PayPal Holdings Inc (PYPL) — Q3 2024 Earnings Call Transcript

Thanks, Sarah. Welcome to PayPal's third quarter 2024 earnings call. I'm joined by CEO, Alex Chriss; and CFO, 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, and thank you to everyone for joining us this morning. PayPal had a highly productive third quarter. We made good progress on our continued transformation, while delivering strong operating and financial results. We brought multiple innovations to market, coupled with a significant new marketing campaign and are seeing encouraging early adoption. We continue to forge important partnerships with leaders in global commerce. We are early in our transformation journey, and we have a lot of work ahead to get to where we want to be. However, I'm proud of what we've been able to achieve in the last year, and it gives me conviction that we're taking the necessary steps to unlock the full potential of PayPal and Venmo over time. We've assembled a world-class leadership team, reignited innovation for our customers and are now moving with clear purpose and increased velocity. We're leaning into our competitive advantage, a two-sided network of hundreds of millions of consumers and tens of millions of merchants around the world to evolve from a set of disparate payment products and point solutions into a powerful commerce platform. As we shift from a payments company to a commerce platform, more of the world's leading commerce players have partnered with us to add value for our mutual customers. In just over two months, we've announced partnerships with Fiserv, Adyen, Amazon, Global Payments and Shopify, and we're actively discussing more collaborations across the industry. These new and expanded relationships are a clear demonstration that our brand, innovations and momentum are resonating. Before we discuss this quarter's details, I'm excited to announce that we will host an Investor Day on February 25 in New York City. We look forward to seeing many of you in person and sharing our team's longer-term strategy, key opportunities, financial and operating targets and how we will get there. Now turning to our Q3 results. Total payment volume grew 9% to $423 billion. We delivered $7.8 billion in revenue, growing 6% on a currency neutral basis. Transaction margin dollars grew 8% to $3.7 billion and were up 6%, excluding the benefit of interest on customer balances. Our non-GAAP earnings per share increased 22% year-over-year. Importantly, this translated into significant free cash flow. We're proud of these results and have a clear plan to drive continued profitable growth over the long-term. After another strong quarter, we're raising our full year guidance for transaction margin dollars and non-GAAP earnings per share. At the same time, we're continuing to invest in areas that we believe will drive long-term profitable growth. Let me update you on our customer business strategies and the promising early results we're seeing. When I joined, it was clear that we had significant work to do to improve branded checkout. PayPal had fallen behind on innovation, and we had work to do to be more competitive, particularly on mobile devices. In January, we shared new mobile checkout experiences designed to significantly improve conversion. We've completed testing over the past few quarters and are now rolling out to customers new experiences on both desktop and mobile. These new checkout experiences are second to none. When implemented properly, the new product experiences are resulting on average in more than 100 basis points of conversion lift for vaulted checkout and up to 400 basis points of conversion uplift for one-time checkout. We're also seeing a 15% to 20% increase in Buy Now, Pay Later use. These experiences are live on close to 5% of our U.S. checkout traffic today, and we're pushing hard to get them into the hands of more of our merchants throughout the holiday shopping season and into next year. I'm proud of our team's innovation velocity as we reestablish ourselves as the best converting branded experience for consumers and merchants. Continuing in large enterprise, we're making solid progress on our initiative to price our services in a way that reflects the current value we bring to our merchants. This is now the second consecutive quarter in more than two years, that Braintree is meaningfully contributing to transaction margin dollar growth. We're having very constructive conversations with our merchants, focused on ways we can enable strategic growth opportunities that drive long-term upside for both of us. What is different today is that we now have a suite of value-added services, including payouts, risk as a service, orchestration, guest checkout and personalization capabilities that help attract new customers and convert them more effectively, in addition to world-class payment processing. We're excited about our progress here as it is key to long-term value creation. Finally, we're pleased with the initial reaction to Fastlane, which targets the 60% of e-commerce purchases made without a branded mark. Since we launched in August, we have over 1,000 merchants using Fastlane to provide a seamless experience to their customers and drive increased conversion. We've also reached a new milestone in our ability to recognize and auto-fill information for first-time Fastlane users. In the U.S., 170 million eligible customer profiles on the PayPal platform can now enjoy a seamless guest checkout, the very first time they try Fastlane. The scale of consumers who are primed to spend with PayPal puts us way ahead of other guest checkout solutions, and it