Good morning and welcome to PayPal’s first quarter 2025 earnings conference call. My name is Pauly and I will be your conference Operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today’s conference, Steve Winoker, PayPal’s Chief Investor Relations Officer. Please go ahead.

Thanks Pauly. Welcome to PayPal’s first quarter earnings call. I’m joined by CEO, Alex Chriss and Chief Financial and Operating Officer, 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. We had a strong first quarter as we begin to execute on the strategy we laid out during our recent investor day. PayPal is transforming from a payments company to a commerce platform. This includes expanding to be available everywhere, whether it’s online, in store or agentic. This means moving from a one-size-fits-all experience to personalized experiences that leverage the vast data at our fingertips. We are developing a dynamic smart wallet that will allow consumers to make the smartest choice in how to pay and get rewarded. With this transformation, we are shifting from being purely a payments processor to an end-to-end strategic commerce partner for our merchants. Underpinning this is our work to converge into a single PayPal platform that unlocks the full potential of PayPal’s two-sided network in support of both consumers and merchants. This strategy is durable and positions us to win in the months and years ahead. Turning to Q1, we have so much to be proud of. Let me share just a few highlights. Our strategy is designed to improve PayPal’s profitability over time. In Q1, we delivered our fifth consecutive quarter of profitable growth with transaction margin dollars growing by 8%, excluding the impact from last year’s leap day. That growth was driven by multiple sources across our strategic initiatives, including omnichannel commerce, both online branded checkout and offline branded payment methods, Venmo, and PSP. As a result of this focus on profitability, non-GAAP earnings per share increased 23% year-over-year. Additionally, PayPal and Venmo are being used by more people, more often. Both total active accounts and monthly active accounts grew a healthy 2% in the quarter. Transactions per active account ex-PSP grew 4%, reflecting improved engagement in transaction growth in online branded checkout and Venmo. As we expand our offerings…

Thanks Alex. Moving to Slide 5, PayPal delivered a strong quarter to start the year. Our results reflect another positive step forward with multiple drivers contributing to an acceleration in profitable growth. We are improving our speed and focus across the organization, working hard to transform the company while improving our value proposition for consumers and merchants. Excluding interest on customer balances, transaction margin dollars grew 7% or 8% ex-leap day, accelerating from last quarter. We outperformed the TM dollars and EPS guidance we provided in February with upside driven by a combination of sources, including PSP profitability, Venmo, credit and transaction expense improvement, and a more favorable tax rate. Non-GAAP earnings per share were $1.33 in the quarter, up 23%, and PayPal generated $1 billion of free cash flow in the first quarter, bringing trailing 12-month free cash flow to $6 billion. Adjusted free cash flow, which excludes the net timing impact between originating and selling European Buy Now Pay Later receivables, was $1.4 billion in the first quarter and $6.2 billion over the past 12 months. Turning to Slide 6, total active accounts increased by about 1.5 million from the fourth quarter and over 8 million versus the prior year’s first quarter, to 436 million. Monthly active accounts continue to show steady progress, up 2% year-over-year to $224 million with contributions from PayPal consumer accounts and Venmo. Transactions per active account excluding PSP processing grew 4%. Moving to Slide 7, total payment volume grew 3% at spot and 4% on a currency-neutral basis to $417 billion. As we highlighted at our investor day in February, this slide now includes a simpler and more relevant TPV breakout. This view reflects how we think about our product portfolio today, the go-forward strategy, and our customer needs. Looking across these categories,…

Thanks Jamie. To summarize, we had a great start to the year and our strategy is taking hold. We’ve built a solid foundation and have multiple ways to win. A huge thank you to the PayPal team for their focus on delivering for our customers and our business. Steve, let’s go to Q&A.

Before we open the line, I’d ask everyone in the queue to consider your fellow analysts and ask just one question, so we can get to as many people as possible. Pauly, please open the line.

[Operator instructions] Your first question comes from the line of Tien-Tsin Huang from JP Morgan. Your line is open.

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.

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.

