PayPal Holdings, Inc.

Thanks, Sarah. Welcome to PayPal's third quarter 2024 earnings call. I'm joined by CEO Alex Criss and CFO Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings, and on our website, Those elements may change as the world changes. Now over to you, Alex.

Thanks, Steve, and thank you to everyone for joining us this morning. PayPal had a highly productive third quarter. We made good progress on our continued transformation while delivering strong operating and financial results. We brought multiple innovations to market, coupled with a significant new marketing campaign, and are seeing encouraging early adoptions. and we continue to forge important partnerships with leaders in global commerce. We're early in our transformation journey, and we have a lot of work ahead to get to where we want to be. However, I'm proud of what we've been able to achieve in the last year, and it gives me conviction that we're taking the necessary steps to unlock the full potential of PayPal and Venmo over time. We've assembled a world-class leadership team, reignited innovation for our customers and are now moving with clear purpose and increased velocity. We're leaning into our competitive advantage, a two-sided network of hundreds of millions of consumers and tens of millions of merchants around the world to evolve from a set of disparate payment products and point solutions into a powerful commerce platform. As we shift from a payments company to a commerce platform, more of the world's leading commerce players have partnered with us to add value for our mutual customers. In just over two months, we've announced partnerships with Pfizer, Audion, Amazon, Global Payments, and Shopify, and we're actively discussing more collaborations across the industry. These new and expanded relationships are a clear demonstration that our brand, innovations, and momentum are resonating. Before we discuss this quarter's details, I'm excited to announce that we will host an Investor Day on February 25th in New York City. We look forward to seeing many of you in person and sharing our team's longer-term strategy, key opportunities, financial and operating targets, and how we will get there. Now turning to our Q3 results. Total payment volume grew 9% to $423 billion. We delivered $7.8 billion in revenue, growing 6% on a currency-neutral basis. Transaction margin dollars grew 8% to $3.7 billion and were up 6%, excluding the benefit of interest on customer balances. Our non-gap earnings per share increased 22% year over year. Importantly, this translated into significant free cash flow. We're proud of these results and have a clear plan to drive continued profitable growth over the long term. After another strong quarter, we're raising our full-year guidance for transaction margin dollars and non-GAAP earnings per share. At the same time, we're continuing to invest in areas that we believe will drive long-term profitable growth. Let me update you on our customer business strategies and the promising early results we're seeing. When I joined, it was clear that we had significant work to do to improve branded checkout. PayPal had fallen behind on innovation, and we had work to do to be more competitive, particularly on mobile devices. In January, we shared new mobile checkout experiences designed to significantly improve conversion. We've completed testing over the past few quarters and are now rolling out to customers new experiences on both desktop and mobile. these new checkout experiences are second to none. When implemented properly, the new product experiences are resulting on average in more than 100 basis points of conversion lift for vaulted checkout and up to 400 basis points of conversion uplift for one-time checkout. We're also seeing a 15 to 20% increase in buy now, pay later use. These experiences are live on close to 5% of our U.S. checkout traffic today, and we're pushing hard to get them into the hands of more of our merchants throughout the holiday shopping season and into next year. I'm proud of our team's innovation velocity as we reestablish ourselves as the best converting branded experience for consumers and merchants. Continuing in large enterprise, we're making solid progress on our initiative to price our services in a way that reflects the current value we bring to our merchants. This is now the second consecutive quarter in more than two years that Braintree is meaningfully contributing to transaction margin dollar growth. We're having very constructive conversations with our merchants focused on ways we can enable strategic growth opportunities that drive long-term upside for both of us. What is different today is that we now have a suite of value-added services, including payouts, risk as a service, orchestration, guest checkout, and personalization capabilities that help attract new customers and convert them more effectively, in addition to world-class payment processing. We're excited about our progress here as it is key to long-term value creation. Finally, we're pleased with the initial reaction to Fastlane, which targets the 60% of e-commerce purchases made without a branded mark. Since we launched in August, we have over 1,000 merchants using Fastlane to provide a seamless experience to their customers and drive increased conversion. We've also reached a new milestone in our ability to recognize and autofill information for first-time Fastlane users. In the U.S., 170 million eligible customer profiles on the PayPal platform can now enjoy a seamless guest checkout the very first time they try Fastlane. The scale of consumers who are primed to spend with PayPal, puts us way ahead of other guest