improving the conversion rate in the 60% of non-consumption of a branded mark. So the majority of checkout is still guest checkout. We now have the best converting guest checkout product in the market. And so, our focus right now is adoption. Our focus is ensuring we get as many processors up and running. That's important, particularly, as we start to bring large enterprises into Fastlane as well because many of them are multiprocessor and will need potentially a Braintree and an Adyen Fastlane experience as well. And so right now, again, all of our focus on Fastlane is adoption. Pricing is built in to all of our contracts. We have relationships directly with the merchants. But our focus right now has been on adoption, and we'll continue to drive that up.
Jamie Miller: Yeah. And with respect to economics and how this will flow through, we are in the midst of a lot of conversations with merchants. And all of that includes the pricing element. And we’ve got good arrangements with our partners as well. Clearly, Fastlane will take time to ramp. And as we get through fourth quarter and through 2025, it will take time to ramp and see in the numbers.
Operator: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open. |
6,237 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg: Thanks, guys. Good morning. I wanted to ask about branded TPV growth. I'm assuming you're expecting continued stability at around 6% in Q4. I'm just wondering, if the broader rollout of the new checkout experience will accelerate the branded growth in 2025? And just as part of that, I know you gave the metric that 5% of U.S. checkout traffic is on the new experience. Any sense of where that potentially goes over the next 12 months? Thanks. |
6,238 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah. Thank you. Thank you, Jason. So to the first part of your question, yes, we see consistent trends when it comes to branded checkout. Again, our focus, and I've been consistent with this really for a year now is the improvement in our branded checkout experience. I've been very transparent that we had fallen behind on innovation, particularly on mobile. And as I sit here today, I am really proud and excited with the experiences we are now putting into market. And I shared some of the data on the improvement in one-time checkout with the 400 basis point improvement in conversion. Vaulted checkout, 100 basis point improvement in conversion. So we've also reduced latency in the overall experience by 45%. We've included additional mobile specific innovations like an app switch, which is driving 10% lift and success for -- versus just password, which is driving -- it's over 97% success rate on iOS now. So overall, we have rebuilt the entire pay sheet, the entire experience on mobile. I expect us to continue to improve on branded checkout. This is a core focus for the business, not only these experiences, but as I mentioned earlier, Fastlane and PayPal Everywhere, everything driving continued flywheel back into branded checkout. So all-in-all, we need to see this play out. In terms of the ramp, I mentioned we're 5% now. Look, the way I think about it is there are some integrations we have with merchants. Think about it as roughly a third or so, of our integrations, we are in -- we have some ability to continue to ramp up. We will do that throughout the holiday season and into early next year. And then some we need, as we've talked about before, many, many -- hundreds of different integration patterns that we need merchants to do the work on. And so the good news is, they now have an incentive to do it. The conversion improvements are significant. And the conversations with merchants now are very healthy, and they’re excited about getting these new experiences ramped up once they get past the |
6,239 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | with merchants now are very healthy, and they’re excited about getting these new experiences ramped up once they get past the holidays. So we’re not standing still. I expect continued momentum on that 5% throughout the next quarter and into 2025. |
6,240 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Dan Dolev with Mizuho. Your line is open.
Dan Dolev: Hey, guys. Amazing results again. I wanted to ask, if it wasn't addressed already. Are you able to give us like a sneak preview of how you see '25 because from our conversations, this remains a big debate? So I appreciate it. Thank you.
Jamie Miller: Good morning, Dan. I think some of the comments that we've talked about already really helps shape '25 to a degree. You start with the revenue line. When we looked at some of the very deliberate and intentional conversations we've had with Braintree merchants, I mentioned in my prepared remarks that we're seeing the impact of some of the revenue trades we're making begin to flow through the numbers in the third quarter. And that's also implicit in our fourth quarter guide as well. We expect that trend to continue through 2025 as we really shift from focusing on high portions of revenue to just more holistic, better margin contracts. Transaction margin, we've talked about a little bit that ex-interest income, really expect to see at least as favorable in 2024. One area we really haven't talked about is OpEx. And if I spend a minute on that, we do expect to see a higher proportion of OpEx in the fourth quarter than we've seen all year. And we're really reinvesting favorability back into the business. And in addition to that, we had deferred marketing expenses very deliberately from the first half into the second half. So you see that pop-up in the fourth quarter. We now expect the full year to be up low-single digits from an OpEx perspective. And when you look at 2025, that's probably the right framing and way to think about it as well. But just more balanced throughout the year in terms of how it flows through. |
6,241 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Let me just -- I'd love to just share and unpack because you asked a little sneak peek about how we think about it and how we talk about it in the business. We are hyper focused on what we are in control of, and we are focused on building durable growth levers. It's why the focus of the innovations that we've talked about, whether it's branded checkout, everything coming back to that, whether it's the conversations in getting healthier Braintree economics, rolling out new innovations like Fastlane and PayPal Everywhere. All of these are things we're in all of its innovation that is important to our customers and that we can monetize over the long term. We also, from the metrics that we're focused on really are thinking about transaction margin dollar excluding interest income because that's the metric we can really think about and be in control of. And again, as Jamie said, if you think about the last two years, that was a negative amount for us. We've now turned that positive in 2024. I believe we now have built a solid foundation and baseline for us to grow on. And I expect 2025 to grow on top of that. So we, at least as strong and grow from where we set the baseline in '24. So the team is focused. Our innovations will continue to roll out into the market, and I think we're in a healthy place.
Steve Winoker: And that’s part of the good thing, Dan, also about the Investor Day that we announced, that Alex announced today in late February, where we’ll have the chance to also dive more deeply into all those elements.
Operator: Your next question comes from the line of Timothy Chiodo with UBS. Your line is open. |
6,242 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Timothy Chiodo with UBS. Your line is open.
Timothy Chiodo: Great. Thank you for taking the question. I want to hit on Braintree, two aspects there. One around competitive positioning on pricing now with the new sort of rebased pricing strategy. And then, also the ability to bundle and get prominent positioning with the button. So first on the pricing piece, really stated its (ph) -- with this new strategy, would you still consider Braintree to be more of a price leader, meaning when the contract is reset, is Braintree still the lowest price of all the merchant acquirers working with these various large enterprise merchants? And the second piece is, in the past, the button was often bundled as part of the contracts to receive prominent position on websites. Is that clause still able to be added into those contracts with this new pricing strategy? |
6,243 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah. It's a great question, Tim. Here's the way I think about it. We are not -- we are changing the conversation with our merchants. It is not just about a processing what I would consider, in some cases, to be just a commodity conversation about pricing. We are -- when we talk about price to value, we're talking about the full strategic conversation and what we bring to the table. And what -- so when I talk about the healthy conversations we're having, and again, I'm having many of these myself. When I talk to the CEO of a merchant, yes, they want great processing pricing. But what they're really focused on, how do they grow customers? How do they get more customers to buy their products? And those are now value services that we're able to bring to them, not just best-in-class processing, not just FX as a service, risk as a service, the ability to sell all around the world. But now we're bringing to them an ads platform. Now we're bringing to them the ability to start to target with payment APIs, the right customers at the right time. And these are really fun and really healthy conversations. And so, yeah, to be honest, yes, we will bundle branded because that's important to us. And it's important to them because it's still the best converting branded checkout option in the world. Yes. We will still have significant pricing that we will price to value, and we will continue to price all our value-added services. What's most important is, these are now bigger, more strategic conversations with merchants that actually help them drive the growth of their business, not just processing their payments.
Operator: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open. |
6,244 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.
James Faucette: Thanks very much. Really appreciate, Alex, your comments there on changing the conversation and being able to bring incremental value, including ad platform and driving that. I guess following up on Tim's question there, as you think about that, as you change that conversation, how should we be thinking about the potential then for pricing or value add and that kind of thing in the future? I know that you've -- I think you've done a really good job outlining that this is going to take time during the course of '25, but thinking about the long-term trajectory of where you would ultimately like to get and what you think that value looks like? Thanks.
Alex Chriss: Yeah. I think, again, it's very similar to what I just shared, which is, for us having these more strategic, deeper relationships that we can monetize across all of our value-added services is what's most important. And so again, whether it's processing, which, again, we should monetize or all the value-added services or the ad platform, Fastlane, all of these different pieces, we're going to continue to lean in. And we're going to continue to work with our partners to drive branded checkout as well, right? One of the things that's interesting as we have these strategic conversations is, how excited these merchants are about the demographics that we have as we start to reignite PayPal Everywhere, right? There's opportunities with merchants that are omnichannel merchants that are thinking about, hey, how can PayPal Everywhere now work in the store as well? As we start to bring Pay with Venmo. Pay with Venmo is an incredible opportunity for merchants as they now think about the ability to get access to one of the most valuable demographics of young, affluent spenders in the United States. And so again, all of these conversations just continue to build on themselves. And I think, we feel good about the conversations as well. Jamie? |
6,245 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yeah. Maybe I'd just add too, a little bit about where we are in the process. We have worked our way through some large renegotiations, which have been really good conversations. But we've got more progress as well in the next couple of years. The agreements are typically multiyear in nature. Some renewals happen earlier than others. But we expect that more visible impact on TPV and revenue over the next several quarters. But more importantly, we expect margin accretion to emerge over the next few years as well and part of that is these renegotiations. But equally, importantly, and you mentioned value-added services, it puts us in a position where in those discussions and following those discussions, the build-out OVAS and how we can bring that to bear in terms of building a much more sticky holistic relationship but one that really improves margin over time, that's a holistic piece of it that we're looking at. And we're already seeing that we have already launched in the third quarter of a really significant new value-added service that has been launched with a big merchant. And it's that kind of thing that we're -- we'll continue to grow.
