Q4 2023 PayPal Holdings Inc Earnings Call

Good afternoon, My name is Sarah and I will be your conference operator today.

Sarah: Good afternoon. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the PayPal Holdings earnings conference call for the fourth quarter of 2020. All lines have been placed on mute to prevent any background noise.

Sarah: At this time I would like to welcome everyone to Paypal Holdings earnings Conference call for the fourth quarter 2023.

Sarah: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.

Sarah: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to introduce your host for today's call, Ryan Wallace, Head of Investor Relations. Please go ahead.

Sarah: If you would like to withdraw your question Press Star one again.

Sarah: I would now like to introduce your host for today's call Ryan Wallace head of Investor Relations. Please go ahead.

Ryan Wallace: Good afternoon, and thank you for joining <unk> fourth quarter 2023 earnings conference call joining.

Ryan Wallace: Good afternoon, and thank you for joining PayPal's fourth quarter 2023 earnings conference. Joining me today is Alex Criss, our President and CEO, and Jamie Miller, CFO. We're providing a slide presentation to accompany our comments. This conference call is also being recorded. 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.

Ryan Wallace: Joining me today is Alex Chris <unk>, our president and CEO and Jamie Miller CFO.

We're providing a slide presentation to accompany our commentary.

Speaker Change: This conference call is also being webcast.

Speaker Change: Both the presentation and call are available on our Investor Relations website.

Speaker Change: In discussing our company's performance, we will refer to some non-GAAP measures.

Speaker Change: Can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call.

Ryan Wallace: Presentation Accompanying, Our remarks today will include forward-looking statements that are based on our current expectations, forecasts, and assumptions, and the risks involved, and so on. Our actual results may differ materially from these. 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 Investor Relations website. All information in this presentation is as of today's date. And with that, let me turn the call over to you.

Speaker Change: Our remarks today will include forward looking statements that are based on our current expectations forecasts and assumptions and involve risks and uncertainties.

Speaker Change: Our actual results may differ materially from these statements.

Speaker Change: You can find more information about risks uncertainties and other factors that could affect our results and our most recent annual report on Form 10-K, and quarterly report on Form 10-Q filed with the SEC and available on our Investor Relations website.

Speaker Change: 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.

Alex Chris: Thank you, Brian and thank you to everyone for joining us this afternoon.

Alex Criss: Thank you, Ryan, and thank you to everyone for joining us this afternoon. It's been a productive first four months. I am pleased with what we've been able to accomplish in such a short period of time while delivering the solid financial results we will discuss today. But more importantly, I'm excited about the foundation we're setting and the velocity at which we're executing as we enter. Today, I'd like to walk you through the changes we've made to the structure of our company, including several key additions to our leadership team, give a clear roadmap for how we will be executing going forward, and share our strategic priorities for 2020. Jamie will take you through the fourth quarter and full year results in greater detail, but the headline is that we delivered a solid quarter during the most important shopping season for our customers.

Alex Chris: It's been a productive first four months I'm pleased with what we've been able to accomplish in such a short period of time, while delivering solid financial results, we will discuss today.

Alex Chris: More importantly, I am excited about the foundation, we're setting and the velocity at which we're executing as we enter 2024.

Alex Chris: Today I'd like to walk you through the changes we've made to the structure of our company, including several key additions to our leadership team.

Alex Chris: Clear roadmap for how we will be executing going forward and share our strategic priorities for 2024.

Alex Chris: Jamie will take you through the fourth quarter and full year results in greater detail, but the headline is that we delivered a solid quarter during the most important shopping season for our customers.

Alex Criss: In Q4, we delivered 9% revenue growth on $410 billion in total payment volume. Transaction margin dollar performance was better than expected in the fourth quarter, and we continued strong expense management, reducing non transaction-related expenses by 9% year over year. Taken together with $600 million in share repurchases in the quarter, our non-gap earnings per share increased 19% year over year. While these are solid results, we know there is still much room for improvement.

Alex Chris: In Q4, we delivered 9% revenue growth on $410 billion in total payment volume.

Alex Chris: Transaction margin dollar performance was better than expected in the fourth quarter, and we continued strong expense discipline, reducing non transaction related expenses by 9% year over year.

Alex Chris: Taken together with $600 million in share repurchases in the quarter, our non-GAAP earnings per share increased 19% year over year.

Alex Chris: While these are solid results. We know there is still much room for improvement and we're committed to making the necessary changes to our business and how we invest and operate to get it right.

Alex Criss: And we're committed to making the necessary changes to our business and how we invest and operate to get it right. One of the key changes I talked about in our last earnings call was ensuring we have an outstanding leadership team. It's important to me that we have a leadership team with a broad diversity of experience. Deep operational rigor and leaders with track records. I'm thrilled with the talent that we've assembled in the last few months, with Jamie as our new CFO, Isabel Cruz leading people in places, and Michelle Gill leading small business and financial services. Susan Kareri, leading global markets; Diego Scotti, leading consumer and global marketing and communication

Alex Chris: One of the key changes I talked about in our last earnings call was ensuring we have an outstanding leadership team in place.

Alex Chris: As important to me that we have a leadership team with a broad diversity of experience.

Alex Chris: Deep operational rigor.

Alex Chris: And leaders with track records of success.

Alex Chris: I am thrilled with the talent that we've assembled in the last few months.

Alex Chris: With Jamie as our new CFO Isabelle crews, leaving people in places Michel Gil, leading small business and financial services.

Alex Chris: <unk>, leading global markets, Diego, Scotty, leading consumer and global marketing and communications combined with talented leaders who have written within Paypal, we have a world class leadership team in place to help the organization reach its full potential.

Alex Criss: Combined with talented leaders who have risen within PayPal, we have a world-class leadership team in place to help the organization reach its full potential. Each of these leaders chose to join PayPal because they see the tremendous opportunity we have in front of us to reshape commerce. And they're already driving a renewed energy within the company. Second, we've organized our teams around the customers we serve, consumers, small businesses, and enterprises. This creates clear lines of accountability and will enable teams to focus on delivering the right solutions that address our customers' greatest needs. Regardless of the customer we're serving, we want to make the PayPal offering so user friendly, so rewarding, and so integrated into a customer's life that PayPal is Our new structure in a Third, last week we announced that we would reduce our global workforce by approximately 9% through both direct reductions and the elimination of open roles over the course of the year.

Alex Chris: Each of these leaders chose to join Paypal, because they see the tremendous opportunity we have in front of us to reshape commerce and are already driving a renewed energy within the company.

Alex Chris: Second we've organized our teams around the customers, we serve consumers small businesses and enterprises.

Alex Chris: This creates clear lines of accountability and win will enable teams to focus on delivering the right solutions that address our customers' greatest needs.

Alex Chris: Regardless of the customer we're serving we want to make the Paypal offering so user friendly so rewarding.

Alex Chris: So integrated into our customers light that Paypal is the obvious choice.

Our new structure enables that.

Alex Chris: Third last week, we announced that we will reduce our global workforce by approximately 9% through both direct reductions and the elimination of open roles over the course of the year.

Alex Chris: As I mentioned in our last earnings call our size has been slowing us down.

Alex Criss: As I mentioned in our last earnings call, our size has been slowing us down. While this was not an easy decision to make, this change is necessary to execute with the focus and speed required to drive our next chapter of growth and allow us to invest in our customers. With these changes, we continue to reprioritize and invest in the innovation and delivery of products and solutions that offer the greatest impact for our customers. The team has been very focused on building out our strategy and driving focused execution for 2020. These are the most important priorities we're focused on this year. Accelerating growth in our branded checkout business Improving overall profitability, including that of our high-growth PSP service. Unlocking the power of data to create more value for our customers while tapping into new sources of revenue and margin and operating more efficiently. Our first look customer announcement two weeks ago was an initial demonstration of the importance of delivering compelling value propositions to consumers and merchants. As promised, we're doing a lot of things to drive change internally and externally. However, nothing happens overnight.

Alex Chris: While this was not an easy decision to make this change is necessary to execute with a focus and speed required to drive our next chapter of growth and allow us to invest in our future.

Alex Chris: With these changes we continue to re prioritize and invest in innovation and delivery of products and solutions that offer the greatest impact for our customers.

Alex Chris: The team has been very focused on building out our strategy and driving focused execution for 2024.

Alex Chris: These are the most important priorities we're focused on this year.

Alex Chris: Accelerating growth in our branded checkout business.

Alex Chris: Improving overall profitability, including that of our high growth PSP services.

Alex Chris: Unlocking the power of data to create more value for our customers, while tapping into new sources of revenue and margin.

Alex Chris: And operating more efficiently.

Alex Chris: Our first look customer announcement two weeks ago was an initial demonstration of the importance of delivering compelling value propositions to consumers and merchants.

Alex Chris: As promised we're doing a lot of things to drive change internally and externally.

Alex Chris: However, nothing happens overnight.

Alex Criss: It will take time for some of our initiatives to scale and move the needle, but the initial customer reaction and merchant demand for our new innovations have been encouraging. 2024 is going to be a transition year focused on execution to position the business for the long term. Our clear goal is to reshape the company to accelerate profitable growth and margin expansion in the years ahead. Prioritization will be key, allowing us to move more quickly and with better results.

Alex Chris: It will take time for some of our initiatives to scale and move the needle but.

Alex Chris: But the initial customer reaction and merchant demand for our new innovations has been encouraging.

Alex Chris: 2024 is going to be a transition year.

Alex Chris: <unk> on execution.

To position the business for long term success.

Alex Chris: Our clear goal is to reshape the company to accelerate profitable growth and margin expansion in the years ahead.

Alex Chris: Prioritization will be key, allowing us to move more quickly and with better results.

Alex Criss: Later in the call, Jamie will take you through our full-year guidance. We have made strategic decisions to reinvest cost savings back into our most important initiatives. It is critical that we remain on offense and position ourselves to not only innovate but capture our share of the growth in global commerce. We want to be clear-eyed in terms of the potential near-term benefits from our initiative. Which is why our 2024 guidance includes minimal contribution from the innovations we recently announced.

Alex Chris: Later in the call Jamie will take you through our full year guidance.

Alex Chris: We have made strategic decisions to reinvest cost savings back into our most important initiatives. It is critical that we remain on offense and position ourselves to not only innovate.

