Q4 2024 PayPal Holdings Inc Earnings Call
Sarah: Good morning and welcome to PayPal's fourth quarter and full year 2024 earnings conference call. My name is Sarah and I will be your conference operator today. As a reminder, this conference is being recorded.
Sarah: U S branded checkout growth accelerated in the fourth quarter to exit the year at a high point as our new checkout innovations are scaling to customers.
Sarah: Driven by a renewed focus on pricing to value Braintree has meaningfully contributed to our transaction margin dollar growth over the last three quarters.
Sarah: Venmo monetization is making great strides with over 20% growth in venmo debit card and pay with Venmo monthly active accounts.
Sarah: Put simply the Paypal team executed well during our transition year and made strong progress on our transformation.
Sarah: The.
Sarah: Estimates, we made throughout 2024 allowed us to perform well during the holiday shopping season and finished the year strongly.
Sarah: Total active accounts return to growth in 'twenty, four as we enhanced our value proposition and brought innovation to market.
Sarah: Total payment volume grew 10% to nearly $1 seven trillion.
Sarah: We delivered $32 billion in revenue up 7%.
Sarah: We reached an inflection point for transaction margin dollar growth, which increased 5%, excluding the benefit of interest on customer balances.
Sarah: Our non-GAAP earnings per share increased 21% year over year.
Sarah: We generated $6 8 billion in free cash flow and completed $6 billion in share buybacks.
Sarah: For 2025, we expect another solid year of transaction margin dollar growth and strong free cash flow, which Jamie will discuss.
Jamie: As we look ahead to 'twenty five I want to share the areas. We're most focused on.
Sarah: First is innovation.
Sarah: With the leadership team in place and the velocity with which we're executing we've proven we can bring innovations to market in.
Sarah: In 2024, we rolled out new branded checkout experiences launched Paypal everywhere.
Sarah: Introduced fast lane and expanded Paypal complete payments.
Sarah: We are not stopping there and we will continue to innovate to solve our customers' biggest challenges.
Sarah: The second is product adoption <unk>.
Sarah: 2025 will be focused on scaling adoption of our innovations.
Sarah: We have world class products and solutions and we will continue educating customers about all we have to offer.
Sarah: In 'twenty four we completely revamped our marketing and go to market playbook.
Sarah: We're just scratching the surface. So you can expect more ahead.
Sarah: Third is partnerships.
Sarah: Last year, we formed significant partnerships to drive faster adoption and bring more value to customers.
Sarah: We are building on our leadership position in payments and commerce and establishing ourselves as the platform that leading brands want to work with.
Sarah: We will strike even more partnerships throughout 2025.
Sarah: Fourth is efficiency and effectiveness in.
Sarah: In 2024, we reduced head count by 10%, we made deliberate investments in AI and automation, which are critical to our future.
This year, we are prioritizing the use of AI to improve the customer experience and drive efficiency and effectiveness within Paypal.
Sarah: We expect to make meaningful progress on all four of these areas in 'twenty five.
Let me walk you through how this focus will drive our results this year and beyond.
Sarah: In 25, our key strategic initiatives.
Sarah: We'll be to wind checkout.
Sarah: Gail omni grow venmo and accelerate SMB.
Sarah: Our teams are organized around these priorities and tracking progress daily.
Sarah: Starting with wind checkout, our number one priority.
Sarah: With our upgraded experiences we now have the leading checkout solution on desktop and mobile.
Sarah: When fully implemented the upgraded experiences reduced latency by more than 40% and drive more than 100 basis points of conversion lift on average consistent with the early results we've shared.
Sarah: These upgrades are now live for more than 25% of U S checkout traffic, which is up from 5% last quarter.
Sarah: We have a lot of room to grow here as adoption increases in the U S and then expands globally.
Sarah: On top of the benefit of higher conversion. These new experiences improve the presentment of our branded marks and solutions like buy now pay later, which can help to expand our share of wallet.
Sarah: The NPL customers spend 30% more on average and merchant sea higher sales after adding the NPL messaging to their sites, which is critical with one more sale can make all the difference.
Sarah: In 2024, we drove approximately $33 billion in the NPL total payment volume.
Sarah: Growing 21% from the prior year.
Sarah: Consumers and merchants trust, the Paypal brand and experience.
We have a lot more we can do with BNP out in the next year.
Sarah: Merchants continue to show strong interest in faster.
Sarah: In the fourth quarter, we focused on selling fast lane, two large brands that can drive future volume.
Sarah: I'm excited to share that we have signed NBC, universal Roku and stock X and are working on the implementation.
Sarah: We now have nearly 2000 merchants up and running with Vasily.
Sarah: We expect an inflection point in adoption when we expand our go to market efforts and bring fast lane to even more merchants through audience global payments and Pfizer This year.
Sarah: From early data, what's exciting is that 25% of Fastly and users have never had a paypal account before.
Sarah: And more than half have a paypal account, but haven't been active in the last 12 months.
Sarah: To say that simply 75% of faster and consumers are new or dormant Paypal users.
Sarah: This means that fast lane, not only improves conversion for our merchant.
Sarah: But also introduces more shoppers to Paypal and enables us to reengage inactive users.
Sarah: We've shared that one of our strategies is to build deeper relationships with our largest merchants as we renegotiate deals to reflect the value we provide.
Sarah: A key part of that is adding value added services that improve the experience for our mutual customers.
Sarah: We built a suite of world class value added services and continue to introduce new ones in.
Sarah: In the fourth quarter, we launched FX as a surface, which is automated currency conversion and it's already live for meta.