is one of the reasons why so many platforms are choosing to partner with us. We can't wait to get Fastlane into the hands of more merchants, not only on Braintree and PPCP, but also through our partnerships with Fiserv, Adyen and Global Payments next year. Moving to small and medium-sized businesses. Last month, we launched PayPal Complete Payments in new geographies, including China and Hong Kong with more markets on the horizon in 2025. In the markets where PPCP is live, we're steadily converting volume from our legacy products with nearly 40% of our SMB processing and checkout volume now on this platform. What is important to remember is that many of these merchants are using PayPal for both branded and unbranded payments, an example of the benefits that come with integrated solutions. PayPal Complete Payments also allows us to work with many small and medium-sized businesses through partner platforms, including Shopify. As we announced in the quarter, PayPal is now an additional processor for Shopify Payments in the U.S. Our branded checkout solutions are now integrated into Shopify Payments, creating a single, unified experience for time-constrained business owners to drive operational efficiency. We also recently announced a partnership with Amazon to bring PayPal Checkout to SMBs offering Buy with Prime. Next year, we will expand our work together to give Prime members the option to link their Amazon and PayPal accounts so that consumers can receive Prime shipping benefits when they use PayPal, while shopping with Buy with Prime. While they will take time to realize, there is significant opportunity here and more we can do to better serve the needs of small businesses. For consumers, we're redefining our value proposition with last month's launch of PayPal Everywhere. This initiative builds on PayPal's established brand position as an online shopping powerhouse to position PayPal as the go-to solution for spending, sending and earning rewards whether online or offline. We're doing this through cashback incentives on the PayPal debit card, a marketing campaign with the goal of reintroducing our capabilities to consumers, who may never have thought about PayPal as more than an online payment option. We're starting to shift perceptions of PayPal and beginning to drive adoption of our suite of complementary products, which all drive back to branded checkout. The broader awareness and perception shift we're aiming for is not going to happen overnight. This is an area where we plan to continue to invest over time. That said, we're seeing early signs that give us confidence our strategy is working. Since we launched PayPal Everywhere, we've added more than 1 million first-time debit card users. As a reminder, we're allowing consumers to pick a cashback category of their choice each month, which is capped at $50 per month. The top three categories, customers are choosing and earning rewards for us so far are groceries, gas and restaurants. What excites me is that we're now seeing customers make daily in-person purchases with their PayPal debit card. In addition, these debit card users are now choosing PayPal branded checkout more frequently when they shop online. Early data from our existing customers shows a 5x increase in total omni spend within the first two weeks of sign-up. We plan to expand the PayPal Everywhere value proposition to Europe next year, incorporating learnings from our U.S. launch. We expect the availability of NFC capabilities will help drive further adoption and use of PayPal. With Venmo, we're making progress in executing our strategy to shift from solely a P2P service to a central part of consumers' financial lives. Our new leadership team is taking a fresh look at Venmo, and we're completely transforming and upgrading the user experience. We know that we inherited one of the strongest P2P brands and see an opportunity to prioritize innovations that unlock Venmo's value. We believe that Venmo will eventually have multiple monetization levers. In the short-term, we see two meaningful contributors. Let me unpack each of them. First is the Venmo debit card, which allows customers to spend with their balance, both online and offline. We're in the early days of driving adoption, but we're seeing encouraging trends in engagement and monetization. In the quarter, monthly active debit card accounts grew 30% yet again. This is exciting as the average revenue per account is 4 times that of all Venmo accounts. However, only 5% of Venmo active accounts are monthly active Venmo debit card users demonstrating the opportunity ahead of us. The second lever is Pay with Venmo, which provides a seamless way to pay online. The strategy with Pay with Venmo involves both consumer and merchant adoption. On the consumer side, 8% of Venmo active accounts are monthly active Pay with Venmo users, so we have room to grow. Monthly active Pay with Venmo users were up 20% in the quarter, and the average revenue per account is 3 times that of all Venmo accounts. On the merchant side, we will bundle Pay with Venmo with PayPal Checkout in our go-to-market motions to accelerate distribution. With these product improvements in place, we're now leaning into marketing for Venmo for the first time in years. We will continue to build on this foundation and obsess over consumer needs and our product to fully unlock the brand's long-term potential as a multibillion dollar franchise. I want to thank the PayPal team for their continued commitment to transforming our company and making it even stronger. We've got the right team in place and we're playing to win. With that, over to Jamie.

