Q3 2024 PayPal Holdings Inc Earnings Call
It is being recorded I would now like to turn the program over to your host for today's conference, Steve Winokur, Paypal as Chief Investor Relations Officer. Please go ahead.
Steve Winokur: Thank you Sarah welcome to <unk> third quarter 2024 earnings call I'm joined by CEO, Alex Chris and CFO, Jamie Miller. Our remarks today include forward looking statements that involve risks and uncertainties actual results may differ materially from these statements. Our commentary is based on our best view.
Steve Winokur: <unk> of the world and our businesses as we see them today as described in our earnings press release, SEC filings and on our website those elements may change as the world changes now over to you Alex.
Sarah: Good morning and welcome to Paypal's third quarter 2024 earnings conference call. My name is Sarah and I will be your conference operator today.
Sarah: As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer, please go ahead.
Alex Chris: Thanks, Steve and thank you to everyone for joining us this morning.
Alex Chris: Paypal had a highly productive third quarter.
Alex Chris: We made good progress on our continued transformation, while delivering strong operating and financial results.
Steve Winoker: Thanks, Sarah. Welcome to PayPal's third quarter 2024 earnings call. I'm joined by CEO Alex Chris and CFO Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties.
Alex Chris: We brought multiple innovations to market.
Alex Chris: With a significant new marketing campaign and are seeing encouraging early adoption and.
Steve Winoker: Actual results may differ materially from these statements. Our commentary is based in our best view of the world and our businesses as we see them today. As describes in our earnings press release, FTC filings and on our website, those elements may change as the world changes. Now over to you, Alex.
Alex Chris: And we continue to forge important partnerships with leaders in global Commerce.
Alex Chris: We're early in our transformation journey and we have a lot of work ahead to get to where we want to be.
Alex Chris: However, I am proud of what we've been able to achieve in the last year and it gives me conviction that we're taking the necessary steps to unlock the full potential of Paypal and venmo overtime.
Alex Chris: Thanks, Steve, and thank you to everyone for joining us this morning.
Alex Chris: PayPal had a highly productive third quarter.
Alex Chris: We've assembled a world class leadership team.
Alex Chris: We make good progress on our continued transformation while delivering strong operating and financial results.
Alex Chris: Reignited innovation for our customers and are now moving with clear purpose and increased velocity.
Alex Chris: We brought multiple innovations to market coupled with a significant new marketing campaign and are seeing encouraging early adoption.
Alex Chris: We're leaning into our competitive advantage a two sided network of hundreds of millions of consumers and tens of millions of merchants around the world to.
Alex Chris: and we continue to forge important partnerships with leaders in global commerce.
Alex Chris: To evolve from a set of disparate payment products and point solutions.
Alex Chris: We're early in our transformation journey and we have a lot of work ahead to get to where we want to be. However, I'm proud of what we've been able to achieve in the last year and it gives me conviction that we're taking the necessary steps to unlock the full potential of PayPal and Venmo over time.
Alex Chris: Into a powerful commerce platform.
Alex Chris: As we shift from a payments company to a commerce platform more of the world's leading commerce players have partnered with us to add value for our mutual customers.
Alex Chris: In just over two months, we've announced partnerships with Pfizer audiences, Amazon global payments and Shopify and we're actively discussing more collaborations across the industry.
Alex Chris: We've assembled a world-class leadership team.
Alex Chris: Reignited Innovation for our customers and are now moving with clear purpose and increased velocity.
Alex Chris: We're leaning into our competitive advantage, a two-sided network of hundreds of millions of consumers and tens of millions of merchants around the world, to evolve from a set of disparate payment products and point solutions.
Alex Chris: These new and expanded relationships are a clear demonstration that our brand innovations and momentum are resonating.
Alex Chris: Before we discuss this quarter's details I'm excited to announce that we will host an investor day on February 25 in New York City.
Alex Chris: and to a powerful commerce platform.
Alex Chris: As we shift from a payments company to a commerce platform, more of the world's leading commerce players have partnered with us to add value for our mutual customers.
Alex Chris: We look forward to seeing many of you in person and sharing our teams longer term strategy key opportunities financial and operating targets and how we will get there.
Alex Chris: In just over two months, we've announced partnerships with Pfizer, Audium, Amazon, Global Payments, and Shopify, and we're actively discussing more collaborations across the industry.
Alex Chris: Now turning to our Q3 results.
Alex Chris: Total payment volume grew 9% to $423 billion.
Alex Chris: We delivered seven $8 billion in revenue growing 6% on a currency neutral basis.
Alex Chris: These new and expanded relationships are a clear demonstration that are brand, innovations, and momentum are resonating.
Alex Chris: Transaction margin dollars grew 8% to $3 7 billion and were up 6%, excluding the benefit of interest on customer balances.
Alex Chris: Before we discuss this quarter's details, I'm excited to announce that we will host an investor day on February 25th in New York City.
Alex Chris: Our non-GAAP earnings per share increased 22% year over year.
Alex Chris: We look forward to seeing many of you in-person, in sharing our team's longer term strategy, key opportunities, financial and operating targets, and how we will get there.
Alex Chris: Importantly, this translated into significant free cash flow.
Alex Chris: We're proud of these results and have a clear plan to drive continued profitable growth over the long term.
Alex Chris: Now turning to our Q3 results.
Alex Chris: After another strong quarter, we're raising our full year guidance for transaction margin dollars and non-GAAP earnings per share at.
Alex Chris: A total payment volume grew 9% to $423 billion.
Alex Chris: We delivered $7.8 billion in revenue, growing 6% on a currency neutral basis.
Alex Chris: At the same time, we're continuing to invest in areas that we believe will drive long term profitable growth.
Alex Chris: Transaction margin dollars grew 8% to 3.7 billion dollars and were up 6% excluding the benefit of interest on customer balances.
Alex Chris: Let me update you on our customer business strategies and the promising early results we're seeing.
Alex Chris: When I joined it was clear that we had significant work to do to improve branded checkout.
Alex Chris: Our non-gap earnings per share increased 22% year over year.
Alex Chris: Paypal had fallen behind on innovation, and we had work to do to be more competitive, particularly on mobile devices.
Alex Chris: Importantly, this translated into significant free cash flow.
Alex Chris: We're proud of these results and have a clear plan to drive continued profitable growth over the long term.
Alex Chris: In January we shared new mobile checkout experiences designed to significantly improve conversion.
Alex Chris: After another strong quarter, we're raising our full-year guidance for transaction merchant dollars and non-gap earnings per share.
Alex Chris: We've completed testing over the past few quarters and are now rolling out to customers new experiences on both desktop and mobile.
Alex Chris: At the same time, we're continuing to invest in areas that we believe will drive long-term, profitable growth.
Alex Chris: These new checkout experiences are second to none.
Alex Chris: When implemented properly the new product experiences are resulting on average in more than 100 basis points of conversion lift for voltage checkout and up to 400 basis points of conversion uplift for onetime checkout.
Alex Chris: Let me update you on our customer business strategies and the promising early results we're seeing.
Alex Chris: When I joined, it was clear that we had significant work to do to improve branded checkout.
Alex Chris: Paypal had fallen behind on innovation, and we had worked to do to be more competitive, particularly on mobile devices.
Alex Chris: We're also seeing a 15% to 20% increase in buy now pay later use.
Alex Chris: These experiences are alive on close to 5% of our U S. Checkout traffic today, and we're pushing hard to get them into the hands of more of our merchants throughout the holiday shopping season and into next year.
Alex Chris: In January, we share new mobile checkout experiences designed to significantly improve conversion.
Alex Chris: We've completed testing over the past few quarters and are now rolling out to customers new experiences on those desktop and mobile.
Alex Chris: I am proud of our team's innovation velocity as we reestablish ourselves as the best converting branded experience for consumers and merchants.
Alex Chris: These new check-out experiences for a second to none.
Alex Chris: When implemented properly, the new product experiences are resulting on average in more than 100 basis points of conversion left for voltage checkout and up to 400 basis points of conversion uplift for one time checkout.
Alex Chris: Continuing in large enterprise, we're making solid progress on our initiative to price our services in a way that reflects the current value we bring to our merchants.
Alex Chris: This is now the second consecutive quarter and more than two years that Braintree is meaningfully contributing to transaction margin dollar growth.
Alex Chris: We're also seeing a 15-20% increase in Binow Paylader use.
Alex Chris: These experiences are live on close to 5% of our US checkout traffic today and we're pushing hard to get them into the hands of more of our merchants throughout the holiday shopping season and into next year.
Alex Chris: We're having very constructive conversations with our merchants focus on ways, we can enable strategic growth opportunities that drive long term upside for both of us.
What is different today is that we now have a suite of value added services, including payouts risk as a service orchestration guest checkout and personalization capabilities that help attract new customers and convert them more effectively in addition to world class payment processing.
Alex Chris: I'm proud of our team's innovation velocity as we re-establish ourselves as the best converting branded experience for consumers and merchants.
Alex Chris: Continuing in large enterprise, we're making solid progress on our initiative to price our services and a way that reflects the current value we bring to our merchants.
Alex Chris: We're excited about our progress here as it is key to long term value creation.
Alex Chris: This is now the second consecutive quarter in more than two years that Brainsry is meaningfully contributing to transaction margin dollar growth.
Alex Chris: Finally, we're pleased with the initial reaction to Fastly, which targets the 60% of e-commerce purchases made without a branded mark.
Alex Chris: We're having very constructive conversations with our merchants, focused on ways we can enable strategic growth opportunities that drive long-term upside for both of us.
Alex Chris: Since we launched in August we have over 1000 merchants using fast lane to provide a seamless experience to their customers and drive increased conversion.
Speaker Change: What is different today?
Speaker Change: is that we now have a suite of value-added services, including payouts.
Alex Chris: We've also reached a new milestone in our ability to recognize and Autofill information for first time fast Lane users.
Speaker Change: Risk of the Service, Orchestration, Gas Checkout, and Personalization capabilities that help attract new customers and convert them more effectively. In addition to World Class payment processing.
Alex Chris: In the U S 170 million eligible customer profiles on the Paypal platform can now enjoy a seamless guest checkout. The very first time, they try a fast way.
Speaker Change: Work cited about our progress here as it is key to long-term value creation.
Speaker Change: Finally, we're pleased with the initial reaction to FastLane, which targets the 60% of e-commerce purchases made without a branded mark.
Alex Chris: The scale of consumers, who are primed to spend with Paypal puts us way ahead of other guest checkout solutions and it is one of the reasons why so many platforms are choosing to partner with us.
Speaker Change: Since we launched an August, we have over 1,000 merchants using FastLane to provide a seamless experience to their customers and drive increased conversion.
Alex Chris: We can't wait to get fast lane into the hands of more merchants not only on Braintree in PBC, but also through our partnerships with fiserv audiences and global payments next year.
Speaker Change: We've also reached a new milestone in our ability to recognize and auto-fill information for first time FastLane users.
Alex Chris: Moving to small and medium sized businesses.
Alex Chris: Last month, we launched Paypal complete payments and new geographies, including China, and Hong Kong with more markets on the horizon in 2025.
Speaker Change: In the US, 170 million eligible customer profiles on the PayPal platform can now enjoy a seamless guest check out the very first time they try FastLane.
Alex Chris: In the markets, where <unk> is live we're steadily converting volume from our legacy products with nearly 40% of our SMB processing and checkout volume now on this platform.
Speaker Change: The scale of consumers who are primed to spend with PayPal puts us way ahead of other guest checkout solutions, and it is one of the reasons why so many platforms are choosing to partner with us.
