The operator, Krista, welcomes everyone to the PayPal Holdings Earnings Conference Call for the Third Quarter 2023. She introduces the host, Ryan Wallace, and mentions that the call will include a presentation and a question-and-answer session. Ryan introduces the other speakers, Alex Chriss and Gabrielle Rabinovitch, and notes that the presentation and call are available on the Investor Relations website. He also mentions that they will be discussing non-GAAP measures and making forward-looking statements, and advises listeners to refer to the presentation for reconciliations and information about risks and uncertainties.

The speaker, Alex Chriss, thanks his predecessor Dan Schulman for his help in transitioning to the CEO role and welcomes Jamie Miller as the new CFO. He expresses gratitude to Gabrielle for her work as interim and acting CFO. He is excited about the potential impact of PayPal on the world.

The author has spent their career helping consumers and small businesses, and now sees PayPal as an opportunity to continue that mission on a larger scale. They are aware of the challenges and are committed to being transparent about both successes and areas for improvement. The company's focus and resource allocation may need to be reassessed, but the author is confident in the company's potential for growth and impact. They are determined to work with the team to execute better and at a higher velocity to achieve success.

The author shares their onboarding process and what they have learned from internal and external stakeholders. They have identified two main focuses for the company: differentiating in solving customer problems and accelerating growth. The author is impressed by the consistency and clarity of the company's assets and market position. They also note the positive qualities of the employees and their dedication to the company's mission. The author plans to establish a clear strategy and refocus systems and processes to drive growth. They also mention the three main customer segments and their potential for growth opportunities.

The author discusses the importance of focusing on customer needs and packaging innovation effectively. They highlight the popularity and engagement of PayPal among consumers, as well as the success of their unique products such as the PayPal Cashback Mastercard and PayPal Rewards. They also mention the use of AI to provide personalized recommendations and increased security measures for customers.

PayPal is expanding its presence both online and in-person through its PayPal and Venmo branded credit and debit cards, as well as the launch of the first regulated stablecoin PYUSD. The company aims to integrate these innovations into a seamless customer experience and relaunch a new consumer experience centered around Checkout. For small businesses, PayPal offers solutions to help them reach more customers globally and has recently launched a new PayPal Complete Payments solution and package tracking feature for merchants.

PayPal has seen positive results with their new product, with merchants experiencing a decrease in disputes and faster funds release. They are now focusing on scaling this product globally to serve small businesses, and plan to expand offerings in the future. Additionally, they have successfully served large enterprises and have a strong market share in that segment. They plan to build upon this success in the future.

PayPal is focused on addressing additional customer needs such as payouts, fraud management, charge-back automation, and FX, which will not only improve performance and provide additional services but also help drive margin revenue. They are also evolving to become a platform company, which will allow them to unlock innovation and value through their strong technology and data platforms. Their machine learning capabilities and scale give them a unique advantage in the market, and they plan to use AI responsibly to further connect merchants and consumers. In order to maximize this opportunity, they will need to consolidate and automate technology across the company to reduce costs and increase efficiency.

The speaker is evaluating their company's growth priorities and aligning resources accordingly. They plan to become more efficient and effective, with a focus on reinventing the consumer experience, expanding PayPal for small businesses, and driving margin expansion. They will also invest in their company-wide platform and communicate more consistently and clearly with shareholders, highlighting their operating principles and important metrics such as high-quality customer growth and profitable revenue growth.

PayPal's main focus going forward will be on generating real profit for the company and ensuring margin-accretive revenue growth. They are reviewing their financial performance metrics and will make it easier for stakeholders to understand how the company operates and makes money. The CEO is also focused on operating leverage and reducing expenses to drive growth. The company is already working on a comprehensive plan for 2024 and will share their strategic priorities in the next earnings call.

In this paragraph, the speaker discusses the company's strategic focus, growth priorities, and plans for achieving profitable growth. They acknowledge that these changes will take time, but they are committed to moving quickly. The speaker then hands the call over to another speaker to discuss the company's Q3 results and highlights, including revenue and earnings growth, expense discipline, and improved efficiencies. They also mention their commitment to transparency and improving disclosures. Finally, the speaker thanks the team for their hard work and dedication.

In the quarter, the company made progress in their long-term strategic initiatives focused on driving profitable growth. They saw a decline in active accounts but this was expected as they continue to remove low-quality customers. Customer growth is a priority for the company and they are positioning themselves for a return to growth in their customer base. Total payment volume grew by 15%, primarily driven by Braintree. Branded checkout volumes also grew, but at a slower rate compared to last year. Revenue increased by 9% on a currency neutral basis, driven by transaction revenue and hedge gains were lower compared to the same quarter last year.