Sarah: We also actively scaled the use of network tokens for automated billing capabilities, which is live with merchants, including instant card niche mobile and posh Mark.
Sarah: The expansion of our value added services is a key driver of the transaction margin dollar growth we're delivering.
Sarah: Next let's talk about our initiative to expand beyond e-commerce to become truly omnichannel.
Sarah: We launched Paypal everywhere in September.
Sarah: This is driving significant increases in debit card adoption and opening new categories of spend.
Sarah: We added more than $1 5 million first time, Paypal debit card users in the fourth quarter.
Sarah: And debit card Ptv was up nearly 100% in Q4.
Sarah: Our most active reward categories, our gas groceries and restaurants.
Sarah: These new capabilities are driving deeper relationships with our users and more Paypal volume overall offline and online.
Sarah: The average debit card actives generate five times the transaction activity in two times the average revenue per account compared to users who only use branded checkout.
This is leading to a habituation.
Sarah: Power users, which are Paypal consumer accounts transacting more than 100 times per year grew more than 9% year over year in the fourth quarter.
Sarah: So we are seeing strong momentum today with our omni channel push but we're just getting started.
Sarah: We plan to expand our Paypal everywhere value proposition to several European markets, this year, including launching NFC capabilities in Germany.
Sarah: Moving to our progress to grow venmo or.
Sarah: Our task is twofold.
Sarah: First continue to improve the social PDP payment experience that made venmo over <unk>.
Sarah: Increasing engagement and bringing on more users.
Sarah: Drive adoption of our monetize products, including the venmo debit card and pay with venmo.
Sarah: In the fourth quarter, we continued improving the venmo experience by giving our users more of the capabilities they've been asking for like scheduled.
Sarah: An improved search.
Sarah: With these steady improvements to the experience we see engagement increasing.
Sarah: Our engaged venmo user base grew 4% in the quarter, reaching more than 64 million monthly active accounts.
Sarah: On monetization, we increased the average revenue per active venmo account in 2024, and we plan to build on that growth in 'twenty five.
Sarah: Monetize venmo monthly active accounts beyond PDP and instant transfers grew more than 20% in the fourth quarter driven by the adoption of venmo debit card and pay with venmo.
Sarah: Venmo debit card monthly actives grew more than 30% and pay with Venmo monthly actives grew more than 20%.
Sarah: We continue to expand then most acceptance with major brands like instant card and Moon, PE and venmo in the fourth quarter.
Sarah: And as we recently announced Jetblue became the first airline to accept venmo for flight bookings.
Sarah: So while we are still early in monetizing venmo, we have a proven playbook that is resonating with customers.
Sarah: This gives us confidence as we move to 2025 and beyond.
Sarah: Finally, I'd like to cover our efforts to accelerate growth for Smbs.
Sarah: We are moving from a disparate set of payment products to.
Sarah: Building, an end to end suite of solutions that solve more small business needs pay.
Sarah: Paypal complete payments was the first step towards an integrated suite of solutions and we continue to make progress driving adoption with 45% of SMB processing and checkout volume now on this platform.
Sarah: Merchants on PTC benefit from our upgraded branded checkout experiences.
Sarah: Key to our success in growing with small businesses on our platform is our expanding set of connected and value added services.
Sarah: Which move us beyond a payment provider to a growth partner and help us retain customers throughout their business lifecycle.
Sarah: Take for example, our merchant financing solutions.
Sarah: <unk> entrepreneurial come to us for payment services as they start their business.
Sarah: As their business grows they need access to capital to buy inventory invested marketing and higher.
Sarah: Paypal working capital is a financing solution purpose built for early stage companies.
Sarah: As the business matures.
Sarah: Our business loan offers more traditional merchant financing to match, the increasing complexity and multichannel nature of larger businesses.
Sarah: Our business financing solutions increased loyalty and engagement driving the Paypal flywheel.
Sarah: Merchants typically increase their paypal volume by 36% after adopting Paypal working capital and 16% after taking a paypal business loan.
Sarah: Our merchant lending originations were $3 billion in 'twenty, four demonstrating our leadership and that there is plenty of room to grow to support our customers.
Sarah: This is just one example of the services, we offer that help smbs changed the trajectory of their businesses.
Sarah: Expanding this ecosystem of value added services is our focus in 2025 and beyond.
Sarah: To close out I want to thank the Paypal team for their focus on delivering for customers every day.
Sarah: I am proud of how far we've come in the last year.
Sarah: It was an important transition year for Paypal.
Sarah: We created strong momentum that sets up well for 2025 and beyond.
Sarah: We are now executing our game plan that we have confidence in and I am excited to share more at our Investor Day later this month.
James: With that over to James.
James: Thanks, Alex.
Speaker Change: Moving to slide seven Paypal delivered another solid quarter of results to end the year well.
Speaker Change: While there is still more work to be done the team is making progress building on the firm Foundation that we have established.
Speaker Change: As we enter the second year of the company's transformation. Our teams are energized and moving quickly. We remained focus on better serving our customers as we seek to drive durable profitable growth.
Speaker Change: Looking at the high level financial results in the fourth quarter revenue grew 4% on both a spot and currency neutral basis for.
Speaker Change: For the full year revenue grew 7% on both the spot and currency neutral basis.
Speaker Change: Transaction margin dollars grew 7% in the fourth quarter or 6%, excluding the benefit of interest on customer balances.
Speaker Change: Performance compared to our guidance was driven by higher contribution from branded checkout and then <unk>.
Speaker Change: Credit performance and interest earned on customer balances.
For the full year transaction margin dollars grew 7% or 5%, excluding the benefit of interest on customer balances.