Alex Chris: What is important to remember is that many of these merchants are using Paypal for both branded and unbranded payments. An example of the benefits that come with integrated solutions.
Speaker Change: We can't wait to get FastLane into the hands of warm merchants, not only on brain tree and PPCP, but also through our partnerships with FISER, Audien and Global Payments next year.
Alex Chris: Paypal complete payments also allows us to work with many small and medium sized businesses through partner platforms, including Shopify.
Speaker Change: Moving a small and medium-sized businesses.
Speaker Change: Last month, we launched PayPal complete payments in new geographies, including China and Hong Kong, with more markets on the horizon in 2025.
Alex Chris: As we announced in the quarter Paypal is now an additional processor for shopify payments in the U S.
Alex Chris: Our branded checkout solutions are now integrated into shopify payments, creating a single unified experience for time constrained business owners to drive operational efficiency.
Speaker Change: In the markets where PPCP is live, we're steadily converting volume from our legacy products, with nearly 40% of our SMB processing and checkout volume now on this platform.
Alex Chris: We also recently announced a partnership with Amazon to bring Paypal checkout to smbs offering by with Prime.
Speaker Change: What is important to remember is that many of these merchants are using PayPal for both branded and unbranded payments, an example of the benefits that come with integrated solutions.
Alex Chris: Next year, we will expand our work together to get prime members the option to link their Amazon and Paypal accounts, so that consumers can receive prime shipping benefits when they use paypal, while shopping with bio with prime.
Speaker Change: Tape-how complete payments also allows us to work with many small and medium-sized businesses through partner platforms, including Shopify.
Alex Chris: While it will take time to realize there is significant opportunity here and more we can do to better serve the needs of small businesses.
Speaker Change: As we announced in the quarter, PayPal is now an additional processor for Shopify payments in the US.
Speaker Change: Our branded checkout solutions are now integrated into Shopify payments, creating a single unified experience for time-constrained business owners to drive operational efficiency.
Alex Chris: For consumers.
Alex Chris: We are redefining our value proposition with last month's launch of Paypal everywhere.
Alex Chris: This initiative builds on Paypal established brand position as an online shopping powerhouse to position Paypal as the go to solution for spending sending an earning rewards whether online or offline.
Speaker Change: We also recently announced a partnership with Amazon, to bring PayPal check out to SMB's offering buy-with-prime.
Speaker Change: Next year, we will expand our work together to get prime members the option to link their Amazon and PayPal accounts, so that consumers can receive prime shipping benefits when they use PayPal while shopping with FIWIFIWIFI.
Alex Chris: We're doing this through cash back incentives on the Paypal debit card and a marketing campaign with a goal of reintroducing our capabilities to consumers, who may never have thought about Paypal is more than an online payment option.
Speaker Change: While they will take time to realize there is significant opportunity here, and more we can do to better serve the needs of small businesses.
Alex Chris: We're starting to shift perceptions of Paypal and beginning to drive adoption of our suite of complementary products, which all drive back to branded checkout.
Speaker Change: For consumers, we're redefining our value proposition with last month's launch of PayPal everywhere.
Speaker Change: Disinitiative builds on PayPal's established brand position as an online shopping powerhouse to position PayPal as the go-to solution for spending, sending, and earning rewards, whether online or offline.
Alex Chris: The broader awareness and perception shift we're aiming for is not going to happen overnight. This is an area, where we plan to continue to invest over time.
That said, we're seeing early signs that give us confidence our strategy is working.
Alex Chris: Since we launched Paypal everywhere, we've added more than 1 million first time debit card users.
Speaker Change: We're doing this through cash-back incentives on the PayPal debit card and a marketing campaign with the goal of reintroducing our capabilities to consumers who may never have thought about PayPal as more than an online payment option.
As a reminder, we're allowing consumers to pick a cashback category of their choice each month, which is capped at $50 per month.
Speaker Change: We're starting to shift to perceptions of PayPal and beginning to drive adoption of our suite of complementary products, which all drive back to branded checkout.
Alex Chris: The top three categories customers are choosing an earning rewards for so far our groceries gas and restaurants.
Alex Chris: What gets me. So excited is that we're now seeing customers make daily in person purchases with their Paypal debit card.
Speaker Change: The broader awareness and perception shift we're aiming for is not going to happen overnight. This is an area where we plan to continue to invest over time.
Alex Chris: In addition, these debit card users are now choosing Paypal branded checkout more frequently when they shop online.
Speaker Change: That said, we're seeing early signs that give us confidence our strategy is working.
Speaker Change: Since we launch PayPal everywhere, we've added more than 1 million first-time debit card users.
Alex Chris: Early data from our existing customers shows a five X increase in total omni spend within the first two weeks of sign up.
Speaker Change: As a reminder, we're allowing consumers to pick a cashback category of their choice each month, we just capped at $50 per month.
Alex Chris: We plan to expand the Paypal everywhere value proposition to Europe next year, incorporating learnings from our U S launch.
Speaker Change: The top three categories customers are choosing and earning rewards for so far are groceries, gas and restaurants.
Alex Chris: We expect the availability of NFC capabilities will help drive further adoption and use of Paypal.
Speaker Change: Well, it gets me so excited is that we're now seeing customers make daily, in-person purchases with their PayPal debit card.
Alex Chris: With Venmo, we're making progress in executing our strategy to shift from solely a PDP service to a central part of consumers' financial lives.
Speaker Change: In addition, these debit card users are now choosing PayPal branded checkout more frequently when they shop online.
Alex Chris: Our new leadership team is taking a fresh look at venmo, and we're completely transforming and upgrading the user experience.
Speaker Change: Early data from our existing customers shows a 5x increase in total on the spend within the first two weeks of sign-up.
Alex Chris: We know that we inherited one of the strongest PDP brands and see an opportunity to prioritize innovations that unlocked than most value.
Speaker Change: We plan to expand the PayPal everywhere value proposition to Europe next year, incorporating learnings from our US launch.
Alex Chris: We believe that venmo will eventually have multiple monetization levers in the short term, we see two meaningful contributors, let me unpack each of them.
Speaker Change: We expect the availability of NFC capabilities will help drive further adoption and use of PayPal.
Alex Chris: First is the venmo debit card, which allows customers to spend with their balance both online and offline.
Speaker Change: With Venmo, we're making progress in executing our strategy to shift from solely a PDP service to a central part of consumers' financial lives.
Alex Chris: We're in the early days of driving adoption, but we're seeing encouraging trends in engagement and monetization.
Speaker Change: Our new leadership team is taking a fresh look at Venmo and we're completely transforming and upgrading the user experience.
In the quarter monthly active debit card accounts grew 30% yet again.
Alex Chris: This is exciting as the average revenue per account is four times that of all venmo accounts.
Speaker Change: We know that we inherited one of the strongest P to P brands and see an opportunity to prioritize innovations that unlock than most value.
Alex Chris: However, only 5% of venmo active accounts are monthly active venmo debit card users demonstrating the opportunity ahead of us.
Speaker Change: We believe that Venmo will eventually have multiple monetization levers.
Speaker Change: In the short term, we see two meaningful contributors. Let me unpack each of them.
Alex Chris: The second lever is pay with venmo, which provides a seamless way to pay online.
Speaker Change: First is the Venmo debit card, which allows customers to spend with their balance both online and offline.
Alex Chris: This strategy with pay with Venmo involves both consumer and merchant adoption.
Alex Chris: On the consumer side, 8% of Venmo active accounts are monthly active pay with venmo users. So we have room to grow.
Speaker Change: We're in the early days of driving adoption, but we're seeing encouraging trends in engagement and monetization.
Speaker Change: In the quarter, monthly active debit card accounts grew 30% yet again. This is exciting as the average revenue per account is four times that of all that Mo accounts.
Alex Chris: Monthly active pay with venmo users were up 20% in the quarter and the average revenue per account is three times that of all venmo accounts.
Alex Chris: On the merchant side, we will bundle pay with venmo with Paypal checkout and our go to market motions to accelerate distribution.
Speaker Change: However, only 5% of Venmo active accounts are monthly active Venmo debit card users, demonstrating the opportunity ahead of us.
Alex Chris: With these product improvements in place, we're now leaning into marketing for Venmo for the first time in years we.
Speaker Change: The second lever is pay with Venmo, which provides a seamless way to pay online.
Alex Chris: We will continue to build on this foundation and obsess over consumer needs and our product to fully unlock the brand's long term potential as a multibillion dollar franchise.
Speaker Change: The strategy with PaywithVenno involves both consumer and merchant adoption.
Speaker Change: On the consumer side, 8% of Venmo active accounts are monthly active pay with Venmo users, so we have room to grow.
Alex Chris: I want to thank the Paypal team for their continued commitment to transforming our company and making it even stronger.
Speaker Change: Monthly active pay with Venmo users were up 20% in the quarter, and the average revenue per account is 3 times that of all Venmo accounts.
Alex Chris: We've got the right team in place and we're playing to win.
Alex Chris: With that over to Jamie.
Speaker Change: On the merchant side, we will bundle Pay with Venmo with PayTelCheckout in our Go to Market motions to accelerate distribution.
Jamie Miller: Thanks, Alex.
Jamie Miller: Moving to slide seven Paypal delivered another strong quarter of results the underlying stability and consistency of the business is encouraging and we remain focused on advancing our transformation to drive durable profitable growth.
Speaker Change: With these product improvements in place, we're now leaning into marketing for Venmo for the first time in years.
Speaker Change: We will continue to build on this foundation and obsess over consumer needs and are product to fully unlock the brand's long-term potential as a multi-billion dollar franchise.
Jamie Miller: Change takes time and we still have a lot of work ahead, but the team is making steady progress on top of an already solid foundation.
Speaker Change: I want to thank the PayPal team for their continued commitment to transforming our company and making it even stronger.
Jamie Miller: Looking at the high level financial results in the quarter revenue increased 6% on both a spot and currency neutral basis transaction margin dollars accelerated slightly from the second quarter.
Speaker Change: We've got the right team in place, and we're playing to win.
Speaker Change: With that, over to Jamie.
Jamie Miller: In addition to a nearly three point benefit from interest on customer balances branded checkout, Venmo, Braintree and better transaction loss performance contributed to growth in the quarter.
Jamie Miller: Thanks, Alex.
Jamie Miller: Moving to slide 7, PayPal delivered another strong quarter of results. The underlying stability and consistency of the business is encouraging, and we remain focused on advancing our transformation to drive durable, profitable growth.
Jamie Miller: Our focus on price to value is paying off with Braintree again contributing materially to transaction margin dollars, even as volume and revenue growth deliberately slows non.
Jamie Miller: Change takes time and we still have a lot of work ahead but the team is making steady progress on top of an already solid foundation.
non-GAAP earnings per share were $1 20, representing 22% year over year growth.
Jamie Miller: Looking at the high-level financial results in the quarter, revenue increased 6% on both a spot- and currency-neutral basis.
Jamie Miller: Relative to our guidance outperformance was driven by a number of factors, including continued optimization of transaction loss venmo and improvements in credit.
Jamie Miller: Transaction margin dollars accelerated slightly from the second quarter. In addition to a nearly three-point benefit from interest on customer balances, branded checkout, Venmo, Braintree, and better transaction loss performance contributed to growth in the quarter.
Jamie Miller: Turning to slide eight our operating metrics reflect another quarter of progress.
Jamie Miller: Total active accounts increased by nearly $3 million from the second quarter to $432 million month.
