Good morning, and welcome to PayPal's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Sarah, 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, Sarah. Welcome to PayPal's Fourth Quarter and Full Year 2025 Earnings Call. 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. Over to you, Jamie.

Thank you, Steve. Good morning, everyone, and thank you for joining the call. Before we turn to our full year and fourth quarter, I want to address the leadership announcement we made earlier this morning. The Board has appointed Enrique Lores, who was most recently our Board Chair, as the next President and CEO of PayPal effective March 1 to accelerate execution and bring greater discipline to how we implement our strategic priorities as we enter our next phase of growth. I want to thank Alex Chriss for his leadership and his many contributions to the company. It has been a pleasure working with him, and we wish him the very best. At the same time, we recognize as a company that our execution has not been what it needs to be. We have not moved fast enough or with the level of focus required, and we are taking immediate steps to address that reality. The Board's appointment of Enrique reflects a clear commitment to strengthening performance. He is a seasoned chief executive who brings deep experience driving customer-centric innovation and disciplined execution, simplifying complex businesses and leading large-scale transformations. We are fully aligned on the path ahead. During the brief transition period through early March, as Enrique steps away from his role at HP, I will serve as interim CEO, and Steve will partner with me leading our finance function to ensure continuity and maintaining momentum. Effective immediately, Board member, David Dorman, will take on the position of Board Chair. With that context, let's turn to our full year and fourth quarter 2025 performance. PayPal delivered solid 2025 performance across multiple dimensions, and I'm confident about our path forward. Last February, we held an Investor Day outlining our transformation strategy. One year later, there are elements working very well,…

Thanks, Jamie. Moving to Slide 9. TM dollars excluding interest grew 4% in the fourth quarter. The drivers of that growth were broad-based, led by strong credit performance, PSP profitability, Venmo monetization and loss improvement across multiple products. This diversification was key in offsetting the headwinds to branded checkout that Jamie walked through. As a result, we delivered 6% TM dollar growth and 14% non-GAAP EPS growth for 2025. And we continue to have clear opportunities to drive durable profitable growth in the years ahead. Moving to the fourth quarter and full year financials in more detail. Total payment volume grew 9% spot, 6% currency neutral in 4Q and 7% and 6%, respectively, for the full year, reaching $1.8 trillion. 4Q revenue grew 4% on a spot and 3% on a currency-neutral basis. Full year revenue grew 4% on a spot and currency-neutral basis to $33.2 billion. Non-GAAP earnings per share increased 3% to $1.23 and 14% for the full year to $5.31. Compared to our fourth quarter guidance, non-GAAP EPS came in $0.04 below the low end of our range. This was driven largely by a higher-than-expected tax rate and slightly lower-than-expected non-GAAP operating income resulting from pressure on branded and the timing of OpEx. Adjusted free cash flow, which excludes the timing impact from the origination and sales of pay later receivables, was $2.1 billion and $6.4 billion for the full year. Turning to Slide 10. We continue to drive deeper, more active relationships with our customers. Monthly active accounts increased 1% to 231 million. Transactions per active account excluding PSP, which is a good proxy for engagement, maintained momentum with 5% growth. Moving to Slide 11. Total payment volume in the fourth quarter grew 9% at spot and 6% on a currency-neutral basis to $475 billion. Working…

[Operator Instructions] Your first question comes from Tien-Tsin Huang with JPMorgan.

Just you went through a lot. I wanted to ask on just the change in the CEO and the timing here. Just maybe, Jamie, can you give us some assurance that the change is primarily to address execution rather than the strategy? Because I'm getting questions from investors asking if there's still risk of wholesale strategy changes once Enrique comes in that could delay or extend the turnaround further here.

