The conference call for PayPal Holdings' first quarter 2024 earnings has begun. The conference operator, Sarah, introduces the host, Ryan Wallace, and the speakers for the call, Alex Chriss (President and CEO) and Jamie Miller (CFO). The call will include a slide presentation and is also being webcast. Non-GAAP measures will be discussed, and forward-looking statements will be made. The speakers remind listeners to refer to the most recent annual and quarterly reports for information on risks and uncertainties. The call is being recorded and information is current as of today's date. Ryan Wallace then introduces Alex to begin the call.

Alex Chriss, the CEO of the company, expresses gratitude for the team's efforts and the progress made in the current quarter. He acknowledges the need for continued improvement and retooling of the company's operations. This year is a transition year focused on execution and making critical choices for long-term success. The company delivered 10% revenue growth and 4% transaction margin dollar growth, exceeding expectations. The focus is on making strategic changes to improve efficiency and drive sustainable transformation, which will take time to show results.

The company needs to remain flexible in order to make important decisions for long-term growth. They expect mid to high single digit EPS growth for the year. Progress has been made in strengthening their strategic positioning and product portfolio for large enterprises. They are also focused on improving their core branded checkout experiences and testing a new product, Fast Lane, which has shown promising results in increasing conversion rates. The company is also working on making the checkout process easier for consumers by removing friction.

PayPal plans to implement more password-less authentication methods and improve their mobile checkout experience to increase conversion rates. They are also discussing with enterprise customers to focus on commercial outcomes and evaluating their top 10,000 merchant accounts to price their services based on value. They are currently showcasing their advanced fraud management solution and leveraging AI to drive customer benefit. The launch of PayPal Complete Payments platform for small and medium sized businesses has been successful in recent months.

PayPal has expanded its platform to more than 34 countries and added new features in Australia, Germany, and the U.S. They have also launched low and no-code tools for merchants and developers to integrate PayPal Complete Payments (PPCP). Currently, 7% of SMB volume is on PPCP and efforts are being made to accelerate adoption through partnerships. Using PPCP leads to higher conversion rates and deeper relationships with merchants. PayPal is investing in correcting their past mistakes in serving small businesses and the PayPal app is central to their strategy of leveraging data for customer value and revenue opportunities.

PayPal made significant updates to their app and rewards program in the first quarter, resulting in increased app usage and transaction margin. They also introduced a debit card and saw a 38% increase in first time users. The company is focused on expanding the use of their debit card and their package tracking solution. They also plan to integrate Venmo with Apple Pay and Google Pay in the near future.

In the first quarter, there was a significant increase in consumers using the Venmo debit card, which drives six times more revenue than a P2P-only customer. The company is focused on investing in efficient operations and innovative solutions for customers. They are also investing in branded checkout and small business services. Xoom, their remittance business, has been stagnant but is now being prioritized and improved with new product refinements and a customizable pricing model. The company plans to reduce costs and offer fee-free transactions with their PY USD Stablecoin, and expects progress in this area throughout 2024 and beyond.

The company is evaluating potential areas of investment that could contribute to sustainable and profitable growth. They are also focused on improving efficiency and reducing costs through automation and a disciplined approach. Changes have been made to incentive programs to align with performance. The company is still in the early stages of transformation, but first quarter results show promising progress.

In this paragraph, the speaker, Jamie Miller, discusses the company's first quarter results and their progress in their transformation. He mentions that their goal for 2025 is to set up the business for future growth, and they are currently focused on strategic analysis, innovation, and execution. He also provides a summary of their financial performance, including a 9% increase in revenue and a 27% growth in earnings per share. He notes that their non-GAAP results now include stock-based compensation expenses and related taxes.

In the first quarter, the company's earnings per share would have increased by 20% if stock-based compensation was excluded, which exceeded their guidance for mid-single digit growth. This was due to better transaction margin dollars, expense discipline, timing of marketing investments, and interest income. The company ended the quarter with 427 million total active accounts and 220 million monthly active accounts, with an increase in transactions per active account and total payment volume. U.S. TPV grew 12% and international TPV grew 17% on a currency-neutral basis, with strong growth in continental Europe and Asia. Global branded checkout grew 7%, driven by large enterprise and international markets.

The company is focused on increasing adoption of their solutions with small and medium sized businesses and improving their mobile capabilities. PSP processing volume grew 26% in the quarter, driven by Braintree. Revenue increased 9% at spot and 10% on a currency-neutral basis. Transaction revenue grew 11%, while other value-added services revenue declined 2%. The credit business performed in line with expectations, with lower revenue due to lower merchant receivables and lower revenue share on off-balance sheet U.S. consumer revolving credit. Transaction take rate declined, primarily due to lower foreign exchange fees and mix shift to large merchants. Transaction margin dollars increased 4%, driven by higher interest on customer balances, branded checkout, better transaction loss performance, and lower credit losses.

In the first quarter, PayPal's core business performed consistently, but some tailwinds are expected to decrease in impact. Non-transaction operating expenses decreased due to cost management and reinvestment in strategic initiatives. Non-GAAP operating income and margin grew, and PayPal generated $1.8 billion in free cash flow. They also completed $1.5 billion in share repurchases and have a strong financial position. For the second quarter, they expect revenue to increase 6.5% and non-GAAP EPS to increase by a low double-digit percentage. For the full year, they expect consistent macroeconomic and consumer spending, and non-GAAP EPS to grow by a mid to high single digit percentage in 2024.