Speaker Change: non-GAAP earnings per share were $1 19 in the quarter up 5%. We ended the full year with $4 65, and non-GAAP earnings per share up 21%.
Speaker Change: These full year results benefited from a return to transaction margin dollar growth fueled by our transformation efforts expense discipline, the higher interest rate environment and a strong capital return program.
Speaker Change: Turning to slide eight our operating metrics reflect another quarter of steady progress total active accounts increased by nearly $3 million from the third quarter and nearly $9 million from last year to $434 million.
Speaker Change: Monthly active accounts also continued to show steady progress up 2% year over year to $229 million with contributions from Paypal consumer accounts and then though.
Speaker Change: Transactions per active account, excluding PSP processing grew 4%.
Speaker Change: Moving to slide nine total payment volume grew 7% on a spot and currency neutral basis to $438 billion.
Speaker Change: For the full year TPB grew to nearly $1 seven trillion.
Speaker Change: Up 10% on a spot and currency neutral basis.
Speaker Change: Looking at the TPB breakdown byproduct, we see strength starting to build in some key areas.
Speaker Change: <unk> accelerated for the sixth consecutive quarter to 6% growth Zen.
Speaker Change: <unk> also accelerated by two points to 10% growth.
Speaker Change: Steady incremental product improvements combined with reinvigorated marketing campaigns are starting to make an impact.
Speaker Change: Global branded checkout volumes increased 6% on a currency neutral basis in the fourth quarter. This was about a 50 basis point acceleration from the prior quarter.
Speaker Change: Underlying this growth we were encouraged to see U S branded checkout volume improve in the fourth quarter.
Speaker Change: Part of this increase can be attributed to a healthy spending environment and specific vertical exposure.
Speaker Change: In the U S. We are focused on scaling our modern best in class experiences.
Speaker Change: From a merchant perspective, we continue to see the greatest strength across large enterprises platforms and marketplaces.
Speaker Change: Winning checkout remains our most critical priority our goal is to drive more consumer engagement and a higher Paypal selection rate, which should accelerate TPB overtime.
Speaker Change: Turning to PSP as discussed throughout the past year, we moved rapidly within our Braintree business to prioritize healthy profitable growth and intentionally let go of unprofitable volume in line with this strategy PSP processing volume grew 2% in the fourth quarter compared to 11% in the third quarter.
Speaker Change: Our conversations with merchants have become more holistic moving beyond price and share of card processing to a deeper appreciation of our customers' needs and how we can add value through our full suite of solutions.
Speaker Change: We expect a handful of large Braintree merchant renegotiations to result in a headwind to revenue growth of about five points in 2025.
Speaker Change: Shifting away from this volume pressures gross revenue, but it is accretive to transaction margin dollars and will result in more than one point benefit. This year. We expect this benefit to build over time as we drive more value added services.
Speaker Change: Over the next few quarters, we will continue to work through renegotiations at which point, we should reach a new baseline to drive faster volume and revenue growth.
Speaker Change: Moving to more financial detail on slide 10 transaction revenue grew 4% on a spot basis to seven $6 billion driven primarily.
Speaker Change: <unk> by branded checkout and venmo.
Speaker Change: Other value added services revenue in the quarter grew 5% to $778 million.
Speaker Change: This acceleration was driven largely by a return to growth in credit revenue.
Speaker Change: We continue to see solid performance across our credit portfolio.
Speaker Change: As Alex shared we have begun to modestly grow merchant originations and expect credit to be a positive revenue and profit driver in 2025.
Speaker Change: Transaction take rate declined by four basis points to 173% driven largely by mix.
Speaker Change: <unk> monetization was a slight benefit offset by merchant mix within branded checkout and Braintree faster growth in payouts and foreign exchange.
Turning to transaction margin dollars. The largest contributors were branded checkout venmo interest on customer balances are returned to growth in credit and brain train trans.
Speaker Change: Transaction margin percent increased by more than 100 basis points for the second consecutive quarter, reflecting our focus on price to value and profitable growth.
Speaker Change: As planned we increased our level of strategic investment in the quarter growing non transaction operating expense by 10%.
Speaker Change: This growth included marketing spend deferred from the first half of the year and efforts to support the rollout of new products and initiatives.
Speaker Change: non-GAAP operating income grew 2% in the quarter to $1 5 billion non-GAAP operating margin declined 34 basis points to 18%.
Speaker Change: Paypal generated $2 $2 billion of free cash flow in the quarter.
Speaker Change: Bringing full year free cash flow to $6 $8 billion.
Speaker Change: This is meaningfully ahead of the $5 billion, we planned for at the start of the year and include some benefit from lower cash taxes, which we expect to be a headwind in 2025.
Speaker Change: In the quarter, we completed $1 2 billion in share repurchases, bringing full year share repurchases to $6 billion.
Speaker Change: Finally, we ended the quarter with $15 $41 billion in cash cash equivalents and investments and $11 1 billion in debt.
Speaker Change: Moving to guidance on slide 11 for the first quarter and full year 2025.
Speaker Change: For the first quarter, we expect flat to low single digit revenue growth on a currency neutral basis, which is heavily impacted by the Braintree renegotiation efforts I discussed earlier this.
This also includes about a one point headwind from lapping last year's Leap day.
Speaker Change: We expect transaction margin dollars to be between three six and $3 $65 billion.
Speaker Change: Which represents 5% growth at the midpoint.
Speaker Change: We are planning for low single digit non transaction opex growth in the quarter.
Speaker Change: And we expect to deliver non-GAAP EPS in the range of $1 15 to $1 17, or approximately 7% growth at the midpoint.