Operator: Your next question comes from the line of Harshita Rawat with Bernstein. Your line is open.
Harshita Rawat: Hi. Good morning. I want to follow-up on Fastlane. Good momentum with partnerships here. Alex, you talked about 100 merchants using Fastlane. What are you hearing from some of the larger merchants ahead of the holiday season and getting into the testing? And you mentioned using your existing ball to go to deliver Fastlane experience now. How should we kind of think about like the dynamics with branded checkout experiences here? Thank you. |
6,246 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Hi, Harshita. Great question. So just to be clear, we're over 1,000 merchants now on Fastlane and continuing to ramp. A lot of those merchants are some of the smaller businesses, small and mid-sized businesses that are part of platforms that we were able to turn on like big commerce as an example. A lot of the large enterprises, as you can imagine, are in the middle of their holiday season. What we're hearing from them is very, very exciting feedback on ramping Fastlane as soon as they can. Oftentimes, that's going to start in Q1 to be transparent for a couple of reasons. One, a lot of their -- the code is shut down for the holiday season. Two, they want to make sure that Fastlane works across multiple processors and many of the large enterprises are using multiple processors, which is why our multiprocessor strategy for Fastlane is so important. And so, bringing on those partners, as you mentioned, processing partners is critical. But the conversations that I've had personally with a number of the large enterprises is, they're excited about Fastlane, they're ready to get on as soon as they can, and it's just about getting the work done. In terms of bringing that back to branded, we are starting to test into that as well. For us, again, if you think about the experience, we're getting the largest population of any accounts right now. These are people that have bypassed the branded experience or some of them have never been PayPal users, of which those folks that have never been PayPal users, 30% are opting in to Fastlane. So we’re now vaulting their instrument, we’re creating a profile for them, and we’re able to bring them back into the branded experience. And so for us, that’s going to be a big initiative as we go into 2025, building on those profiles, those users that continue to check out at high rates through the guest checkout experience, but sharing with them the value proposition that a PayPal branded experience has. And again, that’s why you’ve seen so much focus for us in ‘24 around |
6,247 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | value proposition that a PayPal branded experience has. And again, that’s why you’ve seen so much focus for us in ‘24 around building a rewards platform and starting to – even in the marketing that you’ve seen us go out, really start to burn into the minds of our consumers that PayPal is the most rewarding experience and the most rewarding way to pay because we want people to be habituated into that branded checkout experience. And we think we now have unique levers, whether it’s through PayPal Everywhere or through Fastlane to be able to bring them into that branded checkout. |
6,248 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Trevor Williams with Jefferies. Your line is open.
Trevor Williams: Great. Thanks a lot. I wanted to go back to the transaction take rate. I think the year-over-year decline there was a little bit bigger this quarter despite a better mix between branded and Braintree. If you could just unpack that, how you're thinking about the trajectory of the take rate from here? And then within branded, the faster relative growth of large enterprise and marketplaces versus SMBs, that's been a consistent callout from you guys. Anything more specific on how that spread looked relative to the last few quarters would be helpful. Thanks.
Jamie Miller: Hi. Good morning, Trevor. So take rate, as you know, there's a lot of factors that impact take rate, both our product mix, our geographic mix, custom mix -- customer mix, as well as pricing. And I would say, improvements in our Braintree margins are directly impacting take rate. And that's one of the things as we have lower incentives that we have improving margins, that's one of the more significant things you see impacting take rate just in terms of the overall mix shift in the numbers. And that is offset by we've also had large enterprise growth at a faster rate as compared to small and medium businesses. And that mix shift as well with large enterprises just having lower take rates than small and medium businesses, that also impacts just the math on that. And we've had some impact from FX in our payouts business as well. |
6,249 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: I'd love to just pile on small business. This is, as you all know, a very strong passion for me. What I feel great about is the innovation that we're rolling out. PayPal Complete Payments is now really the best one-stop shop for merchants to be able to do money in and access to capital. Money out, we still have opportunities as we think about the opportunity to allow small businesses to be able to send payments to others. But overall, FX, global, Fastlane, Venmo, all these different things that we can now package together for small businesses is exactly the right product. And the feedback we're getting, especially, as we lean into no-code, low-code solutions, easy onboarding, bringing developer days, I feel really good about the innovation we have with small business. Where I'm dissatisfied right now is, it just takes time, right? This is a long tail of small businesses. You've got a touch, what is ultimately millions of merchants over a period of time. So it's just not as fast of a switch as being able to just have a handful of large enterprise conversations. But we are building the go-to-market motions. I'm very confident in what the team is bringing up, and I expect that to continue to grow and us really to make penetration in the small business as we look into 2025 and beyond.
Steve Winoker: Let's try to fit in two more questions.
Operator: Thank you. Your next question comes from the line of Bryan Keane with Deutsche Bank. Your line is open.
Bryan Keane: Hi. Good morning, guys. I wanted to ask about branded checkout, the 6% growth rate. Alex, how do you think that compares to the e-commerce market and how you guys are doing versus just thinking about the share? And then with Fastlane and improvements in branded and the focus on SMB, where do you think you can get branded checkout growth rates? Do you think you can get it to high-single digits or just some kind of goals that you guys have set for the company? Thanks. |
6,250 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah. What I'd say is, branded checkout has been very consistent. We are again, the largest, best converting and most share of branded checkout anywhere in the world, and it has been consistent. At the same time, we know there are opportunities. And the innovations that I talked about in my remarks and earlier in the call gives me confidence that we have opportunity to continue to improve that experience and grow. If you also then think about Fastlane, if you think about PayPal Everywhere, the habituation of people bringing back into the online branded experience, I think there's room for us to continue to take share there. So I'm excited about, first, you've got to have innovation. You've got to have a value proposition. I think we put those into market now and we've got the flywheel turning. So again, none of this is going to happen overnight, but I'm excited about where we go there.
Steve Winoker: We’ll take the last question.
Operator: Thank you. Our last question comes from the line of Andrew Schmidt with Citi. Your line is open.
Andrew Schmidt: Hey, Alex. Hey, Jamie. Thanks for having me on here. I wanted to switch to the consumer side for a moment. Maybe talk about just the trajectory you see in monthly actives, especially given the, what you're seeing with the Venmo and the PayPal Everywhere promotion? And then just broadly speaking, maybe you could talk about just the pipeline just for products on the consumer side. It's just an area where we get a lot of questions in terms of the consumer fit? Thanks a lot, guys. |
6,251 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah. Thanks, Andrew. First, what I'd say is, innovation is the most durable competitive advantage we have. And what you've seen for us in the last few quarters is really starting to drive innovation, both on the consumer PayPal app, not just in branded checkout, but actually putting real innovation into the app with PayPal Everywhere launch, giving consumers the opportunity to now have an offline experience, which is driving habituation back into online, an enhanced rewards platform. And then on the Venmo side, leading in with innovations that, to be honest, customers have been asking for, for years with scheduled payments and groups and adding direct deposit. And so when I think about customer growth, customer growth is going to be essential for us as we continue to lean in and want to grow the business but that comes through continuing to innovate and continuing to provide great products to our customers. So what I'm really most satisfied about, when I look back over the last year is, we have an innovation machine that's now starting to ramp up inside of the company. Our velocity is improving, while we're reducing tech debt. Our ability for our engineers to put more releases out into our consumers' hands. And we have a very, very healthy road map of innovation that we'll be driving to our consumers. So very excited about where we lean in over the next quarters. |
6,252 | PYPL | 3 | 2,024 | 2024-10-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yeah. And I would just say, we've seen really steady progress in our monthly actives, both sequentially and year-over-year. And that is both the PayPal consumer and our Venmo consumers as well, also internationally. But one of the things we really haven't talked about, and I think Alex has teased in his remarks here is really PayPal Everywhere as well. And we're really excited about the launch we've had the last couple of months. We're seeing really strong adoption, really strong usage. We had more than 1 million new users since that launch. And the economics are nicely attractive on that. And it really drives habituation inflection. Just like Alex was talking about both with that core product and just the engagement with the app, the engagement with the debit card, all of those things, but also with respect to the halo effect that we see across other forms of branded spend with our products. So that's, I think, a great example of one that we're really excited about, and we'll have more of.
Steve Winoker: I know we've gone over a little bit, but Alex, any final thoughts?
Alex Chriss: Yeah. So thanks to you all, and thanks, Steve. So look, we’ve set a solid foundation to build upon, and we’re executing against our strategy. I’m very proud of our team and the momentum we’ve created for our consumers, merchants and partners. And I’m excited to deliver a solid holiday season for our customers and continue the trajectory into 2025. So take care, everyone.
Operator: Thank you. This concludes today's conference. Thank you for participating. You may now disconnect. |
6,253 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Good morning and welcome to PayPal's Second Quarter 2024 Earnings Conference Call. My name is Sarah and I'll be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer. Please go ahead.
