PayPal Holdings, Inc. (PYPL) Earnings Call Transcript & Summary

For our 10:00 a.m. session, Dan, thanks for being with us and supporting us again at our conference this year.

Of course.

Before we dive in, quick housekeeping, again for folks, if you want to ask questions of Dan, send them either if you're in the room, send them via the cards that are in front of you. Aaron, over here will be picking them up periodically or alternatively. If you're online, type them into that chat function that you see on your screen. I see them on my phone right here, so I'll be looking at it periodically to integrate them in. All right. So let's jump in. Before maybe we get into some of the Q&A, Dan, are there any opening comments that you'd like to make for the group?

Well, it's great to be here in person with everybody. That's a delight. And it's always a delight to see you too, Lisa. And maybe just really quickly because I think we'll get into things in the Q&A and probably more depth. But it's obviously a really choppy time for all of us as we navigate the macroeconomic climate and the geopolitical climate. But I do think these are times when market leaders and good companies like Visa or PayPal, these are times where there are certain things we can't control, but there are a lot of things we can control. And there are a lot of advantages we have as companies. We have financial strength. We have market position. I think these are times when we can double down and actually emerge coming out of this stronger than we are coming into it and continue to grab incremental market share, grow faster than the rate of e-commerce and really set ourselves up in a way that maybe this disruption, if it hadn't happened, we couldn't have done.

Okay. Let's talk a little bit about some of the changes going on at PayPal. The past 8 months, as you highlighted, have been difficult ones for PayPal kind of coming off of the back of the pandemic. Just reflecting back what changes or areas of improvement or things that can investors expect might be different going forward?

Well, I'd start off by saying we clearly got ahead of ourselves. We looked at early trends during the pandemic as many people did, and we talked to a lot of people about this. And our assumption sets about how they would play out going forward proves to be wrong. And -- yes, look, at the end of the day, I take full accountability for that. And we have now with gabs here. We've changed the way we think about guidance philosophically. We now believe that in our guidance, we need to operate the likelihood that things get worse going forward, that they don't necessarily stabilize or get better. And when we looked at the low end of our guidance, we thought, okay, things might continue to get worse and we ought to make sure that what we are setting out is our expectation that we feel very comfortable that we can deliver or overdeliver on that. So there's a change in philosophy around how we're thinking about guidance in general. And I think that's prudent in this environment. The second thing I would say, Lisa, is there have been a lot of obituaries written about PayPal over the years. I mean, I've been here almost 8 years now. And I remember when the wireless carriers all came together, most of you will remember this in the unfortunately named ISIS joint venture. Everybody felt, well, they control the mobile phones, so they're going to control digital payments and that dropped to the waste side. You had all the merchants that were coming together in MCX, it was called. That was another thing that was going to really hurt both like Visa and PayPal going forward. You had even things like the single integrated button where that was going to be all of the networks coming together and putting a button together. And -- you know maybe ultimately better than I know, but I really haven't seen many of those buttons out there with merchants. And there have been like -- and then over like the last 6 to 12 months, I can't tell you how many times people like comparing us to Fast and to Bolt and to other companies. And the truth of the matter is through that entire period, we've grown market share from the time we IPO-ed, like this whole time, our base went from 180 million customers to 430 million customers. Our TPV has gone from 288 billion to 1.25 trillion last year, it's 4x. Our transactions went from 4.9 billion for the year, whereas last quarter, I think we did 5.1 billion in the quarter. And if you look at like free cash flow, we went from 1 point -- I think it was $1.6 billion of free cash flow when we IPO-ed, last year we did $5.4 billion in free cash flow. Every metric you look at, whether it be TPA, volumes, revenue, we went from $9 billion to $25 billion. We've executed and grown share that happened again in the first quarter. And we have a lot of advantages. We are at least 8x the placement of any other digital wallet out there with merchants. Consumers preference us maybe 10x more than the nearest person like consumer preference for us is at 60%. The next closest digital wallet is at 8%. And we're not chasing to become free cash flow positive. We're looking to grow our free cash flow from the $5 billion that it's at today. And so we have a lot of advantages that we intend to leverage. And the era of venture capital-based contra revenue for placement, I think it's over. And I think as a result, I think we doubled down on the advantages we have. We sharpen our focus, and we'll come out of this in, I think, a much better place than people probably assume right now.

