Q1 2024 PayPal Holdings Inc Earnings Call

Sarah: Good morning. 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 first quarter of 2024. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Sarah and I'll be your conference operator today at this time I would like to welcome everyone to Paypal Holdings earnings Conference call for the first quarter 'twenty 'twenty four.

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 you would like to withdraw your question. Please press star one again.

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

Ryan Ward Wallace: Thank you for joining PayPal's first quarter 2024 earnings conference call. Joining me today is Alex Chriss, our President and CEO, and Jamie Miller, our CFO. We're providing a slide presentation to accompany our commentary. This conference call is also being webcast.

Ryan Ward Wallace: Good morning.

Ryan Ward Wallace: Thank you for joining Paypal its first quarter 2024 earnings conference call.

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

Ryan Ward Wallace: We're providing a slide presentation to accompany our commentary.

Ryan Ward Wallace: This conference call is also being webcast both.

Ryan Ward Wallace: Both the presentation and call are available on our investor relations website. In discussing our company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call.

Ryan Ward Wallace: Both the presentation and call are available on our Investor Relations website.

Ryan Ward Wallace: In discussing our company's performance, we will refer to some non-GAAP measures.

Ryan Ward Wallace: You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call.

Ryan Ward Wallace: Our remarks today will include forward-looking statements that are based on our current expectations, forecasts, and assumptions and involve risks and uncertainty. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties, and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly report on Form 10-Q, filed with the SEC and available on our website. All information in this presentation is as of today's date. And with that, I will turn the call over to Ashwin.

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

Ryan Ward Wallace: Our actual results may differ materially from these statements you.

Ryan Ward Wallace: 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 website.

Ryan Ward Wallace: All information in this presentation is as of today's date, we expressly disclaim any obligation to update this information.

Ryan Ward Wallace: And with that let me turn the call over to Alex.

Ashwin: Thank you, Ryan. And thank you to everyone for joining us this quarter. This year is off to a good start. Our new leadership team is operating well together, and we are really starting to get our arms around the business. You will see in our numbers and the read through that our efforts are beginning to make a difference.

Alex Chris: Thank you Ryan and thank you to everyone for joining us this morning.

This quarter, we delivered a solid set of results and the year is off to a good start.

Alex Chris: Our new leadership team is operating well together and we're really starting to get our arms around the business.

Alex Chris: You will see in our numbers and the read through that our efforts are beginning to make a difference.

Ashwin: We also see a substantial need for continued retooling of the company, how we work with our customers, and how we execute. We are encouraged by the progress to date, but remain realistic that we still have a lot of work to do and a lot of opportunity to drive profitable growth ahead. What we said at the start of the year still holds.

Alex Chris: We also see substantial need for continued retooling of the company, how we work with our customers and how we execute.

Alex Chris: We are encouraged by the progress to date, but remain realistic that we still have a lot of work to do and a lot of opportunity to drive profitable growth ahead of us.

Alex Chris: What we said at the start of the year still holds.

Ashwin: This is a transition year where we are focused on execution and making critical choices that will set the business up for the long term. We have a plan that will return this company to where it needs to be and remain focused on execution to get there. We see clear opportunities for operational improvements across our large enterprise, small business, and consumer businesses, including Venmo, and in driving more efficiency across the organization. But it will take time to prudently drive a meaningful and sustainable transformation.

Alex Chris: This is a transition year, where we are focused on execution and making critical choices that will set the business up for long term success.

Alex Chris: We have a plan that will return this company to where it needs to be and remain focused on execution to get there.

Alex Chris: We see clear opportunities for operational improvements across our large enterprise small business and consumer businesses, including Venmo and.

Alex Chris: And then driving more efficiency across the organization.

Alex Chris: But it will take time to prudently drive a meaningful and sustainable transformation.

Ashwin: In the first quarter, we delivered 10% revenue growth on a currency-neutral basis on $404 billion in total payment volume. Transaction margin dollar performance grew 4%, which was better than expected, thanks in part to actions we took. Our non-GAAP earnings per share increased 27% year over year.

Alex Chris: In the first quarter, we delivered 10% revenue growth on a currency neutral basis on $404 billion in total payment volume.

Alex Chris: Transaction margin dollars performance grew 4%, which was better than expected. Thanks in part to actions we took.

Our non-GAAP earnings per share increased 27% year over year.

Ashwin: Our results are stronger than we expected earlier in the year, and they require some unpacking to put them in the context of the full year. What I want you to understand is what we are focused on, namely making surgical changes to the way we are running the company. Some of these will have an immediate impact, and others will take longer to bear fruit. As such, we need to maintain flexibility throughout this year to make important decisions to drive the long-term growth of the business. This includes decisions about where we prioritize and reinvest.

Alex Chris: Our results were stronger than we expected earlier in the year and they require some unpacking to put them in the context of the full year what.

Alex Chris: What I want you to understand is what we're focused on.

Alex Chris: Namely, making surgical changes to the way we are running the company.

Alex Chris: Some of these will have an immediate impact and others will take longer to bear fruit.

Alex Chris: As such we need to maintain flexibility throughout this year to make important decisions to drive the long term growth of the business.

This includes decisions about where we prioritize and reinvest how we go to market and actions that can be taken to sharpen our value proposition for consumers and merchants.

Ashwin: How we go to market, and actions that can be taken to sharpen our value proposition for consumers and merchants. With that in mind, we do now expect full year EPS to grow mid to high single digits, which is partially driven by our better than expected start to the year. Jamie will take you through our Q1 results, the contours of the year, and updated guidance in just a few months.

Alex Chris: With that in mind, we do now expect full year EPS to grow mid to high single digits, which is partially driven by our better than expected start to the year.

Jamie will take you through our Q1 results contours of the year and updated guidance in just a few moments.

Ashwin: Let me first spend some time providing an update on our execution against our customer strategies and investment priorities and detail progress on our efforts to operate more efficiently. Turning to our three customer groups, we continue to make steady progress on strengthening our strategic positioning and product portfolio. For large enterprises, we continue to focus on accelerating growth in branded checkout and driving the profitability of our business. We are executing to get upgrades to our core branded checkout experiences to the market.

Alex Chris: Let me first spend some time, providing an update on our execution against our customer strategies and investment priorities and detailed progress on our efforts to operate more efficiently.

Alex Chris: Turning to our three customer groups, we continue to make steady progress on strengthening our strategic positioning and product portfolio.

Alex Chris: For large enterprises, we continue to focus on accelerating growth in branded checkout and driving the profitability of our business.

Alex Chris: We are executing to get upgrades to our core branded checkout experiences to the market.

Ashwin: We continue to make good progress in our early testing of FastLane by PayPal with a focus group of merchants, and data from those alpha merchants show that returning FastLane users are converting at nearly 80%. We are just getting started and already creating a low double-digit lift in guest checkout conversion for participating merchants. The results so far are encouraging as incremental conversion improves our merchants' growth and profit. Demand for this product is promising, and we expect to make FastLane generally available in the U.S. in the second half of the year.

Alex Chris: We continue to make good progress in our early testing of fast lane by Paypal with a focus group of merchants and data from those alpha merchants showed that returning fast lane users are converting at nearly 80%.

Alex Chris: We are just getting started and already creating a low double digit lift in guest checkout conversion for participating merchants.

Alex Chris: Our results so far are encouraging as incremental conversion improves our merchants growth and profits dimmed.

Demand for this product is promising and we expect to make fast lane generally available in the U S. In the second half of the year.

Ashwin: Additionally, we are continuing to focus on making it even easier to pay with PayPal by removing friction from the checkout process. In the coming months, we will continue to move to more passwordless authentication processes like biometrics and launch a redesigned mobile checkout experience, which we believe will result in higher conversion. We've begun active discussions with our largest enterprise customers to focus on commercial outcomes that reflect the true value of our payments processing platform and the services we provide.

Alex Chris: Additionally, we are continuing to focus on making it even easier to pay with Paypal by removing friction from the checkout process.

In the coming months, we will continue to move to more password less authentication processes like biometric.

Alex Chris: And launch a redesigned mobile checkout experience, which we believe will result in higher conversion rates.

Alex Chris: We've begun active discussions with our largest enterprise customers to focus on commercial outcomes that reflect the true value of our payments processing platform and the services we provide.

Ashwin: As we speak, many of our top merchants are gathered in California for our annual Commerce 360 customer conference, where our teams will go deep on the innovations we plan to bring to market this year and the value they can provide. We are also in the early stages of evaluating the overall dynamics and pipeline of our top 10,000 merchant accounts.

Alex Chris: As we speak many of our top merchants are gathered in California for our annual Commerce 360 customer conference, where our teams will go deep on the innovations we plan to bring to market this year and the value they can provide.

Alex Chris: We are also in the early stages of evaluating the overall dynamics and pipeline of our top 10000 merchant accounts.

Ashwin: As we evaluate our programs, we see clear opportunities to price for value. Not only with our PSP processing but especially with our value-added services that we already provide, services such as payouts, fraud prevention, and processing orchestration. This process will take time, but we have a focused game plan, and we are already having fruitful conversations that are helping merchants understand the additional value they can unlock by strengthening their relationships, including through our value added. For example, DraftKings recently went live with our fraud management solution, Fraud Protection Advance, which combines our intelligence with advanced machine learning and analytics to help businesses protect themselves from ever-evolving fraud. This is an example of a best-in-class offering and a key differentiator against our competitors.

Alex Chris: As we evaluate our programs, we see clear opportunities to price to value.

Alex Chris: Not only with our PSP processing, but especially with our value added services that we already provide.

Services, such as payouts fraud prevention and processing orchestration.

Alex Chris: This process will take time, but we have a focused game plan and we are already having fruitful conversations that are helping merchants understand the additional value. They can unlock by strengthening their relationship with us including through our value added services.

Alex Chris: For example draft Kings recently went live with our fraud management solution fraud protection advanced which combines our intelligence with advanced machine learning and analytics to help businesses protect themselves from ever evolving fraud, perhaps.

Alex Chris: This is an example of a best in class offering and a key differentiator against our competitors.

Ashwin: It also showcases our ability to leverage AI to drive customer benefits and is an area where we can price for the value we provide. For small and medium-sized businesses, the launch of our PayPal Complete Payments platform has been gaining momentum over the past couple of quarters. We've made good progress in expanding PPCP's geographic reach to now more than 34 countries. In the first quarter, we expanded the platform to Canada, the UK, and more than 20 European markets. We have also added new features to PPCP in Australia, Germany, and the U.S. in recent months.

Alex Chris: It also showcases our ability to leverage AI to drive customer benefit and is an area, where we can price to the value we provide.

Alex Chris: For small and medium sized businesses the launch of our Paypal complete payments platform has been gaining momentum over the past couple of quarters.