Steve Winoker : Thanks, Sarah. Welcome to PayPal's Second Quarter 2024 Earnings Call. I'm joined by President and CEO, Alex Chriss and CFO, Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses, as we see them today. As described in our earnings press release, SEC filings and on our website, those elements may change as the world changes. Now over to you, Alex. |
6,254 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Thank you, Steve. And thanks to everyone for joining us this morning. PayPal delivered a strong second quarter and first half with encouraging operating and financial results. While change takes time and we still have much work ahead of us, we are well positioned today, have the right leadership in place, and are moving full steam ahead. I'm confident we are on the right track in making meaningful progress on our transformation to position PayPal for long-term, durable and profitable growth. Looking at our results in the second quarter, total payment volume rose 11% to $417 billion, and we delivered 9% revenue growth on a currency-neutral basis. Transaction margin dollars grew 8%, representing our best performance on that metric since 2021. Our non-GAAP earnings per share increased 36% year-over-year. We're encouraged to see not only the strength and stability in PayPal's platform, but also early contributions from some of the initiatives we have underway. Branded checkout continues to grow profitably. Braintree is now meaningfully contributing to transaction margin dollar growth for the first time in over two years. Venmo momentum continues to build and monthly active accounts increased across both PayPal and Venmo. Given the strength across PayPal, we are raising our full year guidance for growth in transaction margin dollars and earnings per share, and increasing our investment in strategic growth initiatives that we are driving. Overall, we remain on course with the strategy we set at the beginning of the year. Our teams are moving with urgency, excited about our innovation, and focused on execution. We are still early in our transformation, and while pleased with our progress in many areas, we know there is much more we can do and with greater speed. For example, mobile experiences, SMB, and Venmo are places we are working hard to improve, and we are continuing to identify ways to operate more effectively and efficiently. I want to spend a moment discussing how PayPal stands apart, as a |
6,255 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | to identify ways to operate more effectively and efficiently. I want to spend a moment discussing how PayPal stands apart, as a strategic commerce partner. In the past two quarters, we have talked at length about the experience upgrades we are bringing to branded checkout. However, I do not want to lose sight of what makes PayPal truly differentiated, our two-sided network of hundreds of millions of consumers and merchants worldwide. We are building an end-to-end platform, spanning the full commerce journey with superior customer experiences and sales conversion from start to finish. PayPal is one of the only players with both sides of the network, consumer and merchant at scale globally and with the infrastructure to support it. That is incredibly hard to replicate and a powerful foundation on which to launch new innovations including Fastlane and the Ads platform that we are in the early stages of building. The data insights and compounding network effects, give us an incredible advantage that we are now just beginning to harness fully. Today, we operate in a massive $6 trillion plus global e-commerce market that benefits from the ongoing digitization of payments and commerce in new contexts. These tailwinds, combined with the initiatives we are now executing, such as building more omnichannel capabilities and offering more value-added services for consumers and merchants, will expand our addressable market and provide PayPal with significant opportunity for long-term growth. Over the last year, we've been working to transform our global business from a series of products and services into a multi-faceted, omni-channel, and open platform capable of generating value in multiple ways throughout the commerce ecosystem. We are building a platform that delivers far more value to our customers and partners than the individual products we offer. This is a key differentiator for PayPal and will expand our market opportunity over time. The initial response to the innovations we are introducing gives us confidence that |
6,256 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | expand our market opportunity over time. The initial response to the innovations we are introducing gives us confidence that we will see more consumers and more engagement in more places across our growing network. That in turn will drive more merchants and higher levels of commitment into our ecosystem. These network effects will be mutually reinforcing, compounding, and add value to the company. Our peers are taking note, and the value of our platform is being recognized by large tech companies that are seeking to partner with us in a variety of new ways. One great example of this is Meta, which we already partner with on multiple fronts. PayPal is a top payment method for advertisers and consumers globally across Meta's family of apps. Meta's donations and charitable giving campaigns now run on the PayPal Giving Fund platform. Meta pays out creators and developers using Hyperwallet, and Meta uses Braintree for credit card processing. We are working closely with Meta to optimize the experiences and look forward to deepening our partnership with Meta in mutually beneficial ways in the months and years ahead. You will continue to hear about more partnerships with deepening commitments over the coming quarters. Let me update you on our customer-backed business strategies. We continue to execute with high velocity to enhance customer experiences and value for our large enterprises, SMBs, and consumers. We are building the foundation for our next phase of growth. For large enterprises, we continue to have a productive conversation to help merchants understand the additional value they can unlock by strengthening their relationship with us to take advantage of our full platform capabilities. For example, we recently renewed our contract with DoorDash to expand how we work together. Beyond unbranded PSP processing and offering our branded marks, DoorDash also relies on our risk capabilities to mitigate losses. As part of our new agreement, DoorDash has committed as an initial launch partner for our latest branded |
6,257 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | to mitigate losses. As part of our new agreement, DoorDash has committed as an initial launch partner for our latest branded checkout enhancements that we announced in January. And they will be participating in our new ads platform. Combining our best-in-class payments platform with value-added services that are margin accretive is helping us create a more profitable dynamic. Last quarter, I told you we expected to make Fastlane generally available in the US, in the second half of the year. I'm pleased to announce that in August, we are delivering on that commitment and making Fastlane generally available to merchants in the US. This includes merchants on Braintree and PPCP, as well as through partners, including Salesforce, Adobe, and BigCommerce. While broad adoption will take time, we have heard from many merchants who are excited to add Fastlane and have a robust go-to-market strategy. As I've shared before, data from our early adopters shows that returning Fastlane users, convert at nearly 80% versus the industry average guest checkout conversion closer to 50%. As our network builds with more merchants and consumers, we expect benefits to scale over time because we will be able to recognize even more shoppers. The early feedback we've heard from our merchants and sales team gives us increasing confidence that Fastlane will accelerate PayPal's ability to capture the roughly 60% share of e-commerce purchases made without a branded mark. As a reminder, A large part of that 60% is still manual card entry, has low conversion today, and is generally a poor experience for consumers and merchants. Much of that is now changing with Fastlane. For small and medium-sized businesses, we are continuing to improve our value proposition through the rollout of PPCP. We continue to make progress migrating volume from legacy platforms onto this new solution, as well as integrating with new partners and merchants. SMB volume on PPCP continues to trend positively, up more than 40% through the first half of the year. A large |
6,258 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | and merchants. SMB volume on PPCP continues to trend positively, up more than 40% through the first half of the year. A large portion of that volume is coming from merchants using PayPal as their full stack processor across both branded and unbranded payments. Our efforts here are also important because PPCP ensures merchants have our latest branded checkout integration, which will include Fastlane. That will give consumers a best-in-class checkout experience wherever they shop and help merchants benefit from higher conversion. On average, merchants who adopt PPCP use more products, which deepens our relationship, reduces churn, and drives higher average revenue per account. As I said before, this is an area where we are focused, and we have tremendous opportunity to better serve small businesses' end-to-end needs. For consumers, we are focused on extending our leadership in consumer preference, increasing the share of checkout, and driving more frequent engagement from our consumers. In the second quarter, we launched in-app offers with major brands including Best Buy, Priceline, Lyft, Instacart, Ticketmaster, Walmart, and Nordstrom. We are seeing positive trends in consumer engagement with gross merchandise volume driven by one of our offers nearly tripling in June compared to March. And while still early days, the initial interest from advertisers is encouraging. As we shared before, you will see us invest in marketing in the back half of the year and beyond to further position PayPal and Venmo as rewarding ways to pay. I talked previously about our need to improve our branded checkout experiences on mobile devices. That improvement is now happening. In the first half, we started ramping several designs and technology innovations to our branded checkout flows to improve the experience for our customers. For example, we are launching a new super simple vaulted experience for high repeat use merchants. In initial tests, the redesigned vaulting payment page alone shows a conversion lift of 75 to 110 basis |
6,259 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | repeat use merchants. In initial tests, the redesigned vaulting payment page alone shows a conversion lift of 75 to 110 basis points. Experiences like this one are clearly resonating with consumers. And remember that every point of conversion lift, drives significant value for our merchants who are fighting to win every sale. We will be ramping our redesigned branded checkout experiences to all eligible consumers in the US in the coming weeks and months. As the number one branded mark with the largest network of merchant acceptance, we are a ubiquitous checkout solution. We are continuing to innovate and create high converting experiences on both desktop and mobile and across platforms and devices. We also continue engaging consumers post purchase with smart receipts, package tracking, push notifications, and more, adding increased value and driving the PayPal engagement flywheel. In fact, we drove almost 20 million app logins from our post-purchase experiences in June alone, growing more than 70% from a year ago. P2P is an essential acquisition and engagement tool for us, and we are returning it to growth. We suffered declines through 2023, but over the past few quarters we have seen an improvement driven by product enhancements such as new global withdrawal capabilities, better risk decisioning, and more cross-border activity. We will continue to invest in our experiences, pricing, and marketing to drive enhanced awareness and engagement. Turning to Venmo, we are building on the business’s strong market position. In the second quarter, Venmo processed more than $73 billion in total payment volume, growing 8% year-over-year. With monthly active, increasing 5% year-over-year, to nearly 62 million. Both a strong base of peer-to-peer users and adoption of our ecosystem of products are driving this growth. For example, both Venmo debit card and Pay with Venmo monthly actives grew approximately 30%. In the second quarter, we launched push provisioning of the Venmo debit card to Apple and Google wallets and continued |
