PayPal Holdings Inc (PYPL) — Q1 2018 Earnings Call Transcript

Thank you, Sherrie. Good afternoon and thank you for joining us. Welcome to PayPal Holdings' earnings conference call for the first quarter 2018. Joining me today on the call are Dan Schulman, our President and CEO; John Rainey, our Chief Financial Officer and EVP Global Customer Operations; and Bill Ready, our EVP Chief Operating Officer. We're providing a slide presentation to accompany our commentary. This conference call is also being webcast and both the presentation and call are available through the Investor Relations section of our website. We will discuss some non-GAAP measures in talking about our company's performance. You can find a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. Earlier this month, we announced updated definitions of active accounts and total payment volume or TPV to capture the diversification of PayPal's products and services through strategic partnerships, new products and acquisitions. The rates of growth discussed on this call related to these metrics reflect revised results from prior year periods for comparability. We do not consider the historical impacts of the updated definitions to be material. In addition, management will make forward-looking statements that are based on our current expectations, forecasts and assumptions, and involve risks and uncertainties. These statements include our guidance for the second quarter and full year 2018. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties and other factors that could affect our results in our most recent annual report on Form 10-K, and quarterly reports on Form 10-Q filed with the SEC and available on the Investor Relations section of our website. You should not rely on any forward-looking statements. All information in this presentation is as of today's date, April 25, 2018. We expressly disclaim any obligation to update the information. With that, let me turn the call over to Dan.

