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PayPal released their latest quarterly
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figures before the market opened. And
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when that happened, the stock was
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actually down 3 to 4% at the time of
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making this video were actually up 1 to
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1.5%. So let's go over the earnings
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report and a couple of comments that
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were made in the earnings call I already
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covered so far. If you missed that
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video, that will be in the top right
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corner. Now for PayPal, it's important
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to note that we are not in growth mode.
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We are in profitable growth mode. Now
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profitable growth mode mean that the
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business is still growing year-over-year
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might not be growing by much but
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profitability wise transaction margin
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dollars EPS margins as a whole is
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improving each and every quarter and
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that's the most important part as of
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right now. So let's dive right into
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this. If you enjoy this type of videos
00:00:48
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description and in the pin comment. More
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on them in just a bit. So, PayPal,
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PayPal is a stock or PayPal, should I
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say, because yeah, really, if you look
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at the last 12 months, this is a stock
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that in the last 12 months basically did
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well, absolutely nothing. It's still
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down
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1.7%. Craziest thing here is that year
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to date, year to date, we're still down
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around
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23%. I mean, it was undervalued before.
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It is extremely undervalued right now.
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We're back in the 60s. were of course
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closer to $100 a couple of months ago.
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But this is a company where margins are
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improving, free cash flows are in the
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billions. They're buying back stocks
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quite a lot each and every quarter.
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PE-wise, it is very low. Of course, it
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should not be that high because this is
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not a high growth company. So, I
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understand that. But still, there is
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quite a lot of value here. But then
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again, the turnaround story in this case
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is also well taking a little bit more
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time. All right, let's start with slide
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number one here. Advancing strategic
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growth drivers. So, of course, we've
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seen that already last quarter, but we
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do have now updated numbers. So, first
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up, win at checkout scaling highest
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converting checkout experiences. So, now
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over 45% of US branded checkout traffic
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is on the new experience. 3 months ago,
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that was 25%. So, quite some growth
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there. They're also going to expand to
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Europe, more specifically the UK and
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Germany. They also said that they've
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seen over 50% pay with Venmo TPV growth
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in Q1. Then as for scale omni channel
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and grow with Venmo, building momentum
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beyond e-commerce. So they've added
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around 2 million firsttime PayPal and
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Venmo debit card users in Q1. Around 40%
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of Venmo debit card monthly active
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accounts growth in Q1 as well. and
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buying operator TPV grew by more than
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20%. As for PSP selling their strong
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suit of value added services. So this is
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again where the strategy come in right
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pricing to value which is why we're not
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seeing revenue growing as fast as
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previously expected. But the margin
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profile, the profitability profile is
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becoming better and better. Now remember
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the plan is for that to happen in 2025.
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So we could see revenue reacelerate in
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2026. So they've meaningfully increased
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transaction margin dollar growth
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contribution from PSP in Q1. They've
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launched optimized debit routing with
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Wfair and Upwork and fraud protection
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advanced with Regal Cinemas. And then as
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for the last part right here, scale next
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gen growth vector. So here we're talking
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about crypto, we're talking about
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PayUSD. And I'll talk a little bit more
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about the ads business further down the
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line. All right. So for the quarter,
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what did we have? We've had total
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revenue of
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$7.79 billion. Of course, most of it is
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coming from transaction revenue. And now
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the rest here, the blue part right here,
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that's the other value added services,
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which has to do with everything uh but
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well the payment services. And that has
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actually been increasing quite nicely
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each and every quarter. Of course, very
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very small part of the business, but
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it's always nice to see that
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reacelerate. Now if you want to see more
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of these types of things or track
00:04:30
company specific metrics well we can do
00:04:33
that here on Finchad the stock research
00:04:35
platform that does track company
00:04:37
specific metrics. So if we go here to
00:04:39
segment and KPIs when you look at the
00:04:41
financials for PayPal or any other
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company you can scroll down and look at
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the key performance indicators for
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example active accounts you can see how
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many they are how much that has grown
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yearoveryear and that would create a
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very very goodlooking chart for us. Of
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course, we can see that it has increased
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2.1% year-over-year to a record
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436 million for the quarter. The
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previous record was back here December
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2022 at
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435 million. And here as well, you can
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see that growth started to reacelerate
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in 2023 or towards the end of 2023. Now,
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of course, we can look at various other
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things where they generate the revenue
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from etc etc. number of payment
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transactions. All of that can be found
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here on Finchad. Not only that, you can
00:05:31
of course look at the transcript for
00:05:33
this earnings call or for all the other
00:05:35
earnings calls, analyst conferences,
00:05:37
etc., etc. You can listen to it and you
00:05:40
can of course generate an AI summary by
00:05:43
just one click of a button and you get
00:05:45
that right here. You can also ask it
00:05:47
specific questions about the transcript.