Jamie Miller: Our focus on price-to-value is paying off, with Braintree again contributing materially to transaction margin dollars, even as volume and revenue growth deliberately slows.
Monthly active accounts continued to show steady progress up 2% year over year to $223 million with contributions from Paypal consumer accounts and Venmo Tran.
Jamie Miller: Non-GAAP earnings per share were $1.20, representing 22% year-over-year growth.
Jamie Miller: Transactions per active account, which is a trailing 12 month number were 61 four in the third quarter up 9%, excluding PSP processing transactions per active grew 5%.
Jamie Miller: Relative to our guidance, outperformance was driven by a number of factors, including continued optimization of transaction loss, Venmo, and improvements in credit.
Jamie Miller: Yeah.
Jamie Miller: Moving to slide nine total payment volume grew 9% on a spot and currency neutral basis to $423 billion.
Jamie Miller: Turning to slide 8, our operating metrics reflect another quarter of progress.
Jamie Miller: Total active accounts increased by nearly 3 million from the second quarter to 432 million.
Jamie Miller: Looking at the breakdown by product global branded checkout volumes grew 6% on a currency neutral basis in the third quarter consistent with the mid single digit growth we've seen for the last three years.
Jamie Miller: Monthly active accounts continued to show steady progress, up 2% year-over-year to $223 million with contributions from PayPal Consumer Accounts and Venmo.
Jamie Miller: Within branded checkout, we continue to see strength across large enterprise platforms marketplaces and international merchants.
Jamie Miller: Transactions per active account, which is a trailing 12-month number, were 61.4 in the third quarter, up 9%. Excluding PSP processing, transactions per active grew 5%.
Speaker Change: As Alex mentioned, our team is hard at work to drive lighter coverage of our most modern best in class checkout experiences, we are particularly focused on small and medium businesses and mobile both critically important areas for us to improve our positioning.
Jamie Miller: Moving to slide 9, total payment volume grew 9% on a spot and currency neutral basis to $423 billion.
Speaker Change: PSP processing volume grew 11% compared to 19% in the second quarter as part of our price to value strategy, we are moving deliberately and making decisions that prioritize healthy profitable growth rather than targeting a high proportion of processing volume at low or even negative margins.
Jamie Miller: Looking at the breakdown by product, global branded checkout volumes grew 6% on a currency-neutral basis in the third quarter, consistent with the mid-single-digit growth we've seen for the last three years.
Jamie Miller: Within Branded Checkout, we continue to see strengths across large enterprise platforms, marketplaces, and international merchants.
Speaker Change: What this looks like in practice with some of our largest enterprise customers is often a renegotiated agreement that reduces our total share of payment processing to a more balanced level. So for example from 95% to 75%, but with better economics, and with a greater breadth of products and services.
Jamie Miller: As Alex mentioned, our team is hard at work to drive wider coverage of our most modern, best-in-class checkout experiences. We are particularly focused on small and medium businesses and mobile, both critically important areas for us to improve our positioning.
Speaker Change: This means we are driving green tree transaction margin dollar improvements and more strategic partnerships, but with lower volume and revenue growth.
Jamie Miller: PSP processing volume grew 11% compared to 19% in the second quarter. As part of our price-to-value strategy, we are moving deliberately and making decisions that prioritize healthy, profitable growth rather than targeting a high proportion of processing volume at low or even negative margins.
Speaker Change: Moving to more financial detail on slide 10 transaction revenue grew 6% on a spot basis to seven $1 billion, driven primarily by Braintree branded checkout and venmo.
Jamie Miller: What this looks like in practice with some of our largest enterprise customers is often a renegotiated agreement that reduces our total share of payment processing to a more balanced level. So for example from 95% to 75% but with better economics and with a greater breadth of products and services.
Other value added services revenue in the quarter increased 2% to $780 million and interest on customer balances continued to be a meaningful tailwind to <unk> and credit revenue was under less pressure compared to the past three quarters.
Speaker Change: We have now fully lapped the actions taken last year to tightened credit underwriting and reduced on balance sheet risk, we're seeing better performance across the portfolio and have now started to modestly grow merchant originations.
Jamie Miller: This means we are driving Braintree transaction margin dollar improvements and more strategic partnerships but with lower volume and revenue growth.
Jamie Miller: Moving to more financial detail on slide 10, transaction revenue grew 6% on a spot basis to $7.1 billion, driven primarily by Braintree, Branded Checkout, and Venmo.
Speaker Change: We will continue to prudently manage the portfolios exposure with the goal of sustaining our balance sheet light business model, while providing our customers with more ways to manage their cash flow spending and borrowing needs.
Jamie Miller: Other value-added services revenue in the quarter increased 2% to $780 million. An interest on customer balances continued to be a meaningful tailwind to OVAS, and credit revenue was under less pressure compared to the past three quarters.
Speaker Change: Transaction take rate declined by four basis points to 167% compared to a three basis point decline last quarter improve.
Speaker Change: Improvements in Braintree, and Venmo monetization benefited transaction take rate these were offset by large enterprise and marketplace growth within branded checkout.
Jamie Miller: We have now fully lapped the actions taken last year to tighten credit underwriting and reduce on balance sheet risk. We're seeing better performance across the portfolio and have now started to modestly grow merchant originations.
Speaker Change: Foreign exchange and faster payouts growth.
Speaker Change: Turning to transaction margin dollar growth as I said earlier interest on customer balances branded checkout venmo and brain tree were the largest contributors.
Jamie Miller: We'll continue to prudently manage the portfolio's exposure with the goal of sustaining our balance sheet-like business model while providing our customers with more ways to manage their cash flow, spending, and borrowing needs.
Speaker Change: <unk> in the quarter continued to benefit from efforts to optimize transaction loss performance with more advanced data analytics and some transaction expense favorability.
Jamie Miller: Transaction take rate declined by four basis points to 1.67% compared to a three basis point decline last quarter.
Speaker Change: Non transaction related operating expenses increased 3% as we continue to actively manage our cost structure, while reinvesting in key growth initiatives, including marketing that was deferred from the first half of the year and the rollout of new products and initiatives like Paypal everywhere.
Jamie Miller: Improvements in Braintree and Venmo monetization benefited transaction take rate. These were offset by large enterprise and marketplace growth within branded checkout, foreign exchange, and faster payouts growth.
Speaker Change: non-GAAP operating income grew 18% in the quarter to $1 5 billion non-GAAP operating margin expanded 194 basis points to 18, 8% benefiting from transaction margin expansion as well as expense leverage.
Jamie Miller: Turning to transaction margin dollar growth, as I said earlier, interest on customer balances, branded checkout, Venmo, and Braintree were the largest contributors.
Jamie Miller: Results in the quarter continue to benefit from efforts to optimize transaction loss performance with more advanced data analytics and some transaction expense favorability.
Speaker Change: Paypal generated $1 $4 billion of free cash flow in the third quarter.
Speaker Change: We completed $1 8 billion in share repurchases, bringing the total number of share repurchases over the past 12 months to approximately $5 4 billion.
Jamie Miller: Non-transaction related operating expenses increased 3% as we continue to actively manage our cost structure while reinvesting in key growth initiatives, including marketing that was deferred from the first half of the year and the rollout of new products and initiatives like PayPal Everywhere.
Speaker Change: Finally, we ended the quarter with $16 $2 billion in cash cash equivalents and investments and $12 4 billion in debt.
Jamie Miller: Non-GAAP operating income grew 18% in the quarter to $1.5 billion. Non-GAAP operating margin expanded 194 basis points to 18.8%, benefiting from transaction margin expansion as well as expense leverage.
Speaker Change: Moving to guidance on slide 11 for the fourth quarter and the full year 2024, we continue to assume a relatively consistent macroeconomic and consumer spending environment for the remainder of the year.
For the fourth quarter, we expect revenue to grow by a low single digit percentage. This is directly related to brain tree merchant negotiations and ongoing efforts to drive quality profitable growth.
Jamie Miller: PayPal generated $1.4 billion of free cash flow in the third quarter.
Jamie Miller: We completed $1.8 billion in share repurchases, bringing the total number of share repurchases over the past 12 months to approximately $5.4 billion.
Speaker Change: As I mentioned earlier this is a deliberate action and a continuation of the strategy. We've articulated throughout the year, where we have accepted a lower near term Braintree revenue profile in exchange for better margins as we have renegotiated agreements.
Jamie Miller: Finally, we ended the quarter with $16.2 billion in cash, cash equivalents, and investments, and $12.4 billion in debt.
Jamie Miller: Moving to guidance on slide 11 for the fourth quarter and the full year 2024, we continue to assume a relatively consistent macroeconomic and consumer spending environment for the remainder of the year.
Speaker Change: As a result of these efforts, we expect lower Braintree volume and revenue growth in the fourth quarter and through 2025 before re accelerating from the reset baseline.
Speaker Change: This is a healthy profitable tradeoff for the business that benefits transaction margin dollar growth and build stronger more strategic relationships.
Jamie Miller: For the fourth quarter, we expect revenue to grow by a low single-digit percentage. This is directly related to Braintree merchant negotiations and ongoing efforts to drive quality, profitable growth.
Speaker Change: We expect higher non transaction opex growth in the fourth quarter as we have intentionally concentrated more of our discretionary investment spend particularly in marketing during the back half of the year and in the holiday season.
Jamie Miller: As I mentioned earlier, this is a deliberate action and a continuation of the strategy we've articulated throughout the year, where we have accepted a lower near-term Braintree revenue profile in exchange for better margins as we have renegotiated agreements.
Speaker Change: This is strategically timed to support key initiatives, including the go to market of new products and innovation as well as ongoing marketing and brand campaigns for Paypal and venmo.
Jamie Miller: As a result of these efforts, we expect lower Braintree volume and revenue growth in the fourth quarter and through 2025 before reaccelerating from the reset baseline.
Speaker Change: Due to this timing, we expect fourth quarter non-GAAP EPS to decrease by a low to mid single digit percentage.
Jamie Miller: This is a healthy, profitable tradeoff for the business that benefits transaction margin dollar growth and builds stronger, more strategic relationships.
2020 for full year non transaction opex growth rate, which we now expect to increase in the low single digit range is a reasonable way to think about the opex profile for the business next year, but like this year, we expect some unevenness in any given quarter.
Jamie Miller: We expect higher non-transaction OPEX growth in the fourth quarter, as we have intentionally concentrated more of our discretionary investment spend, particularly in marketing, during the back half of the year and in the holiday season.
Speaker Change: Moving to the full year in more detail, we are raising our guidance for transaction margin dollars and non-GAAP earnings per share.
Jamie Miller: This is strategically timed to support key initiatives, including the go-to-market of new products and innovation, as well as ongoing marketing and brand campaigns for PayPal and Venmo.
Speaker Change: This increase reflects outperformance in the third quarter as well as strategic reinvestments back into growth initiatives.
Jamie Miller: Due to this timing, we expect fourth quarter non-GAP EPS to decrease by a low-to-mid single-digit percentage.
Speaker Change: We now expect 2024, non-GAAP EPS to grow in the high teens and full year transaction margin dollars to increase by a mid single digit percentage.
Jamie Miller: 2024's full-year non-transaction OPEX growth rate, which we now expect to increase in the low single-digit range, is a reasonable way to think about the OPEX profile for the business next year. But like this year, we expect some unevenness in any given quarter.
Speaker Change: We have seen steady profitable growth from our branded checkout business and the teams are advancing our checkout initiatives I am encouraged by the rollout of innovation. The initial impact of our price to value strategy ongoing product enhancements in areas like venmo, and PDP and the customer response to the launch of Paypal everywhere.