Thanks, Alex. Moving to Slide 7. PayPal delivered another strong quarter of results. The underlying stability and consistency of the business is encouraging, and we remain focused on advancing our transformation to drive durable, profitable growth. Change takes time, and we still have a lot of work ahead, but the team is making steady progress on top of an already solid foundation. Looking at the high-level financial results in the quarter, revenue increased 6% on both a spot and currency neutral basis. Transaction margin dollars accelerated slightly from the second quarter, in addition to a nearly 3 point benefit from interest on customer balances, branded checkout, Venmo, Braintree, and better transaction loss performance contributed to growth in the quarter. Our focus on price to value is paying off with Braintree again contributing materially to transaction margin dollars even as volume and revenue growth deliberately slows. Non-GAAP earnings per share were $1.20, representing 22% year-over-year growth. Relative to our guidance, outperformance was driven by a number of factors, including continued optimization of transaction loss, Venmo and improvements in credit. Turning to Slide 8. Our operating metrics reflect another quarter of progress. Total active accounts increased by nearly 3 million from the second quarter to 432 million. Monthly active accounts continued to show steady progress, up 2% year-over-year to 223 million with contributions from PayPal consumer accounts and Venmo. Transactions per active account, which is a trailing 12 month number were 61.4 in the third quarter, up 9%. Excluding PSP processing, transactions per active grow 5%. Moving to Slide 9. Total payment volume grew 9% on a spot and currency neutral basis to $423 billion. Looking at the breakdown by product, global branded checkout volumes grew 6% on a currency neutral basis in the third quarter, consistent with the mid-single digit growth we've seen for the last three years. Within branded checkout, we continue to see strength across large enterprise platforms, marketplaces and international merchants. As Alex mentioned, our team is hard at work to drive wider coverage of our most modern best-in-class checkout experiences. We are particularly focused on small and medium businesses and mobile, both critically important areas for us to improve our positioning. PSP processing volume grew 11% compared to 19% in the second quarter. As part of our price-to-value strategy, we are moving deliberately and making decisions that prioritize healthy, profitable growth rather than targeting a high proportion of processing volume at low or even negative margins. What this looks like in practice with some of our largest enterprise customers is often a renegotiated agreement that reduces our total share of payment processing to a more balanced level. So for example, from 95% to 75%, but with better economics and with a greater breadth of products and services. This means we are driving Braintree transaction margin dollar improvements and more strategic partnerships, but with lower volume and revenue growth. Moving to more financial detail on Slide 10. Transaction revenue grew 6% on a spot basis to $7.1 billion, driven primarily by Braintree, branded checkout and Venmo. Other value added services revenue in the quarter increased 2% to $780 million, and interest on customer balances continued to be a meaningful tailwind to OVAS, and credit revenue was under less pressure compared to the past three quarters. We have now fully lapped the actions taken last year to tighten credit underwriting and reduce on balance sheet risk. We're seeing better performance across the portfolio and have now started to modestly grow merchant originations. We'll continue to prudently manage the portfolio's exposure with the goal of sustaining our balance sheet light business model, while providing our customers with more ways to manage their cash flow, spending and borrowing needs. Transaction take rate declined by 4 basis points to 1.67% compared to a 3 basis point decline last quarter. Improvements in Braintree and Venmo monetization benefited transaction take rate. These were offset by large enterprise and marketplace growth within branded checkout, foreign exchange and faster payouts growth. Turning to transaction margin dollar growth. As I said earlier, interest on customer balances, branded checkout, Venmo and Braintree were the largest contributors. Results in the quarter continue to benefit from efforts to optimize transaction loss performance with more advanced data analytics and some transaction expense favorability. Non-transaction related operating expenses increased 3% as we continue