Alex Chris: But capture our share of the growth in global Commerce.

Jamie Miller: We want to be clear eyed in terms of the potential near term benefits from our initiatives, which is why our 2024 guidance includes minimal contribution from the innovations we recently announced.

Alex Criss: We want to see execution and clear results prior to embedding these initiatives into our financial output. As a company, we will build back a track record of delivering on our. In November, I committed to being transparent with you all on how we will run the bill. I want to spend a few minutes sharing our operating principles and how we expect these will drive value creation over time. Our five operating principles are number one, start with the customer. I believe in working with customers back. We will start by defining our customers and their most critical needs.

Jamie Miller: We want to see execution and clear results prior to embedding these initiatives into our financial outlook.

Jamie Miller: As a company, we will build back a track record of delivering on our commitments.

Jamie Miller: In November I committed to being transparent with you all on how we will run the business.

Jamie Miller: I want to spend a few minutes to share our operating principles and how we expect these will drive value creation over time.

Jamie Miller: Our five operating principles are number one start with the customer.

Jamie Miller: I believe and working customer back we will start by defining our customers and their most critical needs.

Alex Criss: Then we will use that knowledge to inform everything we do, including investments and innovation. Number two, focus on profitable growth. We will prioritize high quality, profitable growth and driving improved transaction margin dollars to a higher rigor and, Number three, drive operating leverage over time. We will combine our assets and data to develop more personalized experiences for our customers and drive efficiencies across the business to leverage our costs. Number four, set measurable goals and communicate consistently. We say what we mean and mean what we say.

Jamie Miller: Then we will use that knowledge to inform everything we do including investments in innovation.

Jamie Miller: Number two focus on profitable growth.

Jamie Miller: We will prioritize high quality profitable growth and driving improved transaction margin dollars through more rigor and discipline.

Jamie Miller: Number three.

Jamie Miller: Drive operating leverage over time.

Jamie Miller: We will combine our assets and data to develop more personalized experiences for our customers and drive efficiencies across the business to leverage our cost base.

Jamie Miller: Number four.

Jamie Miller: Measurable goals and communicate consistently.

Jamie Miller: We say, what we mean and mean, what we say we will be transparent and accountable for our performance.

Alex Criss: We will be transparent and accountable for our performance. And, number five, maintain a strong balance. We will be diligent in managing our resources and returning excess cash to our shareholders. These five principles will guide how we make decisions and will ultimately keep us accountable to deliver what we say we will do.

Jamie Miller: And number five maintain a strong balance sheet.

Jamie Miller: We will be diligent in managing our resources and returning excess cash to our shareholders.

Jamie Miller: These five principles will guide how we make decisions that will ultimately keeps us accountable to deliver what we say we will do.

Alex Criss: Let me now take you through what this means for how we serve our customers and what we're focused on in 2020. For enterprises, we're focused on accelerating growth in branded checkout and driving the profitable growth of our PSP services this year. Branded checkout is a critical part of PayPal's value proposition. We need to ensure we have our best checkout experience available to every consumer on every merchant, every time. This will be a multi-year effort.

Jamie Miller: Let me now take you through what this means for how we serve our customers and what we're focused on in 2024.

Jamie Miller: For enterprises, we're focused on accelerating growth in branded checkout and driving the profitable growth of our PSP services. This year.

Jamie Miller: Branded checkout is a critical part of Paypal value proposition, we need to ensure we have our best checkout experience available to every consumer on every merchant every time.

This will be a multiyear effort.

Alex Criss: To start, we redesigned our branded checkout experience, creating more simplicity and consistency with the goal of optimizing presentment, increasing speed, and minimizing friction across all major checkout flows. When combined with our efforts in passwordless authentication, these new flows can result in up to an additional 50% drop in latency, allowing a shopper to check out twice as fast. Improvements like this are aimed at driving a higher selection rate for PayPal and better conversion for our merchants. A challenge in the past has been bringing existing merchants onto our latest integrations and experience. This is one of the reasons why our new guest checkout experience, backlinked by PayPal, is so exciting; it's truly differentiated and will provide a compelling reason for merchants to use it. With it, we can recognize up to 70% of guests visiting a merchant, reduce checkout time by up to 40%, and grow the top of our branded checkout. BigCommerce, one of our longtime partners, has already implemented Fastlane on their platform.

Jamie Miller: To start we redesigned our branded checkout experience, creating more simplicity and consistency with the goal of optimizing presentment, increasing speeds and minimizing friction across all major checkout flows.

Jamie Miller: When combined with our efforts and password less authentication. These new flows can result.

Jamie Miller: And up to an additional 50% drop in latency, allowing a shopper to checkout twice as fast.

Improvements like this are aimed at driving a higher selection rate of Paypal and better conversion for our merchants.

Jamie Miller: A challenge in the past has been bringing existing merchants onto our latest integrations and experiences.

Jamie Miller: This is one of the reasons why our new guest checkout experience vaseline by Paypal is so exciting.

Jamie Miller: Truly differentiated and will provide a compelling reason for merchants to upgrade.

Jamie Miller: With it we can recognize up to 70% of guests visiting a merchant reduced checkout time by up to 40%.

Jamie Miller: And grow the top of our branded checkout funnel.

Jamie Miller: Big Commerce, one of our longtime partners has already implemented fast lane on their platform and the conversion of their merchants using this new solution is as high at 79%.

Alex Criss: And the conversion rate of their merchants using this new solution is as high as 79%. Combining solutions like Fastlane with a full suite of PSP offerings and more targeted, personalized commerce experiences creates a powerful end-to-end suite of capabilities that drives higher sales for merchants and gives them more reason to choose. We're focused on driving profitable growth, including within our PSP services like, The team continues to earn market share and merchant confidence through product and performance enhancement, delivering off-rate improvements of up to 240 basis points for enterprise customers in the U.S. We're continuing to build out and seamlessly integrate additional value-added services, in areas like orchestration, routing optimization, payouts, and risk as a service. In addition to serving as a seamless integration point for our latest branded checkout experiences, including PayPal, Venmo, and Buy Now Pay Later.

Jamie Miller: Combining solutions like fast lane with a full suite of PSC offerings and more targeted personalized commerce experiences creates a powerful end to end suite of capabilities.

Jamie Miller: That drives higher sales for merchants and gives them more reason to choose Paypal.

Jamie Miller: We're focused on driving profitable growth, including.

Jamie Miller: Including within our PSP services like Braintree.

Jamie Miller: Team continues to earn market share and merchant confidence through products and performance enhancements delivering off rate improvement of up to 240 basis points for enterprise customers in the U S.

Jamie Miller: We're continuing to build out and seamlessly integrate additional value added services in areas like orchestration routing optimization payouts and risk as a service. In addition to serving as a seamless integration point for our latest branded checkout experiences, including Paypal Venmo and buy now pay later.

Alex Criss: We will be able to compete in the market with a best-in-class offering and price-to-value. In addition, we're putting greater discipline into our go-to-market and renewal processes as we focus on profitable growth. These areas take time to scale, but we're laser focused on them and expect to make steady progress this year. For small businesses, we're on a journey to move from a variety of standalone products to a modern platform with a comprehensive suite of solutions.

Jamie Miller: We will be able to compete in the market with a best in class offering and price to value.

Jamie Miller: In addition, we're putting greater discipline into our go to market and renewal processes as we focused on profitable growth.

Jamie Miller: These areas take time to scale, but we're laser focused on them and expect to make steady progress this year.

Jamie Miller: For small businesses, we're on a journey to move from a variety of Standalone products to a modern platform with a comprehensive suite of solutions.

Alex Criss: What this means in 2024 is that we're focused on accelerating the adoption of PayPal Complete Payments, or PPCP, through a reinvigorated go-to-market approach for partners and developers. This full stack solution enables us to distribute our best branded checkout flow to SMBs while also competing for the approximately $750 billion addressable market of processing volume. We've had limited penetration of SMB full-stack processing to date due to the lack of a strong product, but that is now.

Jamie Miller: What this means in 2024 is that we're focused on accelerating the adoption of Paypal complete payments or PPP.

Jamie Miller: Through a reinvigorated go to market approach for partners and developers.

Jamie Miller: This full stack solution enables us to distribute our best branded checkout flow to Smbs, while also competing for the approximately 750 billion dollar addressable market our processing volumes.

Jamie Miller: We've had limited penetration of SMB full stack processing to date due to the lack of a strong product.

Jamie Miller: But that is now changing.

Alex Criss: November and December were record-setting months for new SMB adoption of PPC, and we're seeing lower churn rates for merchants on PPCP year over year. We've also seen increases in transaction volume for merchants migrating to full-stack processing from our legacy products. As the year progresses, we intend to drive additional adoption through partner channels, targeted marketing, and developer-friendly capabilities like low and no-code integration paths available through our brand-new developer portal. Over time, we want to better serve other important SMB needs, offering more ways to help them connect to new customers. It's also worth noting that all the checkout improvements I just discussed as part of our enterprise strategy can also benefit the tens of millions of SMBs that use PayPal. For consumers, we're focused on differentiating our value proposition, deepening existing relationships, and giving shoppers more reasons to choose PayPal. PayPal already has strong consumer awareness and trust, but that is not enough to compete in today's world.

Jamie Miller: Vendor in December were record setting months for new SMB adoption of <unk>.

Jamie Miller: We're seeing lower churn rates for merchants on <unk> year over year, but we've also seen increases in transaction volume for merchants migrating to full stack processing from our legacy products.

Jamie Miller: As the year progresses, we intend to drive additional adoption through partner channels targeted marketing and developer friendly capabilities like low and no code integration paths available to our brand new developer portal.

Jamie Miller: Over time, we want to better serve other important SMB needs offering more ways to help them connect to new customers.

Jamie Miller: It's also worth noting that all of the checkout improvements I just discussed as part of our enterprise strategy can also benefit the tens of millions of Smbs that use Paypal.

Jamie Miller: For consumers, we're focused on differentiating our value proposition deepening existing relationships and giving shoppers more reasons to choose Paypal.

Jamie Miller: Paypal already has strong consumer awareness and trust, but that is not enough to compete in today's world.