checkout solutions, and it is one of the reasons why so many platforms are choosing to partner with us. We can't wait to get Fastlane into the hands of more merchants, not only on Braintree and PPCP, but also through our partnerships with Fiserv, Audion, and Global Payments next year. Moving to small and medium-sized businesses, Last month, we launched PayPal Complete Payments in new geographies, including China and Hong Kong, with more markets on the horizon in 2025. In the markets where PPCP is live, we're steadily converting volume from our legacy products, with nearly 40% of our SMB processing and checkout volume now on this platform. What is important to remember is that many of these merchants are using PayPal for both branded and unbranded payments. an example of the benefits that come with integrated solutions. PayPal Complete Payments also allows us to work with many small and medium-sized businesses through partner platforms, including Shopify. As we announced in the quarter, PayPal is now an additional processor for Shopify payments in the U.S. Our branded checkout solutions are now integrated into Shopify payments, creating a single, unified experience for time-constrained business owners to drive operational efficiency. We also recently announced a partnership with Amazon to bring PayPal checkout to SMBs offering Buy with Prime. Next year, we will expand our work together to give Prime members the option to link their Amazon and PayPal accounts so that consumers can receive Prime shipping benefits when they use PayPal while shopping with Buy with Prime. While it will take time to realize, there is significant opportunity here and more we can do to better serve the needs of small businesses. For consumers, we're redefining our value proposition with last month's launch of PayPal Everywhere. This initiative builds on PayPal's established brand position as an online shopping powerhouse to position PayPal as the go-to solution for spending, sending, and earning rewards. whether online or offline. We're doing this through cashback incentives on the PayPal debit card and a marketing campaign with the goal of reintroducing our capabilities to consumers who may never have thought about PayPal as more than an online payment option. We're starting to shift perceptions of PayPal and beginning to drive adoption of our suite of complementary products, which all drive back to branded checkouts. The broader awareness and perception shift we're aiming for is not going to happen overnight. This is an area where we plan to continue to invest over time. That said, we're seeing early signs that give us confidence our strategy is working. Since we launched PayPal Everywhere, we've added more than 1 million first-time debit card users. As a reminder, we're allowing consumers to pick a cashback category of their choice each month, which is capped at $50 per month. The top three categories customers are choosing and earning rewards for so far are groceries, gas, and restaurants. What gets me so excited is that we're now seeing customers make daily in-person purchases with their PayPal debit card. In addition, these debit card users are now choosing PayPal branded checkout more frequently when they shop online. Early data from our existing customers shows a 5x increase in total Omni spend within the first two weeks of signup. We plan to expand the PayPal Everywhere value proposition to Europe next year, incorporating learnings from our US launch. We expect the availability of NFC capabilities will help drive further adoption and use of PayPal. With Venmo, we're making progress in executing our strategy to shift from solely a P2P service to a central part of consumers' financial lives. Our new leadership team is taking a fresh look at Venmo and we're completely transforming and upgrading the user experience. We know that we inherited one of the strongest P2P brands and see an opportunity to prioritize innovations that unlock Venmo's value. We believe that Venmo will eventually have multiple monetization levers. In the short term, we see two meaningful contributors. Let me unpack each of them. First is the Venmo debit card, which allows customers to spend with their balance both online and offline. We're in the early days of driving adoption, but we're seeing encouraging trends in engagement and monetization. In the quarter, monthly active debit card accounts grew 30% yet again. This is exciting as the average revenue per account is four times that of all Venmo accounts. However, only 5% of Venmo active accounts are monthly active Venmo debit card users, demonstrating the opportunity ahead of us. The second lever is Pay with Venmo, which provides a seamless way to pay online. The strategy with Pay with Venmo involves both consumer and merchant adoption. On the consumer side, 8% of Venmo active accounts are monthly active Pay with Venmo users, so we have room to grow. Monthly active Pay with Venmo users were up 20% in the quarter, and the average revenue per account is three times that of all Venmo accounts. On the merchant side, we will bundle Pay with Venmo with PayPal Checkout in our go-to-market motions to accelerate distribution. With these product improvements in place, We're now leaning into marketing for Venmo for the first time in years. We will continue to build on this foundation and obsess over consumer needs and our product to fully unlock the brand's long-term potential as a multi-billion dollar franchise. I want to thank the PayPal team for their continued commitment to transforming our company and making it even stronger. We've got the right team in place and we're playing to win. With that, over to Jamie.