Well, you just highlighted sharpening your focus and on your earnings call a couple of weeks ago, you highlighted that going forward, PayPal is going to focus on doing fewer things better. So can you bring that to life? What are the fewer things? And then also, what are you deprioritizing? So what should we just be openly recognize there's going to be less of a focus going forward as well?

Yes. Well, there are few things I talked about on the call, I probably talked about 4 things with you, and then I'll talk a little bit about what we're defocusing. We're clearly going to focus on checkout. We have a ton of advantage in checkout. We're the market leader and -- but we can do better in checkout and we will. And when we make little changes in checkout, it leads to big changes in terms of our ability to serve customers and our financial performance. I'm sure you'll ask me more about checkout later, so I don't want to dwell on that. Second thing is continue to invest in the digital wallet. Look, we want to be at the center of our consumers' financial lives. That digital wallet goes from the beginning of a shopping journey through how you pay, through tracking and post-purchase experience, all the way into how you manage and budget your overall financial life. That has got some really early traction and some very encouraging results. And that was v1.0. We're going to be all over improving the digital wallet because it's got very high engagement metrics, very high ARPA metrics, and we feel there's a lot we can do there. Third thing is continuing to invest in the infrastructure. There's basic kind of hygiene stuff like how do you assure that your 5 9s available. How do you make sure that latency in any transaction with us, moves towards 3 seconds or better. And everything around cyber as all of us who are in financial services know, we've targeted all the time and having high auth rates, low loss rates, low fraud rates all has to do with how well do you know your data and information and your ability to fight off those who would seek to create fraudulent transactions. And then we want to obviously continue to modernize our platform and get more and more efficient when we do that, reduce the number of duplicate platforms, which we're making good progress on, which leads to the fourth element, Lisa, which is we're really going to focus on creating operating leverage going forward. I think we have a ton of room. We threw a lot of headcount when the pandemic hit to meet the demands of our customers. We can be much more efficient. Our OpEx growth balloon to 18% to 20%. We think we can bring that back to pre pandemic, where we were basically in mid- to high single-digit OpEx growth. And obviously, our scale is much bigger right now. And so our ability to leverage that in unit cost improvements, whether that be in our transaction expenses or across other various suppliers is clear. And so I think our ability to create operating leverage going forward is something that we're focused on. We're focused on how do we become just a more efficient organization, delivering more product, more beautiful product into the hands of merchants and consumers. And we are defocusing our emphasis on many of the long-tail international countries where our strategy is to increase engagement, increase the ARPA because, by the way, that will also increase NNAs. But to do that, you need multiple products to be able to bring somebody in and create more engagement. And some of these long-tail countries, the regulatory environment is more difficult. It's going to cost us a lot of money to market and to do that. And we have so much that we can do in our core markets of North America, Western Europe, China, Japan, Singapore, Australia, Mexico, Brazil that we've got plenty to do there, and we can just focus our resources, and we have a lot of opportunities there.

Good. This may link to this a little bit. I like those. PayPal recently announced some restructuring. Can you talk a bit about this -- the organizational changes? And is this -- what are the goals? Is this aimed at efficiency? You have a better positioning here for growth? So talk a little bit about the restructuring that you recently announced.

Well, I'll talk about stuff that we didn't announce on the call because I can only cover so much on the call. But obviously, I believe that less is more in general. I think if you want to run faster, you have to get in better shape. You need to lose weight. You need to do the things. It doesn't mean that you're not going to run faster because you're losing weight. It means you're going to run faster as a result of it. And I think when the pandemic hit, as I mentioned, we threw a ton of headcount to handle the demand, but it wasn't in as efficient away as we were driving down pre-pandemic. So we're going to revert back to the norm where we were. I think -- there's so many places where we can be more efficient and yet deliver more going forward. We also -- and that means taking out costs, it does mean leveraging both OpEx as well as transaction expense and other parts of the income statement. But that doesn't mean that we're not investing because we want to invest more than we ever have going forward, but we can do it in a way that's just much more efficient. Second thing is we've organized now around consumer and merchant. And when you deal with like shutting down different organizations like on the far right and the far left on our platform, for advocating violence or hatred like you always have a number of death threats against me. So when you came up, I'm -- and we'll ask you just my -- No, it was good. It was just no card. Sorry, let me go back. So we've organized our whole company now around our customer segments, and we are driving end-to-end accountability around individual product managers with end-to-end accountability around what are the needs of those customers, what does our road map look like? And when I say end-to-end, that is still a risk organization, through our customer service, through our product and through our engineering. And it's a fundamental change in the way that we're approaching the market, but I think it's going to unleash a ton of potential for us to satisfy customers better than we ever have before.