Alex Criss: Part of a person's decision to choose PayPal comes down to presentation, ease of use, and speed, areas where we still have room to improve. We also want to give consumers more reasons to choose PayPal by delivering personalized and rewarding shopping experiences that also drive higher conversion for merchants. This year, we're launching and evolving a new PayPal app to create habituation. We will also leverage our merchant relationships and the power of AI to make the entire shopping experience personalized for consumers while giving them control over their data.

Jamie Miller: Part of a person's decision to choose Paypal comes down to presentment ease of use and speed areas, where we still have room to improve.

Jamie Miller: We also want to give consumers more reasons to choose Paypal by delivering personal lines and rewarding shopping experiences that also drives higher conversion for merchants.

Jamie Miller: This year, we're launching an evolving a new Paypal app to create.

Jamie Miller: Eight of situations.

Jamie Miller: We will also leverage our merchant relationships and the power of AI to make the entire shopping experience personalized for consumers, while giving them control over their data.

Alex Criss: In addition, we will drive increased understanding and awareness of why PayPal via sustained marketing. Our goal is to drive quality customer growth over time, as well as deeper relationships that include more frequent use and a greater range of product adoption.

Jamie Miller: In addition, we will drive increased understanding and awareness of why Paypal via a sustained marketing efforts.

Jamie Miller: Our goal is to drive quality customer growth overtime as well as deeper relationships that include more frequent news and a greater range of product adoption.

Alex Criss: The new checkout and app experiences we are rolling out this year will also create engagement. That will drive higher awareness of the various products we offer and drive higher adoption of our portfolio over time. Let me give you two examples of where we have a significant opportunity to drive increased adoption. In the US, we have over 27 million active accounts using PayPal Rewards. In the fourth quarter, rewards accounts had higher engagement, and an average revenue per account that was almost double that of non-rewards. The average revenue per account of someone who adopts the PayPal Cashback MasterCard is about five times higher than the average checkout only. Today, only about 2% of active accounts have that card in their wallet.

Jamie Miller: The new checkout and App experiences we are rolling out. This year will also create an engagement loop that will drive higher awareness of the various products, we offer and drive higher adoption of our portfolio over time.

Jamie Miller: Let me give you two examples of where we have significant opportunity to drive increased adoption.

Jamie Miller: In the U S. We have over 27 million active accounts using Paypal rewards.

Jamie Miller: In the fourth quarter rewards accounts had higher engagement and average revenue per account that was almost double that of non rewards accounts.

The average revenue per account of someone who adopt the Paypal cash back Mastercard is about five times higher than the average check up only account.

Jamie Miller: Today, only about 2% of active accounts have that card in their wallet.

Jamie Miller: Increasing adoption of these products will not only drive a richer experience for our customers, but improvement in customer engagement and lifetime value for us.

Alex Criss: Increasing adoption of these products will not only drive a richer experience for our customers but improvement in customer engagement and lifetime value for us. Redesigning our app and creating improved frictionless onboarding paths are tangible ways that we plan to drive higher penetration of these types of products. We're also bringing more functionality and better experiences to Venmo this year, like the ability to connect consumers with cash back offers from small businesses in their local communities. In addition to this innovation, we're focused on driving adoption of the Venmo debit card. Venmo debit card holders are among our most engaged accounts and drive six times the incremental revenue than that of a P2P-only account. About 6% of our active Venmo customers have a Venmo debit card today.

Jamie Miller: Redesigning, our app and creating improved frictionless onboarding pads are tangible ways that we plan to drive higher penetration of these types of products.

Jamie Miller: We're also bringing more functionality and better experiences to venmo. This year like the ability to connect consumers with cashback offers from small businesses in their local communities.

Jamie Miller: In addition to this innovation, we're focused on driving adoption of the venmo debit card.

Jamie Miller: Venmo debit card holders are among our most engaged accounts and drive six times the incremental revenue than that of a P to P. Only customer about 6% of our active venmo customers have a venmo debit card today. So there is significant opportunity there for us to focus on.

Alex Criss: So there is significant opportunity there for us to, Finally, this year, we will demonstrate meaningful progress towards operating more efficiently. We've already consolidated many disparate technology services into a common platform. But we have more work to unleash the power of our data in the service of our customers. We're simplifying and automating manual processes and investing in tools and services needed to drive productivity and innovation velocity. This will reduce cost and complexity, improve the developer experience, and give more reasons for customers to choose us. For example,

Jamie Miller: Finally, this year, we will demonstrate meaningful progress towards operating more efficiently.

Jamie Miller: We've already consolidated many disparate technology services into common platforms. So we have more work to unleash the power of our data and service of our customers.

Jamie Miller: We're simplifying and automating manual processes and investing in tools and services needed to drive productivity and innovation velocity.

Jamie Miller: This will reduce costs and complexity improve the developer experience and give more reasons for customers to choose Paypal.

Jamie Miller: For example, we're converging to a single merchant reporting system. So that our merchants will get consistent and accurate reports, which will make a huge difference in how they run their business.

Alex Criss: We're converging to a single merchant reporting so that our merchants will get consistent and accurate reports, which will make a huge difference in how they run their business. Another outcome of consolidating platforms is that we will now see one view of the customer, which allows us to more effectively cross-sell the various products we offer. We will be moving at lightning speed and with the weight of the company behind each of these initiatives to deliver the best experiences possible for our customers this year. To wrap up, I am pleased with our fourth quarter results and the execution that the team delivered throughout the quarter amid an enormous amount. I'm excited about the year ahead and all the innovation we have in store for our customers. With that, I'll hand the call over to Jamie to take you through our results for the fourth quarter Thanks, Alex. Good afternoon.

Another outcome of consolidating platforms is that we will now see one view of the customer.

Jamie Miller: Which allows us to more effectively cross sell the various products we offer.

Jamie Miller: We will be moving at lightning speed and with the weight of the company behind each of these initiatives to deliver the best experience as possible for our customers this year.

To wrap up I am pleased with our fourth quarter results and the execution that the team delivered throughout the quarter amid an enormous amount of change.

Im excited about the year ahead, and all the innovation, we have in store for our customers.

Jamie Miller: With that I'll hand, the call over to Jamie to take you through our results for the fourth quarter and full year.

Jamie Miller: Thanks, Alex Good afternoon first let me say that I'm very excited to have joined Paypal, Our new leadership team is laser focused on our customers and I am incredibly energized to see our team come together to deliver Paypal full potential.

Jamie: First, let me say that I'm very excited to have joined PayPal. Our new leadership team is laser focused on our customers, and I am incredibly energized to see our team come together to deliver PayPal's full potential. Before I discuss our financial results, you'll notice several things different in our materials today. First, we've redesigned our press release in a more standardized, tabular format designed to allow ease of use and better consumption of information.

Jamie Miller: Before I discuss our financial results, you'll notice several things different in our materials today first we've redesigned our press release and are more standardized tabular format designed to allow ease of use and better consumption of information.

Jamie: We have also included additional supplemental metrics in our investor presentation intended to provide greater transparency into our business. We will continue to evaluate these and other changes over time. I'll start with a summary of our financial performance. In the fourth quarter, we reported 9% revenue growth on a spot and currency-neutral basis. For the full year, revenue grew 8% at spot and 9% on a currency-neutral basis. Transaction margin dollars were flat year-over-year in the fourth quarter and declined 1% for the full year. Non-GAAP earnings per share were $1.48 in the quarter, representing 19% year-over-year growth.

Jamie Miller: We have also included additional supplemental metrics and our investor presentation intended to provide greater transparency into our business. We will continue to evaluate these and other changes over time.

Jamie Miller: I'll start with a summary of our financial performance in the fourth quarter, we reported 9% revenue growth on a spot and currency neutral basis.

Jamie Miller: For the full year revenue grew 8% at spot and 9% on a currency neutral basis.

Jamie Miller: Transaction margin dollars were flat year over year in the fourth quarter and declined 1% for the full year.

Jamie Miller: non-GAAP earnings per share were $1 48 in the quarter, representing 19% year over year growth.

Jamie: Higher earnings per share in the quarter were driven by ongoing expense discipline and better than expected transaction margin dollars, which benefited from branded checkout, brain tree, and interest on customer balances. We ended the full year with $5.10 of non-GAAP earnings per share, up 24%. Our full-year results benefited from lower operating expenses, the higher interest rate environment, and the impact of share buybacks. Now, I'll walk you through some key operating metrics that support these results. We ended the year with 426 million active accounts and 224 million monthly active accounts. Throughout last year, we indicated that we expected ongoing churn of unengaged accounts in less developed markets, predominantly in Latin America and the Asia-Pacific region. This was the primary driver of our year-over-year reduction in total active accounts.

Jamie Miller: Higher earnings per share in the quarter were driven by ongoing expense discipline and better than expected transaction margin dollars, which benefited from branded checkout Braintree and interest on customer balances.

Jamie Miller: We ended the full year with $5.10 of non-GAAP earnings per share up 24%.

Jamie Miller: Our full year results benefited from lower operating expenses, the higher interest rate environment and the impact of share buybacks.

Jamie Miller: Now I'll walk you through some key operating metrics that support these results.

Jamie Miller: We.

Jamie Miller: Ended the year with 426 million active accounts and 224 million monthly active accounts.

Jamie Miller: Throughout last year, we indicated that we expected ongoing churn of unearned gauged accounts in less developed markets predominantly in Latin America, and the Asia Pacific region.

Jamie Miller: This was the primary driver of our year over year reduction in total active accounts.

Jamie: We had modest growth in monthly active accounts, up 1% for both the quarter and the full year, and our active base of engaged accounts remains stable. More than 50% of our total active accounts will be monthly actives over the course of 2023. Transactions per active account, which is a trailing 12-month number, were 58.7 in the fourth quarter, up 14%.

We had modest growth in monthly active accounts up 1% for both the quarter and the full year.

Jamie Miller: Our active base of engaged accounts remained stable.

Jamie Miller: More than 50% of our total active accounts, where monthly actives over the course of 2023.

Jamie Miller: Transactions per active account, which is a trailing 12 month number with $58 seven in the fourth quarter up 14%.