Speaker Change: Moving to the full year, we plan to continue guiding revenue one quarter at a time.
Speaker Change: We believe this approach has served the company well during our transformation, enabling healthy long term decision, making that prioritizes driving faster transaction margin dollar growth over time, we are focused on accelerating both revenue and profitability.
Speaker Change: For the full year, we expect transaction margin dollars of approximately 15.2 to $15 $4 billion, representing approximately four 5% growth at the midpoint.
Speaker Change: In 2024, we had a two point benefit from interest on customer balances.
Speaker Change: For 2025, our guidance includes about $150 million or about a one point headwind due to interest rate cuts.
Speaker Change: Excluding interest on customer balances, we expect transaction margin dollars to grow by at least 5% compared to four 6% growth in 2024.
Speaker Change: In the first quarter, we expect minimal benefit from growth of interest on customer balances and then a headwind for the remainder of the year.
Speaker Change: One other factor to keep in mind is that in 2024, we saw a one point benefit from transaction loss improvements.
Speaker Change: We are planning for some normalization and transaction loss during 2025, as we rollout new products.
Speaker Change: Our focus in 2025 is to strike the right balance between investment and productivity seeking to find long term investments largely through savings generated from better tech and automation deployment.
We expect full year non transaction operating expenses to increase in the low single digit range.
Speaker Change: There will likely be some unevenness quarter to quarter due to due to the timing of initiatives marketing spend and comparisons to the prior year.
Speaker Change: As a result, we expect second quarter opex growth to be higher than in other periods.
We expect to deliver full year non-GAAP EPS in the range of $4 95 to $5 10.
Speaker Change: Representing about 8% growth at the midpoint.
Speaker Change: This includes negative impact from lower interest rates and just over a two point increase in our expected non-GAAP effective tax rate.
Speaker Change: Our guidance also includes approximately $6 billion in share buyback.
Speaker Change: And we expect full year free cash flow of approximately 6% to $7 billion.
Speaker Change: I'd like to wrap up by thanking the Paypal team for their continued focus and dedication. The progress. We made in 2024 gives us a strong foundation to build on as we move into the second year of Paypal transformation.
Speaker Change: One of our primary focuses this year will be driving adoption of recent innovation and scaling better customer experiences. It will take time for some of our efforts to build and drive financial impact, but we are confident in our roadmap and in our execution plans and were excited to share more with you at our Investor day on <unk>.
Alex: February 25th with that back to you Alex.
Alex: Thanks, Jamie.
Alex: To summarize in 2024, we executed the transition plan, we laid out.
Alex: We are positioning Paypal to compete and win and delivered strong results along the way.
Alex: I'm very proud of our team and the impact they made during a year of intense change the.
Alex: The momentum we have created sets us up well for 2025, which is about scaling adoption.
Alex: It is still early in our transformation, but our objective is clear.
Alex: We are evolving Paypal from a payments company to a commerce platform that helps merchants with every sale that helps consumers shop smarter.
Steve: Steve Let's go to Q&A.
Steve: Before we open the line I'd 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.
Laura: Laura Please open the line.
Laura: Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: That's for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Andrew Schmidt with Citi. Your line is open.
Andrew Schmidt: Hi, Alex and Jamie good to see the next stage of the transformation here.
Speaker Change: I wanted to dig just digging on branded volume growth, maybe you can just unpack the fourth quarter performance, particularly in the U S. How did it sort of trend relative to your expectation in terms of share of checkout and then as we think about 2025, what are the right expectation to set for branded volume growth.
Speaker Change: I know you mentioned a few things that are there are drivers there and your checkout integrations reinvigorating the consumer side.
Speaker Change: Maybe just remind us what are the biggest unlocks in the timeframe to see those come into play. Thanks. So much.
Speaker Change: Yes. Thank you Andrew let me, let me kick off and then hand it over to Jamie.
Speaker Change: So first let me just remind us of the context of what we walked into a 24 unbranded checkout I talked about it throughout the course of the year as our number one priority and most of it was focused on how do we improve the customer experience.
Speaker Change: Good about.
Speaker Change: The desktop experience, but clearly gaps in mobile.
Speaker Change: And that was innovation that the team really executed on throughout 'twenty four tested a number of different pay sheets, a number of different bolted experiences and then by the time, we got to 'twenty four I felt really good about the innovation we were rolling out.
Speaker Change: And as we started the rollout just as a reminder, our onetime checkout improvements as 400 basis points on conversion our voltage improvement is 100 basis points on conversion and so and the biggest impact is really on our mobile and our small business base. So really excited about the innovation. That's now rolling out as we talked about in Q3.
Speaker Change: We have just started to rollout we had ramped up to about 5% throughout Q4, we continued to execute on our on our rollout and got that up to 25% by the end of the year. So as we exit 'twenty four I am feeling really good about the quality of the innovation, our ability to roll it out and impact to customers.
Speaker Change: And as we look to 'twenty five we now have I believe the best in class experience on desktop and mobile and starting to see.
Speaker Change: Knock on effects of things like our buy now pay later attach which is up 20% with this new patient so from an innovation perspective, and a customer impact perspective, feeling really good as we go into 'twenty five.
Speaker Change: Yeah, Andrew Good morning, just to add on there with respect to the U S. We did see sequential improvement in branded checkout in the U S. In the fourth quarter and that was about three points of growth quarter over quarter really due to market dynamics, but also specific key vertical exposure around travel crypto gaming et cetera.
Speaker Change: Alex mentioned, we're still early in the ramp of our modern checkout experience and that is certainly something that as we get into 'twenty five where we are very very focused on.