Thank you, Gabrielle, and thanks everyone for joining us on today's call. I'm pleased to say that PayPal had another quarter of strong results and we are off to a great start for the year. We generated $3.69 billion of revenue in Q1, growing at 24% on a spot basis and 22% on a currency neutral basis. We delivered $829 million in non-GAAP operating income, that's up 29% year-over-year, driven by a 90 basis point increase in our non-GAAP operating margin, which was 22.5% for the quarter. As a result, we delivered $0.57 of non-GAAP EPS, up 29% year-over-year. We also had another quarter of strong customer growth and engagement. We added 8.1 million net new actives, up 35% year-over-year, bringing our total active accounts to 237 million. This strong performance was driven by continued growth of core PayPal and Venmo users and our Customer Choice initiative. Choice continues to produce strong customer activations and the year-over-year reduction in our overall churn rate. We expanded the global rollout of Choice by launching in China and nine additional countries across Southeast Asia and further expanding into Europe by launching in France, Germany, Italy and Spain. Following the addition of a record 29 million net new actives in 2017, we're pleased to see continued strength in our customer acquisition. We remain confident that net new actives for this year will be in line with the record additions we experienced last year. As our consumer base expands, the growth of merchants signing up to our platform is also accelerating. Our merchant base now totals 19 million accounts. This powerful network effect, along with continued improvements to our technology platform and enhancements in our product experiences, continues to drive increasing engagement. PayPal ended the first quarter with 34.7 transactions per active account, up once again by 8%. Our efforts to redefine our ecosystem with landmark partnerships, the introduction of new products and services, and the continued expansion of our global footprint led to strong volume growth. PayPal processed $132 billion in TPV in the quarter, up 32% on a spot basis and up 27% on a currency neutral basis. On an FX-neutral basis, our merchant services TPV grew at five times the rate of our eBay marketplaces TPV. There's no doubt that we are benefiting from the explosion of mobile and as cards find their impact on the digitization of commerce and all forms of currency. We're executing against a focused and strategic plan intended to maximize the benefits of these trends and extend our market leadership. We're clearly transforming from a payments button to an open digital payments platform. By doing so, we're redefining our relationship with partners, retailers and consumers in a much more expansive manner. We continue to grow our relationships with technology platforms and companies across the globe, as well as with card networks and issuing banks. Through these partnerships, we are able to increase our addressable market as well as accelerate the introduction of innovative payment experiences. For instance, our relationship with Visa continues to strengthen around the world as we collaborate on multiple initiatives, including tokenization and the increasing use of their services like Visa OCT for instant cash out. JP Morgan Chase added PayPal as a new category for its freedom rewards members, allowing them to earn up to 5% cash back when making PayPal purchases funded by their Chase freedom card. We introduced two new experiences with Bank of America; one enables PayPal to disperse payments on behalf of their corporate clients and another that provides customers a streamlined way to link their debit and credit cards to their PayPal accounts from their Bank of America mobile and online channels. We announced partnership agreements with CaixaBank and Bankia, two of the leading banks in Spain. CaixaBank's business customers can now seamlessly offer PayPal as a way to pay on their websites, helping Spanish SMBs participate more fully in Spain's growing e-commerce market. Bankia now enables its customers to seamlessly link their Bankia cards to their PayPal wallet and open a PayPal account from Bankia's online channels. HSBC announced a new integrated service to allow their corporate customers to make payments to beneficiaries with PayPal accounts in the UK. This partnership will be rolling out across Europe throughout 2018. And Barclays Bank, one of the largest banks in the UK, is announcing a strategic partnership with us that will enable their UK and US customers to more easily link their accounts to their PayPal wallet. US Barclays' credit card holders will soon be able to use their reward points as a funding source in their PayPal wallet. We're pleased to be working with all of our partners to roll out compelling and engaging experiences. Our financial institution partners are now experiencing, firsthand, the benefits of our joint efforts. It's exciting to see them actively encouraging their customers to link their accounts to PayPal to enrich the digital experiences available to our mutual customers. In our relationships with some of the world's largest technology platform partners like Apple, Facebook, Google and Microsoft, continue to expand and grow in the quarter. These experiences allow for PayPal to be more present in the everyday lives of our customers, driving engagement as well as introducing millions of potential new customers to the PayPal brand and value proposition. For instance, last year we announced an expanded agreement with Samsung, and I'm pleased to share that in the next few weeks, users will be able to load PayPal into Samsung Pay, enabling our mutual customers to pay with their phone at millions of retailers in the US. We also continue to innovate around our core platform capabilities. For instance, P2P has increasingly become a powerful driver of customer acquisition and engagement on our platform. We continue to see record levels of customer acquisition through P2P and Venmo as we continue to innovate and consequently differentiate the services we offer. Venmo continues to gain increasing traction as the