Jamie: If we exclude PSP processing, which is primarily Braintree from that figure, transactions per active account grew 7%. Part of this growth rate is driven by the churn of unengaged accounts that I just mentioned, but we were also encouraged by the higher activity levels we're seeing among our core base of accounts. Page 14 in our investor presentation includes additional information on our historical trends in monthly active accounts and transactions per active account excluding PSP processes. On volume growth in the fourth quarter, we saw total payment volume, or TPV, of $409.8 billion, representing 15% growth at spot and 13% growth on a currency-neutral basis. This growth was driven primarily by Braintree, as well as Branded Checkout, and Venmo. US TPV grew 11 percent. International TPV grew 17% on a currency-neutral basis, primarily driven by strength in Europe and improvement in Asia.

Jamie Miller: If we exclude PSP processing, which is primarily braintree from that figure transactions per active account grew 7%.

Jamie Miller: Part of this growth rate is driven by the churn event engaged accounts that I just mentioned, but we were also encouraged by the higher activity levels, we're seeing among our core base of accounts.

Jamie Miller: Page 14 in our Investor presentation includes additional information on our historical trends in monthly active accounts and transactions per active account, excluding PSP processing.

Jamie Miller: On volume growth in the fourth quarter, we saw total payment volume where TPB.

Jamie Miller: $409 $8 billion representing.

Jamie Miller: Representing 15% growth at spot and 13% growth on a currency neutral basis.

Jamie Miller: This growth was driven primarily by Braintree as well as branded checkout and venmo.

Jamie Miller: U S TPB grew 11%.

Jamie Miller: National TPB grew 17% on a currency neutral basis, primarily driven by strength in Europe and improvement in Asia.

Jamie: For the full year, TPV was $1.5 trillion, increasing 13% at spot and 12% on a currency-neutral basis. PayPal's fourth quarter global branded checkout volumes grew by approximately 5% on a currency-neutral basis, bringing full year branded checkout volume growth to six percent. We have seen a solid start to the year with consistent global branded checkout growth through January. PSP processing volumes grew 29% in the quarter, driven by ongoing growth in brain trees.

Jamie Miller: For the full year of TPB was one five trillion.

Jamie Miller: Increasing 13%.

Jamie Miller: And 12% on a currency neutral basis.

Jamie Miller: Paypal is fourth quarter global branded checkout volumes grew by approximately 5% on a currency neutral basis.

Jamie Miller: Bringing full year branded checkout volume growth to 6%.

Jamie Miller: We have seen a solid start to the year with consistent global branded checkout growth through January.

Jamie Miller: PSP processing volumes grew 29% in the quarter driven by ongoing growth in Braintree.

Jamie: The team continues to make product and performance enhancements for merchants. We are also putting greater discipline into our go-to-market and renewal processes as we focus on overall profitable growth. With respect to revenue, as I noted earlier, revenue in the fourth quarter increased 9% on a spot and currency-neutral basis to $8 billion. Transaction revenue grew 9% on a spot basis to $7.3 billion, driven by Braintree and branded checkouts. In the fourth quarter, U.S. revenue grew 8 percent. International revenue increased 10% at SPOT and 12% on a currency-neutral basis, accelerating from the third quarter.

Jamie Miller: The team continues to make product and performance enhancements for merchants.

Jamie Miller: We are also putting greater discipline into our go to market and renewal processes as we focus on overall profitable growth.

Jamie Miller: With respect to revenue as I noted earlier revenue in the fourth quarter increased 9% on a spot and currency neutral basis to $8 billion.

Jamie Miller: Transaction revenue grew 9% on a spot basis to seven 3 billion driven by Braintree and branded checkout.

Jamie Miller: In the fourth quarter U S revenue grew 8%.

Jamie Miller: International revenue increased 10% and 12% on a currency neutral basis accelerating from the third quarter.

Jamie: Similar to TPV, we saw ongoing strength in Europe and improvements in Asia. For the full year, U.S. revenue grew 9%, and international revenue increased 7% at spot and 9% on a currency-neutral basis. Other value-added services revenue in the quarter grew 9% on a spot basis to $743 million. For the full year, other value-added services revenue grew 26% or by approximately $600 million. For both the quarter and the full year, this growth was driven almost entirely by increased interest income on customer stored balances. However, the transaction take rate declined 10 basis points to 1.78% in the fourth quarter. Approximately 7 bps of this decline was driven by two factors.

Jamie Miller: Similar to TPB, we saw ongoing strength in Europe and improvements in Asia.

Jamie Miller: For the full year U S revenue grew 9% and international revenue increased 7% and 9% on a currency neutral basis.

Jamie Miller: Other value added services revenue in the quarter grew 9% on a spot basis to $743 million.

Jamie Miller: For the full year other value added services revenue grew 26% or by approximately $600 million.

Jamie Miller: For both the quarter and the full year. This growth was driven almost entirely by increased interest income on customer stored balances.

Jamie Miller: Transaction take rate declined 10 basis points to 178% in the fourth quarter.

Jamie: Lower gains from foreign currency hedges, which are recorded as international transaction revenue and flat foreign exchange fees. In addition, mixed shifts with higher volumes from large merchants continued to have a slight impact on our branded checkout take rates. The transaction take rate for the full year was 1.76%, also down 10 basis points year over year. Transaction margin dollars were flat year over year in the fourth quarter, compared to a 3.5% decline in the third quarter.

Jamie Miller: Approximately seven bps of this decline was driven by two factors.

Jamie Miller: Lower gains from foreign currency hedges, which are recorded as international transaction revenue and flat foreign exchange fees.

Jamie Miller: In addition mix shift with higher volumes from large merchants continue to have a slight impact on our branded checkout take rate.

Jamie Miller: Transaction take rate for the full year was $1, 76% also down 10 basis points year over year.

Jamie Miller: Transaction margin dollars were flat year over year in the fourth quarter compared to a three 5% decline in the third quarter.

Jamie: This approximate four-percentage point improvement was driven by a combination of the absence of merchant contractual compensation in the prior year period and by Branded Checkout and Braintrace. The growth of interest income on customer stored balances and growth of branded checkout were the largest contributors to transaction margin dollars in the fourth quarter. This growth was offset by the absence of hedge gains compared to the prior year period, as well as declines in other parts of the portfolio, including the impact of migrating and consolidating legacy PayPal payment services. Fourth quarter transaction expense as a rate of TPV came in at 97 basis points, four basis points higher than the same period last year.

Jamie Miller: This approximate four percentage point improvement was driven by a combination of the absence of merchant contractual compensation in the prior year period.

Jamie Miller: And by branded checkout and Braintree.

Jamie Miller: The growth of interest income on customer stored balances and growth of branded checkout were the largest contributors to transaction margin dollars in the fourth quarter.

Jamie Miller: This growth was offset by the absence of hedge gains compared to the prior year period.

Jamie Miller: As well as declines in other parts of the portfolio, including the impact of migrating and consolidating legacy Paypal payment services.

Jamie: This increase was primarily driven by Braintree volume growth and was partially offset by a favorable geographic mix of PayPal volumes and rate benefits in Venmo. Full Year Transaction Expense as a Rate of TPV with 94 Basis Points. Transaction losses as a rate of TPV were 7 basis points for the quarter, up 1 basis point from the fourth quarter last year, and 8 basis points for the full year. Credit losses were $119 million for the quarter, worth three basis points as a rate of TPV, down 32% year-over-year, and three basis points as a rate of TPV for the full year.

Jamie Miller: Fourth quarter transaction expense as a rate of PPV came in at 97 basis points four basis points higher than the same period last year. This increase was primarily driven by Braintree volume growth and was partially offset by a favorable geographic mix of Paypal volumes.

Jamie Miller: And rate benefits and venmo.

Full year transaction expense as a rate of TPB was 94 basis points.

Jamie Miller: Transaction loss as a rate of TPB was seven basis points for the quarter.

Jamie Miller: Up one basis point from the fourth quarter last year and eight basis points for the full year.

Jamie Miller: Credit losses were $119 million for the quarter were three basis points as a rate of TPB down 32% year over year and three basis points as a rate of TPB for the full year.

Jamie: We have taken a prudent and active approach to managing our overall credit risk, tightening originations within our PayPal business loans portfolio and externalizing our European Buy Now, Pay Later portfolio. In the fourth quarter, non-transaction-related operating expenses declined 9% as we continue to actively manage our cost structure. For the full year, the same expenses declined 11%.

Jamie Miller: We have taken a prudent and active approach to managing our overall credit risk tightening originations within our Paypal business loan portfolio and externalizing, our European buy now pay later portfolio.

Jamie Miller: In the fourth quarter non transaction related operating expenses declined 9% as we continued to actively manage our cost structure.

Jamie: Non-GAAP operating income grew 11% in the quarter to nearly $1.9 billion and for the full year by 14% to $6.7 billion. Our non-GAAP operating margin increased 40 basis points to 23.3% in the quarter and increased 110 basis points to 22.4% for the full year due to better operating expense leverage in each period. PayPal generated $2.5 billion in free cash flow in the fourth quarter.

Jamie Miller: For the full year, the same expenses declined 11%.

Jamie Miller: non-GAAP operating income grew 11% in the quarter to nearly $1 $9 billion and for the full year by 14% to $6 7 billion.

Jamie Miller: Our non-GAAP operating margin increased 40 basis points to 23, 3% in the quarter.

Jamie: This includes a $1.7 billion net benefit from the sale of our European Buy Now, Pay Later receivables to KKR, partly offset by the impact of new loans originated as held for sale. Adjusting for this impact, we generated nearly $800 million in adjusted free cash flow in the quarter and $4.6 billion for the full year. Higher than expected changes in working capital and cash taxes had a negative impact on fourth quarter free cash flow.

Jamie Miller: <unk> increased 110 basis points to 22, 4% for the full year due to better operating expense leverage in each period.

Jamie Miller: Paypal generated $2 5 billion and free cash flow in the fourth quarter.

Jamie Miller: This includes a $1 $7 billion net benefit from the sale of our European buy now pay later receivables to KKR, partly offset by the impact of new loans originated and held for sale.

Jamie Miller: Adjusting for this impact we generated nearly $800 million in adjusted free cash flow in the quarter and $4 $6 billion for the full year.