Okay. So let's talk about user growth. Obviously, one of the hot topics when it comes to PayPal. You're now expecting about 10 million net new actives in 2022, realizing this is also a year where you're turning off some of the unprofitable accounts that came into the pandemic. So that's about 2%, 2.5% growth. Over the long term, this is one of the most common questions we get from investors, do you still anticipate that your user base can continue to grow, particularly now that you've narrowed the geographic focus as you mentioned?

I mean the one word answer would be yes, with an exclamation point in that one word. Of course, we can. And I think -- and I take this on ourselves. I don't know if we communicate as well as we should have in terms of this focus on engagement and ARPA. We have 429 million active accounts on our platform. It's a huge platform. And even in years where churn is constant, like -- the bottom of the funnel is really the issue in terms of growing our net new actives. The bigger you get the more that matters. Because the top of our funnel is strong and consistent. And the fact that we put on 120 million net new actives over the last couple of years, and we're letting some of these low engaged churn off as opposed to spending marketing dollars that really don't have the ROI to keep them on the platform. Engagement is what will grow our NNAs going forward. And so -- we're really excited about that focus because the more engaged the customer is, obviously, and we'll start to release more and more metrics like monthly active users and that kind of thing that you can judge our progress on that. The more people engage, obviously, the less they churn. And the more of the bottom of the funnel tightens even a little bit given the strong and consistent top of the funnel, we'll start to see our NNAs begin to take off again. The other thing I'd just point out is we are really different than a lot of companies out there that are subscriber-based companies. Subscriber-based companies, their revenue model depends on a new customer coming in because they monetize that every month with whatever that subscription rate is. For us, 30% of our customers generate 80% of our transactions. Those are our high-value customers. Those are the customers that we want to move more and more people into those categories. That will drive both revenues, it will drive ARPA, it will drive our engagement metrics and it will drive our NNAs. By the way, in those core markets that we talked about, those are huge populations in those core markets. And there's none of those core markets where we're more than 1/3 penetrated. If you average all of that much less than 1/3 penetration. So I think we have a ton of room to grow, but we need to do it smartly. We need to do it through engagement.

Good. On the topic, sorry, juggling my questions here. On the topic of high-value users, that was a good segue because I got one specifically on that topic from the room here. And also just a reminder to folks online, feel free to send them in through the chat because I can see them in front of me. You just mentioned and kudos because he had submitted the question before you just gave that stat and did have the stat right, 30% of clients driving 80% of your transactions. Can you give more color of what that client base looks like? Are they unique demographics? Is it a unique buying behavior? And when you talk about bringing others from the other 70% into that group, what's kind of -- what's required to do that?

Yes. Well, the vast majority of our highly engaged customers come to us through product experiences as opposed to direct marketing attempts. So they come in through checkout and have a good experience in that and then they tend to do more checkout. And then if they do a couple of checkouts in the first month, then they become highly engaged for us. It's those who really do won and done that are really the thing that we need to kind of most focused on that experience that gets somebody to continue to utilize us. The big place that we're putting focus on because it has some really early but very encouraging results, it's the digital wallet. So the digital wallet, which about 50% of our base has in place right now. If you remember, we just started rolling that out in October. It was fully rolled it in October. So all in, it's still pretty early days on the digital wallet. But 50% of our base has it, has installed it. We hope to get to somewhere around 60% by the end of this year. And the stats around the digital wallet are really, really encouraging. So those who use the digital wallet, their ARPA is 2x that of those customers that we have that don't use the digital wallet. Those who use the digital wallet have 25% less churn than those who don't. Think about what we were just saying about the churn numbers. You can get more people and that holds, that really bodes well for what your growth could look like going forward. Those in the digital wallet who try one incremental service, their ARPA goes up by 25%. And just to give you a sense, like we put a shopping tab in, which is really kind of now starting to work with customers and merchants together to get the right deals and offers to customers. We saw a 700% increase in leads to merchants with that. We saw a 330% increase in first-time users using our giving platform to charities. We saw a 200% increase in your favorite bill payment in terms of first-time users, but that's just scratching the surface of that. And so the more customers we can get on to the wallet, the more beautiful we can make this experience is, the more high engaged customers we will begin to see the, less churn we'll begin to see, and that will all kind of lead to a much more virtuous cycle inside our financials of our company, but really the way we serve consumers and merchants.