Speaker Change:
Speaker Change: Our biggest priorities are really around innovation driving those improvements and checkout experience.
Speaker Change: And you mentioned also giving consumers more reasons to choose so some of the things we've done throughout the year around really.
Speaker Change: Improving the app experience, adding rewards, adding different elements to how people can find contacts and things like that all of that is around engaging the consumer in a different way and as we talk about internally really getting.
Speaker Change: Getting the flywheel continuing to move between our consumers and our merchant experience. So from a 2025 guide perspective, we still expect branded checkout TPB to grow about mid single digits.
Speaker Change: And to have consistent growth from last year into this year with some acceleration of our initiatives initiatives on top of that.
Speaker Change: The next question comes from Ramsey El <unk> with Barclays. Your line is open.
Ramsey El: Hi, Thank you for taking my question this morning.
Ramsey El: As expected unbranded volume decelerated again as you pursue the price to value strategy can you give us your updated thoughts on your sort of confidence level timing and toolkit to reaccelerate unbranded volume growth at the higher baseline profitability levels.
Ramsey El: As we as we move forward here.
Ramsey El: Yeah, Let me let me just.
Ramsey El: Touch on thanks for the question Ramsey and let me touch on just how we're how these conversations are evolving. So first again this has been our strategy throughout the year.
Ramsey El: To see just another quarter of branded.
Ramsey El: Unbranded Braintree contribution to Tim dollar growth.
Ramsey El: The conversations are continuing to be strategic in nature, which is exciting for us we're having not just processing conversations but now there is sort of evolving into two steps. One is the value added services that we're bringing to market.
Ramsey El: I mentioned some of these FX as a service risk as a service charge back automation orchestration. All of these are things that we're now able to price to value and monetize its part of a best in class Unbranded offering. In addition, though we're really starting to differentiate ourselves in these conversations by being able to bring customers to the.
Ramsey El: And so again as I sit down with.
Ramsey El: With Ceos of some of our.
Ramsey El: Our largest customers and really talk about what are their greatest needs. It goes well beyond just processing. It really goes to how do we bring more customers to bear.
Ramsey El: And this is really the first time that we're leveraging the two sided network.
Speaker Change: Pal has in being able to say hey, we have hundreds of millions of consumers around the world. We now have an ads platform.
Speaker Change: Reward platforms, we have the ability to enable our unbranded processing customers to create rewards and offers inside of our Paypal.
Speaker Change: Paypal app to be able to drive additional growth for them and so this becomes really fun.
Speaker Change: Conversations to be honest, because we're now having holistic not just processing, but end to end how do we leveraged our marketing dollars, how do we leverage their ability to acquire customers at our two sided network.
Speaker Change: And with respect to forward trends on this.
Speaker Change: We do expect similar dynamics for the next few quarters. Some volatility I mean this is not something that just happens in a perfect line and we still do have some large agreements over the next couple of years that we will work our way through.
Speaker Change: But the revenue growth should build as we lap some of these larger agreements sloughing off over time.
Speaker Change: For 2025, we expect the renegotiations to be about a five point revenue growth headwind, but the other important point here is that it's a one point accretive on the TM dollars growth in 2025, So I think an important dynamic there that as you mentioned, we're very intentionally driving.
Speaker Change: The next question comes from Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg: Good morning, guys I just wanted to come back to the branded TPB topic, I think you mentioned U S accelerated three points in the quarter, if I caught that right I guess that would imply international slowed so perhaps you can quantify that and then maybe give us a sense of how that mid single digit global branded volume outlook for 'twenty five splits between.
Speaker Change: U S and non U S.
Speaker Change: Just a little bit of color on how the transaction margin profile differs between U S and international branded thanks, guys.
Jason Kupferberg: Good morning, Jason with respect to international.
Jason Kupferberg: We are still in a very strong market position, there and we continue to take share internationally, we had less than a full point of international.
Jason Kupferberg: Pullback Tina just some softness in Europe is what I would say and when you look at the split international to U S.
Jason Kupferberg: Within the <unk> line and in the GM line, it's really 50 50.
Jason Kupferberg: And from a margin perspective, it's a slightly healthier outside the U S. But it's very much in line.
Jason Kupferberg: Okay.
Speaker Change: The next question comes from Tien Tsin Huang with Jpmorgan. Your line is open.
Speaker Change: Hey, good morning, Thanks for the update just on grow Venmo can you just.
Speaker Change: Maybe we'll talk a lot about February 25th.
Speaker Change: Is it more about user growth new products or some existing products expanding just just curious what the algorithm is there. If you don't mind a quick clarification the step up in Capex in 2025.
Speaker Change: More of a onetime issues at a sustainable level to consider.
Speaker Change: Thanks.
Tien Tsin: Hey, Tien Tsin, let me hit Venmo, and then hand, it over to Jamie So.
Jamie So: On Venmo and again, we will it'll be exciting to see you all at Investor Day, and we will certainly dive deeper on venmo, but really it is both customer growth as well as monetization growth.
Jamie So: Again, we are excited than most of the number one PDP platform in the U S. We saw.
Jamie So: MAA is continue to grow to $63 million by the end of this year, we're seeing TBD continue to grow up 10% hitting double digits are really for the first time in I think seven eight quarters.
Jamie So: Up to 76 billion, so really exciting to see the continuation of growth.
Jamie So: And active users.
Jamie So: In terms of our focus on monetization.
Jamie So: Again, we've been consistent this is about proven levers of <unk>.
Jamie So: Debit card MAA growth, which was up 32% and pay with venmo MAA growth, which was up 22%.