Yes, and Tien-Tsin, I would just add that when you look just at the core credit portfolio as a monitor of some of your question around consumer health or merchant health, we monitor that very closely. Charge-off rates are stable and, in some cases, improving, and in particular with respect to the consumer portfolios, we’ve actually seen delinquencies over the last 30 days improve. Also as it relates to just broader consumer trend, the first part of April we saw an uplift as well in terms of TPV, and a lot of folks have referenced that as pull-in; but when you look at just general consumer health coming into what could be a more uncertain time, it’s looking pretty healthy and pretty good. Then with respect to SMB, good continued consistent performance there too, and on the merchant lending side as we monitor that, honestly, pretty consistent with what I’d say about consumer charge-offs, also improving. Obviously we’re monitoring the whole thing very, very carefully, but it looks pretty steady right now.

Your next question comes from the line of Dan Dolev from Mizuho. Your line is open.

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.

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.

Your next question comes from the line of Ramsey El-Assal from Barclays. Your line is open.

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.

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.

Your next question comes from the line of Darrin Peller from Wolfe Research. Your line is open.

Hey guys, thanks. Maybe just go a little further, if you don’t mind, into what’s embedded in your outlook around KPIs and modeling assumptions. Totally understand not changing guidance despite the beat, but if you could help us with assumptions on the macro front of what you’re embedding in your outlook, especially around cross-border and China, and just what we should think about being included, as well as just even give us a little more color on branded growth expectations. What are you seeing specifically in April right now from a branded growth rate standpoint, and then branded versus unbranded growth as the year progresses would be really helpful. Thanks guys.

Sorry Darrin - I’m just writing down all your questions here. Let me start with the macro question. I think Alex was alluding to this before, but I would start by saying as we look at this year, we are laser focused on what we can control, staying focused on delivering for customers, and really executing around our core initiatives and our investments. When we look at the macro and forecasting, it’s really difficult to predict which way all these scenarios could land. I would just say maybe that we’re prudently guiding, so despite a strong first quarter and second quarter guide, we’re maintaining our full-year guide, just given the macro uncertainty. It builds in room for a range of consumer activity softening in the second half. Overall, I’d say it covers about two to three points of deceleration in overall ecomm trends in the second half, which is not what we see as run rate. Current performance is really trending well. But when you think about two to three points of ecomm, I think about that as two to three points of TPV plus some level of lower credit originations, maybe a little bit of credit losses, maybe some FBO impact or interest rate impact from some rates shifting. That’s roughly how I’d package it from that perspective. When you ask about April and branded trends, branded has had pretty consistent trending as what we saw in the fourth quarter. In April in particular, we saw some U.S. consumer activity accelerating. I mentioned before it’s likely a pull forward, we’re not assuming that continues. But all in, we’re on track for a mid single-digit branded checkout TPV guide, what we gave earlier this year. Then you also asked about branded and unbranded and how to think about, I think, the revenue side of that. Maybe I’ll just anchor there around the unbranded side of that. You saw that pull back this quarter - that was expected. That deceleration really began in the second half of last year. The one thing I would say about unbranded, or PSP and VAS, is that it’s been a very strong and growing contributor to transaction margin dollars, so while revenue is shifting down, we’re seeing a nice contribution to TM as we really just shift that margin profile of the business over time. Second quarter on revenue, we expect pretty similar profile to the first quarter and then a second half ramp, and overall continuing to contribute to that transaction margin growth for 2025.

Your next question comes from the line of Jason Kupferberg from Bank of America. Your line is open.

Good morning guys, thank you. It looks like online branded, you were stable on an underlying basis here in Q1 at up 6%; but now, we’ve got almost half the U.S. on the new checkout experience, it sounds like Europe is on tap to start pretty soon, so could we start to see some initial acceleration in online branded volume growth by the end of this year, if the macro stays stable, and could you just give us a word on what the U.S. versus international branded split looked like in terms of Q1 growth rates? Thank you.

