PayPal beats Q1 2024 projections as attention returns to Xoom

PayPal beats Q1 2024 projections as attention returns to Xoom

PayPal has announced its Q1 2024 results and while the company continues to be in a efficiency-focused transition year, it has reported top-line results ahead of its previous expectations. 

Having previously projected net revenue for the quarter of around $7.5bn, the company has reported a 9% YoY increase in net revenue to $7.7bn – or 10% on an FX-neutral basis. Meanwhile, total payment volume (TPV), saw a 14% increase to $403.9bn for the quarter. 

The company also saw a 17% increase in GAAP operating income to $1.2bn, while GAAP operating margin saw a 98 bps increase to 15.2%. 

This year continues to see PayPal focus on fine-tuning its products, particularly with a view to increasing volume and removing inefficiencies, as recently appointed CEO Alex Chriss looks to build a path for post-pandemic growth. However, the company is also reviewing areas of its business where it has the opportunity to increase revenue, largely focusing on segments of the business that saw reduced focus during the pandemic. As a result, this quarter saw Chriss mention the company’s remittance brand Xoom for the first time since 2020. 

With the company warning that its progression this year will not be linear, it has once again opted to provide guidance only for the next quarter. Here it is projecting YoY revenue growth of 6.5% on a spot basis and 7% on an FX-neutral basis, which would see the company report Q2 2024 revenue of around $7.8bn.

In contrast with the previous quarter, investors reacted positively to PayPal’s earnings, with the share price climbing following the publication of the results.

PayPal beats Q1 24 projections but holds off on FY estimate
PayPal quarterly net revenue, operating margin and total payment volume

Xoom sees rare focus in PayPal’s Q1 2024 earnings

This quarter’s earnings call included discussion of PayPal’s remittance brand Xoom, which was the first time in 14 quarters – since Q2 2020 – that the company has mentioned the brand in its earnings. First acquired in 2015, the brand did see early attention from PayPal, but when the pandemic prompted a sharp uplift in ecommerce sales, the company significantly reduced its focus on Xoom. 

Acknowledging that Xoom “has stagnated while similar services have gained share” over “a couple of years”, Chriss said that the “business has been on a negative revenue trajectory due to a lack of prioritisation and clarity about its value proposition”. This is reflected in the fact that the brand is the only major money transfers player to see a significant decline in average Trustpilot rating between 2021 and 2024.

PayPal mentions Xoom in earnings call for first time in 14 quarters
Mentions of "Xoom" in quarterly PayPal earnings calls, 2015-2024

In 2023 PayPal was thought to have been considering selling the brand, however Chriss has confirmed that the company is now focusing on it as one of a number of “new investments to accelerate future growth that support and strengthen [PayPal’s] strategic priorities”.

While the company did not go into granular details, Chriss highlighted that refining the product while optimising pricing would be key, acknowledging that the company had “priced ourselves out of the market in a number of different corridors”. Our own pricing data has shown that Xoom has been consistently pricing at the top end of many corridors that it operates in over the past few years. 

Saying that the company plans “to reduce the cost of cross-border transfers”, Chriss pointed to the company’s recently announced stablecoin initiative that allows customers to send lower cost remittances when they fund them with PayPal’s stablecoin PYUSD. Launched at the start of April, this sees Xoom remove the fee margin – one of two parts of the total cost of a remittance along with the FX margin – for transactions with the stablecoin. 

The company expects to see progress from its Xoom initiatives both in 2024 and beyond. While it has not provided precise numbers around Xoom, it has published its first quarterly breakdown of TPV by business segment, which includes P2P ex-Venmo, of which Xoom has “some contribution”, along with PayPal’s own P2P money transfers segment. 

This follows the first yearly breakdown of this in its FY 2023 results. Then, the TPV for this segment was shown as having contracted in both FY 2022 and FY 2023, with FX-neutral growth of -1% and -4% respectively. 

However, the quarterly results show more promising signs. While P2P ex-Venmo saw -6% YoY FX-neutral growth a year ago in Q1 2023, in Q1 2024 the segment increased by 3%, following a 1% increase in Q4 2023.

PayPal provides first quarterly TPV brand split
Quarterly share of TPV by business segment, 2023-2024

International drives TPV as cross-border remains stable

On TPV, the top-line growth of 14% was largely driven by international TPV, which increased 17% on a currency-neutral basis, fuelled in particular by Continental Europe and Asia. By contrast, US TPV increased by 12%. 

The company’s unbranded card processing segment (PSP), which largely consists of Braintree, saw the strongest TPV growth of 26%. 

However, the company saw cross-border share of TPV once again reach 12%, its fourth quarter at the figure, having previously dropped from the high teens during the pandemic.

PayPal cross-border value rises while TPV share stabilises
Quarterly cross-border value and cross-border share of total payment volume

PayPal active accounts return to growth

This quarter also saw PayPal end its only period of repeated decline in active accounts, which had been reducing quarter-on-quarter throughout 2023. In Q1 2024, however, the company saw net new active accounts increase by almost two million to reach 427 million – an increase that it says is made up of both merchant and consumer accounts.

On monthly active accounts (MAA), the metric of customers (largely PayPal and Venmo) who have completed at least one transaction in the month of measurement, the company saw a 2% YoY increase to 220 million.

Transactions per active account, meanwhile, increased 13% YoY to reach 60. However, when excluding the Braintree-focused PSP processing, this increase was 7% YoY.

These numbers suggest that PayPal’s shift to focus on higher-value accounts, rather than pure numbers of accounts, is beginning to bear fruit.

PayPal active accounts show early signs of recovery
PayPal quarterly active accounts and payment transactions per account

First Look projects begin to yield benefits

Finally, PayPal also provided an update on the collection of product updates first unveiled in its First Look event in January of this year. Largely focusing on improvements to existing products, these refinements were mainly designed to improve the company’s ecommerce offerings to increase sales by fine-tuning factors such as customer return rates and cart abandonment.

Here, while Chriss underscored that some changes will take some time to show an impact, the company has already seen some improvements. 

The company has begun early testing of its Fastlane feature, which is designed to improve the guest checkout experience. The company reports that returning Fastlane users are converting at almost 80%, while the company is seeing a low double-digit lift in guest checkout conversion. PayPal now plans to make Fastlane available in the US in H2 of this year.

Meanwhile, the company has also revamped the core PayPal app, which includes improvements to its rewards programme, and has also begun testing a “rewards-focused life cycle marketing programme” with around 20% of its app users. Here the company has seen an increase of almost 7% in weekly app logins, as well as a 4% increase in transaction margin per user.

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