to actively manage our cost structure while reinvesting in key growth initiatives, including marketing that was deferred from the first half of the year and the rollout of new products and initiatives like PayPal Everywhere. Non-GAAP operating income grew 18% in the quarter to $1.5 billion. Non-GAAP operating margin expanded 194 basis points to 18.8%, benefiting from transaction margin expansion as well as expense leverage. PayPal generated $1.4 billion of free cash flow in the third quarter. We completed $1.8 billion in share repurchases, bringing the total number of share repurchases over the past 12 months to approximately $5.4 billion. Finally, we ended the quarter with $16.2 billion in cash, cash equivalents and investments, and $12.4 billion in debt. Moving to guidance on Slide 11 for the fourth quarter and the full year 2024. We continue to assume a relatively consistent macroeconomic and consumer spending environment for the remainder of the year. For the fourth quarter, we expect revenue to grow by a low single-digit percentage. This is directly related to Braintree merchant negotiations and ongoing efforts to drive quality, profitable growth. As I mentioned earlier, this is a deliberate action and a continuation of the strategy we've articulated throughout the year, where we have accepted a lower near-term Braintree revenue profile in exchange for better margins as we have renegotiated agreements. As a result of these efforts, we expect lower Braintree volume and revenue growth in the fourth quarter and through 2025 before reaccelerating from the reset baseline. This is a healthy profitable trade-off for the business that benefits transaction margin dollar growth and builds stronger, more strategic relationships. We expect higher non-transaction OpEx growth in the fourth quarter as we have intentionally concentrated more of our discretionary investment spend, particularly in marketing during the back half of the year and in the holiday season. This is strategically timed to support key initiatives, including the go-to-market of new products and innovation, as well as ongoing marketing and brand campaigns for PayPal and Venmo. Due to this timing, we expect fourth quarter non-GAAP EPS to decrease by a low to mid-single digit percentage. 2024's full year non-transaction OpEx growth rate, which we now expect to increase in the low single-digit range, is a reasonable way to think about the OpEx profile for the business next year. But like this year, we expect some unevenness in any given quarter. Moving to the full year in more detail. We are raising our guidance for transaction margin dollars and non-GAAP earnings per share. This increase reflects outperformance in the third quarter as well as strategic reinvestments back into growth initiatives. We now expect 2024 non-GAAP EPS to grow in the high teens and full year transaction margin dollars to increase by a mid-single-digit percentage. We have seen steady profitable growth from our branded checkout business, and the teams are advancing our checkout initiatives. I'm encouraged by the rollout of innovation, the initial impact of our price-to-value strategy, ongoing product enhancements in areas like Venmo and P2P, and the customer response to the launch of PayPal Everywhere. As we move into the fourth quarter and beyond, we expect to continue making progress, but there are a few factors to keep in mind. Through the first three quarters of the year, growth in interest on customer balances and improvements to transaction loss were an approximately 4-point percentage benefit to transaction margin dollars. Beginning in the fourth quarter, we expect minimal benefit from growth and interest on customer balances and then a headwind beginning in 2025 due to interest rate cuts. We're also planning for some normalization in transaction losses as we roll out new products. We now expect full-year non-transaction operating expenses to increase in the low-single-digit range with ongoing cost efficiency helping to fund our strategic growth investments. As we move into next year, our focus will be on striking the right balance between investment and productivity, seeking to largely fund long-term investments through savings generated from better deployment of tech and automation. We continue to expect 2024 free cash flow of approximately $6 billion and continue to plan for $6 billion of share buyback this year. In closing, I'd like to thank the PayPal team for their ongoing dedication as we drive meaningful change to strengthen our foundation for profitable growth. We are continuing to execute and we're making good progress and we're excited to share more with you at our Investor Day in February.