Jamie: In the quarter, we completed more than $600 million in share repurchases, bringing full-year share repurchases to approximately $5 billion. We ended the quarter with cash, cash equivalents, and investments of $17.3 billion and debt of $11.3 billion. Before turning to our first quarter in 2024 guidance, I have two updates to our guidance approach to share. First, for the time being, we intend to move away from providing annual revenue guidance and instead provide guidance for the upcoming quarter. Given the considerable changes underway at the company, we believe it is prudent to guide revenue one quarter ahead and provide updates as the year progresses. Second, the first quarter and 2024 guidance that we're providing today excludes the impact of stock-based compensation from our non-GAAP results. This is consistent with our historical approach. However, beginning in the first quarter, we will include stock-based compensation expense in our non-GAAP results.

Jamie Miller: Higher than expected changes in working capital and cash taxes had a negative impact on fourth quarter free cash flow.

Jamie Miller: In the quarter, we completed more than $600 million in share repurchases, bringing full year share repurchases to approximately $5 billion.

Jamie Miller: We ended the quarter with cash cash equivalents and investments of $17 3 billion and debt of $11 $3 billion.

Jamie Miller: Yes.

Speaker Change: Before turning to our first quarter in 2024 guidance I have two updates to our guidance approach to share.

Speaker Change: First for the time being we intend to move away from providing annual revenue guidance and instead provide guidance for the upcoming quarter.

Speaker Change: Given the considerable changes underway at the company. We believe it is prudent to guide revenue one quarter ahead and provide updates as the year progresses.

Speaker Change: Second the first quarter in 2024 guidance that we're providing today excludes the impact of stock based compensation from our non-GAAP results. This is consistent with our historical approach.

Jamie: We will update our reporting and guidance accordingly at that time. Stock-based compensation is an integral part of our cost structure and one that we believe we need to manage more directly and transparently. Including stock-based compensation expense in our non-GAAP earnings will introduce more accountability and discipline and will align our own performance measures to the way that many investors already evaluate our business. In terms of our outlook for the first 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 in the first quarter to grow by a mid-single-digit percentage.

Speaker Change: Beginning in the first quarter. We will include stock based compensation expense in our non-GAAP results, we will update our reporting and guidance accordingly at that time.

Speaker Change: Stock based compensation is an integral part of our cost structure and one that we believe we need to manage more directly and transparently.

Speaker Change: Including stock based compensation expense in our non-GAAP earnings, we will introduce more accountability and discipline and will align our own performance measures to the way that many investors already evaluate our business.

Speaker Change: In terms of our outlook for the first quarter, we expect revenue to increase approximately six 5% at spot.

Jamie: With respect to our full-year financial plan, as we have said previously, with all of the changes we are making, 2024 will be an execution year and one where positioning the business for long-term success will be critical. For the full year, we are planning for a relatively consistent macroeconomic environment with some level of interest rate declines as we move through the year. We also assume that overall consumer spending and activity levels will remain relatively constant.

Speaker Change: 7% on a currency neutral basis.

Speaker Change: In addition, we expect non-GAAP earnings per share in the first quarter to grow at a mid single digit percentage.

Speaker Change: With respect to our full year financial plan as we have said previously with all of the changes we are making 2024 will be an execution year and one we're positioning the business for long term success will be critical.

Speaker Change: For the full year, we are planning for a relatively consistent macroeconomic environment with some level of interest rate declines as we move through the year.

Jamie: We expect full-year 2024 non-GAAP EPS to be roughly in line with prior year EPS of $5.10. Underpinning our outlook, we expect roughly flat transaction margin dollars. Alex discussed our innovation and product enhancements earlier. Many of these are already in pilot or launch but will require execution throughout the year before we begin to see impact. Our guidance includes minimal impact from these initiatives.

Speaker Change: We also assume that overall consumer spending and activity levels will remain relatively consistent.

Speaker Change: We expect full year 2024, non-GAAP EPS to be roughly in line with prior year EPS of $5 10.

Speaker Change: Underpinning our outlook, we expect roughly flat transaction margin dollars.

Speaker Change: Alex discussed our innovation and product enhancements earlier.

Jamie: We expect a low single-digit increase in non-transaction operating expenses. As Alex mentioned, we announced actions last week to reduce costs to drive continued efficiencies while at the same time investing more in our product engineering and platform teams to drive growth. There are two factors to be mindful of that will impact our other value-added services revenue. First, while we are still seeing benefits from the higher interest rate environment, we expect that this tailwind will be much less significant in 2024. Second, we continue to take an active and prudent approach to managing our credit exposure. We are carrying lower credit receivables after tightening originations last year.

Speaker Change: Many of these are already in pilot or launch that will require execution throughout the year before we begin to see impact.

Speaker Change: Our guidance includes minimal impact from these initiatives.

Speaker Change: We expect a low single digit increase in non transaction operating expense.

Speaker Change: As Alex mentioned, we announced actions last week to reduce costs to drive continued efficiencies while at the same time investing more in our product engineering and platform teams to drive growth.

Speaker Change: There are two factors to be mindful of that will impact our other value added services revenue.

Speaker Change: First while we are still seeing benefit from the higher interest rate environment. We expect that this tailwind will be much less significant in 2024.

Jamie: And for our off-balance sheet originations, we are planning for ongoing normalization and loss rates, which will impact the revenue share that we earn. We expect free cash flow for 2024 to be approximately $5 billion. From a financial policy perspective, we remain committed to maintaining an investment-grade credit rating.

Speaker Change: Second we continue to take an active and prudent approach to managing our credit exposure.

Speaker Change: We are carrying lower credit receivables after tightening originations last year.

Speaker Change: And for our off balance sheet originations, we are planning for ongoing normalization in loss rates, which will impact the revenue share that we earn.

Jamie: Absent inorganic growth opportunities, we expect to continue allocating approximately 70 to 80 percent of our free cash flow to share buybacks. However, given our strong cash position as we enter the year, we are currently planning for at least $5 billion in share buybacks in 2024. That concludes my prepared remarks. I'll now hand it back over to the operator for the Q&A. Thank you.

Speaker Change: We expect free cash flow for 2024 to be approximately $5 billion.

Speaker Change: From a financial policy perspective, we remain committed to maintaining an investment grade credit rating.

Speaker Change: Absent inorganic growth opportunities, we expect to continue allocating approximately 70% to 80% of our free cash flow to share buybacks. However.

Speaker Change: However, given our strong cash position as we enter the year. We are currently planning for at least $5 billion in share buybacks in 2024.

Sarah: At this time, I would like to remind everyone that in order to ask a question, please press star and then the number one on your telephone keypad. We ask that you ask one question, then return to the queue if needed. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Xinjin Wang of JPMorgan. Your line is open. Thank you so much.

That concludes my prepared remarks, I will now hand, it back over to the operator to begin Q&A.

Speaker Change: Okay.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad. We ask that you ask one question and then return to the queue if needed we'll pause for just a moment to compile the Q&A roster.

Jamie: Appreciate all the details here, but I wanted to dig in on the outlook for transaction margin dollars to be flat. Can you just give us a little bit more, maybe a high-level thoughts on the key drivers there, and maybe some of the levers that are available to you to get the transaction margin dollar growth to accelerate beyond that in 2024? We get a lot of questions about it, obviously, so we would love to hear the puts and takes that you would underline for us. Sure, thank you, Tenjin.

Speaker Change: Okay.

Speaker Change: Our first question comes from the line of Tien Tsin Huang of Jpmorgan. Your line is open.

Speaker Change: Thank you so much I appreciate all the details here I wanted to dig in on the outlook for <unk>.

Transaction margin dollars to be flat can you just give us a little bit more maybe a high level thoughts.

Speaker Change: The key drivers there and maybe some of the levers that are available to you to get the transaction margin dollar growth to accelerate.

Speaker Change: Beyond that in 2020 four you'll get a lot of questions about it obviously, so love to hear the.

Alex Criss: First, let me start just by recognizing how much change we've gone through. You heard in my prepared remarks, but, you know, we essentially have a brand new executive leadership team. We've accelerated the pace of innovation. The first look experience you saw a couple of weeks ago was really innovation that, you know, could have taken months or years, that I'm very proud of the team for accelerating and getting done in 60 days. And we're at a point now where even our mindset shift, this focus on profitable growth, is something that's new for the organization, and we are grinding away every day. And so, with that said, let me unpack the components of transaction margin growth. The way I think about it is that there are three levers there.

Speaker Change: Puts and takes that you would've been in line for us.

Speaker Change: Yes.

Speaker Change: Sure. Thank you Tien Tsin first let me start just with recognizing how much change there is that we've gone through you heard it in my prepared remarks, but yes, we essentially have a brand new executive leadership team, we've accelerated the pace of innovation.

Speaker Change: The first look experience you saw a couple of weeks ago really was innovation that.

Speaker Change: Could have taken months or years that I.

Speaker Change: I am very proud of the team accelerating and getting done in 60 days.

Speaker Change: And we're at a point now where even our mindset shift this focus on profitable growth is something that's new for the organization and we're grinding away every day and so.

Speaker Change: With that said, let me unpack the components of transaction margin growth the way I think about it is theres three levers there.

Alex Criss: The first is really around the branded experience. This is a proven concept for us. It's one that we, in some of the innovations that we put out, both for merchants that improve their experience, as well as for consumers with a new app that allows them to get through the experience better. That is a significant lever for us. And one that, you know, to be honest, we've underinvested in, and, you know, if I take just specifically the mobile experience for our consumers, it's underwhelming. And it's something that, with the new innovations we just rolled out, I expect us to be able to continue to see improvement there. The second is around unbranded processing.

Speaker Change: First is really around branded the branded experience. So this is a proven experience for us it's one that we.

Speaker Change: In some of the innovations that we put out both for merchants that improve their experience as well as consumers with a new app that allows them to get through the experience better that is a significant lever for us and one that.

Speaker Change: To be honest, we've we've under invested in and if I take just specifically the mobile experience for our consumers.

Speaker Change: <unk> has been underwhelmed and it's something that with the new innovations. We just rolled out I expect for us to be able to continue to see improvement there.

Alex Criss: This is an area that, you know, we have invested significantly in. With Fastlane now, we really have one of the best products in the market for our merchants. We're seeing the highest conversion rates out there, and it's something that our merchants are looking for and looking to adopt. We are also looking to move into new areas for growth that have higher margin opportunities, such as international and small business. And it allows us to actually have, you know, different conversations with our customers and really price to value the product. And the third is really what I'd consider a bucket of value-added services. This is a combination of improving our flows with our consumers to ensure that we're attaching the products that we need to, whether it's buy now, pay later, or our cashback MasterCard. These are flows that we've not optimized, and we're underperforming when it comes to really attaching.