00:05:50
It is on a creditbased model. So, of
00:05:53
course, the more you will use it per day
00:05:55
or per month, well, you will run out of
00:05:58
credit toward the end of your month, but
00:06:00
it is very, very useful. So, as always,
00:06:03
if you want, there is a link down in the
00:06:04
description and in the pin comment.
00:06:06
You'll get 25% off for this week only.
00:06:09
The promotion is running up until
00:06:11
Thursday and then we're back to 15% off.
00:06:14
New members will get two weeks of Finch
00:06:16
Pro for free. Continuing here and
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looking at TPV growth. So total TPV
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increased by 4% year-over-year. We've
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seen a 2% increase in PSP or payment
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service providers, 8% increase in P2B
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and 4% in branded or 6% if you exclude
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leap day. Now if we look at branded
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experiences online and offline, that
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actually increased 7% year-over-year and
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Venmo increased 10%. So quite a good
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performance when you look at TPV.
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Looking at account and activity metrics,
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we've seen the active accounts which we
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can see again right here powered by
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Finchad. We can look at monthly active
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accounts that has increased 2%
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year-over-year. Number of payment
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transactions that's down 7%
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year-over-year. They're saying here
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reflecting pricetoval actions driving
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lower pre-intentry transactions which
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again was to be expected. Now, you might
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say, "Okay, so far, I mean, this quarter
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looks okay, maybe weaker than expected,
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but to be honest, no, it's not weaker
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than expected. It's just that, well, we
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were expecting a weak quarter. We were
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expecting 2025 to be the year of
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profitable growth, but very, very low
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growth. Then, looking at transaction
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margin dollars, fifth consecutive
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quarter where we've seen year-over-year
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growth. So, that has increased by 7%
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year-over-year. transaction margin at
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47.7% that has increased 274 basis
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points year-over-year. Very very good to
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see. And so all in all, what did we get?
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Revenue increase of just 1% but non-GAAP
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operating income did increase 16%.
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Non-GAAP operating margin of 20.7%
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that's up
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257 basis points year-over-year. and on
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the app EPS of $1.33 that has increased
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23% year-over-year. They also returned $
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1.5 billion via share repurchases $6
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billion on a trailing 12-month basis
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reducing weighted average shares by 7%.
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So I mean if they can continue to do
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that I believe by early 2030s this
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company will just be private. Moving on
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to the take rate. So total take rate did
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decrease to 1.87% 87% transaction take
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rate did come down as well to 1.68% 68%.
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They say here that transaction take rate
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is down six basis points driven by
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payouts and merchant mix within Brainree
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and branded checkout. International TPV
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did increase 5% on an FX neutral basis
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driven by continued growth in Europe and
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crossber TPV increased by 6% also on FX
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neutral basis driven predominantly by
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intrauropean corridors. And so looking
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at free cash flow for the quarter that
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was just under a billion dollars, they
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say here that free cash flow includes
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negative impacts from the timing between
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originating European buy now pay later
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receivables as held for sale and the
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subsequent sale of these receivables,
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changes in working capital and shifting
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a portion of annual incentive plan from
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stock to cash, which is why we're seeing
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here, of course, a 45% decrease
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yearover-year. As for guidance for next
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quarter for the full year, not much has
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changed which has been seen as a
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positive by the market especially with
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everything that's going on right now. So
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for the second quarter they expect
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transaction margin dollars to increase
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four to 5% yearover-year. Non-GAAP EPS
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to increase 9% at the midpoint and GAP
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EPS to be between 1.24 and
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1.25. As for a full year of fiscal year
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2025, transaction margin dollars, same
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thing here, four to five% year-over-year
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growth, non-GAAP EPS growing 8% at the
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midpoint, free cash flow between 6 to 7
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billion and repurchases of shares around
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$6 billion. So again, nothing much has
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changed and that has been viewed as
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something positive by the market because
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they also said that look given the
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uncertainties right now we even though
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we had a strong start of the year even
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though Q2 looks okay we want to give
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ourselves some flexibility for the
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second half of the year in case there
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are some drastic changes aka a decline
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in consumer spending e-commerce activity
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and all of that and so a couple of
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things that were mentioned during the
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earnings call PayPal debit Card TPV
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growth exceeded 100% in Q1. Users who
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adopted the PayPal debit card transacted
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nearly six times more and generated more
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than two times the average revenue per
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account compared to those who use online
00:10:48
branded checkout only. As for the PSP
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business, the PSP business remains a key
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driver of transaction margin dollar
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growth with a focus on value added
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services. That's the blue bars that
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we've seen at the start of the video.