Today, I am more confident than ever about our future. We have a durable and differentiated market position and a strong brand that we continue to aggressively invest in. PayPal has a massive global opportunity. We have the right team in place to harness that opportunity and we are firing on all cylinders. It's an enviable position, and we're ready to make the most of it to drive value for our customers and shareholders, as we head into the holiday season and 2025. Overall, this was a good quarter for PayPal. We are confident in our strategy and ability to execute going into the holiday season and 2025. Steve, let's go to Q&A.

Open the line, I 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. Sarah, please open the line.

Hey, guys. Thanks and nice results on gross profit in the quarter. Look, unbranded decelerated as expected. It looks like you've been able to successfully meet that with strong pricing for value. So maybe, Alex, if you could just start by touching on the customer response to the pricing changes and what you're bringing to the table? And then just maybe perhaps touch on the deceleration, again, embedded in fourth quarter margin growth along with how we should think about the exit rate into '25. Jamie, that was helpful color, but any more just in terms of the dynamics and what gives you conviction in the sustainability to the underlying trends? Thanks, guys.

Why don't I start with the second part of your question, Darrin. Good morning. And then Alex can talk about merchant response. So when we look at transaction margin dollars, as you mentioned, we're really excited about our momentum throughout 2024. And maybe I'll pause and just talk for a second about third quarter transaction margin and then talk about the comparative to fourth quarter. And what's important here is, we did have a benefit from interest income in the third quarter. It was about 3 points. But more importantly, we have really good underlying growth drivers. Branded checkout TPV was up 6%, profitably growing transaction margin. It was our second quarter with Braintree contributing nicely to transaction margin dollars growth. So just continued progress there, which has been great. And then Venmo monetization, and Alex mentioned a couple of the data points on the call that, that's really starting to move along. And it's early days, but we're starting to see that become very consistent as it rolls through transaction margin dollars. So all of that consistent trends into fourth quarter. But what we've see in fourth quarter that is a little bit different is that, number one, interest income, it's been a benefit all year, that is going to be a meaningfully lower tailwind in fourth quarter. I'm planning on less than 1 point of contribution to transaction margin dollar growth in the fourth quarter. So really relatively immaterial. And then we're also planning for transaction loss normalization as well. We're launching new products, and we also have some lower fraud recoveries just on a comparative basis. So if I pull up for fourth quarter, we're really looking at low to mid-single digit transaction margin dollar growth for the fourth quarter. Quarter's off to a good start. But the most important holiday weeks are ahead of us, but the consumer feels strong at this point.

Great. Thanks, Jamie. And Darrin, just to hit on the merchant response. I've personally been involved in a number of these conversations and I'd characterize them as very healthy and very strategic. As Jamie described in her remarks, a lot of this is us really laying out our strategy to be focused on profitable revenue growth. And sometimes that comes with a relook at our contracts and a relook at the partnership. But I’d say we're bringing more to the table now. And so the conversations we're having with these merchants is we're innovating, we're bringing Fastlane, we're bringing an ads platform. We're bringing additional value-added services that allow us to have a healthier, stronger conversation about where we're going. So it's not that all the merchants were excited to have the conversations, but they understand where we're coming from and we're bringing more to the table. And again, I feel like, as we’ve talked about, we are really focused on building durable growth levers and making sure that we have these conversations with merchants and getting back into a healthy place is a big part of that conversation.