Alex Chris: We've made good progress in expanding <unk> geographic reach to now more than 34 countries.

Alex Chris: In the first quarter, we expanded the platform to Canada, the UK and more than 20 European markets.

Alex Chris: We also added new features to PPP, and Australia, Germany, and the U S. In recent months.

Ashwin: Additionally, we are seeing positive response to our new low and no-code tools for merchants and developers to integrate PPCP, which we launched in March. As of the end of the first quarter, approximately 7% of our SMB volume is already on PayPal Complete Payments, with our team focused on distribution through partners that can accelerate adoption to the largest number of customers. Our efforts here are important because PPCP ensures merchants have our latest branded checkout integration, which will include FastLane, so that consumers have a best-in-class checkout experience wherever they shop, and merchants will benefit from higher conversion.

Alex Chris: Additionally, we are seeing positive response to our new low and no code tools for merchants and developers to integrate <unk>, which we launched in March.

Alex Chris: As of the end of the first quarter approximately 7% of our SMB volume is already on Paypal complete payments with our team focused on distribution through partners that can accelerate adoption to the largest number of customers.

Alex Chris: Our efforts here are important because <unk> ensures merchants have our latest branded checkout integration, which will include fast lane. So that consumers have a best in class checkout experience wherever they shop and merchants will benefit from higher conversion.

Ashwin: On average, merchants who adopt PPCP use approximately four PayPal products, which deepens the relationship and reduces charges. This translates to an average revenue per account for a PPCP full-stack merchant that is nearly two times that of an SMB on a legacy integration. As you all know, I have a deep passion for helping small businesses succeed. Frankly, this is an area where PayPal took its eye off the ball. Over the years, we've deprecated products and made pricing decisions that have negatively affected our market position.

Alex Chris: On average merchants, who adopt <unk> use approximately for Paypal products, which deepens the relationship and reduces churn.

Alex Chris: This translates to an average revenue per account for a PCP full stack merchant that is nearly two times that of an SMB on a legacy integration.

Speaker Change: As you all know I have a deep passion for helping small businesses succeed.

Speaker Change: Frankly, this is an area, where paypal took its eye off the ball.

Over the years, we've deprecated products and made pricing decisions that negatively affected our market positioning.

Ashwin: Despite that, we still have the largest population of SMBs anyway, who are using our products and eager for us to do more for them. This is an area where we are investing to correct our. We are here to serve and win the small business market. On the consumer front, the PayPal app is at the center of our strategy to leverage the power of our data to create more value for our customers and unlock new sources of revenue and margin expansion opportunities.

Speaker Change: Despite that we still have the largest population of smbs anywhere who are using our products and eager for us to do more for them.

Speaker Change: This is an area, where we are investing to correct. Our course, we are here to serve and win the small business market.

On the consumer front the Paypal App is at the center of our strategy to leverage the power of our data to create more value for our customers and unlock new sources of revenue and margin expansion opportunities.

Ashwin: In the first quarter, we revamped the PayPal app with a new look and feel and introduced enhancements to our rewards program to enable shoppers to get the most out of their money while increasing conversion from return. Additionally, we began testing a comprehensive rewards-focused lifecycle marketing program.

Speaker Change: In the first quarter, we revamped the Paypal app with a new look and feel and introduced enhancements to our rewards program to enable shoppers to get the most out of their money, while increasing conversion for merchants.

Speaker Change: Additionally, we began testing a comprehensive rewards focused lifecycle marketing program.

Ashwin: When tested with approximately 20% of our PayPal app users, we saw it drive a nearly 7% increase in weekly app logins and a 4% increase in transaction margin per user. Introducing consumers to new products like our debit card that can help maximize the value they receive from PayPal is a major focus. The enhancements our team made to our onboarding flow enabled a 38% increase in debit card first-time users during the first quarter.

Speaker Change: When tested with approximately 20% of our Paypal App users.

Speaker Change: We saw it drive in nearly 7% increase in weekly App, logins, and 4% increase in transaction margin per user.

Speaker Change: Introducing consumers to new products like our debit card that can help maximize the value. They receive from Paypal is a major focus.

Speaker Change: The enhancements our team made to our Onboarding flow enabled a 38% increase in debit card first time users during the first quarter.

Ashwin: On average, a customer who adopts the PayPal debit card is more engaged, generating a 2x lift in transaction activity and a nearly 20% increase to average revenue per account compared to users who primarily use. Approximately 4% of our active PayPal consumer accounts in the U.S. have a debit card.

On average a customer who adopts the Paypal debit card is more engaged generating a two X lift to transaction activity and a nearly 20% increase to average revenue per account compared to users who primarily use checkout.

Speaker Change: Approximately 4% of our active Paypal consumer accounts in the U S have a debit card.

Ashwin: So while we have a lot more to do, this work is meaningful to the economics of our company. In the quarter, we onboarded BigCommerce and WooCommerce to our package tracking solution. In the 12 months since launch, we've had approximately 7 million active accounts use packages. This is a key pillar in our post-purchase strategy. Package tracking not only allows consumers to track their shipments within the PayPal app but will also enable us to make personalized purchase recommendations and present relevant offers through the app and our AI-powered smart receiver.

Speaker Change: So while we have a lot more to do this work is meaningful to the economics of our business.

Speaker Change: In the quarter, we onboard a big Commerce, and we'll commerce to our package tracking solution.

Speaker Change: In the 12 months since launch we've had approximately 7 million active accounts used package tracking this.

This is a key pillar in our post purchase strategy.

Speaker Change: Package tracking not only allows consumers to track their shipments within the Paypal App, but will also enable us to make personalized purchase recommendations and present relevant offers through the app and our AI powered smart receipts.

Ashwin: We believe these innovations will drive engagement with the PayPal app and incentivize future branded checkout. For Venmo, we are focused on giving our customers more ways to immediately use their Venmo debit card in person with Apple Pay and Google Pay, which you will see in the market in the coming month. In the first quarter, we saw a 21% year-over-year increase in consumers using our Venmo debit card. Remember, Venmo debit card holders are among the most engaged accounts and, on average, drive six times the incremental revenue than that of a P2P only customer.

Speaker Change: We believe these innovations will drive engagement with the Paypal App and incentivize future branded checkout activity.

Speaker Change: For Venmo, we are focused on giving our customers more ways to immediately use their venmo debit card in person with Apple pay and Google pay which we will you will see in the market in the coming months.

Speaker Change: In the first quarter, we saw a 21% year over year increase in consumers using our venmo debit card <unk>.

Speaker Change: Remember venmo debit cardholders are among the most engaged accounts and on average drive six times, the incremental revenue than that of a <unk> only customer.

Ashwin: Simultaneously, we are making it easier for consumers to use their Venmo balance when making payments or sending money to friends. In the first quarter, balance funded P2P senders grew by 17%, which contributed to our overall transaction margin dollar growth in the quarter. Our leadership team is continuing to go through our business from top to bottom, understanding where we can operate more efficiently and invest in the innovation that will offer the greatest impact for our customers and Paypal. This is a mindset shift.

Speaker Change: Simultaneously, we are making it easier for consumers to use their venmo balance, we're making payments or sending money to friends.

Speaker Change: In the first quarter balanced funded PDP senders grew by 17%, which contributed to our overall transaction margin dollar growth in the quarter.

Our leadership team is continuing to go through our business from top to bottom understanding where we can operate more efficiently and invest in the innovation that will offer the greatest impact for our customers and Paypal.

Speaker Change: This is a mindset shift we are driving throughout the entire organization.

Ashwin: We are driving throughout the entire organization. Investing for durable growth backed by a clear payback path and time horizon remains a top priority. Investing in branded checkout and better serving our small business customers are two focus areas you heard me talk about today. We are also actively evaluating and greenlighting new investments to accelerate future growth that support and strengthen our strategic priorities. A good example of this is our remittance business, Zoom, which has stagnated while similar services have gained. This business has been on a negative revenue trajectory due to a lack of prioritization and clarity about its value proposition. That has now changed.

Speaker Change: Investing for durable growth backed by a clear payback path and time horizon remains a top priority.

Speaker Change: Investing in branded checkout and better serving our small business customers are two focus areas you heard me talk about today.

Speaker Change: We are also actively evaluating and green lighting, new investments to accelerate future growth that support and strengthen our strategic priorities.

Speaker Change: A good example of this is our remittance business zoom, which has stagnated while similar services have gained share.

Speaker Change: This business has been on a negative revenue trajectory due to a lack of prioritization and clarity about its value proposition.

Speaker Change: That is now changing.

Ashwin: We are executing the right product refinements bundled with an enhanced and more customizable pricing model intended to promote growth over the long run. We plan to reduce the cost of cross-border transfers and provide consumers with the option to eliminate transaction fees altogether when funding with our PYUSD Stablecoin. We are implementing those plans, and we expect to see tangible progress throughout 2024 and beyond. The key takeaway here is that we are in the process of assessing a handful of areas of investment where we believe there are compelling unit economics and market opportunities. These may mean that we will make decisions to invest in 2024, where we believe these investments will ultimately contribute to the sustainable and profitable growth of the company. At the same time, we must maintain our focus.

Speaker Change: We are executing the right product refinements bundled with an enhanced and more customizable pricing model intended to promote growth over the long run.

Speaker Change: We plan to reduce the cost of cross border transfers and provide consumers the option to eliminate transaction fees altogether when funding with our py USD stable coin.

Speaker Change: We are activating those plans and we expect to see tangible progress throughout 2024 and beyond.

Speaker Change: The key takeaway here is that we are in the process of assessing a handful of areas of investment where we believe there are compelling unit economics and market upside.

Speaker Change: These may mean that we will make decisions to invest in 2024, where we believe these investments will ultimately contribute to the sustainable and profitable growth of the company.

Speaker Change: At the same time, we must maintain our focus we are continuing to evaluate the markets. We operate in and the products, we offer where we see areas to improve focus and prioritization, we will take action and update you accordingly.

Ashwin: We are continuing to evaluate the markets we operate in and the products we offer; where we see areas to improve focus and prioritization, we will take action and update you accordingly. Finally, a few words on our continued efforts to drive operational efficiency and productivity across PayPal. We are instilling a rigorous cost-benefit discipline throughout the company and leaving no stone unturned when it comes to reducing unproductive time. We are also investing in automation that will help answer our customers' frequently asked questions, simplify the integration process for our merchants, and enable our team to deploy solutions more quickly.

Speaker Change: Finally, a few words on our continued efforts to drive operational efficiency and productivity across Paypal.

Speaker Change: We are instilling a rigorous cost benefit discipline throughout the company and leaving no stone unturned when it comes to reducing unproductive costs.

Speaker Change: We are also investing in automation that will help answer our customers frequently asked questions.