Jamie Miller: Moving to the full year in more detail, we are raising our guidance for transaction margin dollars and non-GAAP earnings per share.
Speaker Change: As we move into the fourth quarter and beyond we expect to continue making progress, but there are a few factors to keep in mind through the first three quarters of the year growth in interest on customer balances and improvements to transaction loss were an approximately four point percentage benefit to transaction margin dollars.
Jamie Miller: This increase reflects outperformance in the third quarter, as well as strategic reinvestments back into growth initiatives.
Jamie Miller: We now expect 2024 non-GAAP EPS to grow in the high teens and full-year transaction margin dollars to increase by a mid-single-digit percentage.
Speaker Change: Beginning in the fourth quarter, we expect minimal benefit from growth in interest on customer balances and then a headwind beginning in 2025 due to interest rate cuts. We're also planning for some normalization and transaction losses as we rollout new products. We now expect full year non transaction operating.
Jamie Miller: We have seen steady, profitable growth from our branded checkout business.
Jamie Miller: and the teams are advancing our checkout initiatives. I'm encouraged by the rollout of innovation, the initial impact of our price-to-value strategy, ongoing product enhancements in areas like Venmo and P2P, and the customer response to the launch of PayPal Everywhere.
Speaker Change: <unk> to increase in the low single digit range with ongoing cost efficiency, helping to fund our strategic growth investments as we move into next year, our focus will be on striking the right balance between investment and productivity seeking to largely fund long term investments through savings generated for.
Jamie Miller: As we move into the fourth quarter and beyond, we expect to continue making progress, but there are a few factors to keep in mind.
Jamie Miller: Through the first three quarters of the year, growth in interest on customer balances and improvements to transaction loss were an approximately four point percentage benefit to transaction margin dollars.
Speaker Change: Better deployment of tech and automation.
Jamie Miller: Beginning in the fourth quarter, we expect minimal benefit from growth in interest on customer balances, and then a headwind beginning in 2025 due to interest rate cuts. We're also planning for some normalization and transaction losses as we roll out new products.
Speaker Change: We continue to expect 2024 of free cash flow of approximately $6 billion and continue to plan for $6 billion of share buyback this year.
Speaker Change: In closing I'd like to thank the Paypal team for their ongoing dedication as we drive meaningful change to strengthen our foundation for profitable growth, we are continuing to execute and we're making good progress and we're excited to share more with you at our Investor day in February.
Jamie Miller: We now expect full-year non-transaction operating expenses to increase in the low single-digit range with ongoing cost efficiency helping to fund our strategic growth investments.
Jamie Miller: As we move into next year, our focus will be on striking the right balance between investment and productivity, seeking to largely fund long-term investments through savings generated from better deployment of tech and automation.
With that back to you Alex.
Speaker Change: Today, I am more confident than ever about our future.
Speaker Change: We have a durable and differentiated market position and a strong brand that we continue to aggressively investing.
Jamie Miller: We continue to expect 2024 free cash flow of approximately $6 billion and continue to plan for $6 billion of share buyback this year.
Speaker Change: Paypal has a massive global opportunity.
Speaker Change: We have the right team in place to harness that opportunity and we are firing on all cylinders.
Speaker Change: It is an enviable position and we're ready to make the most of it to drive value for our customers and shareholders as we head into the holiday season and 2025.
Jamie Miller: In closing, I'd like to thank the PayPal team for their ongoing dedication as we drive meaningful change to strengthen our foundation for profitable growth. We are continuing to execute, and we're making good progress. And we're excited to share more with you at our Investor Day in February.
Speaker Change: Overall this was a good quarter for Paypal.
Speaker Change: We are confident in our strategy and ability to execute going into the holiday season in 2025.
Alex Chris: With that, back to you, Alex.
Steve Let's go to Q&A.
Alex Chris: Today, I am more confident than ever about our future.
Steve Winokur: Over the line I ask everyone in the queue to consider your fellow analysts and ask just one question. So we can get to as many people as possible Sarah Please open the line.
Alex Chris: We have a durable and differentiated market position and a strong brand that we continue to aggressively invest in.
Alex Chris: PayPal has a massive global opportunity. We have the right team in place to harness that opportunity and we are firing on all cylinders.
Sarah: Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
Alex Chris: It's an enviable position and we're ready to make the most of it to drive value for our customers and shareholders as we head into the holiday season and 2025.
Alex Chris: Overall, this was a good quarter for PayPal. We are confident in our strategy and ability to execute going into the holiday season and 2025.
Speaker Change: Your first question comes from the line of Darrin Peller with Wolfe Research. Your line is open.
Darrin Peller: Hey, guys, Thanks, and nice results on gross profit in the quarter.
Speaker Change: Steve, let's go to Q&A.
Steve Winoker: Open the line, I ask everyone in the queue to consider your fellow analysts and ask just one question so we can get to as many people as possible. Sarah, please open the line.
Darrin Peller: Look unbranded decelerated as expected it looks like you've been able to successfully meet that with strong pricing for value.
Speaker Change: So maybe Alex if you could just start by touching on the customer response to the pricing changes on what you are bringing to the table.
Sarah: Thank you. At this time I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
Speaker Change: And then just maybe perhaps touch on the deceleration again embedded in the fourth quarter transaction.
Speaker Change: Margin growth along with how we should think about the exit rate at 25.
Speaker Change: Jamie that was helpful color, but any more just in terms of the dynamics and what gives you conviction in the sustainability to the underlying trends. Thanks guys.
Speaker Change: Your first question comes from the line of Darren Peller with Wolf Research. Your line is open.
Speaker Change: Why don't I start with the second part of your question Darrin Good morning.
Speaker Change: Then Alex can talk about merchant response.
Darren Peller: Hey guys, thanks, and nice results on gross profit in the quarter.
So when we look at transaction margin dollars as you mentioned, we're really excited about our momentum throughout 2024.
Darren Peller: Look, unbranded decelerated as expected. It looks like you've been able to successfully meet that with strong pricing for value. So maybe, Alex, if you could just start by touching on the customer response to the pricing changes of what you're bringing to the table. And then just maybe perhaps touch on the deceleration, again, embedded in fourth quarter.
Speaker Change: And maybe I'll pause and just talk for a second about third quarter transaction margin and then talk about the comparative to fourth quarter.
Speaker Change: And what's important here is we did have benefit from interest income in the third quarter. It was about three points, but more importantly, we have a really good underlying growth drivers branded checkout TPB was up 6% in a profitably growing transaction margin.
Speaker Change: margin growth, along with how we should think about the exit rate into 2025. Jamie, that was helpful, Culler, but any more just in terms of the dynamics and what gives you conviction in the sustainability to the underlying trends?
Speaker Change: Our second quarter with Braintree contributing nicely to transaction margin dollars growth. So just continued progress there which has been great and then venmo monetization and Alex mentioned, a couple of the data points on the call but.
Jamie Miller: Thanks, guys. Why don't I start with the second part of your question, Darren? Good morning. And then Alex can talk about merchant response.
Speaker Change: That's really starting to move along in its early days, but we're starting to see that become very consistent as it rolls through transaction margin dollars. So so all of that consistent trends in the fourth quarter, but what we see in fourth quarter that is a little bit different is that number one interest income it's been a benefit all year.
Speaker Change: And maybe I'll pause and just talk for a second about third quarter transaction margin and then talk about the comparative to fourth quarter.
Speaker Change: And what's important here is we did have benefit from interest income in the third quarter.
Speaker Change: That is going to be a meaningfully lower tailwind in fourth quarter I am planning on less than a point of contribution the transaction margin dollar growth in the fourth quarter. So really relatively immaterial and then we're also planning for transaction loss normalization as well.
Speaker Change: It was our second quarter with Braintree, contributing nicely to transaction margin dollars growth, so just continued progress there, which has been great.
Speaker Change: and then Venmo monetization, and Alex mentioned a couple of the data points on the call, but...
Speaker Change: Launching new products and we also have some lower fraud recoveries just on a comparative basis. So if I pull up for fourth quarter, we're really looking at low to mid single digit transaction margin dollar growth for the fourth quarter quarter's off to a good start but the most important holiday weeks are ahead of us, but the consumer feels strong at this point and then if I pull.
Speaker Change: You know, that's...
Speaker Change: Really starting to move along and it's early days, but we're starting to see that You know become very consistent as it rolls through transaction margin dollars, so so all of that Consistent trends into fourth quarter, but what we'd see in fourth quarter. That is a little bit different
Speaker Change: Is that number one?
25.
Speaker Change: Interest income, you know, it's been a benefit all year. That is going to be a meaningfully lower tailwind in fourth quarter. I'm planning on less than a point of contribution to transaction margin dollar growth in the fourth quarter. So really relatively immaterial.
Speaker Change: I think the thing to think about is when.
Speaker Change: When we look at 'twenty five ex interest income.
Speaker Change: We expect transaction margin dollars to grow at least as fast as 2024 on that same basis.
Darrin Peller: Great, Thanks, Jamie and Darren.
Speaker Change: And then we're also planning for transaction loss normalization as well. You know, we're launching new products and we also have some lower fraud recoveries just on a comparative basis.
Speaker Change: Just to hit on the merchant response.
Speaker Change: <unk> been involved in a number of these conversations I would characterize them as very healthy and very strategic.
Speaker Change: So, if I pull up for fourth quarter, we're really looking at low to mid-single digit transaction margin dollar growth for the fourth quarter. Quarter's off to a good start, but the most important holiday weeks are ahead of us, but the consumer feels strong at this point. And then if I pull to 25, I think the thing to think about is...
Speaker Change: Jamie described in her remarks, a lot of this is us really laying out our strategy to be focused on profitable revenue growth and sometimes that comes with.
Speaker Change: A re look at our contracts and a re look at the partnership but I'd say, we're bringing more to the table now and so the conversations we're having with these merchants is we're innovating, we're bringing fast lane, we're bringing ads platform, we're bringing additional value added services that allow us to have a healthier stronger conversation about where we're going.
Speaker Change: When we look at 25x interest income, you know, we expect transaction margin dollars to grow at least as fast as 2024 on that same basis.
Darren Peller: Great. Thanks, Jamie. And, Darren,
Darren Peller: Just to hit on the merchant response, you know, I've personally been involved in a number of these conversations and I characterize them as
Speaker Change: <unk>.
It's not it's not.
Speaker Change: But all the merchants, we're excited to have the conversations, but they understand where we're coming from and we're bringing more to the table and again I feel like.
Speaker Change: Very healthy and very strategic. As Jamie described in her remarks, a lot of this is us really laying out our strategy to be focused on profitable revenue growth, and sometimes that comes with
Speaker Change: As we've talked about we are really focused on.
Speaker Change: Building, a durable growth levers and making sure that we have these conversations with merchants and getting back into a healthy place is a big part of that conversation.
Speaker Change: a re-look at our contracts and a re-look at the partnership.
Your next question comes from the line of Tien Tsin Huang with Jpmorgan. Your line is open.
Speaker Change: But I'd say we're bringing more to the table now. And so the conversations we're having with these merchants is we're innovating, we're bringing FastLane, we're bringing Ads Platform, we're bringing additional value-added services.
Speaker Change: Okay.
Speaker Change: Hey, Thanks, so much I appreciate all.
Speaker Change: All the data points here can you just give us a little bit more detail on the drivers of the more favorable.