6,260 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | 30%. In the second quarter, we launched push provisioning of the Venmo debit card to Apple and Google wallets and continued to enable Pay with Venmo with more merchants and partners, including eBay and StubHub, which we expect will continue to fuel this growth. Our recently launched Venmo Teen Accounts is showing encouraging early traction, expanding our addressable market, and helping us build lifelong relationships with customers from an early age. What excites me most about Venmo is that we are only scratching the surface of its potential, starting to drive customer-led, profitable innovation, and we see substantial headroom for growth. Said simply, Venmo is primed for growth. Finally, consumers who love PayPal for online purchases are also telling merchants they want to use PayPal for their offline purchases. We continue to drive the adoption of our card products, and we're making it easier to add PayPal and Venmo branded cards to Apple and Google wallets on mobile devices. We are also looking forward to launching even more ways for consumers to use PayPal anytime, anyplace with NFC technology starting in Europe. Expect to see more from us in the coming quarters to enable and incentivize our customers to use PayPal online and in person. Reflecting on the quarter and looking ahead, I want to thank the PayPal team for continuing to work tirelessly as we transform our company and give our customers the best possible experiences. With that, over to Jamie. |
6,261 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller : Thanks Alex. Good morning everyone. Moving to Slide 6, PayPal delivered strong second quarter results and we are raising our full year guidance. We're passing through the first half performance and increasing second half growth investments as we build confidence in initiatives across the company. Our goal for 2024 remains the same, to set PayPal up for long-term success by prioritizing investments that will deliver durable, profitable growth. As Alex mentioned, while the second quarter produced another improving set of results, change takes time and can sometimes be uneven. The success of our transformation will be measured over quarters and years. We have a lot of work ahead but the teams are making progress and building on a strong foundation visible in our first half results. Looking at the high-level financial results in the second quarter, revenue increased 8% at spot and 9% on a currency-neutral basis. Transaction margin dollars grew 8% year-over-year, a more than 300 basis point improvement from the first quarter. Non-GAAP earnings per share were $1.19, representing 36% year-over-year growth. And relative to our prior expectations, higher earnings per share were driven by a combination of factors, including stronger transaction margin dollar growth and interest income. Turning to Slide 7, our financial results are a function of the number of customers we have, how engaged they are across our platform, and how frequently they transact with us. Our operating metrics reflect progress on this front. We ended the second quarter with 429 million total active accounts and 222 million monthly active accounts. Total active accounts increased by nearly 2 million from the first quarter and included growth in PayPal merchant and consumer accounts in addition to other products. We were encouraged to see sustained total active account growth following a positive inflection in the first quarter. Monthly active accounts continued to show steady progress, up 3% year-over-year to $222 million with |
6,262 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | in the first quarter. Monthly active accounts continued to show steady progress, up 3% year-over-year to $222 million with contributions from both PayPal consumer accounts and Venmo. Transactions per active account, which is a trailing 12-month number with 60.9 in the second quarter up 11%. Excluding PSP processing, which is primarily Braintree, transactions per active account grew 6%. Moving to Slide 8, total payment volume grew 11% on a spot and currency-neutral basis to $417 billion. US TPV grew 11%. International TPV also grew 11% on a currency neutral basis, primarily driven by strength in continental Europe and Asia. Looking at the breakdown by product, global branded checkout volumes grew 6% on a currency neutral basis in the second quarter. This was consistent with our first quarter performance, which increased 6%, excluding a one-point benefit from the additional leap day. Within branded checkout, we continue to see strength across large enterprise platforms, marketplaces, and international growth. We remain laser-focused on driving deeper adoption of our best-in-class solutions with small and medium businesses and improving our mobile experiences, which are critical, particularly in markets like the US. And the UK PSP processing volume grew 19% in the quarter compared to 26% in the first quarter. Importantly, we are beginning to see the benefit of our shift in strategy to drive profitable growth. Our focus on price to value is having an impact with Braintree now contributing positively to transaction margin dollar growth in a meaningful way. Moving to more financial detail on slide 9, transaction revenue grew 9% on a spot basis to $7.2 billion driven primarily by Braintree, Branded Checkout, and Venmo. Other value-added services revenue in the quarter was close to flat at $732 million. Interest on customer balances continued to be a meaningful tailwind to OVAS revenue and contributed approximately 3 points to transaction margin dollar growth in the quarter. Revenue within our credit business declined |
6,263 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | approximately 3 points to transaction margin dollar growth in the quarter. Revenue within our credit business declined year-over-year but performed in-line with expectations. Part of the decline is due to proactive decisions made last year to manage risk and reduce on-balance sheet merchant receivables. We are also seeing ongoing normalization of loss rates within our off-balance sheet US Consumer revolving portfolio. Overall, we have taken steps over the last year to actively manage the credit portfolio's exposure and are continuing to position the portfolio to move toward a less capital-intensive business model. Transaction take rate declined by 3 basis points to 1.72% compared to a 5 basis point decline last quarter. PSP Volumes and Venmo benefited transaction take rate, which was offset by faster large enterprise growth within our branded checkout business, foreign exchange fees, and an acceleration in other merchant services, including payouts. Transaction margin dollars increased 8% in the second quarter compared to a 4% increase in the first quarter. Higher interest on customer balances, branded checkout, Braintree, and Venmo were the largest contributors to year-over-year growth. Branded checkout and Venmo's strong transaction margin results benefited from ongoing efforts to improve and optimize transaction loss performance as well as some transaction expense favorability. While it's still early, we are encouraged to see initial actions related to price value, as well as product and ongoing risk enhancements make a positive impact. Relative to last quarter, we saw Braintree return to profitable growth and improvements in the contribution from Venmo, Branded Checkout, and P2P. Non-transaction-related operating expenses declined 1% as we continue to actively manage our cost structure, while reinvesting in key growth initiatives. Non-GAAP operating income grew 24% in the quarter to $1.5 billion. Non-GAAP operating margin expanded 230 basis points to 18.5% benefiting from expense leverage and improvement in |
6,264 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | $1.5 billion. Non-GAAP operating margin expanded 230 basis points to 18.5% benefiting from expense leverage and improvement in transaction margin trends. PayPal generated $1.4 billion in free cash flow in the second quarter, and we completed $1.5 billion in share repurchases, bringing share repurchases over the past 12 months to approximately $5 billion. Finally, we ended the quarter with cash, cash equivalents and investments of more than $18 billion and debt of just over $12 billion. Moving to guidance on Slide 10 for the third quarter and the full year in 2024, for the remainder of the year, we continue to guide, assuming a relatively consistent macroeconomic and consumer spending environment. For the third quarter, we expect revenue to grow by mid-single digits and non-GAAP EPS to grow by high single digits. We are raising our guidance for the full year and now expect 2024 non-GAAP EPS to grow in the low to mid-teens. This increase reflects outperformance in the second quarter, as well as a slightly more positive view of the second half of the year, with some strategic reinvestment into growth initiatives. Underpinning our guidance, we now expect transaction margin dollars to increase by a low to mid-single digit percentage for the full year. We have seen steady profitable growth from our branded checkout business and feel confident in the progress our teams are making. It is encouraging to see the initial impact of our initiatives related to price to value, as well as ongoing product enhancements in areas like P2P. Some of our efforts, particularly on the innovation side, are still early and will take time to scale. But we are encouraged by the initial results and customer response, as we begin moving from the test and pilot phases into launch. As we move into the second half of the year, we expect to continue to make progress on these fronts, but there are a few factors to keep in mind. Consistent with the strategy we laid out in prior quarters, our teams continue to prioritize high-quality, profitable |
6,265 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | in mind. Consistent with the strategy we laid out in prior quarters, our teams continue to prioritize high-quality, profitable growth as we execute against our long-term roadmap. Related to this, we expect lower volume and revenue growth as we move through the second half of the year. This is deliberate, and it shows good progress. By strategically focusing on price-to-value in areas like large enterprise processing within Braintree, we are driving transaction margin dollar improvements even on a lower volume growth. Offsetting some of these improvements, we expect a much smaller tailwind from growth and interest on customer balances, which represented an approximately 3 percentage point tailwind to transaction margin dollar growth in the first half. We were also planning prudently and forecasting less favorability with some normalization in transaction and credit losses. We continue to expect non-transaction operating expenses to increase slightly with ongoing efficiency funding our strategic growth investments. Our investment spending will ramp as the year progresses to support our highest priority growth initiatives that go-to-market of new products, partnerships, and innovation, as well as reinvigorated marketing and brand campaigns for both PayPal and Venmo. These investments are all in support of re-accelerating durable, profitable growth for the company. Given the strong start to the year, we are raising our 2024 free cashflow guidance to approximately $6 billion. We are also increasing our share buyback plan to $6 billion compared to our prior guidance for at least $5 billion. In closing, we've been making good progress throughout the first half of 2024, as we drive significant change across the company. We have clear opportunities to lean in further and ensure we stay on offense in what remains a competitive and dynamic environment. We're excited about the path forward and look forward to updating you on our progress along the way. With that, back to you, Alex. |
6,266 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Thank you, Jamie. To summarize, PayPal grew profitably again with strength in multiple areas, including branded, unbranded, and Venmo. We are also starting to see traction in several initiatives. Taken together, these results highlight the strength of PayPal's global commerce platform. I'll leave you with one last example. You've heard me talk about our Venmo customers, looking for us to provide more money in and money out opportunities. As we are improving opportunities to spend Venmo balance with products like Venmo debit card or pay with Venmo, we are seeing a corresponding improvement in funds being used within the Venmo ecosystem rather than transferred out. This is an example of meeting our customers where they are, solving their needs, and driving monetization and margin improvement in the process. Overall, this was a strong quarter for PayPal, and it gives us the confidence to both increase our growth investments and raise our full year profit and free cash flow guide. I'm proud of our team and excited about the coming quarters and years for PayPal. Steve, let's go to Q&A.
Steve Winoker : Thanks Alex. Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask just one question, so we can get to as many people as possible. Sarah, please open the line.
Operator: Thank you. [Operator Instructions] Your first question comes from the line of Ramsey El-Assal with Barclays. Your line is open.