Speaker Change: The second is around the Enbridge unbranded processing.

Speaker Change: This is an area that we have.

Speaker Change: <unk> invested significantly in with vastly now we have.

Speaker Change: Really I believe one of the best products in the market for our merchants were seeing the highest conversion rates out there and it's something that our merchants are looking forward and looking to adopt we also are looking to move into new areas for growth.

Speaker Change: Have.

Speaker Change: Higher margin opportunities, such as international and small business and it allows us to actually have.

Speaker Change: Different conversations with our customers and really price to value the product and.

Speaker Change: And the third is really what I would consider a bucket of value added services. This is a combination of improving our flows with our consumers to ensure that we're attaching the products that we need to whether it's buy now pay later.

Speaker Change: Or are cash back Mastercard. These are flows that we've not optimized and we are underperforming when it comes to to really attach.

Alex Criss: And then some of the new offerings that we rolled out. You saw our advanced offerings platform, as well as smart receipts. These are all ways that we can monetize and improve the connection between our merchants and consumers. So those are the different ways that I think about the components.

Speaker Change: And then some of the new offerings that we rolled out you saw our advanced offerings platform as well as smart receipts. These are all ways that we can monetize.

Speaker Change: And improve the connection between our merchants and consumers. So that's different ways I think about the components.

Jamie: Yeah, and Tenjin, I'll jump in on the 24 specific puts and takes on transaction margin dollars. And first, you heard us both say earlier that on the initiatives that Alex has been talking about, we have included a limited impact on that in our guidance. But if I pull back, really, we're viewing largely steady trends to what you saw last year, maybe in slightly different proportions. So branded checkout being a healthy contributor to growth, and improvement in our PSP margin profile. We expect some benefit in our interest income on customer balances, but really, that should be much smaller than what we saw last year. And we do expect some headwinds to our credit revenue, which as I think, as I mentioned in the script on the call, with loss rate normalization happening to pre-pandemic levels and that trend starting to work, you know, we'll just see lower revenue share from our partnerships in that space.

Speaker Change: Tien tsin ill jump in on the.

Tien Tsin: The 24 specific puts and takes on transaction margin dollars in first you heard us both say earlier that the initiatives that Alex has been talking about we have included limited included limited impact on that in our guidance, but if I pull back it really we're viewing largely steady trends to what you saw last year, maybe in slightly different.

Tien Tsin: <unk>, so branded checkout being a healthy contributor to growth improvement.

Tien Tsin: Improvement in our PSP margin profile.

Tien Tsin: We expect some benefit in our interest income on customer balances, but really that should be much smaller than what we saw last year and we do expect some headwinds to our credit revenue, which as I think as I mentioned in the script on the call with <unk>.

Tien Tsin: Loss rate normalization happening to pre pandemic levels and that trend is starting to work. We will just see lower Rev share from our partnerships in that space and then <unk>.

Jamie: And then, Offsetting that, we really see also that some of our smaller product lines in the aggregate will be a drag on TM. This will be to a much lower extent than last year, but in areas where we do platform consolidation, there are times we deprecate products to really push customers to new platforms. A good example of that is PPCP. We do see some drop-off, and we've got a few other products that, as you know, we have not invested as heavily as perhaps we should have in the last couple of years, and as we work our way through that, there'll be some offset there. Yeah, that's helpful.

Tien Tsin: Offsetting that we really see also.

Tien Tsin: That some of our smaller product lines in the aggregate will be a drag on T. M. This will be to a much lower extent than last year, but in areas, where we do platform consolidation. There are times, we deprecate products to really push customers to new platforms. Good example of that is <unk>, we do see some drop off and we've got.

Tien Tsin: A few other products that as you know we have not invested as heavily as perhaps we should have in the last couple of years and as we work our way through that there'll be some offset there.

Speaker Change: Got it that's helpful. Thank you both.

Jamie: Thank you both. Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open. Thanks, guys. Appreciate you taking the question. So I wanted to hone in on branded TPV growth a bit. I think it slowed by a point in the fourth quarter to 5%.

Speaker Change: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open.

Jason Kupferberg: Thanks, guys I appreciate you taking the question. So I wanted to hone in on branded TPB growth a bit I think it slowed by a point in the fourth quarter to 5% I was hoping you could maybe take us through some of the monthly intra quarter trends there any market share observations you might've had some holiday season, and then just some general comments on what you're planning for.

Alex Criss: I was hoping you could maybe take us through some of the monthly intra-quarter trends there, any market share observations you might have had from the holiday season, and then just some general comments on what you're planning for on branded TPV growth in the first quarter and full year. Thank you. Yeah, thanks, Jason. Let me set the context, and I'll see if Jamie wants to pile on. You know, our branded checkout performance was 6% for the year. It's been pretty consistent.

Jason Kupferberg: On branded TPG growth in the first quarter and full year 'twenty four.

Speaker Change: Thank you.

Speaker Change: Yes, Thanks, Jason Let me, let me set the context and I'll see if Jamie wants to pile on.

Speaker Change: Our branded checkout performance with 6% for the year.

Speaker Change: It's been pretty pretty consistent and.

Alex Criss: And, you know, for what we're looking into next year, we're expecting it to be consistent as well. And, as we've talked about, that doesn't include or includes minimal aspects of the new innovations that we put out there. Let me talk about just some of the levers when it comes to the new innovations or ways that I think about accelerating branded checkout, because this obviously is going to be a big focus for the organization. The first is that we really have to improve the value proposition for our consumers. This is why you see us leaning into rewards, ensuring that we've got an improved experience that reduces latency, and really leaning in on mobile as well, so that our consumers have a better branded checkout experience.

Speaker Change: For what we're looking going into next year, we're expecting it to be consistent as well.

Speaker Change: We've talked about that doesn't include our includes minimal aspects of the new innovations that we put out there.

Let me talk about just some of the levers when it comes to the new innovations or ways that I think about accelerating branded checkout. Because this obviously is going to be a big focus for the organization.

Speaker Change: First is we really have to improve the value proposition for our consumers. This is why you see us leaning into rewards ensuring that we've got.

Speaker Change: An improved experience that reduces latency.

Speaker Change: And really leaning in on mobile as well so that our consumers have a better brand new checkout experience.

Alex Criss: Second, you know, the acceleration of Fastlane when it comes to our merchants not only improves the unbranded opportunity where we can see 70% of the customers that come through the Fastlane experience but allows us to have a second engagement with our customers and bring them back into a branded experience at a later date and show them all the different reasons why they should be using PayPal or getting a reward back for a purchase that they made. So I think these, again, are just a couple of examples of innovations that we're leaning into now that allow us to really focus on that branded experience. Thank you. Your next question comes from Darrin Peller with Wolf Research. Your line is open.

Speaker Change: Second.

Speaker Change: The acceleration of Fastly and when it comes to our merchants not only improves the unbranded opportunity, where we can see 70% of the customers that come through.

Speaker Change: Come through the fast lane experience, but allows us to have a second.

Speaker Change: Engagement with our customers and bring them back into the into a branded experience at a later date show them all the different reasons why they should be using paypal or getting a reward back for a purchase that they made so I think these again are just a couple of examples of innovations that we're leaning into now that allow us to really focus.

Speaker Change: On that branded experience.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Darrin Peller with Wolfe Research. Your line is open.

Alex Criss: Hey, thanks, Alex and Jamie. Guys, just to follow up on some of this, this train of thought. I mean, I know you're mentioning you're not incorporating these new initiatives in your transaction profit growth thoughts for this year, but when we think about some of these, I mean, most of these, to your point, Alex, are going to be beneficial to gross profit growth. And so, I guess we'd love to hear a little bit more around how you would measure success, whether it's the PPCP initiatives or unbranded, as well as the branded checkout experience. What KPIs should we look for?

Darrin Peller: Hey, Thanks, Alex and Jamie guys just to follow up a bit on some of this train of thought I mean, I know you were mentioning you're not incorporating these new initiatives in your in your transaction profit growth thoughts for this year.

Darrin Peller: But when we think about some of these I mean, most of these to your point, Alex we're going to be beneficial to gross profit growth and so I guess, we'd love to hear a little bit more around what you would measure is how you would measure success, whether it's the <unk> initiatives are unbranded as well as the branded checkout experience what <unk> should we look for and I guess, a little bit more on timing if not this.

Alex Criss: And I guess a little bit more on timing. If not this year, when do you want investors to expect some traction on actual gross profit reacceleration? Well, thank you, Darren. And, look, let me be clear.

Darrin Peller: Year, when do you want investors to expect some traction in actual gross profit reacceleration.

Darrin Peller: Yes.

Alex Chris: Well, thank you Darrin and look let me let me be clear we are not putting in.

Alex Criss: We are not putting in the expectations into the guidance until we see execution. We just think it's prudent for us to put points on the board before we put them into the guidance. That said, the teams are grinding on this every single day.

Alex Chris: The expectations into the guidance until we see execution. We just think it's prudent for us to put points on the board before we put it into the guidance that said the teams are grinding on this every single day, we are having conversations with our with our merchants and introducing them as I mentioned on the call. The reaction has been quite encouraging from from.

Alex Criss: We are having conversations with our merchants and introducing them. As I mentioned on the call, the reaction has been quite encouraging for the innovations. There is demand in the market, and we are starting right now. And I will tell you, the conversations that we're having now that we're focused on both innovations that are driving demand, as well as improvements for these merchants, are different than we've had in the past. And so I just want you to know we are working on this, and we will update you as we start to see progress on the board and adjust our guidance as needed. Secondly, back to your first question about, you know, how I think about this.

Alex Chris: The innovations there is demand in the market and we are starting right now and I will tell you the conversations that we're having now that we're focused on both innovations that are driving.

Alex Chris: Demand as well as improvements for these merchants.

Alex Chris: <unk> are different than we've had in the past and and.

Alex Chris: So I just want you don't know we are working now on this and we will update you as we start to see points on the board and adjust our guidance as needed.

Alex Chris: Secondly back to your first question around how I think about this look the thing I want you to takeaway from all of this innovation that we rolled out in first look is this is really changing the way, we engage with our customers and our merchants. We are now creating experiences across the entire customer lifecycle not just at checkout.

