Paypal Holdings, Inc. · NASDAQ:PYPL
Paypal — Q1 2023 Earnings Presentation
33 slides from Paypal's earnings presentation, May 8, 2023
Slide 1: Q1-23 Investor Update
Q1-23 Investor Update May 8, 2023
Slide 2: Non-GAAP Financial Measures; Forward-Looking Statements
Non-GAAP Financial Measures; Forward-Looking Statements This presentation contains non-GAAP measures relating to our performance. These measures may exclude certain expenses, gains and losses that may not be indicative of our core operating results and business outlook, and, in each case, may be dif
Slide 3: Highlights
Highlights Q1-23 outperformance and cost discipline driving increased FY-23 EPS outlook Q1-23: Exceeded guidance across the board reflecting solid revenue growth and operating expense leverage (1) • Revenue of $7.04B, growing 8.6% at spot and 10.4% FXN , ~1.4 pts above FXN guidance • Non-GAAP operat
Slide 4: First Quarter 2023 Summary
First Quarter 2023 Summary Strong start to the year with better-than-expected revenue, EPS and margin expansion Transactions Total Payment Volume Revenue 5.8B $355B $7.04B Transactions 10% spot and 12% FXN y/y growth 8.6% spot and 10.4% FXN y/y growth 13% increase y/y Accelerated 5pts vs. Q4-22 on a
Slide 5: PayPal delivers results at massive scale
PayPal delivers results at massive scale 2017-2022 Growth 2015 2019 2022 (5-year CAGR) Active Accounts 181M 305M 435M 14% Total Payment $288B $712B $1.36T 24% Volume Supporting Building an Combining customers Net Revenue $9.2B enduring $17.8B through the $27.5B trust and 16% platform innovation pand
Slide 6: Merchants sell more with PayPal
Merchants sell more with PayPal Latest research by Nielsen demonstrates PayPal’s value across the checkout journey CONSUMER PURCHASE JOURNEY Consideration Preference Loyalty Loyalty PayPal impact vs. typical checkout PayPal brings 20% PayPal users make PayPal completes PayPal improves PayPal increas
Slide 7: Advancing PayPal branded checkout
Advancing PayPal branded checkout Refining branded checkout experience to drive engagement and share of checkout Enhancing the merchant Delivering simplified Reducing friction and and consumer experience integration solutions latency • Focused on moving merchants to newer • Strengthened suite of unb
Slide 8: Driving PayPal network with suite of unbranded solutions
Driving PayPal network with suite of unbranded solutions Serving customers across digital commerce with industry-leading authorization rates PayPal Complete Payments (PPCP) Braintree delivers best-in-class, enterprise-grade PPCP is an end-to-end, full stack payments platform processing for merchants
Slide 9: Expanding key merchant relationships to provide greater choice at checkout
Expanding key merchant relationships to provide greater choice at checkout Enabling Microsoft customers to pay with PayPal Pay Later and Venmo PayPal has supported Microsoft for more than 16 years through branded checkout. In 2022, we migrated Microsoft to our latest Braintree integration – allowing
Slide 10: PayPal's sixth annual Global Impact Report
PayPal’s sixth annual Global Impact Report Transparently reporting our environmental, social and governance (ESG) progress Our 2022 Global Impact Report covers key metrics and progress in support of our business across four core dimensions: RESPONSIBLE BUSINESS PRACTICES SOCIAL INNOVATION EMPLOYEES
Slide 11: Business Update Q1-23
Business Update Q1-23
Slide 12: Total Payment Volume (TPV)
Total Payment Volume (TPV) TPV growth accelerated 3pts vs. Q4-22 to 12% FXN Total Payment Volume ($B) 357 355 340 340 337 323 • TPV increased 10% on a spot basis and 12% FXN to $355B • P2P TPV (PayPal, Venmo, and Xoom) increased 2% to $91B, and represented 26% of TPV • Venmo TPV increased 9% to $62.
Slide 13: Cross-Border Trade (CBT)
Cross-Border Trade (CBT) CBT volumes showing signs of improvement, up 4% FXN Cross-Border Trade TPV ($B) 49 44 45 45 45 43 • CBT TPV was $45B, flat on a spot basis and growing 4% FXN, driven by intra-European corridors, partly offset by softness in EU-UK and U.S.-China corridors ◦ CBT TPV represente
Slide 14: Transactions and Engagement
Transactions and Engagement Transactions per active account (TPA) reached 53.1, growing 13% Active Accounts (M) and TPA 426 429 429 432 435 433 • Processed 5.8B payment transactions, up 13% 53.1 • 13% growth in TPA was predominantly driven by 51.4 transaction growth from Braintree, with 50.1 48.7 co
Slide 15: Revenue
Revenue Better-than-expected revenue growth of 8.6% spot and 10.4% FXN Total Revenue ($B) 7.383 • Total revenue grew 9% at spot and 10% FXN 6.918 7.040 6.806 6.846 6.483 ◦ Transaction revenue grew 6%, driven primarily by Braintree ◦ Other Value Added Services (OVAS) revenue increased 39%, driven by
Slide 16: Non-Transaction Operating Expenses declined 12%
Non-Transaction Operating Expenses declined 12% Spend optimization across all areas Non-Transaction Opex Growth (y/y) Q1-21 Q1-22 78% Q1-23 31% 23% 26% 20% 8% 6% 7% 7% —% (2%) (12%) (9%) (9%) (29%) Total Non- Technology & Sales & Marketing Customer Support General & Transaction Opex Development & Op
Slide 17: Continued Operating Margin Expansion