Speaker Change: that allow us to have a healthier, stronger conversation about where we're going.
Speaker Change: Favorable view on transaction margin dollar growth year for the fourth quarter and.
Speaker Change: It's not that all the merchants were excited to have the conversations, but they understand where we're coming from and we're bringing more to the table.
Speaker Change: Would love to hear what might improve and what you're most excited about going into 2025 and I recognize that it's hard to completely offset some of the interest income, but just curious what would be what we should be looking therefore for acceleration in 'twenty five.
Speaker Change: And again, I feel like, you know, as we've talked about, we are really focused on building durable growth levers and making sure that we have these conversations with merchants and getting back into a healthy place is a big part of that conversation.
Speaker Change: Tien tsin good morning.
Speaker Change: I really think it gets back to.
Speaker Change: Your next question comes from the line of Tin Jin Huang with JP Morgan. Your line is open.
Speaker Change: The key themes that we've been seeing all year.
Speaker Change: We've really focused on durable profitable growth as we set the teams up for this year and part of that good gets back to the product innovation and the deep investments, we're making in our consumer experience and working with our merchant around branded checkout.
Speaker Change: Hey, thanks so much. Appreciate all the data points here. Can you just give us a little bit more detail on the drivers of the more favorable view on transaction margin dollar growth here for the fourth quarter?
Speaker Change: And we'd love to hear what might improve and what you're most excited about going into 2025. And I recognize that it's hard to completely offset some of the unjust income, but just curious what we should be looking here for, for acceleration in 2025. Thanks.
Speaker Change: The trends on brand and have been very consistent throughout this year.
Speaker Change: Second and this dovetails with what Alex such as talking about the focus of the teams around how to really have our braintree platform be more holistic.
Speaker Change: Really looking at the holistic margin profile and really getting that to a place where we've got a much deeper breadth of value added services with our merchants.
Speaker Change: Good morning. I really think it gets back to
Speaker Change: You know, the key themes that we've been seeing all year. You know, we've really focused on durable, profitable growth as we've set the teams up for this year. And, you know, part of that gets back to the product innovation and the deep investments we're making in our consumer experience.
Speaker Change: All of those things I think that again have been growing this year, but the momentum we are seeing now in the visibility into how that continues.
Speaker Change: We just have more confidence that we're more constructive on that today than we were three months ago.
Speaker Change: and Working With Our Merchants.
Speaker Change: And then venmo and even PDP Paypal peer to peer money transfer those two products are really turning nicely for us.
Speaker Change: around branded checkout. The trends on branded have been very consistent throughout this year.
Speaker Change: And second, and this dovetails with what Alex was just talking about, you know, the focus of the teams around how to really have our brain tree platform be more holistic.
Speaker Change: Peter has had a nice turn this year and we're continuing to see good momentum and then when we look at venmo the actions of the team to really broaden how we bring this product to our consumers is really real and really rich and you hear it in some of the data points Alex shared in his prepared remarks, but when you actually look at kind of the activity.
Speaker Change: We're all true than most of US are very consistently sticky product for us so really excited about that and thats, what I see as fourth quarter, just continuation and then moving into 'twenty five as well.
Speaker Change: It's just, we just have more confidence and we're more constructive on that today than we were, you know, three months ago.
Speaker Change: and then Venmo and even P2P, you know, the PayPal peer-to-peer.
Speaker Change: Just to just to reinforce what Jamie just talked about what we've talked about with contracts on Braintree, I think thats pretty clear.
Speaker Change: Money Transfer. Those two products are really turning nicely for us.
Speaker Change: P2P has had a nice turn this year and we're continuing to see good momentum. And then when we look at Venmo, the actions of the team to really broaden how we bring this product to our consumers is really real and really rich. And you hear it in some of the data points Alex shared in his prepared remarks.
Speaker Change: You heard in my remarks, the core drivers that we have we've now implemented from an innovation perspective.
Speaker Change: Our pay with venmo.
Speaker Change: Continue to rollout our debit card is now embedded in the product. So I feel very good about the durable growth there may be something we haven't we haven't connected the dots on well enough is all of the innovation that we're doing with fast lane and.
Alex Chris: But when you actually look at kind of the activity roll through, Venmo's just a very consistently sticky product for us. So, really excited about that. And that's what I see as, you know, fourth quarter just continuation and then moving into 25 as well. Yeah, just to reinforce, you know, what Jamie just talked about, what we've talked about with contracts on Braintree, I think that's pretty clear. Venmo, you know, you heard in my remarks, the core drivers that we have, we've now implemented from an innovation perspective.
And with Paypal everywhere and with what I talked about in my remarks on branded checkout. If all comes back to that durable branded checkout growth Paypal everywhere, we're starting to see real habituation of people not just getting access to the offline.
Speaker Change: Offline.
Speaker Change: Check out, but also now bringing that back into online. So all of this is driving back branded checkout growth.
Speaker Change: Same with fast like where we are now starting to get more and more users that are just used to seeing the paypal experience and we can now market to them to bring them back so as we move into 2025.
Alex Chris: Our pay with Venmo continued to roll out. Our debit card is now embedded in the product, so I feel very good about the durable growth there. Maybe something we haven't connected the dots on well enough is...
Speaker Change: I feel like we are very focused on the core drivers that are important to the business and we are innovating in the places that matter for our customers and will drive continued durable profitable transaction margin dollar growth into 'twenty five and beyond.
Alex Chris: all of the innovation that we're doing with FastLane, and with PayPal Everywhere, and with what I talked about in my remarks on branded checkout. It all comes back to that durable branded checkout growth.
Speaker Change: Maybe tien tsin I want to come back and just talk a little bit about interest rates because you mentioned that in your question.
And I think it's probably helpful to table set on that a little bit.
Alex Chris: checkout, but also now bringing that back into online. So all of this is driving back branded checkout growth. Same with FastLane, where we're now starting to get more and more users that are just used to seeing the PayPal experience, and we can now market to them to bring them back. So as we move into 2025,
Speaker Change: So we've talked about transaction margin dollar growth at 8%. When you look at transaction margin dollar growth ex interest income, which is really a metric we look at justice much as we do the the main metric because we think it really represents what we are doing operationally and the business that measure has been 4% year to do.
Alex Chris: I feel like we are very focused on the core drivers that are important to the business.
Alex Chris: And we are innovating in the places that matter for our customers and will drive continued, durable, profitable transaction margin dollar growth into 2025 and beyond. Yeah, and maybe, Tinjan, I want to come back and just talk a little bit about interest rates because you mentioned that in your question.
Speaker Change: David this year.
Speaker Change: Compared to a negative for the last couple of years. So when we look at that really very excited about what we're seeing there, but when we level up and talk about rates. We've had that three point benefit this year fourth quarter, I expect that benefit to be relatively immaterial.
Alex Chris: and I think it's probably helpful to table set on that a little bit. You know, so we've talked about transaction margin dollar growth at 8%. You know, when you look at transaction margin dollar growth X interest income, which is really a metric we look at just as much as we do the main metric.
The rate cuts that.
Speaker Change: Our assumed and the forward curve.
Speaker Change: Pause for a minute on our portfolio is about a four month duration. So it just takes time and it will take time for any particular rate cut to flow through.
Speaker Change: But the way to think about it when you're thinking about 25 is a 25 basis point rate cut is equivalent to about $40 million of transaction margin and it depends on timing and when that happens, but if you just said okay.
Alex Chris: because we think it really represents what we're doing operationally in the business.
Alex Chris: You know, that measure has been 4% year-to-date this year.
Alex Chris: compared to negative for the last couple of years. So, you know, when we look at that, really very excited about what we're seeing there. But when we level up and talk about rates, you know, we've had that three-point benefit this year, fourth quarter, I expect that benefit to be relatively immaterial.
We're going to take rates down by 100 to 150 basis points next year, it's about a one to two point drag on transaction margin dollar growth.
So running the business ex interest income is something we're going to be very very focused on.
Alex Chris: The rate cuts that are assumed in the forward curve, let's just...
Speaker Change: As we go forward.
Alex Chris: Pause for a minute on that. Our portfolio is about a four-month duration.
Speaker Change: Your next question comes from the line of Ramsey El <unk> with Barclays. Your line is open.
Speaker Change: Hi, Thank you very much for taking my question. This morning.
Alex Chris: A 25-basis point rate cut is equivalent to about $40 million of transaction margin. And it depends on timing and when that happens.
Speaker Change: Now that you have a larger sample size of Fastly and acceptance in the marketplace can you update us on the monetization strategy help us think through how potentially additive fast lane take rates might be versus average unbranded volume yields.
Alex Chris: But if you just said, okay, we're going to take rates down by 100 to 150 basis points next year, it's about a 1 to 2 point drag on transaction margin dollar growth.
Speaker Change: Yes, let me take the <unk>.
Speaker Change: Rollout of fast light and then Jamie if you want to pile on with anything.
Alex Chris: So running the business, X interest income, is something we're going to be very, very focused on.
Speaker Change: We are seeing great uptake and fast Lane I mentioned over 1000 merchants. We also as <unk> seen are starting to bring on additional processors as part of that platform as well and really that is the focus of the innovation right now is improving the conversion rate in the 60% of non consumption.
Alex Chris: as we go forward.
Speaker Change: Your next question comes from the line of Ramsey LSL with Barclays. Your line is open.
Speaker Change: Hi, thank you very much for taking my question this morning.
Speaker Change: Thank you.
Speaker Change: Now that you have a larger sample size of FastLane acceptance in the marketplace, can you update us on the monetization strategy, help us think through how potentially additive FastLane take rates might be versus, you know, average unbranded volume yields?
Speaker Change: Branded Mark so the majority of checkout is still guest checkout, we now have the best.
Speaker Change: Converting guest checkout product in the market and so our focus right now is adoption. Our focus is ensuring we get as many processors up and running that's important, particularly particularly as we start to bring on large enterprises in the fast lane as well because many of them are multi processor and we will need it.
Speaker Change: Yeah, let me take the rollout of FastLane and then, Jamie, if you want to pile on with anything.
Speaker Change: You know, we are seeing great uptake in FastLane. I mentioned the over 1,000 merchants. We also, as you've seen, are starting to bring on additional processors as part of that platform as well. And really, that is the focus of the innovation right now is improving the conversion rate in the 60% of non-consumption of a branded mark. So the majority of checkout is still guest checkout. We now have the best...
Potentially a brain tree.
Speaker Change: And in Audion fast lane experience as well and so.
Speaker Change: Right now again all of our focus on.
On fast Lane is adoption pricing is built in to all of our contracts we have relationships directly with the merchants.
Speaker Change: But our focus right now has been on adoption and we will continue.
Speaker Change: To drive that up.
Speaker Change: converting guest checkout product in the market. And so, our focus right now is adoption. Our focus is ensuring we get as many processors up and running. That's important, particularly as we start to bring large enterprises into FastLane as well, because many of them are multiprocessor and will need...
Speaker Change: Yes, and with respect to.
Speaker Change: Economics, and how this will flow through.
Speaker Change: We are in the midst of a lot of conversations with merchants and all of that includes the pricing element.
Speaker Change: We've got good arrangements with our partners as well clearly fast lane will take time to ramp.
Speaker Change: And as we get.
Speaker Change: potentially a Braintree and an Audion FastLane experience as well.
Speaker Change: <unk> through fourth quarter and through 2025, it will take time to ramp and see in the numbers.
Speaker Change: Right now, again, all of our focus on FastLane is adoption. Pricing is built in to all of our contracts. We have relationships directly with the merchants. But our focus right now has been on adoption, and we'll continue to drive that up.