preferred way for millennials to manage and move their money. Venmo acquired more net new actives in Q1 than in any previous quarter and processed $12.3 billion in payment volume, up over 80% versus last year. Venmo is now on a run rate to generate over $50 billion in TPV in 2018. We're making strong progress in monetizing Venmo. Pay with Venmo has deployed more than 2 million merchants across the US, with major brands such as Grubhub, Seamless and Williams-Sonoma installing dedicated Pay with Venmo buttons. We expect the deployment of a distinct Venmo button with our leading brands to accelerate throughout the year, as well as the deployment of dynamic buttons. The use of convenient instant cash out capabilities at a fee of $0.25 per transaction is dramatically accelerating across the Venmo consumer base. Overall adoption of monetized services is exceeding our original expectations. One Touch continues to set the standard for speed and simplicity for mobile checkout. We concluded the quarter with 92 million consumers using One Touch and 8.6 million merchants. We're proud that 78% of the IR-100 now use One Touch, enabling mobile checkout conversions at almost two times the industry average. In fact, the latest comp score study now states PayPal's conversion has further improved to 89%, by far the leader in mobile checkout. We processed $49 billion in mobile payment volume in the quarter, up 52% year-over-year and mobile payments now represent 37% of our total payment volume. Credit is and will continue to be a strategic part of PayPal's offering to consumers and businesses. It is an important way that we help small and midsized businesses compete, grow and thrive. I'm pleased to announce that PayPal Working Capital has now extended more than $5 billion in working capital to more than 150,000 merchants since its launch in 2013. In the quarter, we also launched new services to give our customers more flexibility in how and where they can spend, manage and move their money on the PayPal platform. As the world becomes increasingly digital, too many consumers are challenged by gaps in the current financial system to find convenient and affordable ways to manage their financial health. We recently introduced the PayPal Cash MasterCard aimed at giving greater financial flexibility to underserved and unbanked consumers in the United States. It lets card holders spend their PayPal balance at millions of physical store locations, access cash from ATMs and load their PayPal account with cash at over 20,000 retail locations. Consumers can also add to their balance via direct deposit as well as depositing checks via their mobile device. We're working closely with partners across the financial ecosystem to introduce what will be a comprehensive value proposition for the tens of millions of US consumers that currently rely on shadow banking services like check cashers and payday lenders. It is the central tenant of our mission to provide underserved consumers better access to the opportunities afforded by the digital economy and I'm very pleased that we're taking the first steps on this journey. Around the world, we continue to expand and grow our relationships and footprint. We've introduced advanced capabilities to accelerate our ability to onboard new sellers on AliExpress in order to expand the selection of products available to shoppers around the globe. We now have approximately half of all AliExpress active sellers accepting PayPal as a way to pay. In addition, we're excited to launch our partnership with BYJU in the coming months. We've now successfully moved from pilot to general availability of PayPal for domestic customers in India. We're now pleased to welcome merchants across India to offer PayPal to local consumers in India as well as to our millions of consumers around the globe. We recently announced the partnership with M-Pesa, the transformative mobile payment system in Kenya. Through our relationship, Kenyans can now seamlessly move money between their M-Pesa and PayPal accounts, removing barriers that had prevented Kenyan consumers and businesses from fully participating in the global digital economy. Kenyan consumers can now shop the millions of global businesses that accept PayPal and Kenyan businesses can sell to PayPal's consumers around the world. With almost 28 million M-Pesa customers in Kenya, we see this as a meaningful step forward in working with partners to drive the democratization of financial services. Finally, we have formalized a signed contract with eBay through July 2023 to extend our branded relationship. We're actively working with Devin Wenig and his team to deepen our relationship in ways that drive profitable growth for both companies. It's my belief that eBay and PayPal will continue to be close strategic partners for the foreseeable future and we're committed to that outcome. As we shared previously, this gradual transition in our relationship with eBay was anticipated by both parties and was outlined in the original operating agreement. Consequently, it does not change either our short or medium-term financial values. We're pleased with the opportunity to extend our strategic relationship with eBay while at the same time expand our ability to partner with some of the world's fastest-growing marketplaces. Based on numerous direct conversations, we know that our rapidly expanding two-sided network and our increasing platform capabilities are very attractive to our host of next-generation marketplaces. They're looking forward to deepening their strategic relationship with us. After a strong 2017, it's encouraging to enter 2018 with continued momentum in our strategy delivering results on multiple fronts. Our merchants, consumers, and partners will always remain at the heart of everything we do, and I'd like to extend my thanks to the entire PayPal team for their consistent dedication to our customers. We still have much to accomplish and, as always, a lot of hard work ahead, but the opportunity for us to make a real difference in the lives of so many of our customers has never been greater. And with that, I'll now turn the call over to John.