Sure, Tien-Tsin. So the Board's decision is based on execution. They have been discussing this for the past few months. And when you look at the company, there's really good progress across innovation in a handful of different areas in the company, and you heard us call those out in our prepared remarks. Having said that, our execution is just too slow. And both the Board and Enrique have been deeply involved in setting our plans strategically and around our initiatives, and that carries into what our execution plan is in 2026. And so when you look at Enrique, Enrique has a very deep track record in not only innovation, but operationalizing innovation at scale and driving really complex tech-forward transformations. And so his background and who he is around faster decision-making, clear prioritization, more disciplined execution, which really we need that leaning into branded checkout, I think it's going to be very, very helpful. And I think the other accelerant here that will be good is having been on the Board for 5 years, having been the Chairman for the past 18 months, he just brings a level of depth and immediate context, which really should help shorten the typical cycle that you'd have in a new CEO coming onboard.

The next question comes from Ramsey El-Assal with Cantor Fitzgerald.

I second Tien-Tsin's appreciation about all the granularity here. It sounds like you're quite confident in your strategy around modern online checkout and meaning you see the offering itself is pretty effective and compelling. The issue seems to be getting the merchants to engage and implement it. So how do you do that? How do you get them to adopt it? Is it a question of incentives? Is competition keeping them from engaging? Like what can you guys do to sort of force the issue a little bit?

So engaging with merchants really takes on a lot of different flavors. And whether that's a large enterprise, a small business, merchants want different things. They want to grow their business. They want to bring in new customers. They want to improve conversion. And so honestly, every single conversation we have involves a different strategy with respect to how we approach it. And that can range from really driving our merchant integrations to the latest integration and getting more conversions, combining that with our consumers on biometrics and pass key. It can really lean into upstream presentment around buy now, pay later and again more customer acquisition strategy all the way over to how do we co-market together and how do we pull people in, customers to engage and habituate not only around us but, equally importantly, with them. And so all of that are parts of these discussions. When we've looked at what we've learned over the last several months, I think one of the big things we learned was that we have been trying to do this across all merchants all at the same time. And what we have done now is really reformulated our teams around dedicated, mission-based teams particularly for high-impact merchants and really leaning into the latest integration, really deploying experience and biometrics together and really going in with an aggressive upstream presentment strategy. And you heard me talk about it in my prepared remarks, but I think it's worth repeating that when we see merchants with the latest integration, when we see them with upstream presentment and a second button and with that co-marketing, like that combination drives markedly higher performance for us with our merchants. And we saw that in the holiday season. So there's multiple ways to win here with our merchants, but each is unique, and that's exactly why we're organized the way we are going into '26.

The next question comes from Darrin Peller with Wolfe Research.

Maybe just a quick clarification in terms of the timeline you'd expect some of these investments to help come to fruition. And just help me frame a little bit more on if you're expecting TM dollars and branded to improve in the back half of this year or is this more of a 2027 story? So in other words, exiting the year, should we start to see any evidence of success? And then a bigger picture question would just be your thoughts on balancing between really a growth company and capital return story. I'm just curious if that's changed at all in your framework of how you think about investments in the business, capital investments going forward.

Darrin, why don't I tackle the first question on transaction margin and Jamie will handle the growth versus capital return part of the question. On TM, think about the full year, we talk about a slight decline. We talk about that really coming from a consistent contribution from PSP and Venmo, offset by the roughly 3 points of headwinds from those increased growth investments. And then also we have a 1 to 1.5 points of lower interest. There's a bit less contribution from omni given credit normalization and tougher comps. And then I would call DXO a neutral contribution given the slightly positive to LSC growth we're talking about. This is pretty smooth as we go through the year in the sense that you have our 1Q numbers that we lay out there. Those investments have already started. So they will hit us in 1Q and through the course of the year as opposed to us calling for kind of a back-end loaded year. We're not doing this at this point, and I think we're going to need increased visibility from each of these initiatives and the new incremental investments are performing. We learned a ton in the fourth quarter from the investments that we made, and those are incredibly helpful. We'll apply that through the rest of the year. Jamie?