Ramsey El-Assal: Hi, thanks so much for taking my question and great to see all the progress that you're making. Branded volumes maintain the X-leap year growth rate from last quarter. Can you drill down a bit more into your strategy to drive branded growth acceleration? You mentioned it focused on mobile vaulting user interface. What are the most important levers? And then maybe also, did Jamie's comments on lower volume right there at the end of the prepared remarks in the second half apply to both branded and unbranded volumes? Thanks. |
6,267 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah, thanks for the question, Ramsey. You know, we're excited to see the progress that we've made on branded. As you can see, we've got a consistent, loyal customer base that continues to use and love PayPal. What we've been focused on over the last six months is really some of the things I've touched on before, the experiences particularly around mobile. I touched on some of it in the comments, but the teams are working night and day now to improve everything from the vaulted experience, which is essential on mobile. This is think of high usage, high repeat usage checkout experience where you actually vault PayPal as your default. We've now improved that experience. And as I mentioned, we're seeing a 75 to 110 basis point lift with our new experience. We're also rolling out a new pay sheet experience overall, which simplifies, gives customers still the choice of whether they're using PayPal Balance or any instrument they want, as well as buy-now, pay-later, but just simplifying the experience. And We are seeing a nice lift in conversion rate there as well. So big focus on the end-to-end customer experience. We feel like that combined with the ubiquity that we have just in marks across both mobile and web gives us the ability to continue to not only maintain, but where we want to be, which is taking share in the branded experience.
Jamie Miller: Great. And Ramsey, on the second part of your question about lower volumes in the second half, that primarily relates to Braintree. We are seeing both lapping of larger wins this year, particularly in the second half, and some shifting and normalization in the Braintree revenue profile, just as we enter into and really get into the process of working with our customers around our mission around profitable growth. But on the branded checkout side of things, we expect the second half to be consistent with the first. July is off to a good start. What we've seen in July is very consistent with the first half so far. So we feel pretty good about that. |
6,268 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Ramsey El-Assal: Thanks so much.
Operator: Your next question comes from the line of Darren Peller with Wolf Research. Your line is open.
Darrin Peller: Hey, guys. Thanks, and nice results, especially on the transaction margin side. So I'll just start there and touch on the dynamics around what's contributing to it from mix versus you talked a lot about pricing per value, which we've heard more and more about in the industry also, so it's good to see, but maybe more direction and color on the contributing forces. And adding onto that, the sustainability of the strength you saw this quarter in growing transaction margin dollars at these rates. Help us understand your expectations there going forward now. Obviously, you updated guidance, but really beyond just the next few months. Thanks, guys. |
6,269 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yeah, so good morning, Darrin. Thank you. So maybe I'll start with the biggest contributors to transaction margin dollar growth and talk a little bit about the second half there as well. So we were really excited to see the broad base strengths and the acceleration. There's a lot the team has underway and there's several significant contributors to the growth. First, we talked about in my prepared remarks, interest income on customer balances. That was about 3 points in the first half. But second, and really very strong was branded checkout. It continues to grow profitably as a healthy contributor to transaction margin dollar growth. Braintree, which you mentioned, it is back to contributing to transaction margin dollar growth, which we're really excited about. And it's really great to see some progress from our shift in focus there. Venmo continues to benefit not only from the strong consumer, but, you know, we're doing a nice job in Venmo too, driving continued growth in monthly actives. And then lastly, transaction loss favorability continued to be favorable in the second quarter as well, which was nice to see. When we think about the second half, there is really a couple of things to think about there. I'd say first is that our first half tailwinds around interest income, you know, will begin to decline. We've just got higher comps in the second half of 2023, as rates were coming up in the second half of last year. So that impact on transaction margin dollar growth, the percentage, that'll start to come down. The second is that we saw transaction loss favorability in both the first quarter and the second quarter. It is feeling more durable than we expected, even in the first quarter. Having said that, we're planning for some normalization in the second half. As we get better in transaction loss prevention and detection. So do bad actors, and they continue to work hard to do different things. And the second is we are launching a number of products in the second half. And any time you launch |
6,270 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | to do different things. And the second is we are launching a number of products in the second half. And any time you launch products, we're just being prudent around how we think about transaction loss to make sure that if we have a few bugs in the process, we're working the kinks out as we go. But the core business is solid. We are more positive than we were three months ago on Braintree profitability, P2P, on transaction loss. It's still early in our progress but we're driving significant change. |
6,271 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Tien-Tsin Huang with JP Morgan. Your line is open.
Tien-Tsin Huang: Hi, thanks. Good results here. I wanted to ask about the second half growth and investments. It looks like in your guidance you're applying a fourth quarter step down in EPS performance there. So does that, should we assume that that's heavy marketing around the holiday? Can you maybe just give a little bit more specifics on what you're marketing exactly and what kind of return you're expecting? Thanks.
Jamie Miller: Hi, Tien-Tsin. Good morning. I'll take the first part, and then maybe Alex will want to comment on the marketing pieces of it. So in the first half, we've done, I think, a really nice job with expense discipline. We've taken a number of actions to reduce our OpEx profile, while at the same time remixing or prioritizing investment back into engineering product and some marketing. Now we intentionally deferred in the first half some marketing dollars to the second half. So when you look at the second half profile, you're seeing the same underlying core reinvestment in engineering and go-to-market and things like that. But you're also seeing a much bigger ramp in our marketing spend, you know, around marketing and brand campaigns for both PayPal and Venmo. But really also around these product launches, really making sure we put our marketing dollars to work to have that hit the ground running the way we need to. So in the second half, when you think about the EPS guide side of it, more than half of that 4Q pressure is the ramping of those growth investments. The other side, I'll just mention this quickly while around the topic, is that we've got a higher tax rate in the second half than we have in the first half. And so that, particularly on a comparative basis to last year, is what's impacting some of the EPS profile? |
6,272 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah, and just to pile on and dig a little bit deeper, you know, this is very deliberate. The first half of the year, we needed to invest in innovation and invest in the customer experiences and put to market experiences on both PayPal and Venmo from a consumer standpoint that we can be proud of. I feel like we are at that place now. The experience on the PayPal app, what we are putting out on branded experiences, and even just the engagements, just the new designs, the shopping and rewards that now exist inside of the PayPal app is completely rebuilt and new. On the Venmo side, you've seen the improvement as we started to create real onboarding ramps for our debit card, and we are seeing the improvement there. So feeling really good about the experiences on both of the apps and it's time to tell the world about it. And we are excited to ramp up some of our go-to-market spend in sort of exciting and engaging ways.
Operator: Your next question comes from the line of Harshita Rawat with Bernstein. Your line is open.
Harshita Rawat: Hi, good morning. Alex, I want to ask about Europe. Historically PayPal has grown in the region despite not investing enough. How are you thinking about Europe among PayPal's international markets? Looks like the company has a very strong local presence and the regulatory environment is now more favorable with respect to NFC access [iPhone] (ph)? Thank you. |
6,273 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah, I think it's a great question, and it's one of the things that we may overlook sometimes when we just think about PayPal. We are a global company, and the way customers use us, whether it be cross-border, whether it be access to merchants all over the world, is truly a global phenomenon. We've invested heavily over the years in ensuring that we are compliant in everywhere that we want to be in over 200 different markets. You know, as we think about our strategy, as I've laid out in the past, to make sure that PayPal is available everywhere for every purchase every time. That includes being able to be available in an omnichannel solution, whether it's e-commerce or whether it's in-person. And with some of the changes coming particularly in Europe around NFC, that opens up the opportunity for us and we will be prepared shortly to be able to play in that space. So it's exciting to see our growth. I'll hit one more example. Our buy now pay later growth that we continue to see, 60% of that volume comes from outside of the US. So we are bringing the entire ecosystem of what PayPal brings to the global stage and excited to continue to invest there.
Operator: Your next question comes from the line of Colin Sebastian with Baird. Your line is open.
Colin Sebastian: Great, thanks, and good morning to everybody. I was curious on the SMB initiatives, in particular the strategy to drive more adoption of branded checkouts, how important Fastlane is that initiative. And then also, if you think advertising can be ultimately a lever for that side of the business as well on both sides of the network. Thank you. |
6,274 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah, it's a great question. And SMB, as I've said since I got here, I think is an untapped opportunity for us. So let's just pull back and talk about what SMBs really need. Small businesses are there fighting for every customer. They need to be able to find customers, they need to be able to engage with customers, convert them, and then reengage with them. And really what they're looking for is an end-to-end platform and an end-to-end solution to help them. It is very difficult for a small business to piece together 17 different solutions. They just don't have the bandwidth, the people, and the time to be able to make that happen. With PPCP, we now have put together the most powerful single platform for them to be able to run their business in a full stack manner. So with PPCP, you now get branded experiences with the best branded experiences. You get access to the best guest checkout conversion with Fastlane. You get unbranded processing so that you can ensure that you can process anywhere around the world. You get every mark. You get buy-now pay-later. You get access to our working capital. And then as you mentioned, now that we start to roll out our ads platform, you get the ability to drive new customers. You also get the ability to re-engage with customers in a delightful way, so package tracking, smart receipts, the ability to be able to re-market to customers even after they've purchased. All of this is in one place with one partner. And so, you know, we're in early days right now. PPCP really is just rolling out. We're excited about the progress and the growth, but there's a lot more to play here. Live in 30 markets and through 40 partner channels. But I think we're just getting started. This is going to play out over the next few years.
Operator: Your next question comes from the line of Sanjay Sakhrani with KBW. Your line is open. |
6,275 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Sanjay Sakhrani with KBW. Your line is open.
Sanjay Sakhrani: Good morning. It's nice to hear about the accelerated general availability of Fastlane. Maybe you could talk about what it means from a revenue contribution standpoint. And if not this year, maybe we could just talk about how we should think about the revenue contribution. Would it be through more engagement? And then maybe just secondly, if you could just talk about the volume trends. It seemed like US was pretty stable, international dropped off. Maybe you could fill a bit more color there would be helpful. Thanks.