Hey Jason, thanks. Again, just to unpack our branded strategy, I’d really think about it as three parts. One is the improved branded checkout experience, and as you mentioned, we’ve moved very quickly, up now over 45% in the U.S. Again, that still is--you know, think of that as sort of low double-digits of our global transactions, and so we’re really excited--you know, we think we’ve got a really strong playbook now and we think as we start to roll this out into Europe, we’ll actually accelerate even faster; but our pay sheet redesign is holding, the improvement is holding, and now this is just about scaling. Second lever is really accelerating pay with Venmo, and you’ve seen the results there, so very fast flywheel starting to happen from a pay with Venmo perspective - TPV up over 50% and MAAs up over 30%. Then the third lever is Buy Now Pay Later and our pay later products, and again TPV up over 20%. You add all three of those together, and as we continue to see us leaning into those three levers, I don’t know the exact timing of when we’ll start to see branded checkout, but we put pretty strong growth numbers of 8% to 10% by 2027, and I think those three levers continue to give us confidence that we’re executing well and heading in that direction.

Then Jason, what I would just add to that, when you look at the pay sheet redesign, I would say we think about that as ramping over time. This is something that as things come on, transactions start flowing, it’s not something that is an immediate translation, and we do see impact coming through the numbers but it’s very small so far, so maybe that’s how I would position that piece of it. When you look at the U.S. and international, I guess I’d start with the U.S. by saying performing was relatively consistent with the fourth quarter. We are beginning to see good traction across U.S. MAAs, across TPA, across shifting to--you know, more upstream to more power users. Alex mentioned pay with Venmo, which has really had good traction there. It is early, but we talked in the fourth quarter about seeing some shifting in our U.S. branded checkout levels. We saw that hold again this quarter, watching it very closely but cautiously optimistic about that. Then on the outside the U.S. side, relatively consistent as well, a little bit of macro volatility across the markets. But in Europe, we continue to take share in continental Europe, including in Germany - you know, really strong brand presence, as you know, across merchants, across consumers. I think what we’re really excited about is that we’re bringing our new product innovation to the market in Europe starting this quarter, so we’ll start with Germany and the U.K., and this is the checkout redesign, it is Buy Now Pay Later, it is omni and NFC launches, and brand marketing to accompany all of that with a fast follow to other countries after that. I think the overall look right now, we feel pretty good about branded checkout and just laser focused on our execution.

Your next question comes from the line of Andrew Schmidt from Citi. Your line is open.

Hi Alex, hey Jamie - good morning. Thank you for taking the questions. Maybe we could switch gears to the consumer side. I was wondering if you could just talk a little about the PayPal Everywhere program - obviously some rich rewards across categories there, but could you talk a little bit about the halo effect, if any, that you’re seeing outside of those categories? I’m curious about adoption and spend trends with that program now that it’s been in place for some time. Thank you so much.

Yes, thank you Andrew. Again, what you mentioned is exactly what we’re starting to see. Just as a reminder, rolled out PayPal Everywhere, we really launched it in August-September of last year. Since then, 4 million new debit card active, so really starting to see strong demand from our consumer base that loves the brand and wants to be able to use PayPal everywhere that they shop. TPV growth, again up over 100% in Q1 with attractive economics in offline as well, so it’s not just delivering the habituation that we want for every purchase, but the offline spend is actually quite attractive. What’s exciting is, though, that halo effect, so we’re starting to see that debit card users have a 5.5% to 6% lift in transaction activity and over 2x increase in average revenue per active user, versus just a checkout only. This is the strategy starting to take hold. This is a user that’s now becoming habituated with PayPal. They’re enjoying their rewards in a category of their choice. We’re also starting to see the spend and the category demand actually extend to other categories outside, so we started with things I mentioned in the past - gas, groceries, restaurants, things that consumers have never used PayPal for before. Now, we’re starting to add new everyday spend categories like ride share and transit, so demand is really strong from these consumers. We’re starting to see the halo effect of not just offline but now moving into online, and again this is why this all comes back to this habituation and this branded experience journey that we think is going to work, first in the U.S. and then as Jamie just mentioned, really excited to see this roll out in Germany and then the U.K, with Germany as an example coming this quarter. We’ve got some really exciting Buy Now Pay Later opportunities which are, I think, going to be very, very powerful in a market that has traditionally not been a credit market but one that’s been connected to bank, that we think we can come in with our already connected bank product and actually give consumers the ability to make the purchases they need on a Buy Now Pay Later product. Again, lots of exciting innovation coming and the flywheel starting to spin.