Yes. And then, Darrin, with respect to balancing between growth and capital return, listen, we've got a collection of really unique assets here. And our focus right now is on transforming this business and really growing the assets we have and investing organically. In addition to that, we've had a strong capital return profile over the last couple of years with $6 billion buyback, the initiation of a dividend and continuing that program into this year. The Board discusses and is involved with our capital allocation strategy on a regular basis. And part of Enrique coming in really is to lean into continuing to improve and grow our businesses, and doing that through prioritization through better execution and really being very choiceful about where we're placing our bets.

The next question comes from Sanjay Sakhrani with KBW.

I just want to follow up on some of the questions that have been asked, maybe just a little bit more embellishment on what's included and embedded in the 2026 outlook given it's a transition year. I guess when we think about the underperformance in branded volumes, some of it's been the lack of upgrading merchants, macro and then maybe others taking share. Like which parts can actually turn the corner as we move through 2026? And then just on Tien-Tsin's question, is it fair that Enrique was involved in the process of sort of setting the expectation? So we shouldn't expect a big change after he comes on?

Why don't I start with your questions around '26, then I'll hand it over to Jamie for the second part of your question around the branded and Board decision process, Sanjay. First, just running down the kind of P&L for a moment for '26 to give everybody that color. We talked about a slight decline in TM. Ex FBO, that's roughly flat, call it, about 3% increase in OpEx for the year. That gets you to non-GAAP EPS of this low single-digit decline to slightly positive. GAAP EPS of mid-single-digit decline. Tax rate assumption, call it, 19% to 21%. And then we provided the free cash flow story when you move over there. CapEx, about $1 billion or so. And then within all of that, OVAS, about flattish for the year, low single digit, by the way, in 1Q. TEs, at a bit of a lower rate versus '25, so called out about 88 bps or so versus 89 this year. TL, in line with '25, so call that about 7.5 bps of TPV. And creditor loan losses of about 2.5 bps, which is another 0.5 bp or so. So those are the numbers, Jamie, do you want to hit on the kind of how to think about branded and then the Board decision?

Yes. With respect to branded, as Steve mentioned earlier, when we execute on these investments, we have included the cost of investments but we have assumed minimal in-year benefit from those. And when you look at the traction side of it, certainly, the changes we're making in go-to-market and traction around all elements of merchant integration, upstream presentment, all those different pieces will begin to gain traction as we go throughout the year. As we go live and merchants go up, we test, we start to see where we can adjust and pivot and optimize. But that will just continue as we go throughout the year. What I'm really excited about is Enrique coming in. I think the prioritization element here for us is really important. We have lots of good ideas. We love to do lots of things. And I think us getting laser-focused on what to go after and where with respect to branded is going to help us get even more traction sooner. And then with respect to Enrique's involvement from a strategy perspective, look, he's deeply involved in it. He has helped shape and reviewed not only the capital allocation strategy, the investment priorities that support them, but also the 2026 guidance. And he is coming in focused on the acceleration of our plan and just continuity in building on the work of the team.

The next question comes from Andrew Schmidt with KeyBanc Capital Markets.

So obviously, the branded checkout piece is a function of both the consumer and the merchant experience. Maybe you could talk about whether -- and obviously, you're addressing both pieces. But do you think the shortfall is attributable to one side or the other? Obviously heard the slowness in terms of the modern checkout experience, et cetera. But I'm curious if there's attribution more on one side versus the other. And then just if you could drill down the consumer side, just core PayPal trends, account acquisition, TPA ex-PSP trends and then also the need to perhaps drive a more holistic experience versus the transacting experience on the consumer side. Maybe talk a little bit about how all that's resonating.