Hi. Thank you for the data points provided. Could you share more details on what is driving the improved outlook for transaction margin dollar growth in the fourth quarter? I would also like to know what potential improvements you foresee and what excites you most as we approach 2025. I understand that some of the interest income is difficult to offset completely, but I'm interested in what signs we should look for regarding acceleration in 2025. Thank you.

Tien-Tsin, good morning. I really think it gets back to the key themes that we've been seeing all year. We've really focused on durable, profitable growth as we've set the teams up for this year. And part of that gets back to the product innovation and the deep investments we're making in our consumer experience and working with our merchants around branded checkout. The trends on branded have been very consistent throughout this year. And second, and this dovetails with what Alex was just talking about, the focus of the teams around how to really have our Braintree platform be more holistic, really looking at the holistic margin profile and really getting that to a place where we've got a much deeper breadth of value-added services with merchants. I mean, all of those things are things that again, have been growing this year, but the momentum we're seeing now and the visibility into how that continues is just, we just have more confidence and we're more constructive on that today than we were three months ago. And then, Venmo and even P2P, the PayPal peer-to-peer money transfer, those two products are really turning nicely for us. P2P has had a nice turn this year, and we're continuing to see good momentum. And then, when we look at Venmo, the actions of the team to really broaden how we bring this product to our consumers is really real and really rich. And you hear it in some of the data points Alex shared in his prepared remarks. But when you actually look at kind of the activity roll through, Venmo's just a very consistently sticky product for us. So really excited about that. And that's what I see as fourth quarter just continuation and then moving into '25 as well.

I want to emphasize what Jamie discussed regarding contracts on Braintree, which I believe is quite clear. In my earlier comments about Venmo, I mentioned the key drivers we’ve implemented from an innovation standpoint. Our Pay with Venmo is being rolled out, and our debit card is now integrated into the product. I'm very confident about the sustainable growth in this area. One aspect we may not have communicated effectively is how all the innovations we’re implementing with Fastlane, PayPal Everywhere, and the branded checkout I mentioned contribute to sustainable branded checkout growth. With PayPal Everywhere, we are beginning to see people not only accessing offline checkout but also integrating that experience back into online usage. This drives branded checkout growth. The same goes for Fastlane, where we notice increasing numbers of users who are familiar with the PayPal experience, allowing us to market to them effectively. As we approach 2025, we remain focused on the essential drivers crucial to our business, innovating in ways that matter to our customers, and fostering continued sustainable and profitable growth in transaction margin dollars into 2025 and beyond.

Yeah. And maybe, Tien-Tsin, I want to come back and just talk a little bit about interest rates because you mentioned that in your question. And I think it's probably helpful to table set on that a little bit. So we've talked about transaction margin dollar growth at 8%. When you look at transaction margin dollar growth ex-interest income, which is really a metric we look at just as much as we do the main metric because we think it really represents what we're doing operationally in the business, that measure has been 4% year-to-date this year compared to negative the last couple of years. So when we look at that, really very excited about what we're seeing there. But when we level up and talk about rates, we've had that 3 point benefit this year, fourth quarter. I expect that benefit to be relatively immaterial. The rate cuts that are assumed in the forward curve, let's just pause for a minute on that, our portfolio is about a four month duration. So it just takes time, and it will take time for any particular rate cut to flow through. But the way to think about it when you’re thinking about ‘25 is a 25 basis point rate cut is equivalent to about $40 million of transaction margin. And it depends on timing and when that happens. But if you just said, okay, we’re going to take it down by 100 basis points to 150 basis points next year, it’s about a 1 to 2 point drag on transaction margin dollar growth. So running the business ex-interest income is something we’re going to be very, very focused on, as we go forward.