Thanks, Alex. Moving to slide seven, PayPal delivered another strong quarter of results. The underlying stability and consistency of the business is encouraging, and we remain focused on advancing our transformation to drive durable, profitable growth. Change takes time, and we still have a lot of work ahead, but the team is making steady progress on top of an already solid foundation. Looking at the high level financial results in the quarter, revenue increased 6% on both a spot and currency neutral basis. Transaction margin dollars accelerated slightly from the second quarter. In addition to a nearly three point benefit from interest on customer balances, branded checkout, Venmo, Braintree, and better transaction loss performance contributed to growth in the quarter. Our focus on price to value is paying off with Braintree again contributing materially to transaction margin dollars, even as volume and revenue growth deliberately slows. Non-GAAP earnings per share were $1.20, representing 22% year-over-year growth. Relative to our guidance, outperformance was driven by a number of factors, including continued optimization of transaction loss, Venmo, and improvements in credits. Turning to slide eight, our operating metrics reflect another quarter of progress. Total active accounts increased by nearly 3 million from the second quarter to 432 million. Monthly active accounts continued to show steady progress, up 2% year over year to 223 million, with contributions from PayPal consumer accounts and Venmo. Transactions per active account, which is a trailing 12-month number, were 61.4 in the third quarter, up 9%. Excluding PSP processing, transactions per active grew 5%. Moving to slide nine, total payment volume grew 9% on a spot and currency neutral basis to $423 billion. Looking at the breakdown by product, global branded checkout volumes grew 6% on a currency neutral basis in the third quarter. consistent with the mid-single-digit growth we've seen for the last three years. Within branded checkout, we continue to see strength across large enterprise platforms, marketplaces, and international merchants. As Alex mentioned, our team is hard at work to drive wider coverage of our most modern, best-in-class checkout experiences. We are particularly focused on small and medium businesses and mobile, both critically important areas for us to improve our positioning. PSP processing volume grew 11% compared to 19% in the second quarter. As part of our price-to-value strategy, we are moving deliberately and making decisions that prioritize healthy, profitable growth rather than targeting a high proportion of processing volume at low or even negative margins. What this looks like in practice with some of our largest enterprise customers is often a renegotiated agreement that reduces our total share of payment processing to a more balanced level. So, for example, from 95% to 75%, but with better economics and with a greater breadth of products and services. This means we are driving Braintree transaction margin dollar improvements and more strategic partnerships, but with lower volume and revenue growth. Moving to more financial detail on slide 10, transaction revenue grew 6% on a spot basis to $7.1 billion, driven primarily by Braintree, Branded Checkout, and Venmo. Other value-added services revenue in the quarter increased 2% to $780 million, and interest on customer balances continued to be a meaningful tailwind to OVAS, and credit revenue was under less pressure compared to the past three quarters. We have now fully lapped the actions taken last year to tighten credit underwriting and reduce on-balance sheet risk. We're seeing better performance across the portfolio and have now started to modestly grow merchant originations. We'll continue to prudently manage the portfolio's exposure with the goal of sustaining our balance sheet-like business model while providing our customers with more ways to manage their cash flow, spending, and borrowing needs. Transaction take rate declined by four basis points to 1.67%, compared to a three basis point decline last quarter. Improvements in Braintree and Venmo monetization benefited transaction take rate. These were offset by large enterprise and marketplace growth within branded checkout, foreign exchange, and faster payouts growth. Turning to transaction margin dollar growth, as I said earlier, interest on customer balances, branded checkout, Venmo, and Braintree were the largest contributors. Results in the quarter continued to benefit from efforts to optimize transaction loss performance with more advanced data analytics and some transaction expense favorability. Non-transaction related operating expenses increased 3% as we continue