Sure. Let me talk a little bit about the first part of your question, then I'll turn it over to Steve for the account trends and some of that. And then I can talk a little bit about loyalty and some of the other programs that we're really focused on in 2026. With respect to branded checkout, in the second half, we began to see some slowdown really in September, and that really persisted into the fourth quarter. We saw weakness in U.S. retail. People have talked a lot about K-shaped economy. And we're really a middle-income demographic as it relates to the PayPal brand. And so certainly, we felt that in a slightly more pronounced way than others. We've had moderating international growth, including in Germany, and deceleration in high-growth verticals. We've had really strong growth over the last 18 months in places like travel, ticketing, crypto, gaming, things like that. And not only did we have tough comps, but those slowed a bit in December as well. And so all of this has been amplified by execution, by slower product deployment. So when you level back up to sort of merchant versus consumer, I'd say it's a play of both. And really, it underscores our need to get our experience further out into the market with our merchants, the latest integrations and consumers using biometrics and pass key and the presentment that we talked about and really leaning into things like co-marketing and loyalty programs.

Andrew, to your question on transactions for active or TPA. Ex-PSP, it was growth of about 5%, which is in line with prior quarters. Think of the consistency quarter-to-quarter in branded P2P plus improvements in Venmo. And then we continue to be encouraged by the strength on the PayPal debit card engagement front as well. So positive here. And maybe this just brings me back to talking a little bit about the focus on quality in our consumer base, and that's indicative of that, the strength in PayPal power users, the idea that we're really going for more and more depth of engagement with our customer base as a key differentiator as opposed to just simply adding folks who are not durable or we're not able to drive deeper with.

Yes. And then just coming back to the loyalty question, which I think is really most relevant to the third question you asked. We have been or are introducing competitive rewards programs for both PayPal and for Venmo. Venmo, we launched a couple of months ago, it's a program called Stash. And it's changed our onboarding. The program is about stepping up in levels as you come in, really incenting behavior around using our debit card, stepping up to credit and more rewards the more you work in and around our Venmo ecosystem. It is super cool. The onboarding process is very engaging and catchy. And we've had really good progress in our first several weeks on that. The other piece is PayPal Plus. And this is something we've been working on for over a year, really doing deep industry benchmarking. We really want this to be a very competitive program we soft launched in the U.K. a couple of months ago. And so while it's early, we're seeing some good cohorts of results come through there. And this rewards you for not just what you buy online but also what you buy off-line in sending money to friends, dabbling in crypto, things like that and again rewards but also some pretty unique characteristics around it with special drops of access to whether it's a deal or whether it's some other thing. This will be a global multiyear rollout and part of the incremental investment we talked about. It began, as I mentioned, fourth quarter for Venmo and PayPal U.K. But really, I'd say, midyear to second half is when PayPal Plus will come out for us. Early reads, super encouraging. We're just seeing nice TPV lift up across consumer cohorts that have come onboard. But again, something we're pretty excited about.

The next question comes from Harshita Rawat with Bernstein.

I think a question which is in investors' minds is whether the branded business can be turned around or is the shift has tailed. Besides the macro, you have intensified competition, e-commerce is aggregating into platforms, aggregate you a smaller share. I know you talked about presentment, experience and rewards as kind of the key areas of execution. And maybe, I guess, talk about upstream presentment. It seems like PayPal historically has been a premium offering. Competitors are catching up on value proposition. Does it all mean that transaction margin dollars and branded will come down as you focus on upstream presentment? There's a concern on price-based competition as well. And also it's hard to, at this point, to kind of narrow the range of outcomes in branded. I know you talked about Venmo and PSP profitability. Can PayPal grow earnings if branded doesn't improve from here?

Yes. So there's a lot there. And maybe I'll talk first about our approach with merchants and then I'll move over to talking about sort of the multiple ways we can win. With respect to upstream presentment, and let me just talk generally about the investments we're making. These clearly are multiyear investments. You look at these kinds of programs, and these are deep, going into co-invest with our merchants to really shift how we perform for them and, candidly, bring more value to them. And so what you see in '26, we fully expect that this kind of investment level will be consistent as we go into the few years following. And we think it's really important because we've really got to lean into the product, both in terms of having to deliver what it needs to deliver but also remain competitive, as you mentioned. Having said that, when you look at the company, I think one thing that 2025 really illustrated for us is that we do have really strong assets across the board between Venmo, PSP, debit and credit. We've really diversified our revenue growth sources as well as our margin growth sources. And so even with a low mid-single-digit branded checkout profile in 2025, we delivered very solid transaction margin dollar growth. We delivered mid-teens earnings per share growth. And so I think there continues to be a lot of ways we can win here. And again, I'm particularly excited about the acceleration in our execution and the galvanization around that, that we'll see this year with both investment and with Enrique.