Speaker Change: Simplify the integration process for our merchants and enable our team to deploy solutions more quickly.

Ashwin: As mentioned on the last earnings call, we have started reporting stock-based compensation as part of our non-GAAP metrics beginning this quarter. In addition to our annual incentive plan, shifting to cash payment from stock, we have also better aligned our incentive programs to performance, particularly focusing on transaction margin and non-GAAP operating income growth. We will continue to focus on a pay-for-performance culture that appropriately aligns pay with results. I'll conclude by thanking the PayPal team for continuing to innovate and serve our customers.

Speaker Change: As mentioned on the last earnings call. We have started reporting stock based compensation as part of our non-GAAP metrics beginning this quarter.

Speaker Change: In addition to our annual incentive plan shifting to cash payment from stock. We have also better aligned our incentive programs to performance.

Speaker Change: Particularly focusing on transaction margin and non-GAAP operating income growth.

Speaker Change: We will continue to focus on a pay for performance culture that appropriately aligns pay with results.

Speaker Change: I'll conclude by thanking the Paypal team for continuing to innovate and serve our customers.

Ashwin: While we are still in the early innings of driving a meaningful and comprehensive transformation of PayPal to deliver the sustainable and high-quality growth we are aiming for, our first quarter results are an encouraging indication of what our team's renewed strategic focus and persistent execution can achieve. We will continue to update you on our progress throughout the year and be transparent about our progress. I'm confident that we are taking the right steps to build long-term profitable growth. With that, I'll hand it over to Jamie to take you through our first quarter results.

While we are still in the early innings of driving a meaningful and comprehensive transformation of Paypal to deliver the sustainable and high quality growth we are aiming for our.

Our first quarter results are an encouraging indication of what our teams renewed strategic focus and persistent execution can achieve.

Speaker Change: We will continue to update you on our execution throughout the year and be transparent about our progress.

Speaker Change: I am confident that we are taking the right steps to build long term profitable growth.

Speaker Change: With that I'll hand, it over to Jamie to take you through our first quarter results.

Jamie: Thanks, Alex. Good morning, everyone.

Jamie S. Miller: Thanks, Alex good morning, everyone.

Jamie: We had a solid start to the year with first quarter results that were above our expectations. But, as Alex mentioned, it's still early in the company's transformation. We are digging deeper and understanding both our challenges and our opportunities with much greater clarity. Our goal for 2024 is to foundationally set up the business for the future by making key decisions and aligning our investment path for growth. And to do so, we are laser focused on strategic analysis and decision making, driving innovation back into the business, and executing with excellence.

Jamie S. Miller: We had a solid start to the year with first quarter results that were above our expectations.

Jamie S. Miller: As Alex mentioned, it's still early in the company's transformation, we are getting deeper in understanding both our challenges and our opportunities with much greater clarity.

Jamie S. Miller: Our goal for 2024 is to foundation really set up the business for the future by making key decisions and aligning our investment path for growth.

Jamie S. Miller: And to do so we are laser focused on strategic analysis and decision, making driving innovation back into the business and executing with excellence.

Jamie: While it will take time for our efforts to sustainably flow through results, the speed at which the team is moving is encouraging, and we are making steady progress. Let me start with a summary of our financial performance. As a reminder, our non-GAAP results now include the impact of stock-based compensation expense and related payroll taxes. This change is intended to enhance transparency, operating discipline, and align our performance measures with how many investors already evaluate our business. Now, moving on to our results.

Jamie S. Miller: While it will take time for our efforts to sustainably flow through results.

Jamie S. Miller: Speed at which the team is moving is encouraging and we are making steady progress.

Jamie S. Miller: Let me start with a summary of our financial performance as a reminder, our non-GAAP results now include the impact of stock based compensation expense and related payroll taxes.

Jamie S. Miller: This change is intended to enhance transparency operating discipline and align our performance measures to how many investors already evaluate our business.

Jamie S. Miller: Now moving to our results.

Jamie: As Alex mentioned, in the first quarter, revenue increased 9% at spot and 10% on a currency-neutral basis. Transaction margin dollars grew 4% year over year, improving in growth by more than 400 basis points from the fourth quarter. I'll walk through the drivers of that growth in a few minutes and provide context on the shape of the year, including tailwinds that we expect to be more pronounced in the first half compared to the second half.

Jamie S. Miller: As Alex mentioned in the first quarter revenue increased 9% at spot and 10% on a currency neutral basis.

Transaction margin dollars grew 4% year over year, improving and growth by more than 400 basis points from the fourth quarter.

I'll walk through the drivers of that growth in a few minutes and provide context on the shape of the year, including tailwind that we expect to be more pronounced in the first half compared to the second half under our updated non-GAAP methodology earnings per share were $1, <unk>, representing 27% year over year growth under.

Jamie: Under our updated non-GAAP methodology, earnings per share were $1.08, representing 27% year-over-year growth. Under the company's prior non-GAAP methodology, which excluded the impact of stock-based compensation, earnings per share would have increased approximately 20% to $1.40, above our guidance for mid-single-digit growth on a comparable basis. Relative to our outlook, higher earnings per share were driven by a combination of factors, including better-than-expected transaction margin dollars, ongoing expense discipline, the timing of certain investment and marketing spend, and interest income. Now we'll walk through some key operating metrics that support those results. We ended the first quarter with $427 million in total active accounts and $220 million in monthly active accounts.

Jamie S. Miller: The companys prior non-GAAP methodology, which excluded the impact of stock based compensation earnings per share would have increased approximately 20% to $1 40.

Jamie S. Miller: Above our guidance for mid single digit growth on a comparable basis.

Jamie S. Miller: Relative to our outlook higher earnings per share were driven by a combination of factors, including better than expected transaction margin dollars ongoing expense discipline, the timing of certain investment in marketing spend and interest income.

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

Jamie S. Miller: We ended the first quarter with 427 million total active accounts and 220 million monthly active accounts.

Jamie: Total active accounts increased by nearly 2 million from the fourth quarter and included growth in PayPal merchant and consumer accounts, in addition to other products. We were encouraged to see total active accounts inflect positively in the quarter, and we remain focused on driving deeper relationships and more activity across our customer base. Monthly active accounts continue to show steady progress, up 2% year-over-year to $220 million with contribution from both PayPal and Venmo.

Jamie S. Miller: Total active accounts increased by nearly $2 million from the fourth quarter and included growth in Paypal merchant and consumer accounts. In addition to other products. We were encouraged to see total active accounts inflect positively in the quarter and we remain focused on driving deeper relationships and more activity across our customer base.

Jamie S. Miller: Monthly active accounts continued to show steady progress up 2% year over year to $220 million with contribution from both Paypal and venmo.

Jamie: Transactions per active account, which is a trailing 12-month number, were 60 in the first quarter, up 13%. Excluding PSP processing, which is primarily Braintree, transactions per active account grew 7%. Moving to volume growth, in the first quarter, TPV grew 14% on a spot and currency-neutral basis to $403.9 billion. U.S. TPV grew 12%. International TPV grew 17% on a currency-neutral basis, primarily driven by strength in continental Europe and improvement in Asia.

Jamie S. Miller: Transactions per active account, which is the trailing 12 month number with 60 in the first quarter up 13%, excluding PSP processing, which is primarily green tree transactions per active account grew 7%.

Jamie S. Miller: Moving to volume growth in the first quarter TPB grew 14% on a spot and currency neutral basis to $403 9 billion.

Jamie S. Miller: U S. <unk> grew 12% international <unk> grew 17% on a currency neutral basis, primarily driven by strength in continental Europe and improvement in Asia.

Jamie: Global branded checkout growth accelerated to 7% on a currency-neutral basis from 5% in the fourth quarter. The first quarter included about a one point benefit from leap day, as well as ongoing benefits from the growth of global marketplaces. Within Branded Checkout, large enterprises and international markets were the biggest contributors to growth.

Jamie S. Miller: Global branded checkout growth accelerated to 7% on a currency neutral basis from 5% in the fourth quarter the.

Jamie S. Miller: The first quarter included about a one point benefit from leap day, as well as ongoing benefits from the growth of global marketplaces.

Jamie S. Miller: Within branded checkout large enterprise and international markets were the biggest contributors to growth.

Jamie: We remain laser-focused on driving deeper adoption of our best-in-class solutions with small and medium-sized businesses and improving our mobile experience, which is critical, particularly in markets like the U.S. and the U.K. PSP processing volume grew 26% in the quarter, driven by continued momentum from Braintree compared to 29% in the fourth quarter. Conversations with merchants have been encouraging as we shift our focus to a more disciplined go-to-market and renewal process that emphasizes focusing on profitable growth.

Jamie S. Miller: We remain laser focused on driving deeper adoption of our best in class solutions with small and medium sized businesses and improving our mobile experience.

Jamie S. Miller: Which are critical particularly in markets like the U S and the UK.

Jamie S. Miller: PSP processing volume grew 26% in the quarter driven by continued momentum from Braintree compared to 29% in the fourth quarter.

Conversations with merchants have been encouraging as we shift our focus to a more disciplined go to market a renewal process that emphasizes our focus on profitable growth.

Jamie: Merchants recognize the product and performance improvements we have already started to make and are excited about the pipeline of upcoming innovation. As I noted earlier, revenue in the first quarter increased 9% at spot and 10% on a currency-neutral basis to $7.7 billion. Transaction revenue grew 11% on a spot basis to $7 billion, driven by Braintree and branded checkouts. Other value-added services revenue in the quarter declined 2% on a spot basis to $665 million.

Jamie S. Miller: Merchants recognize the product and performance improvements we have already started to make and are excited about the pipeline of upcoming innovation.

Jamie S. Miller: As I noted earlier revenue in the first quarter increased 9% at spot and 10% on a currency neutral basis to seven 7 billion.

Jamie S. Miller: Transaction revenue grew 11% on a spot basis to $7 billion, driven by Braintree and branded checkout.

Jamie S. Miller: Other value added services revenue in the quarter declined 2% on a spot basis to $665 million.

Jamie: Within other value-added services, interest on customer balances continues to be a meaningful tailwind. Our credit business performed relatively in line with our expectations, with revenue lower because of two main factors. First, we are carrying lower merchant receivables after tightening originations last year. Second, we have had a lower revenue share on our off-balance sheet U.S. consumer revolving credit portfolio due to ongoing normalization of loss rates. The transaction take rate declined five basis points to 1.74%, driven primarily by lower foreign exchange fees and lower gains from foreign currency hedges.

Jamie S. Miller: Within other value added services interest on customer balances continued to be a meaningful tailwind our credit business performed relatively in line with our expectations with revenue lower because of two main factors first we are carrying lower merchant receivables. After tightening originations last year second we have had lower Rev.