Alex Criss: Look, the thing I want you to take away from all of this innovation that we rolled out in First Look is that this is really changing the way we engage with our customers and our merchants. We are now creating experiences across the entire customer lifecycle, not just at checkout. So we are driving not only a checkout improvement, the 50% improvement in latency, being able to improve the fast lane, but now we're starting to see a customer value proposition with cash pass, giving rewards back to our customers so that they have a reason to choose PayPal at every purchase. We're improving the onboarding and the reboarding as they come back into the app and start to now attach our MasterCard or debit experiences or buy now, pay later We're improving the post-purchase experience, where we now have smart receipts or package tracking so that we can improve the engagement between our merchants and our consumers.

Alex Chris: So we are driving not only the checkout improvement a 50% improvement in latency.

Alex Chris: Being able to improve fast lane, but now we're starting to see our customer value proposition with cash pass, giving rewards back to our customers. So that they have a reason to choose Paypal at every purchase we're improving the onboarding and the re boarding as they come back into the App and start to now attach.

Alex Chris: Our mastercard or debit experiences or buy now pay later on we're improving the post purchase experience, where we now have smart receipts or package tracking so that we can improve the engagement between our merchants and our consumers and we now have an ongoing active use engagement and then we're leaning into demand generation and actually solving the biggest challenge that our merchants.

Alex Criss: And we now have an ongoing active user engagement, and then we're leaning into demand generation and actually solving the biggest challenge that our merchants have, which is finding new customers. As we think about our advanced offers platform, we're creating shopper insights so that our merchants can start to engage and personalize their experience through our data and through the AI that we can leverage. So the way I think about it is we are looking at the entire end-to-end experience, and we'll measure success through the metrics that you have. It's going to turn into what transaction margin looks like, and what active use looks like from our ongoing users. So that's how we'll think about it. Your next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Hey, good afternoon.

Alex Chris: Which is finding new customers as we think about our advanced offers platform or creating shopper insights. So that our merchants can start to engage and personalize their experience through our data and through the AI that we can lean through so the way I think about it is we're looking at the entire end to end experience and we will measure our success through the metrics that you have it's going to turn into.

Alex Chris: What is transaction margin look like what are what is active used look like.

Alex Chris: From our ongoing users. So that's how we'll think about it.

Speaker Change: Okay. Thanks.

Thanks, guys.

Speaker Change: Your next question comes from the line of Michael <unk> with Goldman Sachs. Your line is open hey.

Jamie: Thank you for the question. I want to ask you about PayPal's commitment to durable, high quality, profitable growth. You know, how does that impact the pricing strategy in Braintree? You know, what unprofitable businesses and products will PayPal de-emphasize? And how does that tie into your 2024 non-transaction OPEX outlook of flat? Thank you very much.

Michael: Good afternoon, and thank you for the question.

Michael: Wanted to ask a question about Paypal commitment to durable high quality profitable growth.

Michael: How does that impact the pricing strategy in Braintree.

Michael: What unprofitable business system products will Paypal deemphasize and how does that tie into your 2020 for non transaction opex outlook of flat. Thank you very much.

Alex Criss: Thanks, Mike. Let me talk about Braintree, and then I'll have Jamie talk about, you know, potentially some of the other products and businesses. So let me take you back. Braintree, you know, if you go back a few years ago, was really trying to establish itself in the market. It hadn't delivered at scale, and there were gaps in the product.

Speaker Change: Great. Thanks, Mike Let me talk about Braintree, and then I'll have Jamie talk about potentially some of the other.

Jamie Miller: Products and businesses. So let me take you back Braintree.

Jamie Miller: If you go back a few years ago.

Jamie Miller: It was really trying to establish itself in the market.

Jamie Miller: It hadn't delivered at scale and there were gaps in the product we've invested heavily in.

Alex Criss: We've invested heavily in the product and have really focused on some of the largest U.S. enterprise customers, which have now proven the scale. While we've gotten the product to parity, then you look at what we've just rolled out with innovations like Fastlane, and I think we've now leapfrogged the competition. So what does that allow us to do? It allows us to be the one-stop shop for merchants. It allows us to provide a best-in-class experience on auth rates and give them the ability to have not only the best processing in an unbranded environment but also package that with PayPal and with all the other ways that customers want to pay, including buy now, pay later.

Jamie Miller: In the product and have really focused on some of the largest U S enterprise customers.

Jamie Miller: Which now has proven the scale, while we've gotten the product.

Jamie Miller: Alrighty, then you look at what we just rolled out with innovations like fast Lane and I think we've now leapfrogged. The competition. So what does that allow us to do it allows us to be the one stop shop for merchants. It allows us to provide a best in class experience on off rates and give them the ability to have not only the best processing it.

Jamie Miller: Unbranded, but also package that with.

Jamie Miller: With Paypal and with all the other ways that customers want to pay.

Jamie Miller: <unk> buy now pay later.

Alex Criss: We are now shifting towards being able to have a price-to-value conversation with our merchants and being able to really start to think about how we will ramp up and go to market for not only Braintree but also PBCP. We are also now moving into markets that have higher margins. So international and small business with both Braintree and PBCP allow us to now, again, price-to-value and have different conversations. So that is how we think about it. We're not focused on unprofitable growth when it comes to Braintree. We think we now have the product in the market to be able to compete effectively and win. Yeah, and Mike too.

Jamie Miller: We now are shifting towards being able to have a price to value conversation with our with our merchants and being able to really start to think about how we ramp up go to market for not only braintree, but also pvp.

Jamie Miller: We also are now moving into markets that have higher margins. So international that small business with both Braintree and PVC P allow us to now again price to value and have different conversations.

Jamie Miller: That is that is how we think about it we're not focused on profitable growth. When it comes to Braintree. We think we now have the product in market to be able to compete effectively and win.

Jamie: On the other part of your question, I guess what I'd say is we are just doing too many things, and our biggest opportunity is that we have to make decisions to stop things and really focus. And that gets into market competitiveness, it gets into pricing, it gets into really leaning into market opportunity, and really stopping doing things that prevent us from doing the right thing in those spaces. So we are knee deep in that right now. And so when we talk about a year of transformation and execution, that's exactly what we're talking about. Thanks, Alex. Thanks, Jamie. Your next question comes from the line about Ramsey LSL with Barclays. Your line is open. Hi, Chris and Jamie, thanks so much for taking my call, Alison, Jamie, thanks so much for taking my call.

Jamie Miller: And Mike.

Mike: And the other part of your question I guess, what I'd say is we are just doing too many things.

Mike: And our biggest opportunity is that we have to make decisions to stop things and to really focus and that gets into market competitiveness. It gets into pricing it gets into really leaning into market opportunity and really stopping doing things that prevent us from doing the right thing in those spaces. So we are knee deep in that right now and so when we talk about a year of transform.

<unk> and execution, that's exactly what we're talking about.

Speaker Change: Okay. Thanks, Alex Thanks, Jamie.

Speaker Change: Your next question comes from the line of Ramsey Lso with Barclays. Your line is open.

Ramsey El: Hi, Chris and Jeremy Thanks, So much for taking my Allison Jamie. Thanks, So much for taking my questions. This evening.

Jamie: I wanted to ask about how much leeway or opportunity you have to continue kind of taking out expenses while simultaneously executing on the growth strategy. How are you thinking about striking that balance of cost control versus growth? And I guess how confident are you that you have room to do both? Yeah, I would say that it's definitely an "and" and not an "or."

Ramsey El: I wanted to ask about how much leeway or opportunity you have to continue kind of taking out expenses, while assignment simultaneously executing on the growth strategy. How are you thinking about striking that balance sort of cost control versus growth I guess, how confident are you that you have room to do both.

Speaker Change: Yes, I would say that it's definitely an and not an or.

Jamie: And that's exactly what we're doing with the workforce announcements we made a week ago, and really taking that and putting that back into product, into engineering, and into marketing. We have got to invest deeply to grow this place, and it's really important for us to just set the company up for the future. And to do that, the innovation muscle, the commercial muscle means that right sizing our expense levels isn't going to be something that we think it's a one and done.

Speaker Change: And that's exactly what we're doing with the workforce announcements, we made a week ago, and really taking that and putting that back into product into engineering and into marketing.

Speaker Change: We have got to invest deeply to grow this place.

Speaker Change: And it's really important for us to just set the company up for the future and to do that the innovation muscle the commercial muscle means that rice right sizing our expense levels is it going to be something that we it does it does.

Speaker Change: But it's a one and done.

Jamie: We know we have a significant opportunity to continue to be more efficient, be that through automation, or through driving deeper productivity. And as we harvest that, that just gives us more levers to invest in that are the right things for our profile as we go forward. Got it, okay. Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open. Great, Thank you so much. James, a quick clarification, and I have a question for Alex, but you said that starting with the first quarter, you'll be including stock-based compensation in your non-GAAP earnings rather than excluding it.

Speaker Change: No we have significant opportunity to continue to be more efficient.

Speaker Change: Through automation be that through driving deeper productivity and as we harvest that that just gives us more leverage to invest that are.

Speaker Change: The right things for our profile as we go forward.

Speaker Change: Got it okay. Thank you.

Speaker Change: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.

James E. Faucette: Great. Thank you so much.

James E. Faucette: Jamie a quick clarification, and then I have a question for Alex but.

James E. Faucette: You said that starting from the first quarter youll be including stock based compensation.

James E. Faucette: Sure no.

James E. Faucette: non-GAAP rather than excluding it so does that mean that.

Jamie: So, does that mean that, you know, if we just imagine that we fast-forward a few months, that the non-GAAP earnings would be reduced by roughly that $1.8 billion? Just looking for a little bit of clarification there. And then, Alex, you made an interesting comment in terms of, like, feeling like things are too big organizationally, but I'm wondering how you feel about the tech stacks right now and the level of integration and where we're at from that perspective in terms of your ability to drive the kinds of improvements and perhaps add functionality to improve the customer experience. Yeah, James, on your first question, you have it exactly right. So beginning in the first quarter, we'll start including stock-based compensation expense in our non-gap. And closer to that time, we'll do the look back, where we'll provide, you know, the retrospective data so that we've got everything on a comparable basis. But But yeah, you're thinking about that, right?

