Paypal Holdings, Inc. · NASDAQ:PYPL
Paypal — Q3 2023 Earnings Presentation
34 slides from Paypal's earnings presentation, Nov 1, 2023
Slide 1: Q3-23 Investor Update
Q3-23 Investor Update November 1, 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: Solid Q3 performance with ongoing disciplined execution of cost initiatives and capital allocation strategy
Solid Q3 performance with ongoing disciplined execution of cost initiatives and capital allocation strategy Q3-23: Revenue outperformed FXN outlook, with continued double-digit TPV growth and 20% non-GAAP EPS growth 1 • Revenue of $7.4B, growing 8% at spot and 9% FXN , ~1 pt above FXN guidance • Ong
Slide 4: Third quarter 2023 summary
Third quarter 2023 summary FXN revenue growth and non-GAAP EPS above guidance Transactions Total payment volume Revenue 6.3B $388B $7.4B 11% transaction growth 15% spot and 13% FXN growth, 8% spot and 9% FXN growth driven by Braintree, PayPal branded In line with spot guidance and above 56.6 checkou
Slide 5: PayPal has a global, two-sided network at scale and is one of the world's most trusted brands
PayPal has a global, two-sided network at scale and is one of the world’s most trusted brands Scale Trust ~430M $1.5T 2 24B 2 Active consumer and Total payment volume Payment transactions 1 merchant accounts Reach 200+ 150 25 Global Send Hold markets currencies currencies ©2023 PayPal Holdings, Inc.
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: New ways to use PayPal's digital wallet
New ways to use PayPal’s digital wallet Early fraud alerts • Early fraud alerts lets users know when PayPal detects potential card fraud attempts with the eligible credit or debit card in a customer’s offers free 24/7 PayPal wallet, often allowing a user to report fraud before significant early frau
Slide 8: Introducing more ways to gift with Venmo
Introducing more ways to gift with Venmo Send and receive Easily and securely customizable gift gift money with cards from popular Venmo in a brands through the physical Hallmark Venmo app card Eligible Venmo customers can send gift cards Hallmark + Venmo Cards are now available from popular brands,
Slide 9: PayPal launches U.S. dollar-denominated stablecoin, PayPal USD
PayPal launches U.S. Distribution dollar-denominated Only stablecoin supported throughout PayPal’s payment ecosystem stablecoin, PayPal USD Fully-backed, regulated stablecoin to Fiat to Digital Connectivity seamlessly connect fiat and digital currencies Buy and redeem in the PayPal and Venmo wallet,
Slide 10: Strengthening business relationships to drive growth
Strengthening business relationships to drive growth Since 2010, PayPal and Meta (then Facebook) have enjoyed collaborating across various business and product areas. Meta began offering PayPal as a payment option for Facebook Games to give their customers choice and flexibility in how they pay, and
Slide 11: Business Update Q3-23
Business Update Q3-23
Slide 12: Total payment volume (TPV)
Total payment volume (TPV) TPV growth of 13% FXN Total payment volume ($B) 388 377 • TPV increased 15% on a spot basis and 13% FXN 357 355 340 337 to $388B • P2P TPV (PayPal, Venmo, and Xoom) increased 4% to $97B, and represented 25% of TPV • Venmo TPV increased 7% to $68B 1 • Branded checkout TPV i
Slide 13: Cross-border trade (CBT)
Cross-border trade (CBT) CBT volume growth improved, up 9% spot and 4% FXN Cross-border trade TPV ($B) 45 47 47 45 45 43 • CBT TPV was $47B, growing 9% on a spot basis and 4% FXN, driven by intra-European corridors, partly offset by softness in EU-UK activity ◦ CBT TPV represented 12% of TPV, compar
Slide 14: Transactions and account activity
Transactions and account activity Transactions per active account (TPA) reached 56.6, growing 13% Active accounts (M) and TPA 429 432 435 433 431 428 56.6 • Processed 6.3B payment transactions, up 11% 54.7 53.1 • 13% growth in TPA was predominantly driven by 51.4 50.1 transaction growth from Braintr
Slide 15: Revenue
Revenue FXN revenue growth exceeded guidance Total revenue ($B) 7.383 7.287 7.418 6.806 6.846 7.040 • Total revenue grew 8% at spot and 9% FXN ◦ Transaction revenue grew 7% ◦ Other value added services (OVAS) revenue increased 25%, driven by interest on customer balances • Hedging gains, recognized
Slide 16: Transaction margin dollars
Transaction margin dollars Transaction margin dollars pressured, with impact from lapping Transaction margin ($B) • Transaction margin dollars declined 3% 3.671 ◦ Negative lapping impact from lower gains on 3.491 3.314 3.315 3.348 3.369 foreign currency hedges of $149M and $75M of merchant contractu
Slide 17: Non-transaction operating expenses declined 12%