to actively manage our cost structure while reinvesting in key growth initiatives. including marketing that was deferred from the first half of the year and the rollout of new products and initiatives like PayPal Everywhere. Non-GAAP operating income grew 18% in the quarter to $1.5 billion. Non-GAAP operating margin expanded 194 basis points to 18.8%, benefiting from transaction margin expansion as well as expense leverage. PayPal generated $1.4 billion of free cash flow in the third quarter. We completed $1.8 billion in share repurchases, bringing the total number of share repurchases over the past 12 months to approximately $5.4 billion. Finally, we ended the quarter with $16.2 billion in cash equivalents and investments and $12.4 billion in debt. Moving to guidance on slide 11 for the fourth quarter and the full year 2024, we continue to assume a relatively consistent macroeconomic and consumer spending environment for the remainder of the year. For the fourth quarter, we expect revenue to grow by a low single-digit percentage. This is directly related to Braintree merchant negotiations and ongoing efforts to drive quality, profitable growth. As I mentioned earlier, this is a deliberate action and a continuation of the strategy we've articulated throughout the year, where we have accepted a lower near-term Braintree revenue profile in exchange for better margins as we have renegotiated agreements. As a result of these efforts, we expect lower Braintree volume and revenue growth in the fourth quarter and through 2025 before re-accelerating from the reset baseline. This is a healthy, profitable tradeoff for the business that benefits transaction margin dollar growth and build stronger, more strategic relationships. We expect higher non-transaction OPEX growth in the fourth quarter, as we have intentionally concentrated more of our discretionary investment spend, particularly in marketing, during the back half of the year and in the holiday season. This is strategically timed to support key initiatives, including the go-to market of new products and innovation, as well as ongoing marketing and brand campaigns for PayPal and Venmo. Due to this timing, we expect fourth quarter non-GAAP EPS to decrease by a low to mid single digit percentage. 2024's full year non-transaction OPEX growth rate, which we now expect to increase in the low single digit range, is a reasonable way to think about the OPEX profile for the business next year. But like this year, we expect some unevenness in any given quarter. Moving to the full year in more detail, we are raising our guidance for transaction margin dollars and non-GAAP earnings per share. This increase reflects outperformance in the third quarter, as well as strategic reinvestments back into growth initiatives. We now expect 2024 non-GAAP EPS to grow in the high teens and full year transaction margin dollars to increase by a mid single digit percentage. We have seen steady profitable growth from our branded checkout business, and the teams are advancing our checkout initiatives. I'm encouraged by the rollout of innovation, the initial impact of our price-to-value strategy, ongoing product enhancements in areas like Venmo and P2P, and the customer response to the launch of PayPal Everywhere. As we move into the fourth quarter and beyond, we expect to continue making progress, but there are a few factors to keep in mind. Through the first three quarters of the year, growth in interest on customer balances and improvements to transaction loss were an approximately four-point percentage benefit to transaction margin dollars. Beginning in the fourth quarter, we expect minimal benefit from growth in interest on customer balances and then a headwind beginning in 2025 due to interest rate cuts. We're also planning for some normalization in transaction losses as we roll out new products. We now expect full-year non-transaction operating expenses to increase in the low single-digit range with ongoing cost efficiency helping to fund our strategic growth investments. As we move into next year, our focus will be on striking the right balance between investment and productivity, seeking to largely fund long-term investments through savings generated from better deployment of tech and automation. We continue to expect 2024 free cash flow of approximately $6 billion and continue to plan for $6 billion of share buyback this year. In closing, I'd like to thank the PayPal team for their ongoing dedication as we drive meaningful change to strengthen our foundation for profitable growth. We are continuing to execute, and we're making good progress. And we're excited to share more with you at our Investor Day in February. With that, back to you, Alex.