Jamie S. Miller: The new share on or off balance sheet U S consumer revolving credit portfolio due to ongoing normalization of loss rates.

Transaction take rate declined five basis points to 174% driven primarily by lower foreign exchange fees and lower gains from foreign currency hedges. In addition mix shift to large merchants continued to impact our branded checkout take rate.

Jamie: In addition, mixed shifts to large merchants continue to impact our branded checkout take rate. However, transaction margin dollars increased 4% in the first quarter. Higher interest on customer balances, branded checkout, better transaction loss performance, and lower credit losses were the largest contributors to growth. While the performance of the core business has been relatively consistent, we expect that a few of these tailwinds are likely to be less meaningful as we move through the year.

Jamie S. Miller: Transaction margin dollars increased 4% in the first quarter higher interest on customer balances branded checkout better transaction loss performance and lower credit losses were the largest contributors to growth.

Jamie S. Miller: While the performance of the core business has been relatively consistent we expect that a few of these <unk> are likely to be less meaningful as we move through the year, specifically, we expect to see lower year over year benefit from interest on customer balances and lower year over year improvement on transaction and loan loss performance.

Jamie: Specifically, we expect to see lower year-over-year benefit from interest on customer balances and lower year-over-year improvement on transaction and loan loss performance. Non-transaction-related operating expenses declined 2% as we continue to actively manage our cost structure while reinvesting in key strategic initiatives. Part of the decline in operating expenses was a result of certain corporate and marketing investments deferred to the second half, as well as lower stock-based compensation. Non-GAAP operating income grew 15% in the quarter to $1.4 billion, and non-GAAP operating margin expanded 84 basis points to 18.2%. PayPal generated $1.8 billion in free cash flow in the first quarter, or $1.9 billion excluding the impact of held-for-sale accounting related to our European Buy Now, Pay Later externalization.

Jamie S. Miller: Non transaction related operating expenses declined 2% as we continue to actively manage our cost structure, while reinvesting into key strategic initiatives.

Jamie S. Miller: Part of the decline in operating expenses is a result of certain corporate and marketing investments deferred to the second half as well as lower stock based compensation.

Jamie S. Miller: non-GAAP operating income grew 15% in the quarter to $1 4 billion and non-GAAP operating margin expanded 84 basis points to 18, 2%.

Jamie S. Miller: Paypal generated $1 8 billion and free cash flow in the first quarter were $1 9 billion, excluding the impact of held for sale accounting related to our European buy now pay later externalization.

Jamie: In the quarter, we completed $1.5 billion in share repurchases, bringing share repurchases over the past 12 months to approximately $5.1 billion. We ended the quarter with cash, cash equivalents, and investments of $17.7 billion and debt of $11 billion. I'll now move to our second quarter and 2024 guidance. Consistent with the approach we shared in February, we will continue to provide revenue guidance one quarter at a time. For the second quarter, we expect revenue to increase approximately 6.5% at SPOT and 7% on a currency-neutral basis. In addition, we expect non-GAAP earnings per share to increase by a low double-digit percentage. For the full year, we continue to plan for a relatively consistent macroeconomic and consumer spending environment.

Jamie S. Miller: In the quarter, we completed $1 5 billion in share repurchases, bringing share repurchases over the past 12 months to approximately $5 $1 billion.

Jamie S. Miller: We ended the quarter with cash cash equivalents and investments of $17 7 billion and debt of $11 billion.

Speaker Change: I'll now move to our second quarter and 2020 for guidance.

Jamie S. Miller: Consistent with the approach we shared in February we will continue to provide revenue guidance one quarter at a time.

Jamie S. Miller: For the second quarter, we expect revenue to increase approximately six 5% at spot and 7% on a currency neutral basis.

Jamie S. Miller: In addition, we expect non-GAAP earnings per share to increase by a low double digit percentage.

Jamie S. Miller: For the full year, we continue to plan for a relatively consistent macroeconomic and consumer spending environment.

Jamie: With respect to earnings per share, we now expect 2024 non-GAAP EPS to grow by a mid to high single-digit percentage. As Alex said earlier, we are in a transition year, and we do not expect that our quarterly progression will be linear. To help bridge this outlook compared to our prior guidance for approximately flat non-GAAP EPS, there are two main factors I would point you to. First, our inclusion of stock-based compensation expense within non-GAAP results is expected to benefit EPS growth by approximately three percentage points this year.

Jamie S. Miller: With respect to earnings per share. We now expect 2024, non-GAAP EPS to grow by a mid to high single digit percentage.

Jamie S. Miller: As Alex said earlier, we are in a transition year and we do not expect that our quarterly progression will be linear.

Jamie S. Miller: To help bridge this outlook compared to our prior guidance for approximately flat non-GAAP EPS. There are two main factors I would point you to first.

Jamie S. Miller: First our inclusion of stock based compensation expense within non-GAAP results is expected to benefit EPS growth by approximately three percentage point this year.

Jamie: Second, we saw meaningful outperformance in the first quarter relative to our plans. We intend to reinvest a portion of this performance back into the business. We expect earnings growth to be more muted in the second half of the year due primarily to less benefit from interest income on customer balances.

Jamie S. Miller: Second we saw meaningful outperformance in the first quarter relative to our plan, we intend to reinvest a portion of this performance back into the business we.

Jamie S. Miller: We expect earnings growth to be more muted in the second half of the year due primarily to less benefit from interest income on customer balances nor.

Jamie: Normalization and Transaction and Loan Loss Performance as we progress through the year and the Expected Timing of Investment Actions. Underpinning our outlook, we now expect transaction margin dollars to be slightly positive for the full year. We expect non-transaction operating expenses to increase slightly. Embedded within this outlook is the flexibility to make key strategic decisions to invest in and reinvigorate profitable growth within components of the portfolio and accelerate go-to-market efforts. For the full year, we expect other value-added services revenue to be roughly flat year-over-year. This excludes any potential impact from the CFPB late fee regulation, given pending litigation across the banking industry and uncertainty on both timing and implementation.

Jamie S. Miller: Normalization and transaction and loan loss performance as we progress through the year.

Jamie S. Miller: And the expected timing of investment actions.

Jamie S. Miller: Underpinning our outlook, we now expect transaction margin dollars to be slightly positive for the full year.

Jamie S. Miller: We expect non transaction operating expenses to increase slightly.

Jamie S. Miller: Bedded within this outlook is the flexibility to make key strategic decisions to invest and reinvigorate profitable growth with any components of the portfolio and accelerate go to market efforts.

Jamie S. Miller: For the full year, we expect other value added services revenue to be roughly flat year over year. This excludes any potential impact from the CFPB late fee regulation, given pending litigation across the banking industry and uncertainty on both timing and implementation as a company we have already taken steps to me.

Jamie: As a company, we have already taken steps to mitigate future impact, though these take time to fully take hold. Consistent with the approach we shared last quarter, our guidance includes minimal impact from the new innovations rolling out this year. Our focus is on execution as we begin moving from test and pilot phases into launch. We continue to expect free cash flow for 2024 to be approximately $5 billion and at least $5 billion in share buybacks.

Jamie S. Miller: Mitigate the future impact, though these take time to fully take hold.

Jamie S. Miller: Consistent with the approach we shared last quarter, our guidance includes minimal impact from the new innovations rolling out this year. Our focus is on execution as we begin moving from test in pilot phases into launch.

Jamie S. Miller: We continue to expect free cash flow for 2024 to be approximately $5 billion and for at least $5 billion in share buybacks.

Jamie: In closing, 2024 is off to a solid start as we drive significant change across the company. We have clear opportunities to lean in further. We are doing the hard work now to position PayPal for profitable growth in the years ahead. And it has been incredibly energizing to see the team's commitment to this goal. With that, I'll now hand it back to the operator to begin Q&A.

Jamie S. Miller: In closing 2024 is off to a solid start as we drive significant change across the company.

Jamie S. Miller: We have clear opportunities to lean in further we are doing the hard work now to position Paypal for profitable growth in the years ahead and it has been incredibly energizing to see the team's commitment to this goal.

Speaker Change: With that I'll now hand, it back to the operator to begin Q&A.

Sarah: Thank you. At this time, I would like to remind everyone that in order to ask a question, please press star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ting-Jin Huang with J.P. Morgan. Your line is open.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.

Speaker Change: Pause for just a moment to compile the Q&A roster.

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

Speaker Change: Hey, thanks, so much for all the detail here on fraud.

Speaker Change: I want to ask on transaction margin dollars. If you don't mind the acceleration there maybe can you give us a little bit more detail on the growth across.

Speaker Change: The main businesses branded checkout unbranded and what we've been calling other than of course on the other side love to hear if there's any.

Alex: Yeah, thank you, Tenjin. Let me hand it over to Jamie to walk you through transaction margin, and then I'll take the more strategic piece on the other and how we think about

Speaker Change: I'm thinking there on the strategy to to reclaim growth or even divest some of those some of those assets.

Speaker Change: Yes. Thank you Tien Tsin, let me, let me hand, it over to Jamie to walk you through the transaction margin and then I'll take the more strategic piece on other than how we think about the year.

Jamie: Morning, Tingen. I'll just walk you through the drivers for transaction margin growth during the quarter. You know, we were happy with the positive growth progression. As I mentioned in my prepared remarks, we've got a lot underway to really position the company for positive TM growth over time. And in the quarter, just to give you a little bit, interest income on customer balances was the highest contributor.

Jamie S. Miller: Tien tsin.

Jamie S. Miller: I'll just walk you through the drivers for transition transaction margin growth during the quarter. We are happy with deposit growth progression I mentioned in my prepared remarks, we've got a lot underway to really position the company for positive Tam growth over time and in the quarter.

Jamie S. Miller: Just to walk walk it a little bit interest income on customer balances was the highest contributor.

Jamie: Branded checkout continued to grow profitably and was a nice contributor to our growth this quarter. We did benefit from leap day, but we also benefited from strength in large enterprise and international. We've been very focused this year on PSP profitability, and that will ramp over time, but it wasn't a meaningful contributor this quarter, and we had small, but I'd say steady, ongoing product improvements in Venmo, in P2P, so we saw some shifts there, and better transaction and credit loss performance, and then lastly, to the last point of your question, we did see smaller drag from the other smaller parts of the portfolio.

Jamie S. Miller: Branded checkout continued to grow profitably and with a nice contributor to our growth. This quarter, we did benefit from leap day, but we also benefited from strength in large enterprise and international.

Jamie S. Miller: We've been very focused this year on PSP profitability.

Jamie S. Miller: And that will ramp over time, but it wasn't a meaningful contributor this quarter and we've just had small, but I'd say steady ongoing product improvements and venmo in PDP. So we saw some shifting there and better transaction and credit loss performance and then lastly to the last point of your question, we did see smaller drag from the other <unk>.