Your next question comes from the line of Harshita Rawat from Bernstein. Your line is open.

Good morning Alex and Jamie. I had a clarification question on the [indiscernible]. Are these numbers holding as you [indiscernible].

You broke up a bit, Harshita, but--you’ve got it, Jamie?

I think so, yes. First, I think the first part of the question was talk about conversion uplift as we roll out the new checkout redesign. We talked about 100 BPs of conversion uplift, is that holding, and I’d say yes, that is what we’re seeing continue to come through in the results that we have. Then your second part of your question was how quickly can we roll this out in Europe, and what I would say is a really important point here, is that a much higher proportion of our European merchants are already on our latest integration, so this makes a much faster and easier rollout process for them as we tackle Europe.

If we didn’t get that whole question, Harshita, we can follow up later.

Your next question comes from the line of Sanjay Sakhrani from KBW. Your line is open.

Thank you, good morning. OVAS revenue growth was quite strong. I was wondering, Jamie, if you could just walk through where the strength was and if it outperformed relative to your expectations, and if you expect that strength to continue over the course of the year. Thanks.

Yes, good morning. When we look at OVAS, there is one thing I would just call out before I talk about the actual quarter, which is that in the first quarter of ’24, we did have lower credit revenue with a lower gain share on our consumer credit partner. As we had coming through COVID, we had some loss normalization happening there, so last year’s first quarter was slightly lower in that regard, and if you remember, we had also pulled back on our merchant lending portfolio, so revenue was lower there as well. As we come into this year, I mentioned on our fourth quarter call that we are really back in the market with a rebuilt credit team and just really good capability, and we saw that growth come through. Again, OVAS growth this quarter was primarily credit driven, both consumer and merchant, small contribution from interest. But I mentioned the portfolio is performing well, we feel really good about it. We’re very actively managing it, and as we look at the year, we continue to expect mid-single digit OVAS growth. Credit will continue to be a primary driver this year, but you might remember that we also have baked into our forecast about $150 million of impact of interest rate headwinds, which also run through OVAS as well.

Your next question comes from the line of Timothy Chiodo from UBS. Your line is open.

Great, thank you for taking the question. I want to dig in a little bit more to Germany and the U.K. - I believe they’re the two largest branded markets outside of the U.S., particularly from a gross profit standpoint. I believe they’re two of the largest markets for branded. Two topics I was hoping we could touch on. One is a little bit about the competitive landscape in those two markets specifically, and then on the U.K., I know there were some efforts to roll out biometrics to help with two-factor authentication, and I was hoping you could talk a little bit about the progress and the phasing of that initiative.

Yes, let me get started, Tim. As you said, two very important markets for us and strong markets outside of the U.S. Competitive dynamics are a little bit different, so let me unpack them. Germany, we are really the market leader there. I think we’re the number one brand in Germany for the last three years, so very, very strong consumer presence, very strong merchant presence. It’s also a different type of market - as I just mentioned, it was not--it’s not a credit-heavy market, so the way PayPal is used is we’re connected to bank and then PayPal is used as really the way to make an online purchase. Our transactions in ecommerce in Germany are extremely high. That’s what gives us a lot of confidence as we now move into offline, is we’re really going to be really one of the first at scale bank connected offline wallets, that we think will be able to drive significant penetration into the market, so we’re really excited about that, as well as bringing some new innovations to market with not only our rewards program but also the Buy Now Pay Later connected element as well. With the brand presence we’ve got in Germany, with the banks already connected and the on-boarding experience that’s just really delightful - I mean, it’s literally one click from your bank to be able to set up your offline wallet, and with the innovations of rewards and Buy Now Pay Later, we’re really excited to get into the market there. U.K., much more competitive dynamic there. We’ve really suffered in the last few years with what I would consider to be one of our poorest app experiences for consumers. We’re rolling out a new app experience in the U.K shortly, but we’ve already started with,…

Your next question comes from the line of Dan Perlin from RBC Capital Markets. Your line is open.