Speaker Change: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg: Thanks, guys. Good morning, I wanted to ask about branded TPG growth I'm assuming your.
Jason Kupferberg: Expecting continued stability at around 6% in Q4, I'm just wondering if the broader rollout of the new checkout experience will accelerate the branded growth in 2025, and just as part of that I know you gave the metric that 5% of U S. Checkout traffic is on the new experience any sense of where that potentially.
Speaker Change: Yeah, and with respect to, you know, economics and how this will flow through, you know, we are in the midst of a lot of conversations with merchants, and, you know, all of that includes the pricing element, you know, and we've got good arrangements with our partners as well. Clearly, FastLane will take time to ramp, and as we get through fourth quarter and through 2025, you know, it'll take time to ramp and see in the numbers.
Jason Kupferberg: Over the next 12 months okay.
Speaker Change: Yes. Thank you. Thank you Jason so.
Speaker Change: Your next question comes from the line of Jason Kupferberg with Bank of America. Your line is open.
Speaker Change: So the first part of your question, Yes, we see consistent trends when it comes to branded checkout again, our focus and I have been consistent with this.
Speaker Change: Really for a year now is the improvement in our in our branded checkout experience.
Speaker Change: <unk> been very transparent that.
Speaker Change: We had fallen behind on innovation, particularly on mobile.
Speaker Change: As I sit here today I am I am really proud and excited with the experiences we're now putting into market and I shared some of the data on the improvement in onetime check out with the 400 basis point improvement in conversion Volta checkout 100 basis point improvement in conversion so.
Speaker Change: 25, and just as part of that, I know you gave the metric that 5% of U.S. checkout traffic is on the new experience. Any sense of where that potentially goes over the next 12 months? Thanks.
Speaker Change: Yeah, thank you. Thank you, Jason.
Speaker Change: We've also reduced latency and the overall experience by 45%.
Speaker Change: To the first part of your question, yes, we see consistent trends when it comes to branded checkout. Again, our focus, and I've been consistent with this,
Speaker Change: Included additional mobile specific.
Speaker Change: Innovations like in App switch, which is driving 10% lift in success for.
Speaker Change: really for a year now is the improvement in our branded checkout experience.
Speaker Change: Versus just password, which is driving its over at 97% success rate on iOS now. So overall, we have rebuilt the entire patient the entire experience on mobile.
Speaker Change: You know, we had fallen behind on innovation, particularly on mobile. And as I sit here today, I am really proud and excited with the experiences we are now putting into market. And I shared some of the data on the improvement in one-time checkout with the 400-basis point improvement and conversion, vaulted checkout, 100-basis point improvement and conversion. So, you know, we've also reduced latency in the overall experience by 45%.
Speaker Change: <unk>.
Speaker Change: I expect us to continue to improve on branded checkout. This is a core focus for the business not only these experiences, but as I mentioned earlier fast way and Paypal everywhere everything driving continued.
Speaker Change: <unk>.
Speaker Change: Flywheel back into branded checkout. So all in all we need to see this play out in terms of the ramp I mentioned, we're at 5% now.
Speaker Change: Look the way I think about it is there are some integrations, we have with merchants.
Speaker Change: Think about think about it is roughly a third or so of our integrations we are in.
Speaker Change: We have some ability to continue to ramp up we will do that throughout the holiday season and into early next year and then some we need.
Speaker Change: As we've talked about before many many hundreds of different integration patterns that we need merchants to do to work on and so the good news is they now have an incentive to do it the conversion improvements are significant and the conversations with merchants now are very healthy and they're excited about getting getting these new experiences ramped up once they get past the haul.
Speaker Change: Today, So we're not standing still.
Speaker Change: <unk> continued momentum.
Speaker Change: On on that 5% throughout the next quarter.
Speaker Change: And into 2025.
Speaker Change: Your next question comes from the line of Dan <unk> with Mizuho. Your line is open.
Speaker Change: Hey, guys.
Amazing results again wanted to ask if it wasn't addressed already are you able to give us like a sneak preview of how you see 25 because from our conversations this remains.
Speaker Change: A big debate so I appreciate it thank you.
Speaker Change: Yes.
Speaker Change: Yes.
Good morning, excuse me good morning, Dan.
Speaker Change: I think some of the comments that we've talked about already really helped shape <unk> five to a degree.
Speaker Change: You start with the revenue line when we looked at some of the very deliberate and intentional conversations we've had with Braintree merchants.
Speaker Change: I mentioned in my prepared remarks that we're seeing the impact of some of the revenue trades, we're making begin to flow through the numbers in the third quarter and Thats also implicit in our fourth quarter guide as well, we expect that trend to continue through 2025, as we really shift from.
Speaker Change: Focusing on high portions of revenue to just more holistic better margin contracts.
Speaker Change: Transaction margin.
Speaker Change: Talked about a little bit that ex interest income really expect to see.
Speaker Change: At least as favorable in 2024, one area, we really haven't talked about is opex and if I spend a minute on that.
Speaker Change: We do expect to see a higher proportion of opex in the fourth quarter than we've seen all year, and we're really reinvesting favorability back into the business and it is addition to that we had deferred.
Speaker Change: Marketing expenses very deliberately from first half into the second half. So you see that pop up in the fourth quarter.
Speaker Change: We now expect the full year to be up low single digits from a.
Speaker Change: Opex perspective, and when you look at 2025, that's probably the right framing and way to think about it as well, but just more balanced throughout the year in terms of how it how it flows through.
Speaker Change: Let me just I'd love to just share and unpack because you asked a little sneak peek about how we think about and how we talk about it in the business. We are hyper focused on what we are in control of and we are focused on building durable growth levers. It's why the focus of the innovations that we've talked about whether it's branded checkout everything coming back to the.
Speaker Change: That whether it's the conversations and getting healthier.
Speaker Change: Braintree economics.
Speaker Change: Rolling out new innovations like fast Lane and Paypal everywhere on all of these are things were in control of its innovation that is important to our customers and that we can monetize over the long term. We also from the metrics that we're focused on really are thinking about transaction margin dollar excluding interest income because that's the metric we can really think about it.
Speaker Change: <unk> controller and again as Jamie said.
Speaker Change: If you think about the last two years that was a negative.
Speaker Change: A negative amount for us we've now turn that positive in 2024 I believe we now have built a solid.
Speaker Change: Foundation in baseline for us to grow on and I expect 2025.
Speaker Change: To grow on top of that so be at least as strong and grow from where we set the baseline and 24. So the team has focused our innovations will continue to roll out into the market and I think we're in a healthy place and.
Speaker Change: And that's part of the good thing Dan also about the Investor day.
Speaker Change: We announced that Alex announced today in late February we will have the chance to also dive more deeply into all of those elements.
Speaker Change: Okay.
You think about the last two years that was a negative.
Speaker Change: Your next question comes from the line of Timothy Chiodo with UBS. Your line is open.
A negative amount for us we've now turn that positive in 2024 I believe we now have built a solid foundation in baseline for us to grow on and I expect 2025.
Timothy Chiodo: Great. Thanks for taking the question I want to hit on Braintree, two aspects there one around competitive positioning on pricing now with the new sort of re based pricing strategy and then also the ability to bundle a prominent positioning with the button. So first on the pricing piece really stated it with this new strategy would you still consider.
To grow on top of that so at least as strong and grow from where we set the baseline and 24. So the team has focused our innovations will continue to roll out into the market and I think we're in a healthy place.
Braintree to be more of a price leader, meaning when the contract is reset is braintree still the lowest price of all the merchant acquirers working with these various large enterprise merchants and the second piece is in the past the button with often bundled as part of the contracts to receive prominent position.
And that's part of the good thing Dan also about the Investor day.
We announced that Alex announced today in late February we will have the chance to also dive more deeply into all of those elements.
Your next question comes from the line of Timothy Chiodo with UBS. Your line is open.
Great. Thanks for taking the question I want to hit on Braintree, two aspects there one around competitive positioning on pricing now with the new sort of re based pricing strategy and then also the ability to bundle a prominent positioning with the button. So first on the pricing piece really stated it with this new strategy would you still consider.
Timothy Chiodo: Websites.
Timothy Chiodo: Is that clause still able to be added into those contracts with this new pricing strategy.
Timothy Chiodo: Okay.
Speaker Change: Yes, it's a great question.
Timothy Chiodo: Tim.
Tim: Here's the way I'd think about it we are not.
Tim: We are changing the conversation with our merchants it is not just about.
Braintree to be more of a price leader, meaning when the contract is reset is braintree still the lowest price of all the merchant acquirers working with these various large enterprise merchants and the second piece is in the past the button with often bundled as part of the contracts to receive prominent position.
Tim: Processing.
Tim: What I would consider in some cases to be just a commodity conversation about pricing.
Tim: We are when we talk about price to value, we're talking about the full strategic conversation and what we bring to the table and so when I talk about the healthy conversations we're having them again I'm, having many of these myself.
Websites is that clause still able to be added into those contracts with this new pricing strategy.
Tim: When I talk to the CEO of a merchant.
Tim: Yes, they want great processing pricing, but what they're really focused on how do they grow customers how.
Yeah.
Yes, it's a great question.
Tim.
Here's the way I think about it.
Tim: How do they get more customers.
We are not.
Tim: To buy their products and those are now value services that we're able to bring to them not just best in class processing, not just FX as a service risk as a service the ability to sell all around the world, but now we are bringing to them on ads platform now, we're bringing to them the ability to start to target with payment API.
We are changing the conversation with our merchants it is not just about.
Processing.
What I would consider in some cases to be just a commodity conversation about pricing.
We are when we talk about price to value, we're talking about the full strategic conversation and what we bring to the table and so when I talk about the healthy conversations we're having them again I'm, having many of these myself.
Tim: The right customers at the right time, and these are really fun and really healthy conversations and so yes.
When I talk to the CEO of a merchant.
Tim: To be honest, yes, we will bundle our branded because that's important to us and it's important to them because it's still the best converting branded checkout option in the world.
Yes, they want great processing pricing, but what they're really focused on how do they grow customers how.
How do they get more customers.
Tim: Yes, we will still have significant pricing that we will price to value and we will continue to price all our value added services, but what's most important is these are now bigger and more strategic conversations with merchants that actually help them drive the growth of their business not just processing their payments.
By their products and those are now value services that we're able to bring to them not just best in class processing, not just FX as a service risk as a service the ability to sell all around the world, but now we are bringing to them on ads platform now, we're bringing to them the ability to start to target with payment API.
Tim: Okay.
Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.
The right customers at the right time, and these are really fun and really healthy conversations and so.
Speaker Change: Thank you very much.
To be honest, yes, we will bundle our branded because that's important to us and it's important to that because it's still the best converting branded checkout option in the world.
James Faucette: Really appreciate you Alex your comments there on changing the conversation in and being able to bring incremental value, including AD platform and driving that.
Yes, we will still have significant pricing that we will price to value and we will continue to price all our value added services, but what's most important is these are now bigger more strategic conversations with merchants that actually help them drive the growth of their business not just processing their payments.
Speaker Change: Yes.
Speaker Change: Blowing up on Tim's question, there as you think about that as you change that conversation.
James Faucette: How should we be thinking about the potential then for.
Speaker Change: Pricing or value add in and that kind of thing.
Sarah: Okay.
Speaker Change: In the future I know that you've I think you've.
Speaker Change: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.