Speaker Change: All or parts of the portfolio I don't know Alex that you want to talk to you that yes, let me let me just.

Speaker Change: Sort of take a step back and talk about how we've been thinking about the year you've heard us talk about this as a transition year. The way, we've really been focusing the team is on sort of three different components to make sure that we're set up well for profitable growth into the future.

Alex: Yeah, let me just sort of take a step back, Tenjin, and talk about how we've been thinking about the year. You know, you've heard us talk about this as a transition year. You know, the way we've really been focusing the team on sort of three different components to make sure that we're set up well for profitable growth into the future, so really accelerating the velocity of our innovation. The second is adoption and ensuring that once that innovation is actually in the market, that our consumers are using it, and that our merchants are onboarding to our latest and greatest integrations.

Speaker Change: First is accelerating innovation and ensuring that we've got best in class innovation, whether thats on the consumer side and ensuring that our customers have a frictionless incredible experience in checkout to.

Speaker Change: To an unbranded side, where we allow our merchants to have again best processing available.

Speaker Change: So really accelerating the velocity of our innovation. The second is adoption and ensuring that once that innovation is actually in the market that our consumers are using it that our merchants are onboarding to our latest and greatest integrations I will give you. An example, we talked about in the last call the opportunity for <unk>.

Alex: You know, I'll give you an example. We talked about on the last call the opportunity for debit card engagement. We changed the onboarding flow inside of the PayPal app this past quarter and saw 69% higher debit card engagement just by changing that flow.

Speaker Change: Debit card.

Speaker Change: Engagement, we changed the onboarding flow inside of the Paypal App. This this past quarter and saw a 69% higher debit card engagement just by changing that flow. So a big focus on the team are not just delivering our innovation, but actually delivering the adoption and then lastly, as you mentioned and cleaning up some of our underperforming services.

Alex: So a big focus for the team on not just delivering our innovation but actually delivering the adoption. And then lastly, as you mentioned, cleaning up some of our underperforming services. I mentioned Zoom on the call. That is a business that we looked at very hard. It's been underperforming for a couple of years now, and so that's just an example. We're going top to bottom throughout the organization, and there will be some businesses or markets that don't meet that cut, and we'll let you know when we make those decisions.

Speaker Change: I mentioned zoom on the call that is a business that we looked at very hard it's been underperforming for a couple of years now.

Speaker Change: And we wanted to make a decision on is this an asset that strategic to the business that should.

Speaker Change: It should be a profitable grower for us or not and when we looked at it we realized that there were just opportunities where we had priced ourselves out of the market in a number of different corridors that we could make strategic decisions on and actually make this a profitable growing business and so that's just an example, we're going top to bottom throughout the organization and there will be some businesses or.

Speaker Change: Markets that don't meet that cut and we'll let you know when we when we make those decisions and there will be other ones that.

Alex: And there will be other ones that, with focus and execution, will turn around. Your next question comes from Darrin Peller with Wolf Research. Hey guys, thanks. You know, I think you'd be helpful if you didn't mind just...

Speaker Change: With focus on execution will turnaround.

Speaker Change: Got it appreciate it thank you.

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

Speaker Change: Yes.

Darrin David Peller: Hey, guys. Thanks, I think it'd be helpful. If you don't mind, just first revisiting some of the initiatives or add on branded and your conviction in the timing around the impact from them on perhaps on transaction margin, but.

Alex: Your next question comes from the line of Darrin Peller with Wolf Research. Your line is open.

Darrin David Peller: Maybe even more specifically if you've had discussions with braintree merchants around pricing and I think you touched on some of the prepared remarks, but more pricing devalued on pricing to win how are those conversations going.

Alex: Yeah, thank you, Darren. So again, just to sort of paint the big picture on unbranded, you know, this is an important segment for us, both for enterprise and for small business. We have to nail the basics, right? So our customers are looking for the best authentication rates, the best uptime, the best availability, and the best reliability. And those are things that we are now providing. And I think over the last few years, as we've been building the service, whether it's Braintree or now with PPCP, we've been investing in that and establishing a beachhead for our product across the market.

Darrin David Peller: I guess, Alex market wide, when we think about the appreciation of the value added services and differentiator for Paypal two sided network.

Darrin David Peller: How has that been resonating in the market lately.

Speaker Change: Thank you Darren so so again just to sort of paint the Hyatt picture on unbranded.

Speaker Change: This is an important segment for us both on for.

Darren: For enterprise and for small business.

Darren: We have to nail the basics right. So our customers are looking for the best off rates the best uptime, the best availability the best reliability.

Darren: And those are things that we are now providing and I think over the last few years as we've been building the service, whether it's braintree or now with <unk>, we've been investing in that and establishing a beachhead.

Darren: For our product across the market.

Alex: In doing so, though, we also have been building value-added services that, to be totally transparent, we haven't been able to price for value, or we haven't been able to ensure that we're engaged with our customers in a real end-to-end strategic conversation. That's changing now.

Speaker Change: In doing so though we also have been building value added services that to be totally transparent, we haven't we haven't been able to price to value or we haven't.

Speaker Change: Been able to.

Speaker Change: To ensure that we're engaged with our customers and a real end to end strategic conversation, that's changing now and so to your question, we're having great conversations with both enterprise and small business merchants around our end to end solutions. The value added services that we can now bring to bear really more strategic conversations as you.

Alex: And so to your question, you know, we're having great conversations with both enterprise and small business merchants around our end-to-end solutions, the value-added services that we can now bring to bear, really more strategic conversations, as you mentioned, around the two-sided network, both an unbranded and branded, and then even things like our new marketing and ad platform in the mix. We're now having really deep conversations with our merchants that are, again, strategic for them and extract the value of the services that we're providing.

Speaker Change: And around the two sided network both in unbranded branded and then even things like our.

Speaker Change: Our new marketing and AD platform.

Speaker Change: In the mix, we're now having really deep conversations with our merchants that.

Speaker Change: Again, our strategic for them and extract the value that of the services that we're providing so very encouraged with these conversations obviously, it's going to take time.

Alex: So very encouraged by these conversations. Obviously, it's going to take time, especially for some of the largest merchants. It just takes time for them to roll out and adopt. But our teams right now are, as I mentioned on the call, in LA for our Customer 360 conference and showing them all the innovations and having really, really good conversations. So very encouraged by the start. It's just going to take time throughout the year.

Speaker Change: Especially for some of the largest merchants it just takes time for them to rollout and adopt but.

Speaker Change: Our teams right now are as I mentioned on the call MLA with with.

Speaker Change: Our customer 360 conference and showing them all the innovations and having really really good conversations so encouraged with the start just kind of take time throughout the year.

Alex: Your next question comes from the line of Timothy Chiodo with UBS. Your line is open.

Speaker Change: Got it.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Timothy Chiodo with UBS. Your line is open.

Alex: Great, thank you for taking the question. I really want to talk about two parts, one around mechanics, and one around uplift.

Timothy Chiodo: Great. Thank you for taking the question I wanted to jump.

Timothy Chiodo: Two really one around mechanics, one around the uplift on the mechanics, Kevin is there might be two ways to go about this one is to make it a part of your unbranded offering and it could be either part of your negotiations on pricing it could be a separate fee, but any way you look at it in that scenario it would be more of a fast lane than Braintree.

Alex: On the mechanics, Kevin, there might be two ways to go about this. One is to make it a part of your unbranded offering. And it could be either part of your negotiations on pricing, or it could be a separate fee. But anyway, you look at it in that scenario, it would be more of if FastLane, then Braintree does the processing. But the alternative way would be for it to be more of a service and available on a process or agnostic basis.

Timothy Chiodo: Does the processing, but the alternative way would for it to be more of a as a service and available on our processor agnostic basis wanted to see first if you. If you can give us color on which routes you might be able to take or maybe both and then lastly on the uplift which is if.

Alex: One to see first if you can give us color on which routes you might be able to take, or maybe both. And then lastly, on the uplink lift, which is, if we think about the range of net take rates with unbranded at the low end and branded at the high end, where do you think FastLane could eventually reside on that spectrum? Thanks.

Timothy Chiodo: If we think about the range of net take rates with unbranded at the low end and brand and at the high end, where do you think <unk> could could eventually reside on that spectrum.

Alex: Yeah, thanks, Tim. Let me take the first part and see if Jamie wants to add anything.

Timothy Chiodo: Yes.

Speaker Change: Yeah. Thanks, let.

Speaker Change: Let me take the first part and Steve Jamie wants to add anything in.

Alex: You know, we are really excited about FastLane as it now gets to market. We are live with a handful of early partners, and the results just continue to impress. And just as a reminder, you know, we're now enabling an 80% conversion rate for returning users through our guest checkout flow. What's even more exciting that we've now been able to start to see with these early merchants is that we're actually seeing unrecognized users, so these are non-PayPal users, opting in to FastLane at a 40% rate.

Speaker Change: You know we are really excited about fast lane is it now gets to market.

Speaker Change: We are alive with a handful of of early partners and the results.

Jamie S. Miller: Just continue to impress and just as a reminder.

Jamie S. Miller: We're now enabling 80% conversion rate for returning users to our guest checkout flow, what's even more exciting.

Jamie S. Miller: That we've now been able to start to see with these early merchants is that we're actually seeing.

Jamie S. Miller: Unrecognized users. So these are non Paypal users opting in to fast lane at a 40% rate that just shows the power of our brand and it shows the power of of what Paypal can be and it goes a little bit to your to your question around how we think about pricing it and how we think about go to market because it's even beyond just.

Alex: That just shows the power of our brand, and it shows the power of what PayPal can be. And it goes a little bit to your question around how we think about pricing it and how we think about going-to-market, because it's even beyond just an unbranded processing element.

Jamie S. Miller: And on.

Jamie S. Miller: An unbranded processing element.

Alex: I don't want to unveil exactly how our go-to-market will work, but that data point shows that this is not just within the PayPal ecosystem. This is allowing us to actually take the brand that we've established over 25 years and leverage that for our merchants to deliver incredible checkout conversion rates for the 60% of the market that continues to go through a guest checkout experience. So we're really encouraged by the early signs there.

Jamie S. Miller: I don't want to unveil exactly how our go to market will work, but.

Jamie S. Miller: But that data point shows that this is not just within the Paypal ecosystem. This is allowing us to actually take the brand that we've established over 25 years and leverage that for our merchants to deliver in.

Jamie S. Miller: Credible checkout conversion rate for the 60% of the market that continues to go through a guest checkout experience. So we're really encouraged by the early signs there.

