PayPal Holdings, Inc.

Good afternoon. My name is Sumel, and I will be your conference operator for today. At this time, I would like to welcome everyone to PayPal Holdings Earnings Conference Call for the third quarter 2021. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to introduce your host for today's call, Ms. Gabrielle Rabinovich, Senior Vice President, Corporate Finance and Investor Relations. Please go ahead.

Thank you, Mel. Good afternoon, and thank you for joining us. Welcome to PayPal's earnings conference call for the third quarter of 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 our Investor Relations 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 fourth quarter and full year 2021 and our outlook for 2022. 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 our Investor Relations website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, November 8th, 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. Well, the big news today is that for the first time, we are teaming up with Amazon to enable customers in the U.S. to pay with Venmo at checkout. Starting next year, customers will be able to make purchases on Amazon.com, and the Amazon mobile shopping app using their Venmo accounts. This is obviously a very significant moment in our Venmo monetization efforts and marks the beginning of an exciting journey with Amazon now that we are no longer constrained by the contractual obligations of the eBay operating agreement. The increasing scale and brand trust associated with our two-sided platform continues to set us apart from the rest of the market and enables us to expand our footprint with existing merchants and attract new partners. And now to our results. Our overall Q3 results were generally in line with our expectations. Our total payment volume grew 26% on a spot basis to $310 billion. This comes even as eBay's TPV declined by 45% in the quarter and is now approximately 3% of our overall TPV. Excluding eBay, our volumes grew by 31% on a spot basis with an annualized run rate of $1.2 trillion. Our active accounts were up 15% year over year, reaching 416 million. We added 13.3 million net new active accounts in the quarter, including another 1.2 million merchant accounts, bringing our total merchant count to 33 million. And we remain on track to deliver more than 52 million NNAs for the year. Importantly, our diverse suite of products and services drove double-digit growth in our transactions per active account, up 10% to 44.2 times. Revenues in the quarter grew to $6.182 billion, growing 13% on a spot basis. This was slightly below our expectations, as back-to-school sales and travel were weaker than we expected. But even so, excluding eBay, our revenues grew by 25% in Q3. eBay now represents less than 4% of our total revenues. We delivered non-GAAP EPS of $1.11, even as we continue to invest heavily in our growth initiatives. Our platform continues to drive substantial value for our merchants. PayPal is the most accepted digital wallet, with more than 75% of the top 1,500 largest global merchants utilizing PayPal at checkout. And on average, our PayPal checkout conversion is 34% higher than other checkout options. In addition to our Amazon news, we are very pleased to say that Walmart now presents PayPal as a checkout option for both their grocery and marketplace business. And GoFundMe added PayPal to their checkout flow with Venmo to follow in the coming months. Valero and Phillips 66 are adding our QR codes to their thousands of gas stations across the U.S., and United Airlines recently launched PayPal QR payments in-flight. As checkout evolves from pay now to pay on your own terms, we've seen rapid adoption of our buy now, pay later capabilities in the U.S., germany france uk and australia in q4 we will expand buy now pay later to italy and spain also in this quarter we eliminated consumer late fees to assure we deliver the very best value proposition to our consumers while delivering on our mission to build an inclusive digital economy Since our Buy Now, Pay Later launch, we have processed approximately $5.4 billion in TPV, with more than $2 billion of that TPV in Q3 alone. Approximately 950,000 merchants have customers who use our Buy Now, Pay Later capabilities, and more than 65,000 have positioned Buy Now, Pay Later upstream on their product pages. And over 9.5 million consumers have transacted more than 33 million times with our Buy Now, Pay Later products. We will expand our global Pay Later portfolio in the first half of 2022 to include longer-term installment plans. allowing consumers to spread higher-priced purchases over longer periods of time. This is already available in Germany, where we are seeing great initial success. We completed our acquisition of Payti, a fast-growing, two-sided payments platform and provider of buy-now, pay-later solutions in Japan. This will accelerate our momentum in Japan, a strategically important market and one of the largest e-commerce markets in the world. We are seeing very positive trends on our new PayPal app, which is now ramped to 100% globally. Consumers are engaging with the app and discovering the breadth of our new value proposition. Although it's still early, initial results show that the new app has driven a 25 times lift in consumers exploring our deals and offers tab, a 15% increase in first-time users transacting with crypto, and it has also driven a 35% lift in our cash card enrollments. And The average revenue per account from digital wallet users is twice that of checkout-only users. We expect to launch more features next year, including equity investing capabilities. It's quite exciting to see the initial positive reaction to our app. and we will continue to refine and expand its functionality to help consumers navigate an increasingly digital and connected lifestyle. Venmo continues to achieve milestones and break records and is on track to deliver $900 million in revenue this year. With more than 80 million customers and $240 billion in run rate TPV, venmo's scale is on par with paypal's entire u.s franchise in 2016. then most customers are adopting more and more products and we are seeing accelerating momentum with our new product introductions even with all this growth and these impressive accomplishments We are just at the start of Venmo's commerce journey, and we could not be more pleased about joining forces with Amazon. We expect Venmo to be transaction margin positive this year, while still growing its P2P business at very healthy rates. The back half of 2021 was always going to be the low point of our revenue growth this year. And we are appropriately cautious as we enter Q4 and as we think about 2022. We are seeing the impact of global supply chain shortages in our merchant base. Consumer confidence is weakened with the absence of stimulus payments. And with the economy reopening, more people may be likely to do their holiday shopping in-store as confidence in delivery logistics is depressed from last year. And, of course, we still feel the impacts of eBay's managed payments migration over the next few quarters, although at a lessening rate. Almost all of these issues are temporal. And consequently, we expect our revenues will accelerate throughout next year, and we remain confident in our medium-term guidance. I'd like to spend a few moments on the recent rumors that made their way through the news. We participate in a rapidly moving industry, and it's quite clear that consumers and merchants prefer a more connected digital lifestyle. that encompasses financial services, shopping, payments, and commerce. Our market research and that of others strongly supports the vision of a more connected economy, and PayPal clearly has the brand trust, regulatory relationships, and scale to be a meaningful leader in the digital economy. Exploring all potential opportunities to enhance shareholder value is our responsibility. But obviously, only a select few deals will meet our very strict financial, strategic, and capital allocation criteria. We are fortunate to be a market leader in an environment with so many potential opportunities and operate in an industry with a number of favorable tailwinds. We will continue to execute against our game plan and responsibly explore the options in our rapidly evolving ecosystem so that we remain the leader we are today in tomorrow's world. And with that, I'll turn the call over to John.