Paypal Holdings, Inc. · NASDAQ:PYPL
Paypal — Q2 2023 Earnings Presentation
34 slides from Paypal's earnings presentation, Aug 2, 2023
Slide 1: Q2-23 Investor Update
Q2-23 Investor Update August 2, 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 Solid performance with disciplined execution driving 8% FXN revenue growth & 24% EPS growth Q2-23: Revenue at the high end of guidance with double-digit TPV growth and 24% non-GAAP EPS growth 1 • Revenue of $7.3B, growing 7% at spot and 8% FXN ; total payment volume (TPV) of $377B, growin
Slide 4: Second quarter 2023 summary
Second quarter 2023 summary Revenue at the high end of guidance with 24% non-GAAP EPS growth Transactions Total payment volume Revenue 6.1B $377B $7.3B Transactions 11% spot and FXN growth, driven by 7% spot and 8% FXN growth 10% increase Braintree, PayPal branded checkout High end of guidance range
Slide 5: PayPal has a global, two-sided network at scale
PayPal has a global, two-sided network at scale and is one of the world’s most trusted brands Scale Trust ~400M ~35M $1.4T 24B Active consumer Active merchant Total payment Payment 1 1 2 2 accounts accounts volume transactions Reach 200+ 150 25 Global Send Hold markets currencies currencies ©2023 Pa
Slide 6: PayPal has a diversified and complementary portfolio of assets
PayPal has a diversified and complementary portfolio of assets Wallet and Commerce Network Payment Service Provider (PSP) P2P Friends Risk as a Remittances Checkout Recurring Processing and Family Service Buy Now, Merchant Debit/Credit Offers PayPal Credit In Store Pay Later Lending Savings/ P2P Goo
Slide 7: PayPal expands passkeys globally
PayPal expands passkeys globally Passkeys offer an easy and secure way to sign in and check out with PayPal • PayPal introduced passkeys in the U.S. in 2022 and is expanding passkeys globally this year • A passkey allows users to securely log in to PayPal without entering a password • User identity
Slide 8: Rolling out Tap to Pay and Teen Accounts on Venmo
Rolling out Tap to Pay and Teen Accounts on Venmo Tap to Pay Venmo Teen for Venmo Accounts Merchants can now Parents and legal accept contactless guardians can now credit and debit open a Venmo cards, Apple Pay®, account for their and other digital teens aged 13-17 wallets using the years old to sen
Slide 9: European pay later receivables sale to KKR
European pay later receivables sale to KKR Optimizing PayPal’s balance sheet, unlocking free cash flow for strategic initiatives • Announced on June 20, 2023 and expected to close in H2-23 "We are thrilled to deepen our footprint in • Exclusive, multi-year agreement for a €3B replenishing loan commi
Slide 10: Expanding key merchant relationships in international markets
Expanding key merchant relationships in international markets Multi-year agreement establishes PayPal as one of Booking.com’s strategic card processors globally PayPal and Booking.com have had a longstanding branded checkout relationship since 2016 in the U.S. and internationally. Since then, we hav
Slide 11: Business Update Q2-23
Business Update Q2-23
Slide 12: Total payment volume (TPV)
Total payment volume (TPV) TPV growth of 11% FXN Total payment volume ($B) 377 357 355 340 337 323 • TPV increased 11% on a spot and FXN basis to $377B • P2P TPV (PayPal, Venmo, and Xoom) increased 2% to $95B, and represented 25% of TPV • Venmo TPV increased 8% to $67B Q1-22 Q2-22 Q3-22 Q4-22 Q1-23
Slide 13: Cross-border trade (CBT)
Cross-border trade (CBT) CBT volumes return to growth, up 3% spot and FXN Cross-border trade TPV ($B) 45 47 44 45 45 43 • CBT TPV was $47B, growing 3% on a spot and FXN basis, driven by intra-European corridors, partly offset by softness in EU-UK activity ◦ CBT TPV represented 12% of TPV, compared t
Slide 14: Transactions and engagement
Transactions and engagement Transactions per active account (TPA) reached 54.7, growing 12% Active accounts (M) and TPA 429 429 432 435 433 431 • Processed 6.1B payment transactions, up 10% 54.7 • 12% growth in TPA was predominantly driven by 53.1 transaction growth from Braintree, with 51.4 contrib
Slide 15: Revenue
Revenue Revenue at the high end of guidance, growing 7% spot and 8% FXN Total revenue ($B) 7.383 7.287 6.846 7.040 6.806 • Total revenue grew 7% at spot and 8% FXN 6.483 ◦ Transaction revenue grew 5% ◦ Other value added services (OVAS) revenue increased 37%, driven by interest on customer balances •
Slide 16: Non-transaction operating expenses declined 11%
Non-transaction operating expenses declined 11% Spend optimization and efficiency across all areas Non-transaction opex growth (y/y) Q2-21 Q2-22 68% Q2-23 27% 23% 23% 18% 6% 6% 9% —% (7%) (7%) (10%) (11%) (12%) (24%) Total non- Customer support Sales & Technology & General & 1 transaction opex & ope
Slide 17: Continued operating margin expansion
