Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total payment volume rose 11% to $417 billion, indicating strong transaction growth.
- Non-GAAP earnings per share increased 36% year over year, showcasing significant profitability.
- Branded checkout continues to grow profitably, contributing positively to transaction margin dollar growth.
- Venmo momentum continues to build, with monthly active accounts increasing and total payment volume growing 8% year over year.
- PayPal is raising its full-year guidance for growth in transaction margin dollars and earnings per share, reflecting confidence in future performance.
Negative Points
- Despite improvements, the company acknowledges that change takes time and there is still much work ahead.
- The international TPV growth showed a decline, primarily due to lapping large Braintree wins from the previous year.
- The company expects lower volume and revenue growth in the second half of the year, particularly in Braintree.
- There is an anticipated decline in the tailwind from interest income on customer balances in the second half of the year.
- The company is planning for some normalization in transaction and credit losses, which could impact future profitability.
Q & A Highlights
Q: Branded volumes maintain the ex-leap-year growth rate from last quarter. Can you drill down a bit more into your strategy to drive branded growth acceleration?
A: Alex Chriss, President, Chief Executive Officer, Director: We're excited to see the progress on branded. We've focused on improving mobile experiences, particularly the vaulted experience for high-repeat usage. We've seen a 75 to 110-basis-point lift with our new experience. We're also simplifying the pay sheet experience, which has shown a nice lift in conversion rates.
Q: Can you touch on the dynamics around what's contributing to transaction margin dollar growth and its sustainability?
A: Jamie Miller, Chief Financial Officer, Executive Vice President: Key contributors include interest income on customer balances, branded checkout, Braintree, and Venmo. We also saw transaction loss favorability. For the second half, we expect a decline in interest income tailwinds and some normalization in transaction losses, but we remain positive on Braintree profitability and P2P.
Q: Can you give more specifics on the second-half growth investments and their impact on EPS?
A: Jamie Miller, Chief Financial Officer, Executive Vice President: We deferred some marketing dollars to the second half, focusing on marketing and brand campaigns for PayPal and Venmo, as well as product launches. More than half of the fourth-quarter EPS pressure is due to these growth investments, with the rest due to a higher tax rate.
Q: How are you thinking about PayPal's international markets and the regulatory environment?
A: Alex Chriss, President, Chief Executive Officer, Director: PayPal is a global company, and we are compliant in over 200 markets. We are excited about opportunities like NFC in Europe, which will allow us to play in the omnichannel space. Our Buy Now, Pay Later growth is also strong internationally, with 60% of volume coming from outside the US.
Q: Can you discuss the strategy to drive more adoption of branded checkout among SMBs and the role of Fastlane?
A: Alex Chriss, President, Chief Executive Officer, Director: SMBs need an end-to-end platform, and PPCP offers branded experiences, guest checkout conversion with Fastlane, unbranded processing, and more. Fastlane is crucial for capturing guest checkout, and our ads platform will help drive new customers and reengage existing ones.
Q: What does the accelerated general availability of Fastlane mean for revenue contribution?
A: Alex Chriss, President, Chief Executive Officer, Director: Fastlane targets the 60% of guest checkout. We aim to capture and improve conversion rates for repeat users. While pricing is built into contracts, we haven't included Fastlane upside in second-half guidance. The focus is on adoption rather than monetization this year.
Q: Can you contextualize PayPal's competitive positioning regarding Apple Pay?
A: Alex Chriss, President, Chief Executive Officer, Director: PayPal is the number one branded experience across all platforms. We've held share despite competition. Merchants seek an end-to-end solution, and consumers want ubiquity and flexibility. PayPal offers the most complete platform and two-sided global network, driving high value for both consumers and merchants.
Q: Can you discuss the relative levels of growth and transaction margin for branded checkout in the US versus international markets?
A: Jamie Miller, Chief Financial Officer, Executive Vice President: Both US and international markets are strong contributors. In the US, large enterprises and SMBs are key areas. Internationally, branded checkout is strong in several European countries and Asia. Funding mix, product mix, and geo mix impact transaction expense, with Braintree being the biggest driver.
Q: Has your full-year outlook for transaction profit dollar growth from core branded and Braintree businesses changed?
A: Jamie Miller, Chief Financial Officer, Executive Vice President: We are seeing a stronger branded baseline and have increasing confidence in the slope of Braintree profitability efforts.
Q: What are the key to-dos for Fastlane as we go through the rest of this year and into next year?
A: Alex Chriss, President, Chief Executive Officer, Director: We aim to get as many merchants on board as possible. The focus is on adoption rather than monetization this year. Fastlane's network effect will improve conversion rates as more customers use it. We expect this to take quarters and years to fully roll out.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