Thanks, good morning. I just wanted to revisit cross-border for a moment and maybe the puts and takes in terms of dynamics that we need to be thinking about. One of those is just kind of now that we have a situation where we have this weak dollar, how does the purchasing power parity associated with a weaker dollar typically play out for you guys in terms of cross-border behavior, and then if you can just also give any color as a reminder, kind of discretionary versus non-discretionary spending bents that tend to fall heavy in cross-border. Thank you.

Yes, good morning Dan. How are you? I’ll start with the discretionary side of it. When you look at PayPal today, I would say discretionary spend, we are a lot more diversified today than we were a few years ago. Now we’re about 50/50 split in our U.S. TPV between goods and services, and even in those categories, we are diverse as well. When you look at that, just breaking down retail as an example, about 10% of that is fashion, but then it’s really split across a lot of different things between variety and discount, beauty, sports, pets, toys - lots of different things. When you look at those, I mentioned before I think we’re really positioned well to capture spend as it may shift amongst categories, and we’re well positioned around that. When you look at the cross-border side of it, what I would really say there, again, is it’s really diversified. I talked before about the China to U.S. direct, a large portion of our cross-border is intra-European corridors, and so when you start to look at how this looks over the globe, it’s just very well diversified. It’s really hard to say how a shifting dollar is going to impact that and, honestly, what will actually happen there, but I would just say if we take a step back and we think about our guidance here, our process, we’re just planning prudently and preparing for some level of uncertainty.

Hey Pauly, we’ll make time for one more question.

Your last question comes from the line of Will Nance from Goldman Sachs. Your line is open.

Hey, appreciate you taking the question. I just wanted--you know, you said several times on the merchant lending portfolio that you guys are actively managing standards in the current environment. I’m just wondering if you’ve made any changes to underwriting or how you would think about changes to underwriting in the face of merchants facing cash flow strains on the back of supply chain dynamics, tariffs specifically, and if you guys have any way of dimensionalizing what sort of cash flow strains your merchants may experience if tariffs do go into effect, in terms of things like importing inventory and things of that nature. Thank you.

Yes, I think it’s difficult to answer the latter part of your question, but if we go back to the merchant lending part of it, this is a portfolio that is actively managed, and it’s something that a year ago, when Michelle Gill came in and really reconstituted the team, they’re very focused on how we can help our small businesses really navigate growth. The portfolio has a couple of different things in it. One is just really helping small businesses with working capital and inventory buy, and we monitor that and underwrite it with an eye towards credit, towards cash flow. When you look at this, these are things where we’ve got cash tweaks with sales as sales come in. It’s just a very well constructed portfolio from both an underwriting and from a risk management perspective. The other side of it is PayPal business loans, which are cash flow based, they’re typically personally guaranteed, and again these are things that we monitor all the different indicators of the portfolio and we adjust as we go. I mean, we did make some adjustments in March to tweak and fine tune and make our underwriting slightly more conservative, but it’s something the team is all over and I think we can react very quickly in a changing environment.

Thanks Jamie. Alex, any final thoughts?

Yes. Thanks everyone for the call this morning. I’m very proud of the quarter that the team delivered, not only great results but also just the innovation and the pace that the teams are moving. We didn’t get a chance to talk a lot about Venmo, but I know I mentioned it on the call - we’ve leaned in there, and the innovation is really starting to take hold. We talked about moving into monetization and debit cards, just to give you another data point - 10% of the new cohort of users are now adopting the debit card. This is showing our innovation coming to life, and funds-in, Venmo users that are using and keeping funds in, we’re seeing funds beyond P2P up over 100%, and add funds and auto reload, really as we’ve innovated there, are starting to become the habituation for our consumers. Just goes to show that as we are executing and leaning into our strategy, our innovation is really taking hold. So we’re focused, we’ll continue to scale our innovation, and look forward to updating you along the way. Take care, everyone.

Thank you. This concludes today’s conference. Thank you for participating. You may now disconnect.