Thanks Dan. In the first quarter, we outperformed on both revenue and earnings, building on our momentum from 2017. The strength across active accounts, payment volume, and revenue demonstrates the strength of our two-sided platform. Our ability to grow operating income while expanding operating margin highlights the sustainable scalability of our model. During the quarter, we continued to invest in our strategic initiatives and at the same time delivered strong earnings growth. Before I go into detailed financial results, a few highlights for the quarter: Revenue was $3.69 billion, growing 24% on a spot basis and 22% on a currency-neutral basis. Non-GAAP EPS grew 29% to $0.57. During the quarter, we also returned $1.8 billion to shareholders, repurchasing approximately 23.6 million shares as part of our buyback program. Consistent with Q4 '17, as a result of the sale of our US consumer credit receivables portfolio to Synchrony Financial and the associated reclassification of the receivables to held for sale, there are changes to the presentation of our results. These changes reduce comparability to prior periods. Where relevant to the discussion, I'll provide normalized results to adjust for these changes. Following the closing of the transaction, which we expect to occur early Q3, the US consumer credit portfolio will no longer sit on our balance sheet. We will no longer incur any direct cost related to the charge-offs of principal or interest. This reclassification affects three areas on our income statement. First, revenue from other value-added services benefited by approximately $38 million in the quarter as a result of no longer recognizing reserves on interest receivables; second, transaction and loan losses benefited by approximately $111 million from no longer recognizing reserves on principal receivables; and third, non-transaction related expenses were negatively impacted by approximately $128 million from the recognition of incurred charge-offs on principal and interest. Turning to our financial performance in the first quarter, our total payment volume was $132 billion, up 27% on a currency-neutral basis, including US payment volume growth of 28% and international volume growth of 25%. Our merchant services volume grew 30% on a currency-neutral basis to $116 billion. Volume associated with eBay grew 6% on a currency-neutral basis to $17 billion. P2P volume, which is a component of merchant services and includes volume across core Venmo and Zelle, grew 50% to $30 billion and represented approximately 23% of total payment volume versus 20% in Q1 '17. In the first quarter, we added 8.1 million net new active accounts, ending with 237 million active accounts, representing 15% growth over Q1 last year. On the consumer side, active account growth was predominantly driven by core PayPal and Venmo, and we added nearly 900,000 merchants to our platform. The number of payment transactions per active account on a trailing 12-month basis reached 34.7, with 8.2 billion transactions occurring on our payment platform over that period. In the first quarter, transactions once again grew 25% to 2.2 billion. Revenue increased 24% on a spot basis and 22% on a currency-neutral basis to $3.69 billion. US revenue increased 26% versus Q1 '17 and international revenue increased 18% year-over-year on a currency-neutral basis. Revenue growth on a currency-neutral basis accelerated nearly 3.5% from strength in our US and APAC businesses, including our acquisition of Swift Financial. Overall, our total revenue benefited from the weaker dollar by $91 million, with $141 million of translation benefits, partially offset by $50 million of hedging losses. This $50 million hedging loss compares to a $40 million gain last year. In the first quarter, transaction revenue grew 22% and revenue from other value-added services grew 39%. Transaction revenue growth was driven by our core PayPal and Braintree businesses, while revenue from other value-added services benefited from the acquisition of Swift and from the reclassifications related to held-for-sale accounting. Adjusting for these events, other value-added services revenue grew at approximately the same rate as transaction revenues. For Q1, our transaction take rate was 2.42%, a decline of 19 basis points from the first quarter of 2017. Our total take rate was 2.78%, down 17 basis points year-over-year. Almost half of the decline in take rate is related to the $90 million headwind from hedging losses. This combined with the growth in our P2P businesses, led by Venmo, contributed to more than 75% of the transaction take rate decline, with the remainder being driven by business mix. Volume-based expenses grew 23% in Q1. Transaction expense was $1.3 billion and represented 96 basis points of TPV, a decrease of 2 basis points year-over-year. Funding mix pressure was offset by lower funding costs from growth in P2P. Transaction loss in the quarter was $243 million, or 18 basis points of TPV, an increase of 1 basis point versus the same period a year ago. This 1 basis point increase relates to the introduction of new products and services where we look to balance our risk tolerance with our growth plans. Loan losses were $62 million, or 5 basis points as a rate of TPV, down more than 50% from Q1 '17 as a result of the effect