Alex: In terms of rollout and how we think about it, obviously, on the PPCP side, as we continue to deliver FastLane to that platform through many of our platform partners, it becomes easy for our small businesses to one-click turn that on. So that will be a big part of our rollout, and then we have good merchant conversations as well on the large enterprise side. And again, those are really kicking off in earnest this week at our C360 conference.

Jamie S. Miller: In terms of rollout and and how we think about it obviously on the PVC side.

Jamie S. Miller: As we continue to.

Jamie S. Miller: To deliver fast lane too to that platform through through many of our platform partners. It becomes easy for our small businesses to one click turn that on so that will be a big part of our rollout and then having having good merchant conversations as well.

Jamie S. Miller: On the large enterprise side and again those are kicking off really in earnest. This weekend at <unk> hundred 60 contracts. So again.

Alex: So again, the last thing I'd say just on pricing, and then Jamie, see if you want to add anything, is, you know, because, you know, we've focused this year on a transition year, we may get very aggressive on the pricing side when it comes to FastLane for 2024, because we want to drive adoption. We think this is a best-in-the-market innovation that all merchants should have access to, and as they think about winning this shopping season, you know, our encouragement to them is to improve the onboarding for them, create low-code, no-code opportunities for them to get up and running as fast as possible so that they can win this season and really prove to themselves that conversion improvement. And, you know, rest assured; we'll be pricing the value over time to ensure that we get the right value from that.

Jamie S. Miller: <unk>.

Speaker Change: The last thing I'd say just on pricing and then Jamie if you want to add anything is.

Speaker Change: Because we've focused this year on a transition year, we may get very aggressive on the pricing side when it comes to fast Lane for 2024.

Speaker Change: Because we want to drive adoption. We think this is the best in the market innovation that all merchants should have access to and as they think about winning this shopping season.

Jamie S. Miller: Our encouragement is.

Jamie S. Miller: <unk> improved the onboarding for them create.

Jamie S. Miller: Low code no code opportunities for them to do.

Jamie S. Miller: Get up and running as fast as possible so that they can win this season.

Jamie S. Miller: And really prove to themselves that conversion improvement and.

Jamie S. Miller: Rest assured we'll be pricing to value over time to ensure that we get the right value from that.

Jamie: Anything you'd add? No, I think you've said it all. I really think FastLane reinforces our holistic value proposition, both for branded and for unbranded. And the focus on merchant checkout conversion and that being at our core, I think, drives a strong value proposition, and it will support strong pricing over time.

Speaker Change: Jamie anything you'd add no I think you've said it all I really think fast lane reinforces our holistic value prop both branded and for unbranded.

Jamie S. Miller: The focus on merchant checkout conversion and that being at our core I think drives a strong value prop and it will support strong pricing over time, the only the only thing because that I would just just last point.

Alex: The only thing that I would just, just last point, is this conversion rate with FastLane. What's so exciting to me is not just the 40% that's coming in as unrecognized users leveraging our brand and the 80% conversion rate of guest checkout for returning users, but this is just early days. This is with a handful of merchants.

Speaker Change: Is.

Speaker Change: He is.

Jamie S. Miller: This conversion rate with vaseline, what's so exciting to me is not just the 40% that's coming in is unrecognized users leveraging our brand.

Jamie S. Miller: And the 80% conversion rate of guest checkout for returning users. But this is just early days. This is with a handful of merchants. This is a network effect as we gain more and more users coming through as these users now become returning users over and over again those rates should continue to improve and so this is already.

Alex: This is a network effect. As we gain more and more users coming through, as these users now become returning users over and over again, those rates should continue to improve. And so this is already an order of magnitude better than anything else in the market. And with the network effect and scale that we have, we just expect it to continue to get better.

Jamie S. Miller: In order of magnitude better than anything else in the market and with the network effect and scale that we have we just expect it to continue to get better.

Speaker Change: Excellent. Thank you.

Jamie S. Miller: Your next question comes from the line of Ramsey El <unk> with Barclays. Your line is open hi.

Ramsey Clark El: Hi, Thanks, so much for taking my question. This morning, Alex could you comment on the European Commission ruling to open up the iPhone NFC hardware on the handset and whether you see that as a competitive opening for Paypal in Europe. I know there is some rumblings in the U S as well about about that type of a move I mean, how ready from a product perspective.

Alex: Excellent, thank you. Your next question comes from the line of Ramsey LSL with Barclays. Your line is open.

Alex: Your next question comes from the line of Ramsey LSL with Barclays. Your line is open. Hi, thanks so much for taking my question.

Jamie S. Miller: Are you to take advantage of a more open NFC environment. Thanks.

Alex: Thank you for the question, Ramsey. So, let me set the context so that it's clear how we think about it.

Jamie S. Miller: Yes.

Alex Chris: Thank you for the question Ramsey So let me let me set the context, so that it's clear how.

Alex Chris: How we think about it first we must.

Alex: First, we must play in an omni-channel world. We have established ourselves as the leader in the market for online, and our customers love us and use us globally for online checkout. But they are demanding an offline opportunity, an omni-channel opportunity, and to get the value that we're able to provide as we start to deliver not only the basics of our security and flexibility but also as our rewards platform continues to improve, we want to be able to deliver a PayPal service for customers everywhere, anytime, every purchase.

Speaker Change: Play in an Omnichannel world.

Speaker Change: We have established ourselves as the leader in the market and online and.

Speaker Change: And our customers love us and use us glue.

Speaker Change: Globally for online checkout, but they are demanding an offline opportunity in omnichannel opportunity and to get the value that we're able to provide as we start to deliver not only the basics of our security and flexibility, but also as our rewards platform continues to improve we want to be able to deliver.

Speaker Change: Paypal service for customers everywhere anytime every purchase.

Alex: So we will be playing in an omni-channel environment. Where there are locations where NFC opens up, that obviously becomes a very easy opportunity for us to provide a wallet on an Android or iPhone operating system, and we will be ready.

Speaker Change: We will be playing in an omnichannel environment.

Speaker Change: <unk>.

Speaker Change: Where there are locations, where NFC opens up that obviously becomes a very easy opportunity for us to provide a wallet in an android or iPhone.

Speaker Change: Operating system, and we will be ready.

Alex: If there are environments where it's not available, we will still operate in an Omnichannel. So Omnichannel is a strategic initiative for us. It's something that is customer-backed and delivers an incredible PayPal experience, again, for every purchase and every checkout. And we'll take advantage of whatever market, whatever features and functionality we have in whatever market we play in. Got it. Thanks. The next question comes from the line of Mr. Kupferberg with Bank of America. Your line, Good morning, guys. I just had a two part question. The first was just following up on the transaction profit dollar.

Speaker Change: If there are environments, where it's not available we will still operate in an omnichannel. So omnichannel is a strategic initiative for us it's something that is customer back and delivers an incredible Paypal experience again for every purchase and every checkout and we will take advantage of whatever market.

Speaker Change: <unk> features and functionality, we have in whatever market we plan.

Speaker Change: Got it thanks.

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

Jason Alan Kupferberg: Good morning, guys I just had a two part question. The first just following up on the transaction profit dollar growth I know youre now expecting slightly positive for the year I guess that would seem to imply maybe a little bit of a deceleration from Q1 levels, even though the second half comps are a little easier. So just wanted to get a sense of whether that's conservatism.

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

Jamie: So just to walk through a little bit of the first half and second half dynamics on transaction margin dollars, you know, as I talked about before, and you noted, Q1 in particular benefited from a few tailwinds, and we do expect those will be less meaningful as we move throughout the year. You know, first of all, the growth in our interest income on customer balances was the largest contributor, but when you start to look at later in the year, the comps just get more challenging, you know, rates were rising in the lower half of last year.

Speaker Change: Or just some normalization of things like transaction and loan loss that helped you in Q1.

Speaker Change: And then the second part is just is there any change in your full year expectations for branded payment volume growth. Thank you.

Speaker Change: Good morning, Jason.

Jason Alan Kupferberg: So just to walk through a little bit of a first half second half dynamics on transaction margin dollars.

Speaker Change: As I talked about before and you noted I mean Q1 in particular benefited from a few tailwind and we do expect those will be less meaningful as we move throughout the year.

Jason Alan Kupferberg: First of all the growth in our interest income on customer balances.

Jason Alan Kupferberg: It was the largest contributor but when you start to look at later in the year the comps just get more challenging and our rates are rising in the latter half of last year.

Jamie: We also saw improvement in transaction loss and credit loss in the first quarter. Transaction loss in particular may not sustain or may not be as material as we move throughout the year, and we saw, as you pointed out, a meaningful benefit in loan losses in the first quarter, and we don't expect that to continue either. So, you know, I'd say those few things are some of the dynamics, and then our initiatives and some of the new innovation that Alex talked about will take time to ramp up. So right now, we're focused on execution. We want to keep expectations measured until we see really steady execution results.

Jason Alan Kupferberg: We also saw improvement in transaction loss and credit loss in the first quarter.

Jason Alan Kupferberg: Transaction loss in particular may not sustain or may not be as material as we move throughout the year.

Speaker Change: And we saw as you pointed out a meaningful benefit in loan losses in the first quarter and we don't expect that to continue either so.

Speaker Change: Those few things are some of that dynamic and then our initiatives and some of the new innovation that Alex talked about it will take time to ramp.

Jason Alan Kupferberg: Right now we're focused on execution, we want to keep expectations measured until we see really steady execution results.

Alex: And just to underline Jamie's point. We have not put, or we have put a limited upside to this innovation that we've talked about in these expectations. And so again, this is about us having the flexibility, ensuring that we take the right time and do the right thing by the customers, as well as building for the long term. But those are not built into the rest of the year. Yeah, and what you asked about.

Jason Alan Kupferberg: Just just to underlying Jamie's point.

Jason Alan Kupferberg: We have not put or are we have put limited.

Jason Alan Kupferberg: Upside to this innovation that we've talked about.

Jason Alan Kupferberg: And these expectations and so again this is about us having the flexibility us ensuring that we take the right time and do the right thing by the customers as well as building the long term.

Jason Alan Kupferberg: But those are not built into.

Jason Alan Kupferberg: To the rest of the year.

Jamie: Yeah, and you asked about branded as well, and, um... And when we look at that, we had a nice quarter in terms of TPP and revenue. It was a healthy contributor to our transaction margin dollars.

Jason Alan Kupferberg: And you asked about branded as well and.

Jason Alan Kupferberg: And when we look at that we had a nice quarter in terms of TPB in revenue. It was a healthy contributor to our transaction margin dollars we do.

Jamie: You know, we did have some benefit this quarter from leap day, but by and large, we expect branded revenue trends to be pretty consistent with last year as we look at that. And I guess the other comment I might make is that when you think about take rate for us, we saw a decent drop last year. We do expect take rate to come down again this year, but not nearly to the same extent. And a little bit of that as it comes through on the branded trend line is just that we're seeing a little bit of mixing towards large enterprises from SMB, and that's impacting the take rate side.