Hi. Thank you very much for taking my question this morning. Now that you have a larger sample size of Fastlane acceptance in the marketplace, can you update us on the monetization strategy? Help us think through how potentially additive Fastlane take rates might be versus average unbranded volume yields?

Yeah. Let me take the rollout of Fastlane and then, Jamie, if you want to pile on with anything. We are seeing great uptake in Fastlane. I mentioned over 1,000 merchants. We also, as you've seen, are starting to bring on additional processors as part of that platform as well. And really, that is the focus of the innovation right now is improving the conversion rate in the 60% of non-consumption of a branded mark. So the majority of checkout is still guest checkout. We now have the best converting guest checkout product in the market. And so our focus right now is adoption. Our focus is ensuring we get as many processors up and running. That's important, particularly, as we start to bring large enterprises into Fastlane as well because many of them are multiprocessor and will need potentially a Braintree and an Adyen Fastlane experience as well. And so right now, again, all of our focus on Fastlane is adoption. Pricing is built in to all of our contracts. We have relationships directly with the merchants. But our focus right now has been on adoption, and we'll continue to drive that up.

Yeah. And with respect to economics and how this will flow through, we are in the midst of a lot of conversations with merchants. And all of that includes the pricing element. And we’ve got good arrangements with our partners as well. Clearly, Fastlane will take time to ramp. And as we get through the fourth quarter and through 2025, it will take time to ramp and see in the numbers.

Thanks, guys. Good morning. I wanted to ask about branded TPV growth. I'm assuming you're expecting continued stability at around 6% in Q4. I'm just wondering if the broader rollout of the new checkout experience will accelerate the branded growth in 2025? And just as part of that, I know you gave the metric that 5% of U.S. checkout traffic is on the new experience. Any sense of where that potentially goes over the next 12 months? Thanks.

Thank you, Jason. To answer the first part of your question, we are observing consistent trends in our branded checkout. Our main focus has been improving the branded checkout experience, and I'm pleased to share that we are now making significant progress in this area. We've acknowledged that we had fallen behind in terms of innovation, particularly on mobile, but I am excited about the new experiences we are launching. For instance, we've seen a 400 basis point improvement in conversion for one-time checkout and a 100 basis point improvement in vaulted checkout. Additionally, we've cut down latency in the entire experience by 45% and introduced mobile-specific features like an app switch, which has increased success rates by 10%. The success of password recovery has reached over 97% on iOS. We've essentially rebuilt the mobile payment experience, and I anticipate ongoing enhancements in branded checkout, which remains a top priority for our business. This includes our initiatives like Fastlane and PayPal Everywhere, all contributing to a positive feedback loop for branded checkout. Regarding our current statistics, we're at 5% now. It's important to note that some of our merchant integrations allow for further ramp-up. We plan to work on this throughout the holiday season and into early next year. However, for many integration patterns, merchants will need to take action. The good news is that they are now motivated to do so given the significant conversion improvements. Conversations with merchants are thriving, and they are eager to implement these new experiences after the holiday rush. We're not staying idle, and I expect the 5% growth to continue into the next quarter and carry over into 2025.

Hey, guys. Amazing results again. I wanted to ask, if it wasn't addressed already. Are you able to give us like a sneak preview of how you see '25 because from our conversations, this remains a big debate? So I appreciate it. Thank you.

Good morning, Dan. I think some of the comments that we've talked about already really help shape '25 to a degree. You start with the revenue line. When we looked at some of the very deliberate and intentional conversations we've had with Braintree merchants, I mentioned in my prepared remarks that we're seeing the impact of some of the revenue trades we're making begin to flow through the numbers in the third quarter. And that's also implicit in our fourth quarter guide as well. We expect that trend to continue through 2025 as we really shift from focusing on high portions of revenue to just more holistic, better margin contracts. Transaction margin, we've talked about a little bit that ex-interest income, really expect to see at least as favorable in 2024. One area we really haven't talked about is OpEx. And if I spend a minute on that, we do expect to see a higher proportion of OpEx in the fourth quarter than we've seen all year. And we're really reinvesting favorability back into the business. And in addition to that, we had deferred marketing expenses very deliberately from the first half into the second half. So you see that pop-up in the fourth quarter. We now expect the full year to be up low-single digits from an OpEx perspective. And when you look at 2025, that's probably the right framing and way to think about it as well. But just more balanced throughout the year in terms of how it flows through.

