PayPal Holdings, Inc. Q1 FY2025 earnings call

• PayPal is transforming from a payments company to a commerce platform, focusing on omnichannel commerce, personalized experiences, and a dynamic smart wallet.
• Q1 saw fifth consecutive quarter of profitable growth with transaction margin dollars growing by 8% excluding leap day impact. Non-GAAP earnings per share increased 23% year-over-year.
• Total active accounts and monthly active accounts grew 2% each. Transactions per active account ex-PSP grew 4%.
• Online branded checkout TPV grew over 4% on currency neutral basis. Pay with Venmo TPV increased over 50%, monthly active accounts grew 30%.
• PayPal and Venmo debit cards saw strong adoption with debit card TPV growing ~64% in Q1. Venmo debit card monthly active accounts grew nearly 40%.
• PSP business continues to build relationships with large brands and sell value-added services. AI, PayPal Ads, and crypto initiatives are driving innovation.

Online branded checkout TPV grew nearly 6% in Q1. Branded experiences TPV, including online checkout, PayPal and Venmo debit, as well as tap to pay, grew 8% ex-leap day. Venmo had 20% revenue growth. PSP business contributed to transaction margin dollar growth. Other value-added services revenue grew 17% to $775 million.

• Maintaining full-year guidance despite macro uncertainty. Second quarter expected low to mid single-digit revenue growth on currency neutral basis. Transaction margin dollars between $3.75B and $3.8B, midpoint 4.5% growth. Non-GAAP EPS range $1.29 to $1.31.
• Full-year expected transaction margin dollars growth at least 5%, non-GAAP EPS range $4.95 to $5.10. About $6B in share buybacks for full year, free cash flow $6B to $7B.

• Macro uncertainty and geopolitical issues impacting consumer spending and supply chains.
• Potential deceleration in ecomm trends in the second half, which could affect TPV and credit originations.

Q: Hi, thanks for the progress report here, lots to talk about. Just wanted to maybe ask the obligatory macro question, if you don’t mind. I’d love to hear a little bit more on how you’d characterize consumer and SMB health overall. I know you touched upon it a little bit, but is the macro, the geopolitical stuff that’s going on in the world, is that changing enough for you to reorder some of your priorities? It does sound like you’re leaning harder into BNPL and Venmo, but yes, just a broader macro question. Thank you.

A: Hey Tien-Tsin, thanks for the question. I wouldn’t say we’re reordering any priorities, and I don’t think we’ve--you know, we’re obviously watching it very closely to see what plays out, but things have been pretty consistent so far. Obviously we think there’s an opportunity - you mentioned Buy Now Pay Later. We think with our strong position there and strong product, there’s obviously an opportunity to continue to lean in. I think from a consumer standpoint, we’ve been building over the last few quarters to really be the most rewarding way for consumers to pay, and we think that’s an opportunity for us to continue to get our message out - you know, our rewards coming back on debit card, the rewards we just put out on crypto. These are things that put more money in the pockets of consumers, and that’s a positive thing and an opportunity for us. On small business, again we know that cash flow is the most critical part for small businesses. We haven’t seen a big impact yet, but as they think about money-in, money-out, and access to capital, we know that we have tremendous strength when it comes to providing capital to our small business customers, and we think we can be a place for them to come in times of need. But I’d say we’re still early and we haven’t seen any big shifts yet, but we feel confident in our position if those things happen.

Q: Hey guys, great results here. Really appreciate it. Can you give us a sense of--it looks like the branded experience TPV strategy is doing really well. Can you give us maybe a sense of how much traction you’re getting there and what you’re doing to get those nice results? Thanks again.

A: Yes Dan, let me start. Good to hear from you. This is the strategy that we’ve laid out really coming to life. First, we have a branded checkout strategy that is really about driving habituation everywhere that a customer wants to pay. We have such strong brands in both PayPal and Venmo, and our customers are asking to be able to leverage that trust, the safety, the brand, the rewards in every purchase that they make. We’ve been focused on not only improving that online experience that we’ve talked about, and I’m sure we’ll talk about more, making it available for them exactly how they want to pay, whether that’s immediately or with a pay later scenario with Buy Now Pay Later, but then also offline. You mentioned branded experiences - this really is enabling our PayPal debit card or our Venmo debit card to be accessible to our consumers. We saw PayPal debit card TPV growth over 100% in Q1, and that really is driving habituation. This is driving our consumers to actually start to come back, move online, and start to pay with PayPal wherever they see it, so the strategy is working, TPV up 8% overall in branded experiences, and this really is the metric that we are focused on, and we hope you’re focused on as well because, again, it is really all about the strategy that we’ve laid out.

Q: Hi, thank you very much for taking my question this morning. I wanted to ask about the de minimis tariff exemption for China - I think that’s scheduled to be eliminated on May 2. Do you expect an impact from that, I guess, and if so, if you could help us dimensionalize the impact, I’d appreciate it.

A: Yes, good morning. Obviously the whole situation around tariffs is really changing daily, and there is multiple scenarios that could unfold. Maybe I’d first start by saying, I think we come into this from a position of strength. We are globally diversified, our merchant base, our region base, it’s just very, very global and diverse, and we’re well positioned to capture shifts in spending as they happen. The other thing I would just add is in particular in the U.S., we are about 50/50 between retail and services, so diversification there as well. But when you talk about de minimis, the way I’d size that for you, our Chinese merchants selling into the U.S. is less than 2% of our branded checkout TPV, and this includes both direct China to U.S. cross-border transactions and volume from Chinese merchants with U.S. entities, but where they’re shipping from China. From that perspective, that’s probably how I’d size it there.