of held-for-sale accounting. For modeling purposes, we expect loan losses to be in the range of 5 basis points as a rate of TPV for the year. Transaction margin dollars grew 25% to $2.1 billion. Adjusted for the impact of held-for-sale accounting, transaction margin dollars were $2 billion, representing 16% growth versus last year. For the quarter, transaction margin as a rate was 57.1%. Adjusting for held-for-sale accounting, transaction margin was 53.6%. Non-transaction related expenses grew 22% in the quarter. Normalizing for the held-for-sale accounting adjustments, these expenses would have grown approximately 10%, resulting in 365 basis points of operating leverage. Further adjusting for our 2017 acquisitions, we would have seen non-transactional related expenses grow at 6.9% for the quarter, which is in line with our target of mid-single digit growth. After adjusting for held-for-sale accounting treatment and backing out incremental revenue and cost associated with our acquisitions from last year, these expenses increased only $0.11 for every incremental dollar of revenue. We believe that we can sustainably grow our business with this level of investment in our non-transactional related expenses, allowing us to continue to deliver operating margin expansion. In the first quarter, operating income grew 29% to $829 million on 24% top-line growth. This resulted in an operating margin of 22.5%, or 90 basis points of operating leverage. It's worth noting that this is the highest operating margin we've reported as an independent company. Adjusting for held-for-sale accounting and acquisitions, operating income grew 29% to $833 million, delivering organic margin expansion of approximately 100 basis points. Non-GAAP earnings per share grew 29% in the first quarter to $0.57. Capital expenditures were $178 million, or approximately 5% of revenue. As a result of changes from the designation of our U.S. consumer credit receivables portfolio, net new loans of $1.26 billion reduced cash flow from operations in the quarter. Prior to this change in designation, this amount would have been recognized in cash flows from investing activities. As a result, cash flow from operations in the first quarter was negative $349 million, with free cash flow of negative $527 million. But on a normalized basis, we would have recognized $733 million in free cash flow, generating approximately $0.20 of free cash flow for every dollar of revenue. We ended the quarter with cash, cash equivalents and investments of $7.8 billion. In addition, we ended the quarter with short-term borrowings of $3 billion, drawing down on our unsecured credit facility. During Q1, we returned $1.8 billion to shareholders in the form of stock repurchases. I would now like to discuss our outlook for the second quarter of 2018 and our updated guidance for the full year. For the second quarter, we expect revenue in the range of $3.78 billion to $3.83 billion, or 19% to 20% growth on a currency-neutral basis. We also expect non-GAAP earnings per share of $0.54 to $0.56, representing an 18% to 23% growth. Before I discuss full year 2018 guidance, I would like to discuss a change to our GAAP EPS outlook for the year. We now expect GAAP EPS to be within the range of $1.73 to $1.76. This updated outlook reflects a $19 million increase in our estimate for non-GAAP adjustments. Approximately two-thirds of this increase is attributable to additional stock-based compensation based on our financial outperformance. The remaining third is from a restructuring charge that we recognized in the quarter related to reductions of our global workforce and the decision to wind down TIO Networks operations, which was not in our original guidance. For the full year 2018 based on current trends, we are raising our revenue outlook by $175 million at the midpoint of our prior range. We now expect revenue between $15.2 billion and $15.4 billion, representing currency-neutral growth of 15% to 16%. We expect our sale for Synchrony of approximately $6 billion of US consumer credit receivables to close early in the third quarter. Following the completion of this sale, we will no longer recognize revenue from interest and late fees related to this portfolio. Overall, we continue to estimate a 3.5 percentage point impact to 2018 revenue growth from this transaction. We expect revenue from other value-added services to decline in the back half of 2018 relative to 2017. At the same time, transaction revenue is on track to continue growing at approximately 20%. Our full year 2018 guidance contemplates modest expansion in our non-GAAP operating margin. We continue to balance delivering operating margin expansion with reinvesting back into the business to further strengthen our platform and competitive positioning. Given our growth opportunities, we have a bias toward investing. We are also narrowing our range for non-GAAP effective tax rate and now estimated to be between 17% and 19%, and we are raising non-GAAP earnings per share to $2.31 to $2.34, representing 22% to 23% growth. To wrap up, our first quarter results position us well for another year of strong financial performance. I would like to thank all of our employees, customers, and partners for a great quarter. And with that, I will turn it over to the operator for questions.