00:11:00
Talking about the macroeconomic
00:11:02
considerations the company's monitoring
00:11:04
consumer and SMB held closely as well as
00:11:06
the potential impact of tariffs and
00:11:09
geopolitical events. PayPal recently
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expanded its ad business internationally
00:11:14
with a launch in the UK and is launching
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offsite ads which are ads informed by
00:11:19
PayPal's insight but placed outside of
00:11:22
the PayPal platform. It still is very
00:11:24
very small. I wouldn't really expect
00:11:27
that much from PayPal ads in 2025. It's
00:11:30
probably something that will affect the
00:11:32
top line and bottom line for the company
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probably starting in
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2026. An analyst at JP Morgan asked
00:11:39
about macroeconomic impacts on consumer
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and SMB held. The CEO noted consistent
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consumer behavior and opportunities in
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the buy now pay later and rewards
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program. The CFO added that charge off
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rates and delinquencies showed stability
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or improvement. Then Dolph from Mizuo
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asked the following. He inquired about
00:11:58
branded experience. TPV traction. Alex
00:12:01
Chris emphasized the success of both
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PayPal debit card adoption and its
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impact on consumer habituation. As for
00:12:07
an analyst at Barclays, they asked about
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well the impacts of tariffs on the
00:12:12
business. The CFO said was specifically
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when it comes to the China side. CFO
00:12:16
said that Chinese merchants selling into
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the US represent less than 2% of branded
00:12:21
checkout TPV. And then the last one
00:12:24
here, Bank of America. They were looking
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for insights into branded volume growth.
00:12:28
Alex Chris highlighted improvements in
00:12:30
branded checkout experiences and plans
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for European expansion. And so to
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conclude this quarter for PayPal, yes,
00:12:38
it can be painful holding this stock,
00:12:40
especially if you look at other fintech
00:12:42
stocks that are moving faster than
00:12:44
PayPal. Yes, it's true. Some others are
00:12:47
in their growth phase. PayPal not so
00:12:50
much. They're more focused right now on
00:12:52
well to be honest changing the business,
00:12:55
changing the way people interact with
00:12:56
the whole PayPal ecosystem, but they're
00:12:59
doing so in a very profitable way. So
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yes, I would say the growth story is
00:13:04
taking maybe a bit longer than what I
00:13:06
previously expected, but definitely not
00:13:08
longer than what we were told a quarter
00:13:11
or two ago. I think things are still on
00:13:13
track. Yes, the stock's reaction, the
00:13:16
stocks movement sucks for sure. I didn't
00:13:18
think we would be back in the 60s, but
00:13:20
then again, I don't control the market.
00:13:22
Alex Chris doesn't control the stock as
00:13:24
well. They can just buy back more and
00:13:26
more shares in the meantime, but I do
00:13:29
still think that this will be a
00:13:31
tripledigit stock. When? That's a very
00:13:34
good question. I remain pretty bullish
00:13:36
on the company until I get proven wrong
00:13:39
by management. But if I look at the
00:13:41
data, things are moving in the right
00:13:44
direction. So, all in all, that's about
00:13:46
it. Do share your thoughts down in the
00:13:48
comment section below and do check out
00:13:50
Think Chat for 25% off. Link is down in
00:13:53
the description and in the pin comment
00:13:54
and I'll see you all in the next one.
00:13:56
Bye-bye.
