PayPal Holdings, Inc.

Good afternoon. My name is Gabriel, and I will be your conference operator today. At this time, I'd like to welcome everyone to PayPal Holdings Earnings Conference Call for the fourth quarter and full year 2020. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the one on your telephone keypad. If you'd like to withdraw a question, simply press the pound key. Thank you. I would now like to introduce your host for today's call, Ms. Gabriela Rabinovich, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Thank you, Gabriel. Good afternoon, and thank you for joining us. Welcome to PayPal's earnings conference call for the first quarter 2021. Joining me today on the call are Dan Schulman, our President and CEO, and John Rainey, our Chief Financial Officer and EVP Global Customer Operations. We're providing a slide presentation to accompany our commentary. This conference call is also being webcast, and both the presentation and call are available on the investor relations section of our website. In discussing our company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. Management will make forward-looking statements that are based on our current expectations, forecasts and assumptions, and involve risks and uncertainties. These statements include our guidance for the second quarter and full year 2021. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties, and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on the Investor Relations section of our website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, May 5, 2021. We expressly disclaim any obligation to update this information. With that, let me turn the call over to Dan.

Thanks, Gabrielle, and thanks, everyone, for joining us today. I'm pleased to say that on the heels of the strongest year in PayPal's history, we just completed our strongest quarter ever. We have the record financial and operating results. Customers across the world have clearly embraced the digital economy and and PayPal has become an essential platform for both consumers and merchants. Consequently, I'm pleased to share that we are raising our annual targets for revenue, EPS, TPV, and net new active accounts. As much of the world begins to shift its attention towards a post-pandemic recovery, We continue to see strong demand for a comprehensive set of services from both our merchants and consumers. Over the coming year, we will accelerate our customers' digital engagement through the rapid innovation of our digital wallet and merchant commerce platform. Our addressable market continues to significantly expand. driven by accelerating secular trends and the proactive steps we are taking to become a full commerce and payments platform. We believe that the shift in consumer digital behavior will remain essentially unchanged in a post-COVID world. Consumers have expanded their digital lives into a seamless online and offline experience. Our products are an essential enabler of the digital economy, and our mission to shape a future where everyone can participate fully in this new digital paradigm has never been more important. Our Q1 trends are strong across the board, and were further accelerated by favorable comps from a year ago. Our TPV grew by 50% on a spot basis or 46% on an FXN basis to $285 billion. eBay now represents 5.5% of our volume, and we expect their TPV to be approximately 3% of total volumes by year-end. Excluding eBay, Our MS volumes grew by an all-time high of 54% on a spot basis and 50% on an FXN basis. Our transactions in the quarter were approximately $4.4 billion, growing 34% year over year. We added 14.5 million net new active accounts, ending the quarter with 392 million active accounts, up 21% year over year. We added 1.4 million new merchants in the quarter, continuing the heightened pace from prior quarters, and we now have 31 million merchant accounts on our platform. By the end of Q2, we expect to exceed 400 million active accounts. And for the year, we now believe our NNAs will be between 52 to 55 million, up from our previous expectations of approximately 50 million last quarter. I'm particularly pleased to see our transactions per active account begin to accelerate due to increased engagement across our portfolio. Normalizing for honey, our Q1 GPA grew by 8.3% year over year to 44.1%. We generated $6.033 billion of revenue in Q1, growing a record 31% spot and 29% on an FXN basis. eBay revenues declined 12%, and we expect they will substantially complete their migration to manage payments by year-end. On the back of this strong revenue growth, we delivered non-GAAP EPS in Q1 of $1.22, up 84%. Venmo continued its strong performance in Q1 with $51.4 billion in TPV, up 63% year over year. We recently launched the ability for Venmo customers to buy, sell, and hold cryptocurrencies. We are heavily investing in Venmo's commerce capabilities, which include rapidly upgrading the Pay with Venmo customer experience with initial rollout beginning this quarter. The Venmo credit card is outpacing our expectations for both new accounts and transactions. And we're also making it easier for small businesses and casual sellers to accept Venmo payments. We now have over 300,000 small business profiles currently established, including 200,000 in Q1 alone. Our Venmo commerce TPV and revenue growth continue to accelerate, and we remain confident in our 900 million revenue target. We expect to roll out our next generation digital wallet in Q3. It will be an all-in-one, personalized app that will empower our users to make the most of their money and strengthen their financial lives every day. We will provide increasingly customized and unique shopping, financial services, and payments experiences for our customers. Consumers are turning to brands that they trust when it comes to choosing a super app. That clearly plays into our strength. As a recent external survey of over 300,000 consumers across the globe selected PayPal as the second most trusted brand in the world. Merchants continue to turn to PayPal in record numbers as we are now an essential platform to enable their transition into the digital economy. Small businesses who used PayPal during the peak of the pandemic saw their overall revenues grow by 25% versus a negative 9% for all other small businesses in the same time period. Small businesses who used PayPal last year drove 75% of their online sales from outside their local neighborhood, clearly expanding their addressable market. And 65% of small businesses in the U.S. who use PayPal have cross-border sales versus less than 5%.