Thanks so much. So for me, was the level of buyback that you guys executed in Q1. It looks like it was mostly 80% or more than what you bought in all of '17. So I'm curious if this is PayPal just being more opportunistic or is this sort of a signal of your capital allocation priorities, maybe shifting the buyback or you are not seeing the adequate returns on potential M&A? Any kind of comment there would be great? Thanks.

Sure, Tien-tsin. This is John. Our priorities have not changed. We still prioritize capital allocations first as investing for growth, and that can be either organically or through M&A activity, but we also believe in returning cash to shareholders. This so happens that in the first quarter we had clarity on a couple of important issues. One is tax reform. The other is the transaction that we announced with Synchrony, and that allowed us to do more than what we have done in the past. But very importantly, a strong balance sheet for us is a strong competitive advantage. It's an asset that a lot of our peers don't have, and we believe as a management team improving that cash to use to create shareholder value. You'll continue to see us allocate capital in that manner whether it's returning cash to shareholders or looking at the M&A landscape. I would not read anything into the amount of the share buyback as to suggest there are not opportunities for us to go and acquire companies. As you can appreciate, those take time to complete a deal. It's not as if you can just start something and close the transaction in the quarter. We will be measured and do what's right for PayPal and allocate capital in a manner that creates shareholder value.

Got it. Thanks for that. Just my quick follow-up then, maybe just on the - Dan listed a bunch of bank promotions. Just curious if you are funding some of these initiatives with the banks, and I'm curious what kind of early returns you might be seeing that maybe hasn't shown up in the P&L so far in Q1?

Yeah, this is Bill. Hi, Tien-tsin. So we don't disclose the details of any one of those partnerships specifically. However, what we are seeing is tremendous receptivity from our banking partners to really drive their customers into PayPal because of the great source of digital transaction growth, which is the primary place where issuers are growing right now. We are seeing really good responses from the programs that are out there, and they've been a tremendous support for us, as well as for our issuing partners. We are not committing any kind of unnatural acts to get those things to happen. In fact, our banking partners have found it very much to be in their interest to promote their customers to use PayPal. So we see that as something that is certainly indicative of the partnership, but also something we are not committing unnatural acts to make those things happen.

Hi, guys. Just wanted to ask about the move to go after the unbanked. What are some of the puts and takes on revenue and cost resulting from offering more comprehensive financial services?

Yeah, maybe I'll start off Bryan with the answer and then I'll turn it over to Bill on that. First of all, we firmly believe as a company that everyone should have access to affordable, convenient, secure, and low-cost financial services. I mean that is our vision of marketizing financial services, and we are working closely with the rest of the financial services ecosystem to do just that. Think about the partners we have in there right now, MasterCard, Wells Fargo, Bank of America, just to name some of them. What we are trying to do is not compete or replace what's going on with banks, but work with the financial system to fill in the gaps in the current system so that everyone can afford the opportunities that the digital economy is extending. If you think about the way that we are putting services into place, we are trying to be a consumer champion, providing, for instance, our PayPal Cash MasterCard with no monthly fee, no minimum, because that is being differentiated in the marketplace. The money we make from that is on transactions that occur at merchants just like we do typically. So we think that we can use technology to reimagine financial services for a mobile-first customer, providing not only a great consumer value proposition but also a great proposition from merchants and the rest of the ecosystem as we bring people into the digital economy. Bill, do you want to add anything?

Yeah, and I would just add to that to your question on what it means for us on economics. We've had some products in market for a while that give us exposure to how these products are, one, used by customers and, two, what those mean to us financially; both prepaid cards we've had in market for a while, merchant debit cards, things like that. There is no material difference in the way we would look to monetize those customers. We've also had things for the unbanked such as being a little walk-in to a retail location like CVS for example and cashing onto PayPal accounts for somebody in the unbanked or unbanked community to participate in the digital economy. We've had exposure to those things, and we don't see this as being any material difference in the way we would monetize those customers versus how we monetize across the rest of our business.