Non-transaction operating expenses declined 12% Improved spend optimization and efficiency across all areas Non-transaction opex growth (y/y) Q3-21 Q3-22 Q3-23 23% 22% 17% 16% 9% 6% 7% 4% 1% (1%) (9%) (8%) (12%) (13%) (23%) Total non- Customer support Sales & Technology & General & 1 transaction ope
Slide 18: Operating margin detail
Operating margin detail Non-GAAP operating income growth of 8% driven by non-transaction expense discipline Total expenses Volume-based Non-transaction GAAP and non-GAAP operating margin 1 2 ($M) expenses ($M) related expenses ($M) 5,771 5,314 4,049 22.9% 22.7% 22.4% 21.4% 22.2% 3,355 16.3% 16.8% 15
Slide 19: Earnings per share (EPS)
Earnings per share (EPS) Non-GAAP EPS grew 20%; YTD EPS growth of 25% Non-GAAP EPS $1.30 $1.24 $1.17 $1.16 $1.08 • Non-GAAP EPS increased 20% • GAAP EPS of $0.93 included a positive impact of $0.93 ~$0.02 related to strategic investments compared to a positive impact of ~$0.34 in Q3-22 Q2-22 Q3-22 Q
Slide 20: Free cash flow (FCF)
Free cash flow (FCF) $5.2B of FCF on a trailing 12-month basis excluding HFS impact Free cash flow ($M) • FCF of $1.1B, which includes a ~$0.8B negative 1,573 impact from European BNPL loans originated as 1,433 held for sale 1,075 1,101 1,000 Q3-23 HFS impact ($M) 810 1,911 (350) 1,101 % of Q2-22 Q3
Slide 21: Capital allocation
Capital allocation Returned $5.4B to stockholders through share repurchases on a trailing 12-month basis Capital allocation ($B) Share repurchases 0.9 Acquisitions & strategic investments 0.8 Capex 0.9 2.8 3.1 0.7 0.5 0.3 0.1 3.8 0.7 1.3 4.2 4.4 0.7 3.5 3.4 0.7 0.4 1.4 1.6 1.0 1.0 2016 2017 2018 201
Slide 22: FY-23 Guidance
FY-23 Guidance Non-GAAP EPS expected to grow ~21% to ~$4.98 • Revenue: Growth of ~7.5% at spot and ~8.5% FXN Non-GAAP EPS growth ~21% • Non-GAAP EPS: ~$4.98, growing ~21% • Non-GAAP operating margin: ~75bps of expansion Non-GAAP EPS ~$4.98 • Free cash flow: At least $4.6B • Share repurchases: ~$5B N
Slide 23: Q4-23 Guidance
Q4-23 Guidance Ongoing benefit from cost initiatives driving earnings growth Net revenue growth • Revenue: Growth of ~6%-7% at spot and ~7%-8% FXN (FXN) ~7%-8% • Non-GAAP EPS: ~$1.36, growing ~10% • GAAP EPS: ~$1.20, compared to $0.81 in Q4-22 Non-GAAP EPS growth ~10% • Non-GAAP effective tax rate:
Slide 24: Supplemental Information
Supplemental Information
Slide 25: PayPal metrics
1 PayPal metrics (in millions, except %) Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 • 45% of active accounts were outside the Active Accounts 429 432 435 433 431 428 U.S. as of September 30, 2023 Y/Y Growth 6% 4% 2% 1% —% (1%) Number of Payment Transactions 5,513 5,643 6,032 5,835 * 6,074 6,275 • Internati
Slide 26: Financial detail
Financial detail (in millions, except %) Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Transaction Revenue $6,272 $6,234 $6,702 $6,364 $6,556 $6,654 Y/Y Growth 8% 11% 5% 6% 5% 7% Other Value Added Services (OVAS) $534 $612 $681 $676 $731 $764 Y/Y Growth 21% 6% 26% 39% 37% 25% Total Revenue $6,806 $6,846 $7,38
Slide 27: Hedging impacts and credit reserve builds and releases
Hedging impacts and credit reserve builds and releases (in millions, except %) Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 (1) Hedging Impacts Favorable (unfavorable) impact to net revenues (exclusive of hedging impact) $ (242) $ (307) $ (277) $ (139) $ 6 $ 141 Hedging impact 107 156 152 76 34 7 Favorable (
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, (In Millions/Unaudited) Note September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, 2022 2021 2020 2023 2023 2023 2022 2022
Slide 29: Reconciliation of GAAP operating income to non-GAAP operating income, and operating margin
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, September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, 2022 2021 2020 (I
Slide 30: Reconciliation of GAAP net income to non-GAAP net income and 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 Share September 30, June 30, March 31, December 31
Slide 31: Reconciliation of operating cash flow to free cash flow and adjusted free cash flow
Reconciliation of operating cash flow to free cash flow and adjusted free cash flow Three Months Ended Year Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, (In Millions/Unaudited) 2022 2021 2020 2023 2023 2023 2022
Slide 32: Q4-23 and FY-23 GAAP and non-GAAP guidance
Q4-23 and FY-23 GAAP and non-GAAP guidance Three Months Ending (a) Estimated non-GAAP amounts for the three December 31, 2023 months ended December 31, 2023, reflect GAAP Non-GAAP(a) adjustments of approximately $150 million, Revenue Growth Rate (Spot) ~6%-7% ~6%-7% primarily representing estimated
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
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