Jamie So: Reason. This is important is we've seen that debit card MAA delivers average revenue per account Forex.
Jamie So: When they adopt our debit card and pay with Venmo average revenue per account is up three X and just as a reminder, we are in single digit penetration across both of those products across the base and so as we continue to grow customers, we're growing active customers and we're starting to grow penetration of monetize level.
Jamie So: Monetize the ball element. So this is exciting for US. We also will just continue to focus on innovation I think we're just scratching the surface of a very engaged highly.
Jamie So: Highly valuable demographic.
Jamie So: We've rolled out new innovations like scheduled send that gifting in groups and direct deposits to bring more money into the ecosystem.
Jamie So: But the team is really really exciting roadmap for 25% as we start to really think about what are the other needs. Once this money is in the ecosystem of venmo what are the other needs that our customers have to be able to enable them to be able to spend.
Jamie So: <unk>.
Jamie So: In an omnichannel way and obviously move money across each other so exciting about what venmo will have and we built a very good baseline of monetization throughout 'twenty four.
Jamie So: Which sets us up well for 25.
Jamie So: And then with respect to Capex.
Jamie So: We are seeing over the next two years, an increase in the program to about two years to $300 million and it relates to tech and for build out and data center build out in connection with both platform consolidation and a few other things, but after the two years it should come down.
Jamie So: Okay.
Speaker Change: The next question comes from Darrin Peller with Wolfe Research Your line is open.
Darrin Peller: Yes, Thanks, guys. Jamie I think you said you would expect stable branded growth grew 25 based on what you are.
Speaker Change: What's built into your outlook.
Speaker Change: Guys have initiatives now, we're 25% of your checkout experiences on the more modern checkout, which I know it was kind of ramp through the end of last year, where they are now and so it should impact I think the debit card. It's more further our marketing has been more substantial I guess I'm just curious when those initiatives you think would have a more material impact or are they embedded into.
Speaker Change: The outlook that they could have an impact on branded acceleration.
Speaker Change: As the year progresses are you just building an uncertainty around things like international and maybe Germany or any other softness and then just one quick follow on would be the exit rate of <unk>.
Speaker Change: Transaction margin growth ex <unk>, which I think 6% in the.
Speaker Change: Text of this 6% branded so I'm just curious when you think of your forecast is there anything about this fourth quarter growth rate that was unsustainable, although that maybe leap year, otherwise your $5 I mean, I think you've added 5% plus so it may capture.
Speaker Change: Thanks, guys.
Speaker Change: Yes, so first let's talk about the branded checkout growth in 2025.
Speaker Change: You were specifically asking about initiatives and as Alex mentioned, we've got 25% of our U S. TPB flowing through the most modern checkout experiences at this point that is something that we expect to scale as we get into 'twenty five and in addition were going global with that as well so.
Speaker Change: So to your point, we do expect some impact from that to start to flow through and we have embedded some of that in our guide and we expect it to build over time, having said that.
Speaker Change: We also think we frequently planned here.
Speaker Change: I wouldn't say, we've explicitly put an overlay for European.
Speaker Change: Softness in there, having said that we've left ourselves room for it to navigate.
Speaker Change: Things that because as we roll this out.
Speaker Change: Impact of how this will flow through may be uneven as we see it.
Speaker Change: And then.
Darrin Peller: Darrin remind me of your second question. It was on GM, but I didn't pick up. The exact question you were you were asking.
Darrin Peller: Growth rate you are at 6% already without any acceleration in the underlying kpis. Despite all the initiatives you've done and Youre guiding 5% plus 5% plus range from a non float impacted so just making sure. There's nothing unsustainable in Q4's exit rate that should inform your 125 group.
Darrin Peller: Yeah. When you look at 25 from a GM perspective, there's probably two things to think about that are headwinds to 2025.
Darrin Peller: First is we expect transaction loss.
Darrin Peller: Normalized as we get into the year, we had a full point benefit of that in 'twenty four.
Darrin Peller: And our full basis point benefit and when we get into 'twenty five we expect about a half a basis point headwind and really we are growing prada.
Darrin Peller: Products that just carry with it a higher transaction loss rate and then.
Darrin Peller: You mentioned, the 6% I would talk a little bit even though around interest rates.
Darrin Peller: You look at total all in GM, we're expecting about $150 million of interest rate headwind on all MTM, there too, but but when you look at the underlying profile of TM, which really revolved around branded checkout Braintree and venmo credit I mean, all of those things are things that we.
Darrin Peller: We believe our durable, it's clearly diverse and things that we fully expect to continue as we get into 'twenty, five and beyond and Darren I just I wanted to.
Darrin Peller: While on to Jamie's comments as well because I think it's really important to set our branded.
Speaker Change: Checkout strategy in context first as Jamie said I think we've been consistent throughout the year. We're excited about the innovations I think we've been pretty prudent in the way that we.
Speaker Change: <unk> looked at our forward guide, we want to see the results before we tell you theyre coming.
Speaker Change: But if I just step back and think about the strategy think about what we did in 2004 we.
Speaker Change: Really worked on innovation and what I would call just fixing the basics of branded checkout as I described earlier.
Speaker Change: Proved.
Speaker Change: <unk> now in the hands of customers on both desktop and mobile.
Speaker Change: And we're now starting to see that scale as you mentioned up to 25% and we will continue to scale that throughout the quarter and the rest of 'twenty five we've expanded to checkout to guest checkout, which we weren't playing in before and now we're starting to bring in new users through our fast lane product, which again needs to continue to scale and will scale over the next few years.
