PayPal Holdings, Inc.

Good afternoon. My name is Donna, and I'll be your conference operator for today. At this time, I would like to welcome everyone to PayPal Holdings' earnings conference call for the fourth quarter of 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, then 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, Jana. Good afternoon, and thank you for joining us. Welcome to PayPal's earnings conference call for the fourth 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 first quarter and full year 2022 and our medium-term outlook. 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, February 1, 2022. 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 going to highlight our 2021 results, but I also want to spend time discussing the opportunities and challenges we face this year. 2021 was one of the strongest years in PayPal's history. Our revenues grew by 18%, to $25.4 billion, and our non-GAAP EPS grew 19% to $4.60. We surpassed $1 trillion in annual TPV for the first time in our history, ending the year with $1.25 trillion of total payment volume. We had a record 5.3 billion transactions in Q4 alone, up 21%. We added 49 million net new active accounts to exit the year with 426 million active accounts, including 34 million merchants. In the last two years, we added 122 million new active accounts. And despite that spike in new users, our transactions per active account grew to 45 this past year, an 11% increase. And last but not least, we generated $5.4 billion in annual free cash flow. With all that said, 2021 was also a difficult year. It was a particularly hard year to forecast. eBay's migration to manage payments happened faster than we anticipated. Overall, eBay put $1.4 billion of pressure on our top line, reducing our revenue growth by 700 basis points. Our revenue growth was very strong, growing 29% on a spot basis for the full year and 22% in Q4. Exogenous factors also did impact our results. Supply chain issues disproportionately impacted our cross-border volumes and our small business merchants. Inflationary pressures impacted spending within certain segments of our user base. Rising threats from COVID variants cut travel and event bookings, and the elimination of government stimulus had an impact as well. E-commerce growth rates during the holiday season were lower than industry expectations despite a strong two-year growth rate of almost 50%. And we are also lapping some of the strongest quarters of growth in our history. Even so, we once again grew our market share and came within our revenue guidance for the quarter. 2022 is going to be a year of transformation and investment as we transition from outside growth driven by lockdowns during the pandemic, and finalize the lapping of eBay's managed payments transition. eBay's transition will put an incremental $600 million of pressure on our top line, approximately $400 million in Q1 and $200 million in Q2. In the second half of the year, I look forward to being able to stop adjusting for eBay and letting the strength of our core results speak for themselves. Our growth ex eBay has consistently been above 20%, and our year-over-two-year growth rates have been remarkably stable. Again, demonstrating the underlying strength of our platform. As I take a step back to reflect, it's clear we are in a significantly stronger position than when we entered the pandemic. With the world continuing to digitize, the use of cash dissipating, and the move towards omnichannel commerce accelerating. our vision of becoming an essential consumer financial super app across payments basic financial services and shopping tools is more relevant than ever before and our tens of millions of merchants continue to look to us to provide a comprehensive platform for them to navigate the digital economy where the lines between virtual and physical commerce are disappearing The past two years have revealed new insights about our customers. We have seen their behaviors and expectations evolve throughout the pandemic, with corresponding impacts on the key drivers of our business model. Consequently, as John will discuss in more detail, we are shifting our emphasis more towards engagement and towards driving higher value NNAs. Consumers who are more engaged drive incremental sales for our merchants, and they drive growth at much higher margins and ROI. Over time, we obviously still expect to grow our net new actives, but more in line with our pre-pandemic levels. At the same time, we fully expect engagement will increase above our current trend lines while we accelerate revenue and EPS growth throughout the year. Our forecast for 2022 is appropriately measured, given the difficult comps in the first half and an unpredictable macroeconomic environment. We're going to focus our energy on what we can control, including key product and go-to-market initiatives that will enable us to capture the numerous opportunities that are inherent in the secular shift to digital. At the same time, we will drive increased operating leverage in order to enter 2023 with revenues and non-GAAP EPS growing at over 20%. The underlying fundamentals of our business are strong, and our team is executing to win. Last year, we launched more products and experience for our customers than any other year in our history. We integrated Honey into the new PayPal app to help consumers shop and discover deals and new brands. We expanded our checkout capabilities to help consumers pay on their own terms, whether in-store with QR codes, over time with Buy Now, Pay Later, or with emerging funding sources like cryptocurrencies or reward points. And we acquired Happy Returns to anchor our post-purchase process and make returns easier and more affordable. We expect these investments will continue to drive increasing engagement. We are intently focused on taking our best-in-class checkout experiences to even greater heights. Through our investments, we are making it faster and easier to check out with some of the highest authorization rates in our history. Today, more than 70% of the top North American and European retailers, including more than 80% of the top U.S. retailers, accept PayPal or Venmo at checkout. We continue to grow our market leadership in branded payments, with our average share of checkout among top merchants continuing to increase. Last quarter, we signed new or expanded agreements with Instacart, Gap Inc., DoorDash, Adobe, Oracle, and Salesforce. Buy Now, Pay Later is a perfect example of the type of investment we are making to give shoppers and retailers more reasons to engage with PayPal. Buy Now, Pay Later is available in eight markets, including with PayD in Japan. We continue to see rapid consumer adoption with $3.2 billion of Buy Now, Pay Later TPV in Q4 alone a $13 billion run rate with Q4 growth of over 325% year over year. We've processed 54 million loans globally since launch with 13 million unique consumers and 1.2 million merchants using our buy now, pay later services. Venmo had a solid finish to the year and closed out 2021 with more than a quarter of a billion dollars of revenue in the fourth quarter, up 80% year over year. We are still at the beginning of our monetization journey, with Amazon implementing the option to pay with Venmo later this year. And Venmo is turning an important corner. And in Q4, help to drive the sequential increase in our overall take rate. As always, we've got a lot of work ahead of us. We are fortunate that we have so many assets to leverage in a future that is clearly moving in our direction. We have a two-sided network at scale. We are one of the most trusted brands in the world. We have tremendous financial strength with a strong balance sheet, and we anticipate generating approximately $6 billion of free cash flow in 2022. We have a seasoned and experienced team with strong relationships with customers, regulators, and policymakers around the world. I want to thank the PayPal team for all they do. for staying focused, innovating its scale, delivering more product than ever before with record platform stability and availability in a time where our payment volumes have nearly doubled over the past two years. I'm excited about building on the underlying momentum of our core business, and I know our team feels that same sense of purpose and optimism. And with that, let me turn the call over to John.