In Q3 of last year, PayPal received $75 million in compensation from merchants, which did not contribute to revenue this year. Other value-added services revenue grew by 25%, driven by increased interest income on customer store balances. U.S. revenue grew by 7%, while international revenue increased by 10% at spot and 11% on a currency neutral basis. Transaction take rate declined by 13 basis points, mainly due to lower gains from foreign currency hedges, a decline in foreign exchange fees, and lapping elevated contractual compensation from merchants last year. The total take rate declined by 12 basis points for the same reasons. Transaction expense as a rate of TPV increased by 4 basis points, primarily due to Braintree volume growth. Transaction loss as a rate of TPV remained flat compared to last year. Credit losses were $117 million or 3 basis points as a rate of TPV. Overall, volume-based expenses increased by 21% in the third quarter.

In the third quarter, the company experienced pressure on transaction margin due to various factors, resulting in a decline in transaction margin dollars and rate. However, they were able to achieve operating expense leverage and non-GAAP operating income and EPS increased. They ended the quarter with a strong balance sheet and generated significant free cash flow, although there was a temporary impact from the classification of European installment loans. Adjusting for this, free cash flow grew. The company has also focused on disciplined capital allocation and managing their balance sheet.

In the third quarter, the company completed $1.4 billion in share repurchases and has returned a total of $4.4 billion to shareholders. They expect to allocate $5 billion for share repurchases for the full year. The company believes share repurchases are a good use of capital and have reduced their weighted average shares outstanding by 7% over the last eight quarters. They also sold their European Pay Later receivables to KKR and will receive proceeds of $1.4 billion. They are also selling their Happy Returns business to UPS for $465 million in cash, which is higher than their acquisition price. The company is evaluating their growth priorities and divesting non-core assets to focus on accelerating their velocity.

The company's sale of a non-core business is expected to close in the current quarter, allowing them to focus more on their core business and priorities. However, their branded checkout growth has been lower than expected, resulting in a revised outlook for the remainder of the year. They now expect fourth quarter revenue to grow between 7-8% and non-GAAP EPS to be approximately $1.36. For 2023, they expect revenue to grow approximately 8.5% and non-GAAP EPS to be approximately $4.98. They have slightly increased their expectations for non-GAAP EPS due to Q3 outperformance and changes to their tax rate assumption. They also expect free cash flow for 2023 to be at least $4.6 billion. Despite challenges, the company believes they are well positioned for the future.

Alex, in his comments, mentioned that the company is focused on accelerating profitable growth and will provide updates on their progress. They are committed to creating the best experiences for customers and are managing their business prudently. In terms of assets, the employee base has been impressive and the company has a strong platform with PayPal and Venmo. Alex is excited about the opportunities ahead.

Alex and Gabrielle discuss the various core problems that can be solved with the company's assets, such as Rewards, Buy Now Pay Later, and cashback cards. They are working on creating a strong value proposition for customers and expanding their merchant penetration with Braintree. They are also excited about the potential of their data to personalize and improve the checkout experience for customers. However, they acknowledge that the company is currently spread too thin and will be focusing on the most impactful opportunities in the future.

Alex Chriss, PayPal's executive, expresses his passion for small businesses and their importance to the company. He discusses their challenges in customer acquisition and managing cash flow, and how PayPal's new product, PPCP, can help with these issues. He also mentions their focus on data and ubiquity, and their plans to expand into helping with cash flow. He concludes by stating his excitement for the future of small businesses and their role in PayPal's strategy.

Alex has been congratulated on his new role and Gabrielle has been thanked for her contributions. They discuss the company's outlook for the fourth quarter and mention a decrease in gross profit. Gabrielle says they are seeing healthy trends in their checkout business and have taken a cautious approach to planning for the fourth quarter. They also mention the performance of branded checkout and its moderation in the third quarter. A question is asked about balancing investment and efficiency, to which Gabrielle responds by discussing the need to manage the cost base.

The company plans to invest in growth and manage expenses efficiently. They will prioritize funding for growth and work on automating processes to drive down costs. The decline in transaction profit dollar growth in Q4 is expected to be less than in Q3, and the company is focused on initiatives to improve growth in 2024. The most promising initiatives include investing in automation and building a platform for reuse of services.

The speaker, possibly the CEO or CFO of a company, discusses their focus on driving profitable growth and the decline in transaction margin dollars in Q3. They expect to see an improvement in Q4 and believe they have the ability to reaccelerate profitable growth in the long-term. They also mention the importance of Venmo, a payment platform, and their plans to expand its acceptance, particularly online.

Alex Chriss expresses his confidence and determination to improve PayPal's performance and accelerate growth. He acknowledges the company's strengths but also recognizes the need for better execution and focus. He promises to impact the go-to-market strategy and financial focus of the company to achieve consistent growth.

The speaker reiterates their focus on profitable growth and delighting customers, while also ensuring the satisfaction of all stakeholders. They mention their motivated employee base and plans to add more senior talent. The business is being future-proofed and the speaker is confident in their ability to succeed. They look forward to sharing their plan for success in the future. The conference call is now ending.

This summary was generated with AI and may contain some inaccuracies.