Speaker Change: But we now have innovation in market that is best in class to go after the guest checkout experience, we expanded to offline. So now we're playing in an Omnichannel world, where it's not just branded but we're seeing offline commerce that we didn't see before and it's driving habituation.
Speaker Change: Our debit card users are transacting twice as much as.
Speaker Change: As just a branded user and driving 20% higher.
Speaker Change: Average revenue per active so.
Speaker Change: We're just starting to put together a holistic strategy here that's beyond just a single button experience, but really starting to engage our growing customer base are growing monthly active customer base.
Speaker Change: A holistic way, where we really can be their commerce commerce partner going forward.
Speaker Change: The next question comes from Timothy Chiodo with UBS. Your line is open.
Speaker Change: Great. Thank you for taking the question so in the past and when we talked about the mix within the branded checkout, we typically talked about it being very skewed to discretionary and two goods.
Speaker Change: And in prior periods of strong discretionary growth during 2000 22021, the branded checkout button grew in line, if not faster depending on the metric or the industry data that youre looking at the growth was better than the industry.
Speaker Change: Could you maybe talk a little bit about how that mix might have evolved if at all and if we were to expect a better period of discretionary spend should we see another period of the branded checkout button growing in line, if not faster than the industry.
Tim: Good morning, Tim.
Speaker Change: So when you look at the composition of our verticals now I would say that one of the things we've done a really nice job of in the last couple of years is really expanding to services.
Tim: And when you look at some of the.
Speaker Change: <unk>.
Speaker Change: The dynamics that you might've seen three or four years ago, when you shift to now.
Speaker Change: We're just more balanced across different verticals and I mentioned some of the growth in a few of the areas, but but services. In particular is one that has been a larger space. So I expect the dynamics to be more muted with respect to that discretionary side of it and the good side of it.
Speaker Change: The next question comes from Sanjay <unk> with <unk>. Your line is open.
Speaker Change: Thank you good morning, just a follow up question on the U S branded volume.
Speaker Change: I think Alex you mentioned that it exited at the.
Speaker Change: In the quarter at the high point.
Speaker Change: Is there any color on sort of what that growth rate was and how it trended.
Speaker Change: <unk> into this new year quarter today.
Speaker Change: Yeah.
Speaker Change: Yes, so really the way I think about branded U S is that we have been moving along and we're obviously very focused on continuing to shift continuing to impact our U S market position and Alex talked about a lot of the innovation, specifically around mobile and around a couple of other areas.
Speaker Change: That is really focused on driving shifting there.
Speaker Change: We saw.
Some lapping in the first part of the year, but as we hit third quarter and into fourth quarter in particular that was pure growth off a base and that three points.
Speaker Change: Was was reflective of that.
Colin Sebastian: The next question comes from Colin Sebastian with Baird. Your line is open.
Colin Sebastian: Thanks, and good morning, maybe maybe turning to the non transaction expenses for the year I was just hoping you could maybe expand on it.
Colin Sebastian: First I guess the ability to use AI for more operating efficiency and are those initiatives that are requiring some incremental investment near term or are you already seeing sort of a positive ROI from that and relatedly with with a focus on scaling innovations in educating consumers I guess, what does that mean, specifically in terms of the investments in custom.
Colin Sebastian: Our acquisition and rewards that might be impacting margins operating margins through the year. Thank you.
Speaker Change: Yes. Thank you. Thank you Colin let me, let me start with AI, and maybe hand, it over to Jamie.
Jamie So: AI is opening up a huge opportunity for us first at our scale. We saw 26 billion transactions on our platform last year.
Jamie So: We have a massive data set that we are actively working and investing in to be able to drive our effectiveness and efficiency. Let me break it into a couple of different pieces first on the customer facing side, we're leveraging AI to really become more efficient in our support cases, and how we interact with our customers.
Jamie So: We see tens of millions of support cases every year and we've rolled out our Paypal assistant which is now really cutting down phone calls and active events that we have we also are leveraging AI to personalize the commerce journey and so working with our merchants.
Jamie So: To be able to understand and create this really magical experience for consumers when they show up at checkout, it's not just.
Jamie So: Our static button anymore. This really can become a dynamic personalized button that starts to understand the profile of the consumer the journey that they've been on perhaps across merchants and be able to enable.
Jamie So: Our reward or or a cashback offer in the moment or even a buy now pay later offer in a dynamic experience and so this is all AI enabled at all things that will generate both.
Jamie So: Efficiency for us from a consumer standpoint, but also drive more more branded checkout and more sales for our merchants.
Jamie So: In addition, we also are looking at our back office and ensuring that not just on the engineering and employee productivity side, but also in things like our risk decisions, we see billions and billions of risk decisions.
Jamie So: That often to be honest, we're very manual in the past, we're now leveraging AI to be able to.
Jamie So: To understand globally, what are the nature of these risk decision that how do we automate these.
Jamie So: Across both risk models as well as even just ensuring that customers get the right response at the right time and in automation automated fashion.
Jamie So: Yes, and then with respect to scaling consumer and non transaction opex.
Jamie So: We increased our marketing spend in 2024 by about $250 million and we were very focused around really reinvigorating the brand and then really reinforcing the consumer value prop as we did it.
Jamie So: And as we get into 2025, we will be increasing marketing slightly our total Opex guide is up low single digits I would say marketing is up low single digits plus in terms of how we look at it.
Jamie So: Heavily weighted towards the second quarter as we really look at the profile throughout the year.
Jamie So: But it's been very targeted.