James E. Faucette: If we just imagine that we fast forward a few months that the non-GAAP.

James E. Faucette: Earnings would be reduced by roughly about $1 8 billion, just looking for a little bit of clarification, there and then.

James E. Faucette: Alex you made an interesting comment in terms of like feeling like things are.

James E. Faucette: Our two big organizationally, but im wondering how youre feeling about.

James E. Faucette: The tech stacks right now and the level of integration and where we're at from that perspective in terms of your ability to drive the kinds of improvements and and Brook.

James E. Faucette: Perhaps add functionality to improve the customer experience.

James E. Faucette: Yes, James on your first question you have it exactly right. So beginning in the first quarter.

James E. Faucette: We'll start including stock based compensation expense in our non-GAAP and closer to that time, what it will do to look back where we will provide the retrospective data. So that we got everything on a comparable basis, but yes, youre thinking about that right.

Alex Criss: And then, James, on your question around the tech stack, look, I'll be transparent. The company has gone through significant growth over the last few years and a lot of acquisitions. We have not invested enough in creating a single platform.

James E. Faucette: And then and then James on your question around the Tech stack look.

James E. Faucette: I will be transparent the company has gone through significant growth over the last few years at a lot of acquisitions.

James E. Faucette: Have not invested enough in creating a single platform.

Alex Criss: That, again, slows us down when it comes to innovation, and it slows us down when it comes to being able to leverage data across the ecosystem. We are investing heavily in that now, and we are starting to see real improvement. I mentioned a couple of things on the call, but really being able to put out a reporting system that now sees across the entire ecosystem. Being able to see a single view of the customer so that now we can provide innovations to customers, but also actually be able to cross sell and be able to say, hey, this is a customer that has this risk profile and should be in these, you know, two or three different products is a It also just accelerates our engineering velocity. Being able to have a services-based engineering team that can build once and deploy across the entire ecosystem is the direction that we're heading in. And so you started to see that.

James E. Faucette: Again slows us down when it comes to innovation and it slows us down when it comes to being able to leverage the data across the ecosystem.

James E. Faucette: We are investing heavily in that now and starting to see real improvement I mentioned a couple of things.

James E. Faucette: On the call, but really being able to put out a reporting system that now sees across the entire ecosystem being able to see a single view of the customer. So that now we can provide innovations to customers, but also actually be able to cross sell and be able to say hey. This is a customer that has this risk profile and should be at least two or three different.

James E. Faucette: Products is a huge win for us as we start to consolidate it also just accelerates our our engineering velocity being able to have a services based engineering team that can build once and deploy across the entire ecosystem is the direction that we're heading in and so you started to see that we.

Alex Criss: Even the innovations that we put out over the last couple of weeks weren't really possible without us investing heavily in the platform. But I also would say we have a ways to go. And so it's a primary focus for me and the organization and will drive velocity and efficiency. Your next question comes from the line of David Togut with Evercore ISI. Your line is open. Good afternoon.

James E. Faucette: Even the innovations that we just put out over the last couple of weeks were really possible without us being investing heavily in the platform, but I also would say we have a ways to go and so it's a primary focus for me and the organization and will drive.

James E. Faucette: Philosophy and efficiency.

James E. Faucette: Your next question comes from the line of David <unk> with Evercore ISI. Your line is open.

David: Thank you good afternoon, a major regulatory change in payments just went through in Europe with Apple opening up its iOS, an NFC chip for physical point of sale payments what opportunity does this present to Paypal.

Alex Criss: A major regulatory change in payments just went through in Europe with Apple opening up its iOS and NFC chip for physical point of sale payments. What opportunity does this present for PayPal? Yeah, thanks for the question, David. You know, we are tracking this closely. Apple is a great partner of ours.

Speaker Change: Yes, thanks for the question David.

Speaker Change: We are tracking this closely Apple is a great partner of ours.

Alex Criss: And our customers that love PayPal on the online e-commerce side are demanding being able to have an omnichannel and offline solution as well. So we'll be working closely on this, and when it is available, we will be ready to be able to deliver for our customers both online and offline. Your next question comes from the line of Sanjay Sakhrani with KBW. Your line is open.

Speaker Change: And our customers that love Paypal on the online e-commerce side are demanding.

Speaker Change: Being able to have an omnichannel and offline solution as well so.

Speaker Change: We will be working closely on this end and when it is available we will be ready.

Speaker Change: To be able to deliver for our customers both online and offline.

Speaker Change: Your next question comes from the line of Sanjay <unk> with <unk>. Your line is open.

Alex Criss: Thank you. Alex, one more on the initiatives and just trying to think through the prioritization of these additional investments you'll be making. You know, of those six initiatives, which do you think will sort of yield the returns quickest and maybe a little bit more on the timing of them? Maybe not 2024, but how early? And then, Jamie, just a quick question on interest rates. I think you mentioned you don't expect them to have a big impact or as big an impact in 2024, but is there an explicit rate forecast you have? Like, do you have lower rates in 2024?

Sanjay: Thank you Alex just one more on the initiatives and just trying to think through the prioritization of these additional investments you'll be making up those six initiatives.

Which do you think will sort of yield the returns quickest and maybe a little bit more on timing of them, maybe not 2024, but how early and then Jamie just a quick question on the interest rates. I think you mentioned you don't expect it to have a big impact or as big an impact in 2024, but is there an explicit rate forecast do you have like do you have lower rates.

Speaker Change: In 2024.

Alex Criss: Thanks. Thank you, Sanjay. So, you know, all of all of the innovations are incredibly exciting for us. But let me be specific on your question. The two that I am closely watching, and our teams are executing on immediately, are really a focus on the branded experience. This is both for the combination of merchants and consumers, easing that experience for a customer to choose PayPal, have a reward that comes back to them, and ensure that they're able to get through the experience with velocity and check out every time with PayPal.

Speaker Change: Thank you Sanjay so all of all of the innovations are incredibly exciting for us, but let me let me be specific on on your question to that.

Speaker Change: I am closely watching and our teams are executing on immediately is really a focus on the branded experience. This is both for the combination of merchants and consumers easing that experience for a customer to choose Paypal have a reward that comes back to them ensure that they are able to get through the experience.

Speaker Change: <unk>.

Speaker Change: Velocity and at.

Speaker Change: Check out every time with Paypal.

Speaker Change: Is a is a huge focus for us and that's where we are driving.

Alex Criss: It is a huge focus for us, and that's where we are driving a new app experience. And again, all of these innovations will be coming out over the next couple of weeks to months. Then we have to drive adoption. So that is having conversations with merchants, ensuring that they're upgrading to our latest innovations. And that is ensuring that we make it easy for them as well.

Speaker Change: Our new App experience.

Speaker Change: Again, all of these innovations will be coming out over the next couple of weeks to months.

Speaker Change: Then we have to drive adoption, so that is having conversations with merchants ensuring that they're upgrading to our latest innovations that's ensuring that we make it easy for them as well. So that's why you've seen us launch a new developer portal, where creating no code low code experiences. So developers can take the demand that they have shown because they have a best in class.

Alex Criss: So that's why you've seen us launch a new developer portal. We're creating no code, low code experiences so developers can take the demand that they've shown because they have a best in class experience now and get it into market. So step one is I'm very focused on that branded experience. The second one is around on the unbranded side, which is ensuring that, Fastlane gets rolled out, that to me starts to create an interesting network effect of us being able to have not only a branded experience, but for them, those consumers that pass a branded experience, whether it's ours or anyone else's, and want to just go through a guest checkout flow, we're able to identify them, we're able to help them and our merchants complete the transaction, and then we're able to have a follow-up conversation with that customer as well, because they've gone through our Fastlane experience.

Speaker Change: Experience now and get it into market. So step one is I'm very focused on that branded experience.

Speaker Change: The second one is around on the unbranded side, which is ensuring that.

Vaseline gets rolled out that to me it starts to create an interesting network effect of us being able to have not only a branded experience, but for then those consumers that passed a branded experience, whether it's ours or anyone else's and wanted to just go through a guest checkout flow, we're able to identify them, we're able to help them and our merchants complete the transaction and then.

Speaker Change: We're able to have a follow up conversation with that customer as well because they've gone through are fascinating experience. So those two to me we need to get rolled out we need to get points on the board and show that it's driving but driving outcomes, but that is that is where I'm most focused on right now.

Alex Criss: So those two, to me, we need to get rolled out, we need to get points on the board and show that it's driving outcomes, but that is where I'm most focused on right now. Yeah, and Sanjay, the interest rates question. We do expect that the interest income on customer balances will have some growth this year, but really, it'll be more first half focused. In the second half, we do expect a series of rate cuts that are assumed in our macroeconomic scenario that underpins our guide. And that's why the second half should be much lighter on that front.

Speaker Change: And Sanjay on the interest rates question.

Sanjay: We do expect that the interest income on customer balances will have some growth this year, but really it will be more first half focused the second half. We do expect a series of rate cuts that is assumed in our app macroeconomic.

Sanjay: Scenario that underpins our guide and that's why the second half should be much later on that front.

Jamie: Thank you. That is all the time we have for questions. I will turn it over to Alex Chris for closing remarks. Fantastic. Thank you, Sarah. And thank you all for joining us today. I want to reemphasize that 2024 is going to be a transition year focused on execution to position our business for long-term success. I'm excited with where we're positioned in the market, and I know that there is real opportunity to grow our role in commerce. We're driving the foundational and transformative changes that will set the company up for the future. Thank you. Thank you. This concludes today's conference call. We thank you for joining. You may now disconnect your lines.

Sanjay: Yes.

Sanjay: Yeah.

Sanjay: That is all the time, we have for questions I will turn it to Alex Christopher closing remarks.

Alex Christopher: Fantastic. Thank you Sarah and thank you all for joining us today.

Alex Christopher: I want to reemphasize that 'twenty 'twenty four is going to be a transition year focused on execution to position our business for long term success.

Alex Christopher: I am excited with where we're positioned in the market and I know that there is real opportunity to grow our role in commerce, we're driving the foundational and transformative changes that will set the company up for the future. Thank you.

Speaker Change: Thank you. This concludes today's conference call. We thank you for joining you may now disconnect your lines.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change:

Speaker Change: Hum.

Speaker Change: Yeah.