PayPal Holdings, Inc. (PYPL) Presents at 7th Annual Evercore ISI Payments & Fintech Innovators Forum Conference (Transcript)

PayPal Holdings, Inc. Conference Call Summary Company Overview - Company: PayPal Holdings, Inc. (NASDAQ: PYPL) - Event: 7th Annual Evercore ISI Payments & Fintech Innovators Forum - Date: March 2, 2023 Key Points Industry Context - The macroeconomic environment remains complex and dynamic, impacting consumer discretionary spending and e-commerce trends [4][5] - Inflation continues to exert pressure on consumer demand, particularly in discretionary e-commerce [5][6] Financial Performance and Outlook - Q1 2023 is off to a strong start, with expectations for a solid year ahead despite ongoing economic headwinds [5][6] - Full-year non-GAAP operating margin is expected to expand by 125 basis points, with an EPS target of approximately 18% growth [7][8] - Revenue growth is projected to be mid-single-digit on a currency-neutral basis [8] Cost Management Initiatives - PayPal has identified $1.3 billion in cost savings for 2023, with an additional $600 million identified recently, primarily through headcount reductions affecting about 7% of the workforce [10][11] - Ongoing vendor rationalization and real estate optimization are also part of the cost management strategy [11] Revenue Drivers - Transaction revenue growth is expected to be impacted by e-commerce trends, with slight positive growth anticipated globally [16] - Braintree and Venmo are key growth areas, although some deceleration is expected due to lapping previous high growth rates [17][18] - OVAS (Other Value-Added Services) is projected to grow in the high teens, driven by credit initiatives and interest income [18][19] Strategic Initiatives - PayPal is focusing on enhancing its branded checkout experience, with a target of 50% penetration of its latest checkout integrations among the top 100 merchants by the end of 2023 [39] - The introduction of password-less, one-click native in-app checkout and advanced checkout using AI is a priority [36][41] - The PayPal Commerce Platform (PPCP) is being ramped up to provide unbranded offerings to small and midsized businesses [43][44] Credit Portfolio Management - PayPal is in the process of externalizing its pay later portfolio, which is expected to have minimal impact on the P&L due to the nature of the portfolio [46][49] - The externalization aims to find a long-term partner for sustainable funding while maintaining customer engagement and transaction volume benefits [48][49] Shareholder Returns - PayPal plans to return approximately 75% of its projected $5 billion free cash flow to shareholders through share repurchases in 2023 [54] - The company has historically returned 30% to 40% of free cash flow, with a significant increase to 82% in the previous year [52][53] Interest Rate Impact - Rising interest rates are expected to benefit both OVAS and OI&E (Other Income and Expenses) in 2023, with a potential $75 million income shift anticipated [57][59] Underappreciated Strengths - PayPal's scale, profitability, and ability to generate free cash flow are highlighted as key strengths that may be underappreciated by the market [61][62] - The focus on core objectives and operational efficiency is expected to drive future growth and market share [63] Conclusion - PayPal is navigating a complex macroeconomic environment while focusing on cost management, strategic growth initiatives, and enhancing shareholder returns. The company remains optimistic about its growth potential in 2023, driven by its core strengths and ongoing investments in technology and customer engagement.