Speaker Change: <unk> done a really good job outlining that this is going to take time during the course of 'twenty five but thinking about the long term trajectory of where you would ultimately like to get in and what you think that value looks like.
Thank you very much.
Speaker Change: Really appreciate it Alex your comments there on changing the conversation in and being able to bring incremental value, including AD platform and driving that.
Speaker Change: Thanks.
Speaker Change: Yes, I think again.
Speaker Change: It's very similar to what I, just shared which is.
Speaker Change: Following up on Tim's question, there as you think about that as you change that conversation.
Speaker Change: For us having these more strategic deeper relationships.
Speaker Change: How should we be thinking about the potential then for.
Speaker Change: That we can monetize across all of our value added services is what's most important and so.
Speaker Change: Pricing or value add in and that kind of thing.
Speaker Change: And whether it's processing, which again, we should monetize.
Speaker Change: In the future I know that you've I think you've done a really good job outlining that this is going to take time during the course of 'twenty five but thinking about the long term trajectory of where you would ultimately like to get in and what you think that value looks like.
Speaker Change: Or all the value added services or the AD platform fast Lane all of these different pieces, we're going to continue to lean in.
Speaker Change: And and we're going to continue to work with our partners to drive.
Speaker Change: <unk> check out as well, Brian one of the things. That's interesting is we have the strategic conversations is how excited these merchants are about.
Alex Chris: <unk>.
Speaker Change: Yes, I think.
Again.
Alex Chris: It's very similar to what I, just shared which is for us having these more strategic.
Speaker Change: The demographics that we have as we start to reignite Paypal everywhere right theres opportunities with merchants that are omni channel merchants that are thinking about hey, how can paypal everywhere now work in store as well.
Alex Chris: Deeper relationships.
Alex Chris: That we can monetize across all of our value added services is what's most important and so again, whether it's processing, which again, we should monetize.
Speaker Change: As we start to bring pay with venmo pay with Venmo is an incredible opportunity for merchants as they now think about the ability to get access to one of the most valuable demographics of young affluent spenders in the United States and so again all of these conversations just continue to build on themselves.
Alex Chris: Or all the value added services or the AD platform fast Lane all of these different pieces, we're going to continue to lean in.
And and we're going to continue to work with our partners to drive.
Speaker Change: And.
Alex Chris: Branded checkout as well right one of the things that.
Jamie Miller: And I think we feel good about the conversations as well Jamie Yeah, maybe I'll just add to a little bit about where we are in the process.
Alex Chris: Interesting is we have these strategic conversations is how excited these merchants are about the demographics that we have as we start to reignite Paypal everywhere right theres opportunities with merchants that are omnichannel merchants that are thinking about hey, how can paypal everywhere now work in store as well.
Jamie Miller: We have worked our way through some large renegotiations, which have been a really good conversations.
Jamie Miller: We've got more progress as well in the next couple of years. The agreements are typically multiyear in nature.
Jamie Miller: Some renewals happen earlier than others.
As we start to bring pay with venmo pay with Venmo is an incredible opportunity for merchants as they now think about the ability to get access to one of the most valuable demographics of young affluent spenders in the United States and so again all of these conversations just continue to build on themselves.
Jamie Miller: But we expect that more visible impact on <unk> revenue over the next several quarters, but more importantly, we expect margin accretion to emerge over the next few years as well and part of that is lease renegotiations, but equally importantly, and you mentioned value added services. It puts us in a position where in those discussions.
Alex Chris: And.
Speaker Change: And I think we feel good about the conversations as well Jamie Yeah, maybe I'll just add to a little bit about where we are in the process.
And following those discussions the buildout of Vas and how we can bring that to bear in terms of building a much more sticky holistic relationship, but one that really improves margin over time, that's the holistic piece of it that we're looking at.
Alex Chris: We have worked our way through some large renegotiations, which had been a really good conversations, but we got more progress as well in the next couple of years. The agreements are typically multiyear in nature.
Jamie Miller: We're already seeing that we have already launched in the third quarter of a really significant new value added service that has been launched with a big merchant.
Some renewals happening earlier than others.
Alex Chris: But we expect that more visible impact on TBD in revenue over the next several quarters, but more importantly, we expect margin accretion to emerge over the next few years as well.
Jamie Miller: That kind of thing that we're that we'll continue to grow.
Jamie Miller: Okay.
Speaker Change: Your next question comes from the line of Hi, Sheila with Bernstein. Your line is open.
Speaker Change: Part of that is lease renegotiations, but equally importantly, and you mentioned value added services. It puts us in a position where in those discussion and following those discussions the build out of that and how we can bring that to bear in terms of building a much more sticky holistic relationship that one that really improves margin overtime. That's.
Speaker Change: Hi, Good morning, I wanted to follow up and fast lane good momentum with <unk>.
The shifts here.
Speaker Change: Alex you talked about 100 merchants using fast lane what are you hearing from some of the larger margin ahead of the holiday season Im guessing that given the testing and you mentioned using your existing bar to get into leather fostering experience now how should we kind of think about the dynamics the branded checkout experience with you. Thank you.
Alex Chris: The holistic piece of it that we're looking at and we're already seeing that we have already launched in the third quarter of really significant new value added service that has been launched with a big merchant and that kind of thing that that will continue to grow.
Alex Chris: Alright, Hershey is a great question. So just to be clear we're over 1000 merchants now on fast lane and continuing to ramp.
Okay.
Speaker Change: Your next question comes from the line of her <unk> Rawat with Bernstein. Your line is open.
Alex Chris: Lot of those merchants are some of the smaller businesses small and midsize businesses.
Alex Chris: A part of platforms.
Speaker Change: Hi, Good morning, I wanted to follow up and fast lane, good momentum with partnerships here Alex.
Alex Chris: That we were able to turn on like like Big Commerce. As an example, a lot of the large enterprises as you can imagine are in the middle of their holiday season, what we're hearing from them is.
Speaker Change: Alex you talked about 100 merchants using fast lane what are you hearing from the larger margin ahead of the holiday season.
Alex Chris: Very very exciting.
Speaker Change: Testing and you mentioned using your existing bar to get into leather fostering experience now how should we think about that the dynamics the branded checkout.
Alex Chris: Feedback on ramping faster and as soon as they can oftentimes that's going to start in Q1 to be transparent.
Alex Chris: For a couple of reasons, one a lot of there.
Alex Chris: Thank you.
Speaker Change: Alright, Hershey is a great question. So just to be clear we're over 1000 merchants now on fast lane and continuing to ramp.
Alex Chris: The code is shut down for the holiday season to they want to make sure that fast thing works across multiple processors and many of the large enterprises are using multiple processors, which is why our our multiprocessor strategy for fast Lane is so important and so bringing on those partners as you mentioned processing partners is critical.
Speaker Change: Lot of those merchants are.
Speaker Change: Some of the smaller businesses small and mid size businesses that are part of platforms.
Alex Chris: That we were able to turn on like like Big Commerce as an example.
Alex Chris: A lot of the large enterprises as you can imagine are in the middle of their holiday season, what we're hearing from them is.
Alex Chris: But the conversations that I've had personally with a number of the large enterprises is.
Alex Chris: Very very exciting.
They are excited about that sitting there ready to get on as soon as they can.
Alex Chris: Feedback on ramping faster and as soon as they can oftentimes that's going to start in Q1 to be transparent.
Alex Chris: And it's just about getting the work done in terms of bringing that back to branded.
A couple of reasons, one a lot of there.
Alex Chris: We are starting to test into that as well for US again, if you if you think about the experience.
Alex Chris: Dakota shutdown for the holiday season to they want to make sure that fast thing works across.
Alex Chris: We're getting the largest population of Av.
Alex Chris: Multiple processors and many of the large enterprises are using multiple processors, which is why our our multiprocessor strategy for fast Lane is so important and so bringing on those partners as you mentioned processing partners is critical.
Alex Chris: Any accounts right now these are people that have bypassed the branded experience or some of them have never been Paypal users of which those folks that have never been Paypal users, 30% are opting in to fast lane. So we're now vaulting their instrument, we're creating a profile for them and we're able to bring them back into the branded experience and so for us that's going to be a big initiative.
Alex Chris: The conversations that I've had personally with a number of the large enterprises.
<unk>.
Alex Chris: As we go into 2025 building on those those profiles those users that continue to check out at high rates through the guest checkout experience, but sharing with them the value proposition that that a paypal branded experience has and again thats why you see so much focus for us in 'twenty four around building a rewards platform.
Alex Chris: They are excited about that play and they're ready to get on as soon as they can.
Alex Chris: And it's just about getting the work done in terms of bringing that back to branded.
Alex Chris: We are starting to test into that as well for US again, if you if you think about the experience.
We're getting the largest population of Av.
Alex Chris: Any accounts right now these are people that have bypassed the branded experience or some of them have never been Paypal users of which those folks that have never been Paypal users, 30% are opting into fast lane. So we're now vaulting their instrument, we're creating a profile for them and we're able to bring them back into the branded experience and so for us that's going to be a big initiative.
Alex Chris: <unk> and starting to even in the marketing that you've seen us go out and really start to.
Alex Chris: Burn into the minds of our consumers that Paypal is the most rewarding experience and the most rewarding way to pay.
Alex Chris: We want people to be habituated into that branded checkout experience that we think we now have unique levers, whether it's through Paypal everywhere or through fast lane to be able to bring them into into that branded checkout.
Alex Chris: As we go into 2025 building on those those profiles those users that continued to check out at high rates through the guest checkout experience, but sharing with them the value proposition that that of.
Speaker Change: Your next question comes from the line of Trevor Williams with Jefferies. Your line is open.
Speaker Change: Paypal branded experience has and again Thats why you see so much focus for us in 'twenty four around building a rewards platform and starting to even in the marketing that you've seen us go out and really start to.
Trevor Williams: Great. Thanks, a lot I wanted to go back to the transaction take rate I think the year over year decline there was a little bit bigger this quarter. Despite a better mix between branded and Braintree. If you could just unpack that how youre thinking about the trajectory of the take rate from here and then within branded the faster relative growth of large enterprise and marketplaces.
Speaker Change: Burn into the minds of our consumers that Paypal is the most rewarding experience and the most rewarding way to pay because we want people to be habituated into that branded checkout experience that we think we now have unique levers, whether it's through paypal everywhere or through fast learning to be able to bring them into into that branded checkout.
Trevor Williams: Versus smbs, that's been a consistent callout from you guys anything more specific on how that spread looked relative to the last few quarters would be helpful. Thanks.
Speaker Change: Hi, good morning Trevor.
Speaker Change: So take rate as you know theres a lot of factors that impact take rate, both our product mix or geographic mix customer mix customer mix as well as pricing and I would say improvements in our brain tree margins are directly impacting take rate and thats. One of the things is we have lower incentives I believe improving margin.
Speaker Change: Your next question comes from the line of Trevor Williams with Jefferies. Your line is open.
Trevor Williams: Great. Thanks, a lot I wanted to go back to the transaction take rate I think the year over year decline there was a little bit bigger.
Speaker Change: This quarter, despite a better mix between branded and Braintree. If you could just unpack that how youre thinking about the trajectory of the take rate from here and then within branded the faster relative growth of large enterprise and marketplaces versus Smbs. That's been a consistent callout from you guys anything more specific on how that spread looked relative to the <unk>.
Speaker Change: That's one of the more significant things youll see impacting take rate just in terms of the overall mix shift in the numbers.
Speaker Change: And that is offset by we've also had large enterprise growth at a faster rate as compared to small and medium businesses and that that mix shift as well with large enterprises, just having lower take rates than small and medium businesses that also impacts just the math on that and we've had some impact from FX in our pads business as well.