Jason Alan Kupferberg: Did have some benefit this quarter from leap day, but by and large we expect branded revenue trends to be pretty consistent with last year as we look at that and I guess the other comment I might make is that when you think about take rate for us we saw a decent drop last year. We do expect take rate will come down again, this year, but not nearly to the same extent.

Jason Alan Kupferberg: And a little bit of that as it comes through on the branded trend line is just that we're seeing so a little bit of mixing towards large enterprise from SMB and that's impacting the take rate side.

Speaker Change: Thank you.

Alex: Your next question comes from the line of Mike Ng with Goldman Sachs. Your line is open.

Jason Alan Kupferberg: Your next question comes from the line of Mike <unk> with Goldman Sachs. Your line is open.

Alex: Hey, good morning. Thanks for the question. Just two for me.

Mike: Hey, good morning. Thanks for the question just two from me first.

Alex: First, I was just wondering if you could just talk a little bit more about the drags from the smaller part of the portfolio on transaction margin dollars. When does that kind of work itself out of the system? And then, related to transaction margin dollar growth, you talked about balance funded Venmo transactions contributing to growth in the quarter. Could you expand a little bit on that? Do you see that scaling over the next couple of years? And what are the opportunities to improve card attach for Venmo users? Thank you.

Mike: I was wondering if you could just.

Mike: Talk a little bit more about the drags on the smaller part of the from the smaller part of the portfolio in transaction margin dollars.

Mike: When does that kind of work itself out of the system and then related to transaction margin dollar growth you talked about balanced funded venmo transactions contributing to growth in the quarter could you expand a little bit on that.

Mike: Do you see that scaling over the next couple of years and.

Mike: What are the opportunities to improve card attach for venmo users. Thank you.

Jamie: Great. Good morning, Mike.

Speaker Change: Good morning, Mike.

Jamie: On the smaller parts of the portfolio, I guess what I'd say at a macro level, we had seen a pretty significant drag on that last year, but it is coming through this year at a smaller rate. I mean, part of these are products we've deprecated. Some of these are, you know, frankly, acquisitions that we just haven't invested in. And as Alex mentioned, you know, we're going through a process of really looking hard at these.

Mike: The smaller parts of the portfolio I guess, what I would say at a macro level.

Mike: We have seen a pretty significant drag on that last year. It is coming through this year at a smaller rate I mean part of these are products. We deprecated. Some of these are frankly acquisitions that we just haven't invested in.

Mike: And as Alex mentioned, we're going through a process of really looking hard at these.

Jamie: You know, candidly, some are just in decline, but the declines are smaller. And some we're investing in are making decisions to really put in more in maintenance mode, which is really shifting the profile going forward. But it will be smaller this year, and it'll take a few years for that to burn off.

Mike: Some are just in decline, but the declines are smaller and some what we're investing in are making decisions to really putting more in maintenance mode, which is really shifting the profile going forward, but it will be smaller this year and it will take a few years for that to burn off.

Alex: Let me talk about, you know, the next level up and talk about Venmo for a minute. So again, on the positive side, we have the leading P2P platform with an incredible customer base with disposable income 22% higher than the U.S. average, 60 million monthly active users, and 90 million 12-month actives. So this is an incredible platform for us to work on.

Speaker Change: Yes, So let me, let me talk about up level and talk about venmo for for a minute and the opportunity there so again.

Speaker Change: On the positive side, we have the leading PDP platform.

Mike: With <unk>.

Mike: Incredible customer base.

Mike: With disposable income, 22% higher than the U S average 60 million monthly active users of $90 million 12 month active. So this is an incredible platform for us to work out.

Alex: As we've talked about in previous calls, and I'll reiterate here, I'm dissatisfied in how we've really thought about monetizing the platform and really thought about delivering, in many ways, just the customer experiences that they're looking for, right? Customers of Venmo are looking for dollars and looking for an alternative to traditional mechanisms when dollars are flowing in, and they want to be able to use Venmo for all of Just to give you some numbers behind it, there's $18 billion of net new funds that flow into the platform of Venmo every single month, but 80% of those dollars leave within 10 days. That is just unacceptable.

Mike: As we've talked about in previous calls and I'll reiterate here.

Mike: Im dissatisfied and how we've.

Mike: <unk> really thought about monetizing the platform and.

Mike: And really thought about delivering.

Mike: Anyway, it's just customer experiences that that they're looking for right customers, a venmo or looking for dollars and looking for an alternative to traditional mechanisms when dollars are flowing in and they want to be able to use venmo for all of their expenses just to give you put some numbers behind it there's 18 billion.

Mike: <unk> of net new funds that flow into the platform of Venmo every single month.

Mike: 80% of those dollars lead within 10 days.

Mike: That is just unacceptable and so our ability to provide the products and services that our customers need when those dollars come in whether that's improving debit card penetration, which.

Alex: And so our ability to provide the products and services that our customers need when those dollars come in, whether that's improving debit card penetration, which you've heard is a focus, and you've heard we are already starting to make significant improvements on, or providing other opportunities for money in or money out opportunities, and access to capital for our Venmo users. This is just a clear opportunity and a clear focus area for us.

Mike: <unk> heard as a focus and you've heard we are already in some of our Onboarding flows are starting to make significant improvements on.

Mike: Providing other opportunities for money in or money out opportunities and access to capital for our Venmo users. This is just a.

Mike: Clear opportunity and our clear focus area for us. So again early days the team is focused on it.

Alex: So, again, early days, the team is focused on it. Hopefully, you hear sort of a reinvigoration in my voice of what Venmo can be and the opportunity ahead of us. But very, very excited about where we're taking it.

Speaker Change: Hopefully you hear sort of a reinvigoration in my voice of of what venmo can be and the opportunity ahead of us, but very very excited about where we're taking it.

Alex: Your next question comes from the line of Brian Keane with Deutsche Bank. Your line is open.

Mike: Your next question comes from the line of Bryan Keane with Deutsche Bank. Your line is open.

Alex: Hi, good morning. We have solid first quarter results here. My question is still more on the big picture. You know, the naysayers on PayPal would say the company is structurally challenged with the rise of payment methods like Apple Pay. Alex, I know you've been at PayPal now for a little over six months. What do you think the naysayers are missing on the competitive advantages PayPal still has in the market, in particular, to grow its brand?

Bryan Connell Keane: Hi, Good morning solid first quarter results here. My question is just still more on the big picture.

Bryan Connell Keane: Naysayers on Paypal would say the company is structurally challenged with the rise of payment methods like Apple pay Alex I know you've been at Paypal now for a little over six months. What do you think the naysayers are missing on the competitive advantages Paypal still has in the market in particular to grow branded.

Alex: Thank you, Brian. Thanks for the question. So a couple of thoughts here that I think people are maybe not appreciating enough. The first is 60% of the market is still what I would consider to be non-consumption. 60% of the market still does not use any mark. So that's what we're playing for.

Bryan Connell Keane: Okay.

Alex Chris: Thank you Brian Thanks for the question so.

Alex Chris: A couple of thoughts here that that I think people are maybe not.

Alex Chris: Appreciating enough the first is.

Alex Chris: 60% of the market is still what I would consider to be non consumption, 60% of the market's still does not use any mark so that's what we're playing for.

Alex: We have the best brand, we have the best products and services, and we have the best ability to be able to deliver. And with products like FastLane, not only delivering a reboarding opportunity for our customers, but that stat that I put in earlier about 40% of unrecognized customers coming through and taking a FastLane experience now gives us an opportunity to be able to remarket to them and turn them into PayPal customers So step one, 60% of the market is non-consumption, and I think we've got a leading opportunity there. On the other 40%, we're still the leading player.

Bryan Connell Keane: The best brand, we have the best products and services and the best of it.

Bryan Connell Keane: Our ability to be able to deliver and with products like fast lane.

Bryan Connell Keane: Not only delivering.

Bryan Connell Keane: Re boarding opportunity for our customers, but that stat that I put in earlier around 40%.

Bryan Connell Keane: Of.

Bryan Connell Keane: Of unrecognized customers coming through and we're taking a fast lane experience now gives us an opportunity.

Bryan Connell Keane: To be able to remarket to them and turn them into Paypal customers. So step 160% of the market is non consumption and I think we've got a leading opportunity there.

Bryan Connell Keane: On the other 40%, we're still the leading player and to be again transparent and I've said. This before we have not delivered the innovation and the experience that I would expect and that our customers expect.

Alex: And to be, again, transparent, and I've said this before, we have not delivered the innovation and the experience that I would expect and that our customers expect. We are doing that now. An improvement in the app, an improvement in the branded experience, reducing latency by 50%, investing in passwordless opportunities and passkeys will improve the conversion rate and improve the experience, and then creating value-added opportunities and an increased value proposition for our consumers with rewards.

Bryan Connell Keane: We are doing that now on improvement in the App an improvement in the branded experience, reducing latency by 50% investing in password list.

Bryan Connell Keane: <unk> and <unk> will improve the conversion rate and improve the experience and then creating value added opportunities and an increased value proposition for our consumers with rewards I think we're the only player out there at the scale that we have to.

Alex: I think we're the only player out there at the scale that we have to provide that end-to-end experience. And again, we provide everything for our customers. It's rewards. It's buy now, pay later. It's a debit experience. And back to what I mentioned earlier in the call, with an omni-channel play now, PayPal can be the solution that you can use anytime, anywhere. Our ability to now start to play in an offline world and bring the same brand and the same experience to every purchase, I think, is something that, again, gets me excited. But we've got to prove it, and we've got to continue to execute and create great experiences in the market for our customers.

Bryan Connell Keane: To provide that end to end experience and again, we provide everything for our customers. Its rewards. It's buy now pay later, it's a debit experience and back to what I mentioned earlier on the call with an Omnichannel play now.

Bryan Connell Keane: Paypal can be the solution that you can use anytime anywhere so our ability to now start to play in an offline world and take the same brand and the same experience.

Bryan Connell Keane: To every purchase I think is something that again gets me excited.

Bryan Connell Keane: But we got to prove it and we've got to continue to execute and create great experiences in the market for our customers.

Alex: That's great. And just one follow-up. We are getting a few questions on the pending CFPB regulation on late fees. Any impact on PayPal from the CFPB caps on late fees? Yeah, Mike.

Speaker Change: That's great.

Speaker Change: And just had one follow up we are getting a few questions on the pending CFPB regulation on late fees any impact on Paypal first from CFPB caps on late fees.

Mike: Yeah, Mike. First, while PayPal's not directly impacted by that regulation, we are indirectly impacted through our revenue share with our consumer credit partner. There's a lot of uncertainty right now around both the timing and implementation of that. And as I mentioned before, our guide excludes the impact of that, just given the uncertainty. The industry expects that if implemented, the impacts would be largely offset over time. And we have been very focused on mitigation. We have actions underway.