Yeah, I think that’s a good point. Look, probably the number one thing there is really a tipping point we’ve reached from a network effect perspective. We now have 237 million people on the platform. And as John mentioned, some 900,000 merchants this quarter signed up. We’ve been seeing that run rate as you have been hearing us talk about the number of merchants. There’s a great flywheel effect that happens. The other thing that I would point out is that more and more consumers are using mobile as their primary device to shop.

Okay. Helpful. And then just as a follow-up, the increase in the merchant count, is there something you guys are doing recently that's driving up merchant acceptance up to 19 million or is it just more a function of Venmo getting out more, PayPal getting out more and being kind of a separate paying entity that's got the attention of numerous additional merchants?

Yeah, I think, look, probably the number one thing there is really a tipping point that we've reached from kind of a network effect perspective and we now have 237 million people on the platform. As John mentioned, some 900,000 merchants this quarter signed up. We've been seeing that run rate. The other thing I would point out is that more and more consumers are using mobile as their primary device to shop. The real big issue for merchants with mobile is that mobile conversion with a mobile phone is typically low. These people have to add in a ton of information on that small phone factor, but with our One Touch and our conversion rate now at 89% from mobile checkout, and then One Touch is two times, maybe two times plus, the industry average. That's obviously a great thing for consumers, but an essential thing for merchants. That combination of those things, plus we are obviously adding more and more capabilities for small and midsize merchants, working capital being one, that I talked about, but we have a whole host of services that we are expanding through our platform as being just - as opposed to being just a payment button that is attracting not just consumers but an acceleration of merchants as well.

Hey guys, let me add my congrats on the strong results. Dan, just wanted to start off, there's a lot of chatter in the market around the networks Visa and MasterCard perhaps embracing their own universal checkout button, if you will. Maybe you can kind of address that as it relates to PayPal's positioning.

Yeah. Let me first address this. Our relationships with the networks could not be stronger. Just every single quarter we find more and more places where we can work together, combine their services and capabilities with our platform and offer incremental value to both merchants and consumers, and very importantly throughout their issuing partners and financial institutions. You’re seeing that through all of the partnerships that are just reflecting. As I was writing my script on just this one quarter, you've seen all of those banking partners working as Bill said very closely with us, observing firsthand the benefits that come from working hand in hand together for our mutual customers. It's been a great partnership, a strong partnership and a growing partnership. In terms of the button specifically, I think Bill can talk a little bit about that and then I have a couple of comments on them.

Sure. On the specific new news there, it was really about sort of interoperability between the paying buttons offered by the networks. We have talked for quite a while now about how we want to help power the complete move to digital buy button experiences. Not only do we have PayPal and Venmo as those widely used for digital payment forms in the world, but we are also one of the largest providers to other digital wallet forms of payment, such as Visa Checkout or MasterPass or Apple Pay and Google Pay. So we work with others. Even as we work with those others, we are seeing that our own buy buttons continue to accelerate, and so we really want to power the entire movement towards seamless digital wallet buying experiences and happy to partner those to do that. This new news around interoperability is sort of a new technical specification. However, interoperability between Visa Checkout and MasterPass and some of these existed previously; you can put a MasterCard into Visa Checkout or a Visa card into MasterPass. So there is a new technical certification there. But interoperability between those checkout forms is not meaningfully different than how we have seen those previously, and we are excited to continue working with our network partners to help them with those efforts, as well as the many ways we're partnering on how to advance digital payments.

With any one period, there are going to be seasonality or things in the business that move around. I would really point you to the full year results. We do make discretionary investments from one period to the next, but if you look at the implied guidance for our full year, it still shows us expanding margins at a nice rate. I think it's reflective of the overall progress in the business. This is, as I noticed in my prepared remarks, we had a record operating margin in the quarter. We've had four consecutive quarters of accelerating revenue growth. For the last three quarters, we've averaged 30% EPS growth and 25% growth in transactions. I’m really pleased with how the business is doing.

Thank you, Heath for that question. Thanks everybody for joining us today. We really appreciate your time. We know there's a lot going on today, and we look forward to speaking to all of you soon. Thank you.