The next question comes from Dan Dolev with Mizuho.

My question is kind of going back to sort of buybacks versus investing. The key question I'm asking and we're getting from a lot of investors is, why not just focus 100% on the merchant and just kind of drive as much growth as you can? What is sort of the puts and takes of that? Because you do have like this very strong two-sided network that's really powerful and global. And so obviously, everyone sees the opportunity. So what prevents you from just going all in on that one?

The most important thing we've got to focus on right now, Dan, is improving our own execution and doing that with the investment dollars we have today and, as we prove that out, increasing that or shifting that or reprioritizing and doing different things with it. And I think you've got to have a balance on that between merchants and consumers. I think one of the great things Alex did when he came in was really focus on the different cohorts of how we work in the market, which is large enterprise, small business and consumer. And having a dedicated consumer team was really important for us because we have really drilled into where and how we win, as Steve talked before, about power users versus active loyalists and just understanding our consumer cohorts better. We know that we win with consumers when we've got a great merchant product, but we also know that merchants win when we bring the value of the consumers and that whole consumer base to them as well. So we've got to focus on both. But clearly, in the investment dollars this year, it's clearly very merchant-focused.

And Dan, I would just add that this debate and question that you're raising is one that we've debated, you and I and many other investors, over time. I think it's our view that you can't win without both. The consumer, you've got to bring strength with the consumer to these merchant negotiations and discussions. That's one of the major reasons merchants want to work with us. And at the same time, you need to bring merchants to the consumers as well. So both are absolutely critical.

The next question comes from Jason Kupferberg with Wells Fargo.

So I know Enrique hasn't officially started yet, but he's obviously pretty familiar with the company. So just wondering, are all options on the table here with respect to creating shareholder value, potential asset sales, et cetera? And then can you just clarify on the branded outlook for '26, I think you said slightly positive. But does that represent a little bit of an acceleration versus where you exited Q4?

Yes. What we said on the branded outlook was that it would be slightly positive to low single digits. And when you look at January quarter-to-date, while the environment continues to be dynamic, quarter-to-date, we're running slightly better than we were in the fourth quarter. Turning to the question on asset sales, things like that. I guess what I'd say is that we are really focused on transforming the business and driving shareholder value. And right now, that means executing on our integrated strategy. We've got several unique assets. We've talked about that, Venmo, Enterprise Payments, things like that. And both are core to our value creation and are performing well and they reinforce them and they complement our portfolio. So right now, our current plan is to really drill into that. The best way to create value is to improve your sales organically, and we're going to be very focused on doing that.

Sarah, we are past the top of the hour. So I'm just going to turn it over to Jamie. Any final thoughts that you have?

Yes. So first, thank you all for your questions. Over the past 2 years, this team has laid important groundwork and built significant momentum with meaningful opportunities ahead. And at the same time, we operate in one of the most competitive tech sectors, which makes disciplined execution really important to fully realizing the competitive advantages of our scaled two-sided network. And I'm really proud of the progress our team has made, and I have strong conviction that we're on the right trajectory to accelerate growth. And again, I want to both thank Alex and welcome Enrique, who brings deep experience leading large-scale organizational transformations, along with strong innovation and operational discipline and a clear understanding of our current priorities. And his familiarity with the business and track record of execution is going to help us move faster and with greater clarity as we enter this next phase. And I look forward to supporting a smooth transition and sustaining our momentum. So thank you.

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