Speaker Change: Yes, Mike.

Speaker Change: First while Paypal is not directly impacted by that regulation, we are indirectly impacted through our revenue share with our consumer credit partner. There is a lot of uncertainty right now around both timing and implementation of that and as I mentioned before our guide excludes the impact of that just given the uncertainty.

Speaker Change: The industry expects that if implemented the impacts will be largely offset over time and we have been very focused on mitigation. We have actions underway in but really in any scenario. It takes time for those offset to fully set in but I guess, what I would say in terms of impact is the date that.

Alex: But really, in any scenario, it takes time for those offsets to fully set in. But I guess what I'd say in terms of impact is, you know, the date that's being debated right now is the May 14th implementation date. And if that were to be implemented, it would have been approximately a three percentage point impact on EPS growth for the year, but that is before mitigation. So by 2025, we would expect roughly half of that impact to be offset, and then more over time.

Speaker Change: Being debated right now as of May 14th implementation date, and if that were to be implemented it would be approximately a three percentage point impact to EPS growth for the year, but that is before mitigation. So by 2025, we would expect roughly half of that impact to be offset and then more over time.

Speaker Change: Thank you.

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

Speaker Change: Your next question comes.

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

Alex: Thank you very much. I wanted to go back to FastLane, and Alex, you made the comments around making FastLane available to all merchants and using it so that they can derive the benefits of it. How should we think about that in terms of what needs to be done, timeline for progression, etc. It sounds like you're going to start moving beyond at least those initial merchants that are using it now. But just trying to think about how that could ultimately end up with most of the first, the merchants served by Braintree, and then, ultimately, the merchants served by PayPal more broadly.

James Eugene Faucette: Thank you very much I wanted to go back too fast Lane and Alex you made the comments around making <unk> available to all merchants and deriving so that they can derive the benefits of it.

James Eugene Faucette: How should we think about that.

James Eugene Faucette: In terms of what needs to be done timeline for progression et cetera. It sounds like you are youre going to start moving beyond at least those initial merchants that are using it now, but just trying to think about like how that ultimately could end up with.

James Eugene Faucette: Most of the the first.

James Eugene Faucette: The merchants served by Brian and then ultimately the merchants serve by Paypal more more broadly.

Alex: Yeah, thanks, James. Here's the best way to think about it. First and foremost, we have to have the best innovation in the market. It was important for us to get some early customers up and running and using it, and the data continues to hold and certainly delight these merchants. And look, in this world, they all talk to each other.

Speaker Change: Yes, Thanks James.

James Eugene Faucette: Sure.

Speaker Change: Best way to think about it first and foremost we have to have the best innovation in the market.

Speaker Change: It was important for us to get some early.

Speaker Change: Customers up and running and using it and the data continues to hold and certainly delight. These these merchants and look in this in this world. They all talk to each other and so the ability for our merchants to now be.

Alex: And so the ability for our merchants to now be rabid fans of the checkout conversion improvement that they're seeing through FastLane is a great proof point for us as we now start to scale it. And again, think about price to value. The second leg will be, okay, now that we've proven this out and we've started to really, just to be clear, we're talking about driving conversion rates for some of the largest merchants in the world.

Alex: Rabid fans of the checkout conversion improvement that Theyre seeing through fast Lane is great proof points for us as we now start to scale it and again think about price to value the.

Alex: The second leg will be okay, now that we've proven this out and we started to really.

Alex: Well just to be clear, we're talking about driving conversion rate for some of the largest merchants in the world we need to make sure that this was proven that it works before we roll this out at scale.

Alex: We need to make sure that this is proven and that it works before we roll this out at scale. There's a lot on the line to be able to nail this, which is why we're moving at a measured pace and ensuring that in Q1 and Q2, we've really proven it out. The conversations we're having at our C360 conference right now, the conversations we're having with some of our PPCP platforms that are now rolling this out to small businesses are, okay, what is the way that, as we get to the second half of the year, we can really enable merchants to have this up and running so that they can win the shopping season and the holiday season in the back half of the year? So that's how we're thinking about it.

Alex: Theres a lot on the line to be able to nail this which is why we're moving at a measured pace and ensuring that in Q1 and Q2.

Alex: We've really proven it out the conversations we're having at our <unk> hundred 60 conference right now the conversations we're having with <unk>.

Alex: Some of our <unk>.

Alex: Platforms that are now rolling it out to small businesses is okay. What is the what is the way that as we get to the second half of the year. We can really enable merchants to have this up and running so that they can win.

Alex: The shopping season, and the holiday season in the back half of the year. So that's how we're thinking about it our merchant demand is very encouraging.

Alex: Merchant demand is very encouraging. As you would imagine, when you have a product that improves conversion rates and provides a double-digit lift in guest checkout conversion, that's a game changer. And so demand is high. We want to make sure that we have as low friction in the onboarding experience as possible, which is why we wanted to make sure that the ability for folks to upgrade to the new integrations would make sense and be easy for them.

Alex: As you would imagine when you have a product that improves conversion rate and provides a double digit lift in guest checkout conversion. That's a game changer and so demand is high we want to make sure that we have.

Alex: As low friction and onboarding experience as possible, which is why we wanted to make sure that the ability for folks to upgrade to the new integrations would make sense and be easy for them.

Alex: And we wanted to make sure that customers could onboard. So the plan is for the back half of the year, get as many merchants on board so that they can win the holiday season. This will still take time; not everyone will get on for this holiday season, and we expect that will continue into 2025. But at some point, there will be a tipping point. You know, if I think about the next year or two years, where we are going to expect all of our merchants to be on the latest and greatest integration, which includes Fast, and we will then move to deprecate our old integrations.

Alex: We wanted to make sure that.

Alex: Customers could onboard so the plan is back half of the year get as many merchants on so that they can win the holiday season. This will still take time not everyone will get on for this holiday season, and we expect that will continue into into 2025, but at some point there will be a tipping point.

Alex: If I think about over the next year or two years, where.

Alex: We are going to expect all of our merchants to be on the latest and greatest integration which includes fastly.

Alex: And we will then move to deprecate, our old integrations, and that's going to be an important milestone for us as we take what is really 15 years of legacy integrations and consolidate them on a more modern stack in a more modern integration for our customers that allows us to continue to build innovation continue to drive the best experience.

Alex: And that's going to be an important milestone for us as we take what is really 15 years of legacy integrations and consolidate them on a more modern stack and a more modern integration for our customers. That allows us to continue to build innovation, continue to drive the best experiences for merchants and customers, and obviously the best transaction margin results for the company as well.

Alex: As for our merchants for customers and obviously, the best transaction margin results for the company as well.

Alex: That's great. I appreciate the color there, Alex.

Alex: Okay.

Speaker Change: That's great appreciate the color there, Alex and then <unk>.

Alex: And then you mentioned you're getting a little bit of improvement in Venmo transaction margin. How much of that is coming from increased acceptance of Venmo as a payment option versus finding ways to reduce costs in transacting Venmo and P2P transactions, etc. Just trying to understand kind of what the drivers there are and what potential there could be.

Speaker Change: Mentioned, youre getting a little bit of improvement in of Venmo transaction margin.

Alex: How much of that is coming from increased acceptance of venmo.

Alex: As a payment option versus <unk>.

Alex: Finding ways to reduce costs and transacting venmo in PDP transactions et cetera, just trying to understand kind of what the drivers there are and what potential could be.

Alex: Yeah, it's it

Speaker Change: Yes. It is.

Alex: Yeah, it's, it is a combination. What I'd say is, you know, we're seeing pay with Venmo really starting to take off. Obviously, it's, in the U.S., it's an incredibly well-loved brand, and when people see that button, it's an opportunity for them to use those dollars that I mentioned earlier that are in their account. So that's an exciting piece online. The piece that, again, I'm sort of dissatisfied with, but excited about the future, is the offline piece, right? When I talk about Omnichannel, it's for PayPal and for Venmo.

Alex: Is a combination what I'd say is we're seeing pay with venmo really starting to take off obviously, it's in the U S. It's incredibly well loved brand.

Alex: And when people see that button.

Alex: It's an opportunity for them to use those dollars that I mentioned earlier that are that are in their account.

Alex: So that's an exciting piece online.

Alex: The piece that again sort.

Alex: Sort of dissatisfied with but excited about the future is the offline piece right when I talk about omnichannel for Paypal and venmo and so those.

Alex: And so those billions of dollars that are coming in every month into the Venmo ecosystem, we have to continue to give our customers opportunities, whether it's debit card penetration or other innovation that we come up with for them to be able to, you know, tap and pay and check out. And so all of that will move towards improving transaction margin. That said, we're also getting better with our risk models and leveraging AI.

Alex: Billions of dollars that are coming in every month into the venmo ecosystem, we have to continue to give our customers opportunities, whether it's debit card penetration or other innovation that we come up with.

Alex: For them to be able to tap and pay and checkout and so of all of that will will move towards improving transaction margin that said, we're also getting better with.

Alex: With our risk models and leveraging AI.

Alex: You know, we are, there are a lot of AI conversations in the market. I would say we are one of the leaders when it comes to leveraging the data that we have at scale to improve our transaction losses, improve the customer service ability for our customers, and improve our transaction margin over time. So still, again, early, early days; there's a lot of work to continue there. But again, my excitement for the path and the direction for Venmo is pretty high.

Speaker Change: We are.

Alex: There's a lot of AI conversations in the market I would say we are one of the leaders when it comes to leveraging the data that we have at scale to improve our transaction losses improved customer service ability for our customers and.

Alex: And improve our transaction margin overtime. So still again early early days there is a lot of work to continue there.

Alex: But again my excitement for the path and the direction for Venmo is.

Alex: It was pretty high.

Sarah: That is all the time we have for questions. I will turn the call back to Alex Christ for his closing remarks.

Alex Christ: Thank you.

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

Alex: Fantastic. Thank you, Sarah. And thank you everyone for joining us today. As you can tell from our results and the comments today, we're making steady progress on our transformation efforts. We had a good first quarter, and we are deep in execution mode. And with time, we will return this company to profitable growth that I know we can deliver. So thank you all.

Alex Christ: Fantastic. Thank you Sara and thanks, everyone for joining us today.

Alex: As you can tell from our results in the comments today, we're making steady progress on our transformation efforts, we had a good first quarter and we are deep in execution mode.

Alex: And with time, we will return this company to profitable growth that I know we can deliver.

unknown: This concludes today's conference call. You may now disconnect.

Speaker Change: Thank you all.

Speaker Change: This concludes today's conference call you may now disconnect.

unknown: Okay.