Alex Chriss: Yeah, let me start with Fastlane. So just as a reminder for everyone, Fastlane is really tackling the 60% of checkout that is guest checkout. We've got a unique experience because of the volume of our two-sided network and the consumers that we see coming in, where we're able to dramatically change the conversion rate for repeat users. So 80% conversion rate versus a traditional roughly 50% on a repeat user. Our goal is to capture and help all merchants for all guest checkouts. So the way we built Fastlane is this really is a platform that can be processed or agnostic. And we want to be able to help every consumer come through and have a delightful guest checkout experience. As well as enable actually our ability to capture them through a Fastlane by PayPal experience and bring them into a branded experience as well. So there's a flywheel effect. In terms of rollout, we're rolling this out now. We've got a developer day situated in a few weeks from this time in August. We're going GA now in August as well, and so we'll be ramping up as many customers as we can. We've not talked about and disclosed pricing on this, so I'm not going to get into that at this point. But know that this is our ability to monetize not just guest checkout that we process through Braintree but really for us the total addressable market is the entire guest checkout experience across the board. |
6,276 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yeah and on the second part of your question around the US and international environments, you know as I mentioned before we see the US environment being very consistent right now with what we've seen over the first half. International is a real strength for us and we did have a shift, down a bit in the international area on TPV this quarter, but when you look at that, what that really is, it's almost solely related to lapping some large Braintree [wins] (ph) last year, otherwise very healthy.
Operator: Your next question comes from the line of Dan Dolev with Mizuho. Your line is open.
Dan Dolev: Hey, guys. Good morning. Thank you for letting me ask the question. Great results. I wanted to ask you, Alex a little bit about the competitive positioning regarding Apple Pay. Obviously, really strong branded checkout. There has been some worries in the past. Can you maybe contextualize a little bit where we are and you know what you're doing to beat them? Thank you. |
6,277 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah thanks Dan, great question. So let me set some context. So first we play in a massive multi-trillion dollar market and it's not a zero-sum game. So we expect competitors, we've had competitors come in since we launched, you know, over a decade ago. We went from one button to now there's lots of different buttons and branded experiences and we'll expect that to continue. Let me, though, set the context of the reality of today, and then how we think about the future. So the reality today, we are the Number #1 branded experience across all platforms and devices. If we narrow down into desktop web, which is still 40% to 50% of all checkout, we see no degradation in our share over the past four years. So let me say that again. We've held share despite competition. Second, if we look across browsers, there's actually no difference in our selection rate across different browsers. So certain buttons moving from one platform to the other just isn't material to us. So that's where we are today. So let us focus around our ability to continue to improve and make this a better experience for our consumers going forward. So for merchants, they're looking for an end-to-end solution. They want to get customers, they want to convert customers, and they want to engage and have a return experience with customers. As we talked about, we now have the best branded experience. We're continuing to improve that. We have Fastlane, we have the best checkout experience. And we've rolled out ads and continuing to invest in our profiles. So we are helping merchants end-to-end. On a consumer side, they're looking for ubiquity, flexibility, and a rewarding experience. We are the most ubiquitous. We have 80% acceptance rate in the developed world with a large and growing customer base. And from a flexibility standpoint, they want to be able to pay everywhere with any way that they can -- that they want to pay and we're able to provide that. So if you pull back, I'm just excited that we are in a strong position of being the |
6,278 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | want to pay and we're able to provide that. So if you pull back, I'm just excited that we are in a strong position of being the most complete platform and two-sided global network, driving the highest value and benefit to our consumers and our merchants. |
6,279 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Timothy Chiodo with UBS Financial. Your line is open.
Timothy Chiodo: Great. Thanks a lot for taking the question. I wanted to drill into, branded checkout a little bit with the 6% growth. Maybe you could talk a little bit about the relative levels of growth, US versus International. Branded, you did call out the strength and international with continental Europe and Asia. And then also on the relative levels of transaction margin, given that there are some differences in transaction expense levels and also potentially merchant size mix. Would appreciate those. Thanks. |
6,280 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yeah, so on a relative level of growth, US and international, both continue to be strong contributors for us. There's obviously different market mixes and different [merchant] (ph) mixes, as you look at those growth profiles. You know, in the US, large enterprises continue to be an area of strength for us. And I would say, in the small business area, we continue to remix that portfolio as we move to PPCP and off of legacy platforms and really move to both a direct and a partner strategy there. You know, when you look at the international side of things, branded checkout is very, very strong in several European, both countries and corridors. UK continues to be pressured, but I would say outside of that, we've got real strength in other countries such as Germany and just real bright spots in Europe as well. So I'd say it is fairly balanced across the globe when you look at it. I'm trying to look at the second part of your question here. Transaction expense. You know, when you look at transaction expense, it is impacted by funding mix, product mix, geo mix, all of that stuff. Funding mix relatively stable. The biggest driver of our shift in TE right now is been Braintree, and that continues to be what is happening there. We're always looking at ways to continuously improve our transaction expense profile and work with different partners to move the needle on that. And we continue to have different benefits, different quarters just in terms of how that rolls-through, none of which was particularly material, but we had a little bit of that too.
Operator: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open. |
6,281 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg: Good morning guys, thanks. I just wanted to ask a follow-up question on the full year guide for the transaction profit dollar growth. Obviously you're ticking that up here. It does imply the deceleration in the second half that you mentioned around flow comps, et cetera. What I'm trying to get a sense of, has your full year outlook for transaction profit dollar growth from the core branded and Braintree businesses changed, just to kind of isolate the delta here in the guidance?
Jamie Miller: Yeah, I would say generally we are seeing a stronger branded baseline and we're having increasing confidence in the slope of our Braintree profitability efforts. That's what I would say on those two.
Operator: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.
James Faucette: Great, thank you so much. Want to circle back to Fastlane and obviously a lot of interest and excitement in terms of its launch timing, et cetera. And I think you've made it pretty clear that this will be kind of a gradual opportunity that will build on it and addressing a big market. How should we think about, like, what your key to-dos are as we go through the rest of this year and into next year? And I'm wondering if any of Fastlane with the launch timing is now built into the guidance, as well as any other new initiatives that may have been added into guidance for the rest of the year. Thanks. |
6,282 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yeah, let me start with the last part. We really not built any Fastlane upside into guidance. And part of that is because of our go-to-market is going to be very focused on just getting adoption, not around monetizing in this half of the year. Now, to be clear, we are pricing in the contracts that we're signing with customers, and so pricing is built in and as I said before, the TAM is every guest checkout. That's what our focus is. But it's not built into the second half of the year. In terms of key to-dos, we really created and worked hard during this beta period to create a seamless experience so that developers and merchants can get on board as fast as possible. And so, you know, for someone using us now, it is really a four to four week experience to get onto the Fastlane code and enable that to roll out. So we need to get it on as many platforms as we can, so that small businesses in particular can just one click a button and turn it on for the holidays. We are working with many of our large enterprises who want access to this before the holidays as well. But again, look, the reality is we've got a lot of merchants around the world, and it is going to take time for them to be able to put this into their roadmap. So that's why we want to set expectations that this is going to take quarters and years to get everyone on board. But the beauty of Fastlane is it's a network effect. More customers coming through it, we are already seeing best-in-class conversion rates. The more customers that come through it, the more profiles that we start to capture, and the better the conversion rates should become. So we want to get started as fast as possible, get as many merchants through this holiday season as we can, and then build from there.
Steve Winoker: Sarah, let's make time for one last question, please.
Operator: Thank you. Our last question comes from the line of Andrew Schmidt with Citi. Your line is open. |
6,283 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Thank you. Our last question comes from the line of Andrew Schmidt with Citi. Your line is open.
Andrew Schmidt: Hey Alex and Jamie. Thanks for squeezing me in here. I wanted to double-click just on the Braintree trends. Obviously, good progress in terms of transaction margin dollar growth. Maybe you could talk a little bit more about what's driving that, clearly more disciplined, lapping of large contracts? And then as we look to the back half and beyond, I hear you on the slope that's kind of built into the outlook. But from what you've seen so far, how does it inform your confidence in terms of building on the progress that you've seen so far in transaction margin dollar growth as we go into the back half in the subsequent years? Thanks a lot. |
6,284 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: So, good morning Andrew. Thank you. So first well, let's just talk through the Braintree growth and what's really driving that. We set out this year to really reorient the team with Braintree around profitable growth. And as we've done that -- we've had just a number of conversations with customers, both around contract renewal, but also just around our holistic relationship and really getting into understanding how we partner, what the margin structure is, how we provide value-added services, just the overall value-to-value exchange that we have got. And honestly, they've been really positive conversations as we -- and just on a total relationship basis sort of thing. As we looked at that, there are certain situations where as we've gotten into the discussion, we are willing to accept a lower share of revenue in exchange for a higher margin contract. There is other situations where, as we work with our customers, we are able to sell in value-added services in ways that we just haven't done before. So it is lots of different levers in that process. But what we are excited about is we are really starting to see good traction on that. It is intentional. We've set out to do this. And it is a really good thing for the business. And I think as you look at the second half, what we saw play out in the second quarter, I expect to continue. We saw some of the volume growth normalize a bit, but we saw more positive transaction margin dollar growth. And it is really good to see that tangible progress play out. And I think it will continue to play out over time. It may be a little bit uneven and not linear, but that trend of a little bit more normalization into the business, but improving margin profiles is something we fully expect to continue.
Steve Winoker: Alex, I think you have time for any final comments you might have? |
6,285 | PYPL | 2 | 2,024 | 2024-07-30 08:00:00 | PayPal Holdings, Inc. | 112,732 | Steve Winoker: Alex, I think you have time for any final comments you might have?