The company is going through a transition year and their quarterly progression may not be linear. They expect stock-based compensation and strong performance in the first quarter to benefit EPS growth, but earnings growth will be slower in the second half of the year due to various factors. They plan to reinvest some of their first quarter performance back into the business. They have the flexibility to make strategic investments and expect other value-added services revenue to remain flat. The impact of new innovations and potential CFPB regulations are uncertain. They are focused on execution and expect free cash flow and share buybacks to remain consistent.

The company is off to a strong start in 2024, with opportunities for further growth. The teams are committed to driving change and positioning PayPal for profitable growth in the future. During the quarter, transaction margin dollars saw acceleration, with growth in interest income, branded checkout, large enterprise, and international. The company is also focused on improving PSP profitability, although it did not have a significant impact this quarter.

The speaker discusses the improvements made in the Venmo P2P product, which resulted in better transaction and credit loss performance. They also mention a focus on accelerating innovation and ensuring adoption of new features, as well as addressing under-performing services like Xoom.

The company has been under-performing for a few years and is evaluating whether certain assets are strategic and profitable for the business. They are making strategic decisions to improve profitability, and some markets may not meet the cut. They are also focusing on executing their initiatives to turn around certain businesses. They are also having discussions with Braintree merchants about pricing and the value of their services in the market. The company is aiming to provide the best authentication rates, uptime, availability, and reliability for their customers.

The company has been investing in building their service and establishing a presence in the market. They have also been developing value-added services, but have not been able to price them properly or have strategic conversations with customers. This is now changing and they are having successful conversations with both enterprise and small business merchants. They are also engaging in strategic conversations about their two-sided network and new marketing and ad platform. The company is encouraged by these conversations, but acknowledges that it will take time for larger merchants to adopt their services. They are currently showcasing their innovations and having good conversations with merchants at a conference. The questioner asks about the mechanics and uplift of the company's strategy.

The speaker discusses two potential routes for integrating Fast Lane, a new feature that improves checkout conversion rates for merchants. One option is to make it a part of the unbranded offering, either as part of pricing negotiations or as a separate fee. The other option is to offer it as a service on a processor-agnostic basis. The speaker notes that Fast Lane has already shown impressive results with early partners, including a 80% conversion rate for returning users and a 40% opt-in rate for non-PayPal users. They hint at leveraging PayPal's brand to further promote Fast Lane and mention that they are still finalizing their go-to-market strategy.

The company is planning to roll out Fast Lane, a new feature that allows for easy checkout on its PPCP platform. They will focus on promoting it to small businesses and having conversations with large enterprises. The company may offer aggressive pricing for Fast Lane in 2024 to drive adoption. The new feature reinforces the company's value proposition and will support strong pricing. The conversion rate with Fast Lane is currently high and is expected to improve as more merchants adopt it.

The speaker discusses the importance of PayPal operating in an omnichannel environment and mentions the potential impact of the European Commission ruling to open up the iPhone NFC hardware. They state that PayPal will be ready to provide a wallet in an Android or iPhone operating system if NFC becomes available, but will still operate in an omnichannel environment regardless.

The speaker discusses how PayPal is customer-focused and provides a positive experience for every purchase and checkout. They also mention their expectations for transaction profit dollar growth and explain that it may decelerate in the second half of the year due to fewer tailwinds. They also mention the impact of interest income, transaction loss, and loan loss on their overall performance.

The company is focused on executing their initiatives and new innovations, but they are being cautious with expectations until they see steady results. They have not factored in the potential upside from these innovations into their current expectations. The branded segment had a healthy quarter in terms of TPV and revenue, but take rate is expected to decrease due to a shift towards large enterprise customers. The company expects the drags on transaction margin dollars from the smaller part of the portfolio to continue for the rest of the year.

The speaker discusses the growth of transaction margin dollars in the quarter, attributing it to balance-funded Venmo transactions. They also mention the decline of some smaller products and investments in others. The speaker expresses dissatisfaction with the current monetization and customer experience on Venmo, highlighting the potential for growth with 60 million monthly active users and $18 billion of net new funds flowing into the platform every month.

The speaker discusses the importance of improving the speed and efficiency of transactions for PayPal customers, as well as the potential for growth in the market. They also mention that there is still a large portion of the market that is not using any form of payment, providing an opportunity for PayPal to expand.

PayPal's CEO highlights the company's strengths in brand, products, and ability to deliver, as well as the potential of their Fast Lane product to re-market to unrecognized customers. They also acknowledge the need for improvement in innovation and customer experience, but highlight their unique offerings such as rewards, buy now pay later, and omnichannel capabilities. In response to a question about potential regulation on late fees, the CEO does not foresee a significant impact on PayPal.

PayPal is indirectly impacted by a new regulation, but they are focused on mitigating the potential impact. The implementation date is still uncertain, but it could have a three percentage point impact on EPS growth for the year. Fast Lane will be made available to all merchants in the future, with the goal of providing the best innovation in the market. Early customers are already using it and the data shows positive results.

The company is excited about the success of their Fast Lane checkout conversion tool and is now focused on scaling it and proving its value to larger merchants. They are moving at a measured pace to ensure its effectiveness and are currently in conversations with potential clients to roll it out on a larger scale in the second half of the year. The demand for the product is high and the company wants to make the on-boarding process as easy as possible for merchants. Their goal is to have as many merchants using the tool for the holiday season.

The speaker mentions that it will take time for all merchants to adopt the latest integration, Fast Lane, but eventually they expect all merchants to use it. They also mention that they are working on reducing costs for Venmo transactions and increasing acceptance as a payment option, both online and offline. The goal is to provide the best experiences for merchants and customers and improve transaction margin for the company.

The company is focused on improving transaction margin and leveraging AI to enhance risk models and customer service. They are considered leaders in this area and are optimistic about the future of Venmo. The company is making progress on their transformation efforts and is determined to return to profitable growth.

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