Let me share and elaborate on how we think about it in our business. We are highly focused on what we can control and on creating sustainable growth strategies. This is reflected in our innovations, such as branded checkout and improvements in Braintree, and the introduction of new features like Fastlane and PayPal Everywhere. These innovations are essential for our customers and provide us with long-term monetization opportunities. Our metrics concentrate on transaction margin dollars, excluding interest income, as this is a key area we can manage effectively. Over the last two years, this metric was negative, but we have now made it positive for 2024. I believe we have established a strong foundation for future growth, and I anticipate that 2025 will see further progress based on the baseline we set in 2024. The team is dedicated, and our innovations will continue to be launched in the market, positioning us in a healthy state.

And that’s part of the good thing, Dan, also about the Investor Day that we announced, that Alex announced today in late February, where we’ll have the chance to also dive more deeply into all those elements.

Hey, Alex. Hey, Jamie. Thanks for having me on here. I wanted to switch to the consumer side for a moment. Maybe talk about just the trajectory you see in monthly actives, especially given the, what you're seeing with the Venmo and the PayPal Everywhere promotion? And then just broadly speaking, maybe you could talk about just the pipeline just for products on the consumer side. It's just an area where we get a lot of questions in terms of the consumer fit? Thanks a lot, guys.

Yeah. Thanks, Andrew. First, what I'd say is, innovation is the most durable competitive advantage we have. And what you've seen for us in the last few quarters is really starting to drive innovation, both on the consumer PayPal app, not just in branded checkout, but actually putting real innovation into the app with PayPal Everywhere launch, giving consumers the opportunity to now have an offline experience, which is driving habituation back into online, an enhanced rewards platform. And then on the Venmo side, leading in with innovations that, to be honest, customers have been asking for, for years with scheduled payments and groups and adding direct deposit. And so when I think about customer growth, customer growth is going to be essential for us as we continue to lean in and want to grow the business but that comes through continuing to innovate and continuing to provide great products to our customers. So what I'm really most satisfied about, when I look back over the last year is, we have an innovation machine that's now starting to ramp up inside of the company. Our velocity is improving, while we're reducing tech debt. Our ability for our engineers to put more releases out into our consumers' hands. And we have a very, very healthy roadmap of innovation that we'll be driving to our consumers. So very excited about where we lean in over the next quarters.

Yeah. And I would just say, we've seen really steady progress in our monthly actives, both sequentially and year-over-year. And that is both the PayPal consumer and our Venmo consumers as well, also internationally. But one of the things we really haven't talked about, and I think Alex has teased in his remarks here is really PayPal Everywhere as well. And we're really excited about the launch we've had the last couple of months. We're seeing really strong adoption, really strong usage. We had more than 1 million new users since that launch. And the economics are nicely attractive on that. And it really drives habituation inflection. Just like Alex was talking about both with that core product and just the engagement with the app, the engagement with the debit card, all of those things, but also with respect to the halo effect that we see across other forms of branded spend with our products. So that's, I think, a great example of one that we're really excited about, and we'll have more of.

I know we've gone over a little bit, but Alex, any final thoughts?

Yeah. So thanks to you all, and thanks, Steve. So look, we’ve set a solid foundation to build upon, and we’re executing against our strategy. I’m very proud of our team and the momentum we’ve created for our consumers, merchants and partners. And I’m excited to deliver a solid holiday season for our customers and continue the trajectory into 2025. So take care, everyone.