Jamie Miller: Yes. Thank you all today, and thanks Steve. Just to close the call, company is energized. We are proud of what we've accomplished, just to again, sort of step -- set the context of where we are. We are really six months in. We've got a new leadership team. We are getting stronger every day. We've returned the company to transaction margin growth. We've returned the company to a consumer user growth. We significantly improved profitability at Braintree, and we are accelerating Venmo. And so I just feel really proud that we are stronger today than we were six months ago, and we will be stronger six months from now than we are today. And we are executing against our game plan. This will be measured in quarters and years. So it will be a long game, but six months in, we are on the right trajectory. So thank you all for today and see you next quarter.
Operator: Thank you. This concludes today's conference. Thank you for participating. You may now disconnect. |
6,286 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Operator: Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to PayPal Holdings' Earnings Conference Call for the First Quarter 2024. [Operator Instructions]
I would now like to introduce your host for today's call, Ryan Wallace, Head of Investor Relations. Please go ahead.
Ryan Wallace: Good morning. Thank you for joining PayPal's First Quarter 2024 Earnings Conference Call. Joining me today is Alex Chriss, our President and CEO; and Jamie Miller, our CFO.
We're providing a slide presentation to accompany our commentary. This conference call is also being webcast. Both the presentation and call are available on our Investor Relations website.
In discussing our company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call.
Our remarks today will include forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. 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 in our most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC and available on our website. All information in this presentation is as of today's date. We expressly disclaim any obligation to update this information.
And with that, let me turn the call over to Alex. |
6,287 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | And with that, let me turn the call over to Alex.
James Chriss: Thank you, Ryan, and thank you to everyone for joining us this morning. This quarter, we delivered a solid set of results, and the year is off to a good start. Our new leadership team is operating well together, and we are really starting to get our arms around the business. You will see in our numbers and the read-through that our efforts are beginning to make a difference. We also see substantial need for continued retooling of the company, how we work with our customers and how we execute. We are encouraged by the progress to date but remain realistic that we still have a lot of work to do and a lot of opportunity to drive profitable growth ahead of us.
What we said at the start of the year still holds. This is a transition year where we are focused on execution and making critical choices that will set the business up for long-term success. We have a plan that will return this company to where it needs to be and remain focused on execution to get there. We see clear opportunities for operational improvements across our large enterprise, small business and consumer businesses, including Venmo, and in driving more efficiency across the organization. But it will take time to prudently drive a meaningful and sustainable transformation.
In the first quarter, we delivered 10% revenue growth on a currency-neutral basis on $404 billion in total payment volume. Transaction margin dollar performance grew 4%, which was better than expected, thanks in part to actions we took. Our non-GAAP earnings per share increased 27% year-over-year. |
6,288 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Our results are stronger than we expected earlier in the year, and they require some unpacking to put them in the context of the full year. What I want you to understand is what we are focused on, namely, making surgical changes to the way we are running the company. Some of these will have an immediate impact and others will take longer to bear fruit. As such, we need to maintain flexibility throughout this year to make important decisions to drive the long-term growth of the business. This includes decisions about where we prioritize and reinvest, how we go to market and actions that can be taken to sharpen our value proposition for consumers and merchants.
With that in mind, we do now expect full year EPS to grow mid- to high single digits, which is partially driven by our better-than-expected start to the year. Jamie will take you through our Q1 results, contours of the year and updated guidance in just a few moments. Let me first spend some time providing an update on our execution against our customer strategies and investment priorities and detail progress on our efforts to operate more efficiently.
Turning to our 3 customer groups. We continue to make steady progress on strengthening our strategic positioning and product portfolio. For large enterprises, we continue to focus on accelerating growth in branded checkout and driving the profitability of our business. |
6,289 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | We are executing to get upgrades to our core branded checkout experiences to the market. We continue to make good progress in our early testing of Fastlane by PayPal with a focused group of merchants. And data from those alpha merchants show that returning Fastlane users are converting at nearly 80%. We are just getting started and already creating a low double-digit lift in guest checkout conversion for participating merchants. The results so far are encouraging as incremental conversion improves our merchants' growth and profits. Demand for this product is promising, and we expect to make Fastlane generally available in the U.S. in the second half of the year.
Additionally, we are continuing to focus on making it even easier to pay with PayPal by removing friction from the checkout process. In the coming months, we will continue to move to more passwordless authentication processes, like biometrics, and launch a redesigned mobile checkout experience, which we believe will result in higher conversion rates.
We've begun active discussions with our largest enterprise customers to focus on commercial outcomes that reflect the true value of our payments processing platform and the services we provide. As we speak, many of our top merchants are gathered in California for our annual Commerce 360 Customer Conference, where our teams will go deep on the innovations we plan to bring to market this year and the value they can provide.
We are also in the early stages of evaluating the overall dynamics and pipeline of our top 10,000 merchant accounts. As we evaluate our programs, we see clear opportunities to price to value, not only with our PSP processing, but especially with our value-added services that we already provide, services such as payouts, fraud prevention and processing orchestration. |
6,290 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | This process will take time, but we have a focused game plan, and we are already having fruitful conversations that are helping merchants understand the additional value they can unlock by strengthening their relationship with us, including through our value-added services.
For example, DraftKings recently went live with our fraud management solution, Fraud Protection Advanced, which combines our intelligence with advanced machine learning and analytics to help businesses protect themselves from ever-evolving fraud threats. This is an example of a best-in-class offering and a key differentiator against our competitors. It also showcases our ability to leverage AI to drive customer benefit and is an area where we can price to the value we provide.
For small- and medium-sized businesses, the launch of our PayPal Complete Payments Platform has been gaining momentum over the past couple of quarters. We've made good progress in expanding PPCP's geographic reach to now more than 34 countries. In the first quarter, we expanded the platform to Canada, the U.K. and more than 20 European markets. We also added new features to PPCP in Australia, Germany and the U.S. in recent months. Additionally, we are seeing positive response to our new low- and no-code tools for merchants and developers to integrate PPCP, which we launched in March.
As of the end of the first quarter, approximately 7% of our SMB volume is already on PayPal Complete Payments, with our team focused on distribution through partners that can accelerate adoption to the largest number of customers. Our efforts here are important because PPCP ensures merchants have our latest branded checkout integration, which will include Fastlane, so that consumers have a best-in-class checkout experience wherever they shop, and merchants will benefit from higher conversion. |
6,291 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | On average, merchants who adopt PPCP use approximately 4 PayPal products, which deepens the relationship and reduces churn. This translates to an average revenue per account for our PPCP full-stack merchant that is nearly 2x that of an SMB on a legacy integration.
As you all know, I have a deep passion for helping small businesses succeed. Frankly, this is an area where PayPal took its eye off the ball. Over the years, we've deprecated products and made pricing decisions that negatively affected our market positioning. Despite that, we still have the largest population of SMBs anywhere, who are using our products and eager for us to do more for them. This is an area where we are investing to correct our course. We are here to serve and win the small business market.
On the consumer front, the PayPal app is at the center of our strategy to leverage the power of our data to create more value for our customers and unlock new sources of revenue and margin expansion opportunities. In the first quarter, we revamped the PayPal app with a new look and feel and introduced enhancements to our rewards program to enable shoppers to get the most out of their money while increasing conversion for merchants.
Additionally, we began testing a comprehensive rewards-focused life cycle marketing program. When tested with approximately 20% of our PayPal app users, we saw it drive a nearly 7% increase in weekly app logins and 4% increase in transaction margin per user. |
6,292 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Introducing consumers to new products, like our debit card that can help maximize the value they receive from PayPal, is a major focus. The enhancements our team made to our onboarding flow enabled a 38% increase in debit card first-time users during the first quarter. On average, a customer who adopts the PayPal debit card is more engaged, generating a 2x lift to transaction activity and a nearly 20% increase to average revenue per account compared to users who primarily use checkout. Approximately 4% of our active PayPal consumer accounts in the U.S. have a debit card. So while we have a lot more to do, this work is meaningful to the economics of our business.
In the quarter, we onboarded BigCommerce and WooCommerce to our package tracking solution. In the 12 months since launch, we've had approximately 7 million active accounts use package tracking. This is a key pillar in our post-purchase strategy. Package tracking not only allows consumers to track their shipments within the PayPal app, but will also enable us to make personalized purchase recommendations and present relevant offers through the app and our AI-powered Smart Receipts. We believe these innovations will drive engagement with the PayPal app and incentivize future branded checkout activity.
For Venmo, we are focused on giving our customers more ways to immediately use their Venmo debit card in person with Apple Pay and Google Pay, which you will see in the market in the coming months. In the first quarter, we saw a 21% year-over-year increase in consumers using our Venmo debit card. Remember, Venmo debit cardholders are among the most engaged accounts and on average drives 6x the incremental revenue than that of a P2P-only customer. Simultaneously, we are making it easier for consumers to use their Venmo balance when making payments or sending money to friends. In the first quarter, balance-funded P2P senders grew by 17%, which contributed to our overall transaction margin dollar growth in the quarter. |
6,293 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Our leadership team is continuing to go through our business from top to bottom, understanding where we can operate more efficiently and invest in the innovation that will offer the greatest impact for our customers and PayPal. This is a mindset shift we are driving throughout the entire organization. Investing for durable growth backed by a clear payback path and time horizon remains a top priority. Investing in branded checkout and better serving our small business customers are 2 focus areas you heard me talk about today.
We are also actively evaluating and greenlighting new investments to accelerate future growth that support and strengthen our strategic priorities. A good example of this is our remittance business, Xoom, which has stagnated while similar services have gained share. This business has been on a negative revenue trajectory due to a lack of prioritization and clarity about its value proposition. That is now changing.