Continued Operating Margin Expansion Non-GAAP operating margin expansion of ~200bps, driven by expense leverage Total Expenses Volume-based Non-transaction GAAP and Non-GAAP Operating Margin (1) (2) ($M) Expenses ($M) Related Expenses ($M) 5,140 5,440 3,725 22.4% 22.9% 22.7% 3,186 20.7% 19.1% 16.3%
Slide 18: EPS
EPS Non-GAAP EPS grew 33%, accelerating 22pts from Q4-22 Non-GAAP EPS $1.24 $1.17 $1.11 $1.08 • Non-GAAP EPS increased 33%, accelerating 22 $0.93 pts from Q4-22 $0.88 • GAAP EPS of $0.70 included a positive impact of ~$0.03 related to strategic investments compared to a positive impact of ~$0.02 in
Slide 19: Free Cash Flow (FCF)
Free Cash Flow (FCF) Generated FCF of $5.1B on a trailing 12-month basis Free Cash Flow ($M) 1,573 1,427 1,433 • FCF of $1.0B, declining 3% primarily due to higher cash taxes related to the intra-group transfer of intellectual property of ~$430M 1,075 1,026 1,000 ◦ Excluding impact from higher cash
Slide 20: Capital Allocation
Capital Allocation Returned $4.1B to stockholders through share repurchases on a trailing 12-month basis Capital Allocation ($B) Share Repurchases Acquisitions & Strategic Investments 0.9 Capex 0.8 0.9 2.8 3.1 0.7 0.3 3.8 0.7 1.3 4.2 0.7 3.5 3.4 0.7 0.2 0.0 0.4 1.4 1.6 1.4 1.0 1.0 2016 2017 2018 201
Slide 21: FY-23 Guidance
FY-23 Guidance Raising non-GAAP EPS guidance to reflect strong Q1-23 performance, with ongoing benefit from cost initiatives • Revenue: H2-23 revenue growth expected to be relatively in line with H1-23 Non-GAAP EPS Growth ~20% • Non-GAAP EPS: Growth of ~20% to ~$4.95, compared to the prior outlook o
Slide 22: Q2-23 Guidance
Q2-23 Guidance Expense discipline driving 24%-26% non-GAAP earnings growth Net Revenue Growth • Revenue: Growth of ~6.5%-7% at spot and ~7.5%-8% FXN (FXN) ~7.5%-8% • Non-GAAP Operating Margin: ~22% Non-GAAP EPS Growth 24%-26% • Non-GAAP EPS: $1.15-$1.17, growing ~25% at the midpoint of the range • G
Slide 23: Supplemental Information
Supplemental Information
Slide 24: PayPal Metrics
(1) PayPal Metrics (in millions, except %) Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Active Accounts 426 429 429 432 435 433 Y/Y Growth 13% 9% 6% 4% 2% 1% Number of Payment Transactions 5,343 5,161 5,513 5,643 * 6,032 5,835 • 45% of active accounts were outside the Y/Y Growth 21% 18% 16% 15% 13% 13% U.S.
Slide 25: Financial Detail
Financial Detail (in millions, except %) Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Transaction Revenue $6,377 $5,998 $6,272 $6,234 $6,702 $6,364 Y/Y Growth 12% 7% 8% 11% 5% 6% Other Value Added Services (OVAS) $541 $485 $534 $612 $681 $676 Y/Y Growth 25% 18% 21% 6% 26% 39% Total Revenue $6,918 * $6,483 $6
Slide 26: Hedging impacts and credit reserve builds and releases
Hedging impacts and credit reserve builds and releases (in millions, except %) Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 (1) Hedging Impacts Favorable (unfavorable) impact to net revenues (exclusive of hedging impact) $ (48) $ (123) $ (242) $ (307) $ (277) $ (139) Hedging impact 2 47 107 156 152 76 Favora
Slide 27: Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses Three Months Ended Year Ended December 31, March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31, (In Millions/Unaudited) Note 2022 2021 2020 2023 2022 2022 2022 2022
Slide 28: Reconciliation of GAAP Net Revenues to Non-GAAP Net Revenues, Operating Income and Margin
Reconciliation of GAAP Net Revenues to Non-GAAP Net Revenues, GAAP Operating Income to Non-GAAP Operating Income, and GAAP Operating Margin to Non-GAAP Operating Margin Three Months Ended Year Ended December 31, (In Millions, Except Percentages/ March 31, December September June 30, March 31, Decemb
Slide 29: Reconciliation of GAAP Net Income to Non-GAAP Net Income and Diluted EPS
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income, GAAP Diluted EPS to Non-GAAP Diluted EPS, and GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate Three Months Ended Year Ended December 31, (In Millions, Except Percentages and Per March 31, December September June 30, March 31, De
Slide 30: Reconciliation of Operating Cash Flow to Free Cash Flow
Reconciliation of Operating Cash Flow to Free Cash Flow Three Months Ended Year Ended December 31, March December 31, September June 30, March December 31, September June 30, March December 31, (In Millions/Unaudited) 2022 2021 2020 2019 2017 2015 31, 2023 2022 30, 2022 2022 31, 2022 2021 30, 2021 2
Slide 31: Q2-23 and FY-23 GAAP and Non-GAAP Guidance
Q2-23 and FY-23 GAAP and Non-GAAP Guidance Three Months Ending (a) Estimated non-GAAP amounts for the three June 30, 2023 months ended June 30, 2023, reflect GAAP Non-GAAP(a) adjustments of approximately $450 million, Revenue Growth Rate (Spot) ~6.5%-7% ~6.5%-7% primarily representing estimated stoc
Slide 32: Definitions
Definitions Our key metrics are calculated using internal company data based on the activity we measure on our payments platform and compiled from multiple systems, including systems that are internally developed or acquired through business combinations. While the measurement of our key metrics is
Slide 33: Pal
Pal