Speaker Change: Last few quarters would be helpful. Thanks.
Speaker Change: Hi, good morning Trevor.
Speaker Change: So it would take rate as you know theres a lot of factors that impact take rate with our product mix or geographic mix customer mix customer mix.
Speaker Change: As well as pricing and I would say improvements in our brain tree margins are directly impacting take rate and thats. One of the things you know as we have lower incentives I believe improving margins. That's one of the more significant things youll see impacting take rate just in terms of the overall mix shift in the numbers.
Speaker Change: I'd love to just pile on small business. This is.
Speaker Change: As you all know a very strong passion for me.
Speaker Change: I feel great about is the innovation that we're rolling out Paypal complete payments is now really the best one stop shop for merchants to be able to do.
Speaker Change: And that is offset by we've also had a large enterprise grows at a faster rate as compared to small and medium businesses and that that mix shift as well with large enterprises, just having lower take rates and small and medium businesses that also impacts just the math on that and we've had some impact from FX and in our pants business as well.
Speaker Change: Money in and access to capital.
Speaker Change: Any out we still have opportunities as we think about the opportunity to allow small businesses to be able to.
Speaker Change: Send send payments to others.
But overall FX global fast Lane Venmo all of these different things that we can now package together for small businesses is exactly the right product and the feedback we're getting especially as we lean into no code low code solutions easy Onboarding.
Speaker Change: I'd love to just pile on small business. This is.
Speaker Change: As you all know a very strong passion for me.
Speaker Change: What I feel great about is the innovation that we're rolling out Paypal complete payments is now really the best one stop shop for merchants to be able to do.
Speaker Change: In developer days I feel really good about the innovation, we have with small business, where I am dissatisfied right now is it just takes time.
Speaker Change: This is a long tail of small businesses you have.
Speaker Change: And and access to capital.
Speaker Change: Touch.
Speaker Change: What is ultimately millions of merchants over a period of time. So it's just not as fast of a switch is being able to just have a handful of large enterprise conversations, but we are building the go to market motions.
Speaker Change: Money out we still have opportunities as we think about the opportunity to allow small businesses to be able to.
Speaker Change: Send send payments to others.
Speaker Change: But overall FX global fast Lane.
Speaker Change: I am very confident in what the team is bringing up and I expect that to continue to grow at us really to make penetration into small business as we look into 2025 and beyond let's try to fit in two more questions.
Speaker Change: Venmo all of these different things that we can now package together for small businesses is is exactly the right product and the feedback we're getting especially as we lean into no code low code solutions easy Onboarding, bringing developer days I feel really good about the innovation, we have a small business where I'm dissatisfied right now is it just takes time right.
Speaker Change: Thank you. Your next question comes from the line of Bryan Keane with Deutsche Bank. Your line is open.
Hi, Good morning, guys wanted to ask about branded checkout, the 6% growth rate Alex how do you think that compares to the e-commerce market and how you guys are doing versus versus just thinking about the share and then with fast lane and improvement in branded and the focus on SMB.
Speaker Change: It is a long tail of small businesses, you've got a touch.
Speaker Change: It is ultimately millions of merchants.
Speaker Change: For a period of time, so it's just not as fast of a switch is being able to just have a handful of large enterprise conversations, but we are building the go to market motions.
Speaker Change: Very confident in what the team is bringing up and I expect that to continue to grow.
Speaker Change: Where do you where do you think you can get branded checkout growth rates do you think you can get it to high single digits or just some kind of goals that you guys have set for the company.
Speaker Change: And that's really to make penetration into small business as we look into 2025 and beyond let's try to fit in two more questions.
Speaker Change: Yes.
Speaker Change: What I'd say is.
Speaker Change: Thank you. Your next question comes from the line of Bryan Keane with Deutsche Bank. Your line is open.
Speaker Change: Branded checkout has been very consistent.
Speaker Change: We are again.
Speaker Change: <unk>.
Bryan Keane: Hi, good morning, guys.
Speaker Change: The largest best converting and.
Bryan Keane: Wanted to ask about branded checkout, the 6% growth rate Alex how do you think that compares to the e-commerce market and how you guys are doing versus versus just thinking about the share and then with fast lane and improvement in branded and the focus on SMB, where do you where do you think you can get branded checkout.
Speaker Change: Most share of branded checkout anywhere in the world and it has been consistent at the same time, we know there are opportunities and the innovations that I talked about.
Speaker Change: My remarks in earlier in the call gives me confidence that we have opportunity to continue to improve that experience and grow it.
Speaker Change: You also then think about fast lane, if you think about Paypal everywhere, the habituation of people, bringing back into into the online branded experience.
Speaker Change: Growth rates do you think you can get it to high single digits or just some kind of goals that you guys have set for the company.
Speaker Change: Yes, what I'd say is.
Speaker Change: There is a room for us to continue to take share there.
Speaker Change: Branded checkout has been very consistent.
Speaker Change: So I am excited about <unk>.
Speaker Change: We are again.
Speaker Change: First you've got to have innovation, you've got to have a value proposition I think we put those into market now and we've got the flywheel turning so again, none of this is going to happen overnight, but I am excited about where we go there.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: The largest best converting and.
Speaker Change: Most share of branded checkout anywhere in the world and has been consistent at the same time, we know there are opportunities and the innovations that I talked about in.
Speaker Change: Let's hit the last question.
Thank you. Our last question comes from the line of Andrew Schmidt with Citi. Your line is open.
Speaker Change: In my remarks earlier in the call gives me confidence that we have opportunity to continue to improve that experience and grow.
Speaker Change: If you also Didnt think about fast lane, if you think about Paypal everywhere, the habituation of people, bringing back into into the online branded experience.
Andrew Schmidt: Hey, Alex Hey, Jamie Thanks for having me on here I wanted to switch to the consumer side for a moment maybe talk about just the trajectory you see in monthly actives, especially given the.
Speaker Change: I think there is a room for us to continue to take share there.
Andrew Schmidt: What youre seeing with the venmo into people everywhere promotion and then just broadly speaking maybe you could talk about just the pipeline just for <unk>.
Speaker Change: I am excited about.
Speaker Change: First you've got to have innovation, you've got to have a value proposition I think we put those into market now and we've got the flywheel turning so again, none of this is going to happen overnight, but.
Andrew Schmidt: Products on the consumer side, it's just an area, where we get a lot of questions in terms of.
Speaker Change: But I'm excited about where we go there.
The consumer said, thanks, a lot guys.
Speaker Change: Let's hit the last question.
Yes, Thanks, Andrew first what I'd say is innovation is the most durable competitive advantage, we have and what you've seen from us in the last few quarters is really starting to drive innovation both on the consumer Paypal App.
Thank you. Our last question comes from the line of Andrew Schmidt with Citi. Your line is open.
Speaker Change: Okay.
Andrew Schmidt: Hey, Alex Hey, Jamie Thanks for having me on here I wanted to switch to the consumer side for a moment maybe talk about just the trajectory you see in monthly actives, especially given what youre seeing with the venmo into people everywhere promotion and then just broadly speaking maybe you could talk about just the pipeline.
Andrew Schmidt: Not just in branded checkout, but actually putting real innovation into the app with Paypal everywhere launch, giving consumers the opportunity to now have an offline experience.
Andrew Schmidt: Which is driving habituation back into online and enhanced rewards platform and then on the venmo side, leading and with innovation that you have to be honest customers have been asking for for years with scheduled payments in groups and adding direct deposit and so when I think about customer growth customer growth is going to be.
Speaker Change: Just for <unk>.
Speaker Change: Products on the consumer side, it's just an area, where we get a lot of questions in terms of.
Speaker Change: The consumer said, thanks, a lot guys.
Speaker Change: Yes, Thanks, Andrew first what I'd say is innovation is the most durable competitive advantage, we have and what you've seen from us in the last few quarters is really starting to drive innovation both on the consumer Paypal App.
Andrew Schmidt: Central for Us as we continue to lean in and want to grow the business, but that comes through continuing to innovate and continuing to provide great products to our customers. So what I'm really most satisfied about when I look back over the last year is we have an innovation machine that is now starting to ramp up inside of the company our velocity has improved.
Speaker Change: Not just in brain to checkout, but actually putting real innovation into the app with Paypal everywhere launch, giving consumers the opportunity to now have an offline experience.
Speaker Change: Which is driving situation back into online and enhanced rewards platform and then on the venmo side leaning in with innovations that you have to be honest customers have been asking for for years with scheduled payments in groups and adding direct deposit and so.
Andrew Schmidt: Moving wild.
While we're reducing tech debt our ability for our engineers to put more releases out into our consumers' hands and we have a very very healthy roadmap of of innovation that that will be driving to our consumers. So very excited about.
Speaker Change: When I think about customer growth customer growth is going to be.
Where we lean in over the next few quarters, Yes, and I would just say, we've seen really steady progress in our monthly actives.
Speaker Change: Central for Us as we continue to lean in and want to grow the business, but that comes through continuing to innovate and continuing to provide great products to our customers. So what I'm really most satisfied about when I look back over the last year is we have an innovation machine that is now starting to ramp up inside of the company our velocity has improved.
Speaker Change: Sequentially and year over year and that is both the Paypal consumer and our venmo consumers as well also internationally, but one of the things, we really haven't talked about and I think Alex's teased in his remarks here is really Paypal everywhere as well and we're really excited about the launch we've had in the last couple of months, we're seeing really strong adoption.
Speaker Change: <unk>.
Speaker Change: While we are reducing tech debt, our ability for our engineers to put more releases out into our consumers' hands and we have a very very healthy roadmap of innovation that that will be driving to our consumers. So.
Speaker Change: Really strong usage, we had more than 1 million new users since that launch.
Speaker Change: And the economics are nicely attractive on that and it really drives habituation inflection just like Alex is talking about both with that core product and just the engagement with the app engagement with the debit card all of those things, but also with respect to the Halo effect that we see across other forms of branded spend with our products. So that's why I say.
Speaker Change: We're excited about.
Where we lean in over the next few quarters, Yes, and I would just say, we've seen really steady progress in our monthly actives.
Speaker Change: Both sequentially and year over year and that is both the Paypal consumer and our venmo consumers as well also internationally.
A great example of one that we're really excited about and we'll have more of I know, we've gone over a little bit, but Alex any final thoughts yes. So thanks, thanks to you all and thanks, Steve.
Speaker Change: One of the things, we really haven't talked about and I think Alex's teased in his remarks here, it's really Paypal everywhere as well and we're really excited about the launch we've had in the last couple of months.
Alex Chris: So look we've set a solid foundation to build upon and we're executing against our strategy I'm very proud of our team and the momentum we've created for our consumers merchants and partners and I'm excited to deliver a solid holiday season for our customers and continue the trajectory into 2025% so.
Jamie Miller: Being really strong adoption really strong usage, we had more than 1 million new users since that launch.
Alex Chris: And the economics are nicely attractive on that and it really drives habituation inflection just like Alex was talking about both with that core product and just the engagement with the app engagement with a debit card all of those things, but also with respect to the Halo effect that we see across other forms of branded spend with our products. So that's why I think a great example of one.
Speaker Change: Take care everyone.
Speaker Change: Thank you. This concludes today's conference. Thank you for participating you may now disconnect.
Steve Winoker: But we're really excited about and we'll have more of I know it has gone over a little bit, but Alex any final phone, yes. So thanks, thanks to you all and thanks, Steve.