We are executing the right product refinements bundled with an enhanced and more customizable pricing model intended to promote growth over the long run. We plan to reduce the cost of cross-border transfers and provide consumers the option to eliminate transaction fees altogether when funding with our PYUSD stablecoin. We are activating those plans, and we expect to see tangible progress throughout 2024 and beyond.
The key takeaway here is that we are in the process of assessing a handful of areas of investment where we believe there are compelling unit economics and market upside. These may mean that we will make decisions to invest in 2024 where we believe these investments will ultimately contribute to the sustainable and profitable growth of the company. At the same time, we must maintain our focus. We are continuing to evaluate the markets we operate in and the products we offer. Where we see areas to improve focus and prioritization, we will take action and update you accordingly. |
6,294 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Finally, a few words on our continued efforts to drive operational efficiency and productivity across PayPal. We are instilling a rigorous cost/benefit discipline throughout the company and leaving no stone unturned when it comes to reducing unproductive costs. We are also investing in automation that will help answer our customers' frequently asked questions, simplify the integration process for our merchants and enable our team to deploy solutions more quickly.
As mentioned on the last earnings call, we have started reporting stock-based compensation as part of our non-GAAP metrics beginning this quarter. In addition to our annual incentive plan, shifting to cash payment from stock, we have also better aligned our incentive programs to performance, particularly focusing on transaction margin and non-GAAP operating income growth. We will continue to focus on a pay-for-performance culture that appropriately aligns pay with results.
I'll conclude by thanking the PayPal team for continuing to innovate and serve our customers. While we are still in the early innings of driving a meaningful and comprehensive transformation of PayPal to deliver the sustainable and high-quality growth we are aiming for, our first quarter results are an encouraging indication of what our team's renewed strategic focus and persistent execution can achieve. We will continue to update you on our execution throughout the year and be transparent about our progress. I am confident that we are taking the right steps to build long-term profitable growth.
With that, I'll hand it over to Jamie to take you through our first quarter results.
Jamie Miller: Thanks, Alex. Good morning, everyone. We had a solid start to the year with first quarter results that were above our expectations. As Alex mentioned, it's still early in the company's transformation. We are getting deeper in understanding both our challenges and our opportunities with much greater clarity. |
6,295 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Our goal for 2024 is to foundationally set up the business for the future by making key decisions and aligning our investment path for growth. And to do so, we are laser-focused on strategic analysis and decision-making, driving innovation back into the business and executing with excellence. While it will take time for our efforts to sustainably flow through results, the speed at which the team is moving is encouraging, and we are making steady progress.
Let me start with a summary of our financial performance. As a reminder, our non-GAAP results now include the impact of stock-based compensation expense and related payroll taxes. This change is intended to enhance transparency, operating discipline and align our performance measures to how many investors already evaluate our business.
Now moving to our results. As Alex mentioned, in the first quarter, revenue increased 9% at spot and 10% on a currency-neutral basis. Transaction margin dollars grew 4% year-over-year, improving in growth by more than 400 basis points from the fourth quarter. I'll walk through the drivers of that growth in a few minutes and provide context on the shape of the year, including tailwinds that we expect to be more pronounced in the first half compared to the second half.
Under our updated non-GAAP methodology, earnings per share were $1.08, representing 27% year-over-year growth. Under the company's prior non-GAAP methodology, which excluded the impact of stock-based compensation, earnings per share would have increased approximately 20% to $1.40, above our guidance for mid-single-digit growth on a comparable basis.
Relative to our outlook, higher earnings per share were driven by a combination of factors, including better-than-expected transaction margin dollars, ongoing expense discipline, the timing of certain investment in marketing spend and interest income. |
6,296 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Now I'll walk through some key operating metrics that support those results. We ended the first quarter with 427 million total active accounts and 220 million monthly active accounts. Total active accounts increased by nearly 2 million from the fourth quarter and included growth in PayPal merchant and consumer accounts in addition to other products. We were encouraged to see total active accounts inflect positively in the quarter, and we remain focused on driving deeper relationships and more activity across our customer base.
Monthly active accounts continued to show steady progress, up 2% year-over-year to 220 million with contribution from both PayPal and Venmo. Transactions per active account, which is a trailing 12-month number, was 60 in the first quarter, up 13%. Excluding PSP processing, which is primarily Braintree, transactions per active account grew 7%.
Moving to volume growth. In the first quarter, TPV grew 14% on a spot and currency-neutral basis to $403.9 billion. U.S. TPV grew 12%. International TPV grew 17% on a currency-neutral basis primarily driven by strength in Continental Europe and improvement in Asia.
Global branded checkout growth accelerated to 7% on a currency-neutral basis from 5% in the fourth quarter. The first quarter included about a 1 point benefit from leap day as well as ongoing benefits from the growth of global marketplaces.
Within branded checkout, large enterprise and international markets were the biggest contributors to growth. We remain laser-focused on driving deeper adoption of our best-in-class solutions with small- and medium-sized businesses and improving mobile experience, which are critical, particularly in markets like the U.S. and the U.K. PSP processing volume grew 26% in the quarter driven by continued momentum from Braintree compared to 29% in the fourth quarter. |
6,297 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Conversations with merchants have been encouraging as we shift our focus to a more disciplined go-to-market and renewal process that emphasizes a focus on profitable growth. Merchants recognize the product and performance improvements we have already started to make and are excited about the pipeline of upcoming innovation.
As I noted earlier, revenue in the first quarter increased 9% at spot and 10% on a currency-neutral basis to $7.7 billion. Transaction revenue grew 11% on a spot basis to $7 billion driven by Braintree and branded checkout. Other value-added services revenue in the quarter declined 2% on a spot basis to $665 million.
Within other value-added services, interest on customer balances continued to be a meaningful tailwind. Our credit business performed relatively in line with our expectations with revenue lower because of 2 main factors. First, we are carrying lower merchant receivables after tightening originations last year. Second, we have had lower revenue share on our off-balance sheet U.S. consumer revolving credit portfolio due to ongoing normalization of loss rates.
Transaction take rate declined 5 basis points to 1.74% driven primarily by lower foreign exchange fees and lower gains from foreign currency hedges. In addition, mix shift to large merchants continued to impact our branded checkout take rate. Transaction margin dollars increased 4% in the first quarter. Higher interest on customer balances, branded checkout, better transaction loss performance and lower credit losses were the largest contributors to growth.
While the performance of the core business has been relatively consistent, we expect that a few of these tailwinds are likely to be less meaningful as we move through the year. Specifically, we expect to see lower year-over-year benefit from interest on customer balances and lower year-over-year improvement on transaction and loan loss performance. |
6,298 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Non-transaction-related operating expenses declined 2% as we continue to actively manage our cost structure while reinvesting into key strategic initiatives. Part of the decline in operating expenses is a result of certain corporate and marketing investments deferred to the second half as well as lower stock-based compensation. Non-GAAP operating income grew 15% in the quarter to $1.4 billion, and non-GAAP operating margin expanded 84 basis points to 18.2%.
PayPal generated $1.8 billion in free cash flow in the first quarter or $1.9 billion, excluding the impact of held-for-sale accounting related to our European Buy Now, Pay Later externalization. In the quarter, we completed $1.5 billion in share repurchases, bringing share repurchases over the past 12 months to approximately $5.1 billion. We ended the quarter with cash, cash equivalents and investments of $17.7 billion and debt of $11 billion.
I'll now move to our second quarter and 2024 guidance. Consistent with the approach we shared in February, we will continue to provide revenue guidance 1 quarter at a time. For the second quarter, we expect revenue to increase approximately 6.5% at spot and 7% on a currency-neutral basis. In addition, we expect non-GAAP earnings per share to increase by a low double-digit percentage.
For the full year, we continue to plan for a relatively consistent macroeconomic and consumer spending environment. With respect to earnings per share, we now expect 2024 non-GAAP EPS to grow by a mid- to high single-digit percentage.
As Alex said earlier, we are in a transition year, and we do not expect that our quarterly progression will be linear. To help bridge this outlook compared to our prior guidance for approximately flat non-GAAP EPS, there are 2 main factors I would point you to. |
6,299 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | First, our inclusion of stock-based compensation expense within non-GAAP results is expected to benefit EPS growth by approximately 3 percentage points this year. Second, we saw meaningful outperformance in the first quarter relative to our plans. We intend to reinvest a portion of this performance back into the business.
We expect earnings growth to be more muted in the second half of the year due primarily to less benefit from interest income on customer balances, normalization in transaction and loan loss performance as we progress through the year and the expected timing of investment actions.
Underpinning our outlook, we now expect transaction margin dollars to be slightly positive for the full year. We expect non-transaction operating expenses to increase slightly. Embedded within this outlook is the flexibility to make key strategic decisions to invest and reinvigorate profitable growth within components of the portfolio and accelerate go-to-market efforts.
For the full year, we expect other value-added services revenue to be roughly flat year-over-year. This excludes any potential impact from the CFPB late fee regulation, given pending litigation across the banking industry and uncertainty on both timing and implementation. As a company, we have already taken steps to mitigate the future impact, though these take time to fully take hold.
Consistent with the approach we shared last quarter, our guidance includes minimal impact from the new innovations rolling out this year. Our focus is on execution as we begin moving from test and pilot phases into launch. We continue to expect free cash flow for 2024 to be approximately $5 billion and for at least $5 billion in share buybacks.
In closing, 2024 is off to a solid start as we drive significant change across the company. We have clear opportunities to lean in further. We are doing the hard work now to position PayPal for profitable growth in the years ahead, and it has been incredibly energizing to see the team's commitment to this goal. |
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