Jamie So: And we've seen the results of that starting to come through with consumer MAA is up sequentially. We saw a debit card MAA is up sequentially. We are seeing PDP improvements. So there has been a nice kind of flow through of what we've seen we've got some attack our customer acquisition cost budgeted for this year, but we really haven't started deploying that yet we've been tests.
Jamie So: That but the full suite will be things that we'll be looking to deploy as we get into 2025.
Rawat: The next question comes from <unk> Rawat with Bernstein. Your line is open.
Speaker Change: Hi, Good morning, I wanted to follow up on Fastly, you talked about the new merchant wins now that the holiday season is over and the merchants are more open to integrate a new solutions.
Speaker Change: Are those conversations going with large merchants, especially because there's also some competitive dynamics. There and then Alex you also talked about 75% of fostering consumer is going to be new or dormant Paypal users can you just remind us about how you're converting those into Paypal users. Thank you.
Alex: Yes, Thanks Rashida.
Alex: So youre exactly right or.
Alex: So guest checkout just as a reminder for fast Lane. This is really six months in the market. So it's still brand new.
Alex: There are other desk checkout experiences that have been in the market for.
Alex: For many years, one almost up to a decade, and so where the new entrant, but we're delivering the best converting.
Alex: Experience for our merchants and that's what gets us really excited.
Alex: As we start to scale, our fasting and experience.
Alex: We are still.
Alex: Continuing to deliver a double digit lift in conversion.
Alex: For our merchants and so our focus our go to market focus has been really on those enterprise merchants on the largest ones I mentioned, a few on the call NBC Universal Roku stock X.
Alex: And this has been obviously set up conversations throughout the holiday season, as many of them weren't ready to actually do the integration, but now as we get into 'twenty five it's full steam ahead.
Alex: Now.
Alex: Just as a reminder, as we have these conversations they are very excited about the conversion uplift.
Alex: Guest checkout is also not something that they've spent a lot of time playing around with so it's not like these merchants have scrum teams sitting there ready to play around with guest checkout. So theyre working on their roadmaps.
Alex: So the conversations have been great. It's now about getting implementation done and I do think this will take a number of quarters for us to really scale this out across across the merchant base.
Alex: But the conversations are exciting.
Alex: Merchants are onboard and I think we'll continue to see this scale to your question on.
Alex: On what we're seeing from a customer perspective again, we.
25% fast lane users that are coming in are new to Paypal, 50% were dormant in the last 12 months and again. These are customers that are opting into vaseline at 45% clip. So we're continuing to see customers choosing to once they go into that guest checkout experience actually.
Alex: In to the fast lane experience.
Alex: To us this is just scratching the surface of being able to now read.
Alex: Invigorate them. So we started to really ramp up our marketing efforts, it's still early and it's through both offline channels things like E Mail.
Alex: <unk> notifications as well as online through the App.
Alex: <unk> incentives and reasons for.
Alex: For these consumers to be able to reengage in the Paypal experience.
Alex: The good news is it's sort of a second bite at the Apple REIT, they've gone past the branded experience they've gone through a guest checkout experience, we've accelerated it for them and for merchants, we've created that conversion and now we can go and remind those consumers what a great experience a cashback offer packaged tracking offer a full end to end experience they could have gone.
Alex: Through our branded checkout.
Alex: And we are going to continue to lean into that to reignite those users into being more consistent active users on.
Alex: On Paypal the last thing just I would say as context is.
Alex: Yeah.
Alex: Our Paypal users that are online don't use Paypal for every single one of their purchases.
Alex: This is why the Omnichannel habituation and just continuing to drive up not just our MAA, but those power users that I talked about that are really using us for all of their purchases is so important to us because we still have users that love Paypal have an active app use us, but still use us for just a free.
Alex: Action and so our ability even through the fast lane experience to gather those users up and remind them of the benefits of actually going through the branded experience with Paypal is so important and will ultimately drive too to our branded checkout growth et cetera, we have time for one more question.
Speaker Change: Thank you. Our last 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 Venmo, Jamie It sounded like next to brand. It was one of the biggest contributors to <unk> dollar growth in Q4, you guys have given some good stats on attach rate and user growth across the different buckets.
Trevor Williams: It would be helpful. If we could get an updated transaction margin dollar number for venmo and then anything more just on the current mix of revenue across the different buckets debit card pay with that though instant transfer and then just how youre thinking about that most contribution to transaction margin dollar growth and 25, yes.
Trevor Williams: Yes, so venmo has been a growing contributor to transaction margin dollar growth.
Trevor Williams: Certainly in 'twenty four it was behind interest branded checkout, Braintree et cetera, as we get into 2025. It continues to grow in terms of it its impact on <unk>, which is really great to see when you look at.
Trevor Williams: Our venmo TPB was up 10% in the fourth quarter, our debit card <unk> was up 40% pay with venmo was up 50%.
Trevor Williams: PDP.
Trevor Williams: Was up 8%. So we're really excited about not only the core PDP continued strength, but also just the beginnings of the investments, we're making in debit and pay with venmo, which.
Trevor Williams: When we really dig into this which is really our new venmo leaders target in 2025, we're excited about the growth we can drive.
Trevor Williams: When we get to Investor day at the end of February will impact us with a lot more detail and we're looking forward to talking to you all there.
Alex: Alex any any final thoughts no.
Speaker Change: Just a huge thank you to all of you and thanks, Steve.
Speaker Change: Look forward to seeing many of you later this month at our Investor Day on February 25, where we will share our vision for the future and dive into our strategies for medium and long term growth and what it's going to take to get us there so take care everyone.
Speaker Change: This concludes today's conference. Thank you for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.