Continued operating margin expansion Non-GAAP operating margin expansion of ~230bps Total expenses Volume-based Non-transaction GAAP and non-GAAP operating margin 1 2 ($M) expenses ($M) related expenses ($M) 5,504 5,727 3,939 22.4% 22.9% 22.7% 3,492 21.4% 19.1% 16.3% 16.8% 15.5% 2,012 14.2% 1,788 11
Slide 18: Earnings per share (EPS)
Earnings per share (EPS) Non-GAAP EPS grew 24%, contributing to H1-23 EPS growth of 28% Non-GAAP EPS $1.24 $1.17 $1.16 $1.08 • Non-GAAP EPS increased 24% • GAAP EPS of $0.92 included a positive impact of $0.93 $0.88 ~$0.09 related to strategic investments compared to a negative impact of ~$0.45 in Q
Slide 19: Free cash flow (FCF)
Free cash flow (FCF) Reiterating FY-23 guidance of ~$5B, ~$4.9B of FCF on a trailing 12-month basis excluding HFS impact Free cash flow ($M) • FCF of ($0.4B), which includes a ~$1.2B negative 1,573 impact from European BNPL loans originated as 1,433 HFS, as well as changes in working capital 1,075 •
Slide 20: Capital allocation
Capital allocation Returned $4.9B to stockholders through share repurchases on a trailing 12-month basis Capital allocation ($B) Share repurchases Acquisitions & strategic investments 0.8 0.9 Capex 0.9 2.8 3.1 0.7 0.3 3.8 0.3 0.7 0.1 1.3 4.2 0.7 3.5 3.4 0.7 3.0 0.4 1.4 1.6 1.0 1.0 2016 2017 2018 201
Slide 21: FY-23 Guidance
FY-23 Guidance Reiterating non-GAAP EPS growth of ~20% • Revenue: H2-23 revenue growth expected to be at least in line Non-GAAP EPS growth ~20% with H1-23 • Non-GAAP EPS: Growth of ~20% to ~$4.95 Non-GAAP EPS ~$4.95 • Non-GAAP operating margin: At least ~100bps of expansion • Free cash flow: ~$5B, r
Slide 22: Q3-23 Guidance
Q3-23 Guidance Expense discipline driving 13%-14% non-GAAP earnings growth Net revenue growth • Revenue: ~$7.4 billion based on current exchange rates, growing Net Revenue Growth (FXN) ~8% ~8% at spot and FXN (FXN) ~8% 1 • Q3-23 off to a strong start with July revenue growing ~9% FXN, TPV growing in
Slide 23: Impact of European pay later receivables sale to KKR
Impact of European pay later receivables sale to KKR Impact from externalization and Held for sale (HFS) impact on Q2 results future forward flow sales Revenue Immaterial Not material to our overall business Benefit of no longer needing to provision for expected Credit loss ~$33M benefit to credit l
Slide 24: Supplemental Information
Supplemental Information
Slide 25: PayPal metrics
1 PayPal metrics (in millions, except %) Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 • 45% of active accounts were outside the Active Accounts 429 429 432 435 433 431 U.S. as of June 30, 2023 Y/Y Growth 9% 6% 4% 2% 1% —% Number of Payment Transactions 5,161 5,513 5,643 6,032 * 5,835 6,074 • Average Payment
Slide 26: Financial detail
Financial detail (in millions, except %) Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Transaction Revenue $5,998 $6,272 $6,234 $6,702 $6,364 $6,556 Y/Y Growth 7% 8% 11% 5% 6% 5% Other Value Added Services (OVAS) $485 $534 $612 $681 $676 $731 Y/Y Growth 18% 21% 6% 26% 39% 37% Total Revenue $6,483 $6,806 $6,84
Slide 27: Hedging impacts and credit reserve builds and releases
Hedging impacts and credit reserve builds and releases (in millions, except %) Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 (1) Hedging Impacts Favorable (unfavorable) impact to net revenues (exclusive of hedging impact) $ (123) $ (242) $ (307) $ (277) $ (139) $ 6 Hedging impact 47 107 156 152 76 34 Favorabl
Slide 28: 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, June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, (In Millions/Unaudited) Note 2022 2021 2020 2023 2023 2022 2022 2022 2022
Slide 29: Reconciliation of GAAP operating income to non-GAAP operating income
Reconciliation of GAAP operating income to non-GAAP operating income, and GAAP operating margin to non-GAAP operating margin Three Months Ended Year Ended December 31, June 30, March 31, December 31, September 30, June 30, March 31, December 31, September June 30, March 31, 2022 2021 2020 (In Millio
Slide 30: Reconciliation of GAAP net income to non-GAAP net income
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 Share June 30, March 31, December 31, September 30
Slide 31: Reconciliation of operating cash flow to free cash flow
Reconciliation of operating cash flow to free cash flow and adjusted free cash flow Three Months Ended Year Ended December 31, June 30, March 31, December September June 30, March 31, December September June 30, March 31, (In Millions/Unaudited) 2022 2021 2020 2023 2023 31, 2022 30, 2022 2022 2022 3
Slide 32: Q3-23 and FY-23 GAAP and non-GAAP guidance
Q3-23 and FY-23 GAAP and non-GAAP guidance Three Months Ending (a) Estimated non-GAAP amounts for the three September 30, 2023 months ended September 30, 2023, reflect GAAP Non-GAAP(a) adjustments of approximately $490 million, Revenue Growth Rate (Spot) ~8% ~8% primarily representing estimated stoc
Slide 33: 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 34: Pal
Pal