Well, speaking of digital wallets, Venmo monetization has certainly been a bright spot lately, reaching $900 million in revenues in 2021. So what are your priorities to maintain that revenue growth momentum in Venmo? And I would say particularly comment on the fact that because many Venmo users, including me, are also PayPal users. So how do you think about like monetizing both of the wallet simultaneously?

Yes. So we now have about 85 million active accounts on Venmo, continues to grow. It's a pretty styrene number, given it's all U.S. right now. When I'm I speak a lot at college campuses in these huge auditoriums and I always just out of curiosity ask like how many of you use Venmo? And it's like 100% of the class that raises their hands. And so it's a phenomenon for that demographic in that age group. And as you mentioned, we grew revenues by 60% in Q1. TPV was slower at 12%. I don't want to gloss over that. That was on top of 63% growth that we had a year ago. And a lot of this kind of growth comparisons are really hard because you have eBay, which is unique to us, which has been painful transitioning there but the overwhelming majority of that will be done in about 1 month and 19 days. And so -- but who's counting on that. But we've had a transition through that. And then we also have the 1099 tax issue that confused a lot of people, honestly, and we saw our MAUs dip when that happened and now they're back up where they were, but we spent a lot of time doing customer education on the 1099 tax issue as well. We're putting a ton of focus on Venmo, that digital wallet will be as robust as the PayPal wallet is. Pay with Venmo continues to experience good traction. And obviously, in the second half of this year, we'll have pay with Venmo with Amazon. Let's see how big that can be, but it's obviously a very meaningful moment. It's a meaningful moment for both Amazon and for us. It's the first new payment methodology, digital wallet that they're putting in. Business profiles continues to explore. We're putting charities on to Venmo. We're revamping both on the PayPal and the Venmo side, our credit and debit. We're going to put a lot of focus on card at point of sale. We'll probably talk about that later. So I think there's a ton of momentum. The commerce revenues of Venmo are really growing quite rapidly right now, and the team's got a lot that they're excited about.

Well, another area of diversification for PayPal is with the unbranded platform, which we didn't talk a lot about for a couple of years there when we've been really focused on the branded platforms. This is the old Braintree platform. I'm not ever sure it's really appropriate anymore to even call it that, it's really just part of PayPal. But with the recent recovery in travel and event ticketing in particular, where that platform is strong, it's gotten a lot of visibility. Can you comment on what makes Braintree unique compared to some of the other high-profile e-com oriented unbranded platforms? And how are you focused on growing that platform going forward?

Yes, sure. Well, for the first time in the first quarter, we released the process volume on Braintree. We said that it grew 61% in Q1. By the way, that was on top of 79% growth last year. So I think our way is we're a little tired of hearing like other players are growing faster than you are on this and it's not true. Like Braintree is more than holding its own unbranded processing. And you look at the client base we have, where we have the overwhelming majority of their full stack processing, Uber, Airbnb, Live Nation, DoorDash, Spotify. These are like the leading apps, some of the leading apps in the world. And we have a lot more than that, and we have a lot more verticals than even you mentioned, it's becoming much more for that platform. And that platform as we continue to modernize it and get it ready for even more and more scale. We'll continue to move down market as well. And so when somebody integrates their full stack processing into Braintree, it's a fully native integration into our most advanced tech stack, it's fully native. It basically means you're not popping in and out of the app, like sometimes you do with PayPal, you pop out and then pop back in. It's fully linear checkout across Venmo and PayPal, other APMs, alternative payment methodologies, Apple Pay, Google Pay. If you're a merchant, you get all of that in. We're doing more and more of the orchestration layer in a multi PSP environment, where we can fully orchestrate one integration into us. Higher conversion rates, higher reliability, higher auth rates, lower loss rates and really a seamless quite beautiful customer experience. And those are clients of ours that have very, very high expectations in terms of availability, in terms of feature functionality. By the way, very interestingly, we've vault billions of financial instruments inside of PayPal, billions. We're probably one of the largest in vaults in world on that. That will prove to be very valuable when we start moving into like next-gen checkout, which maybe we'll talk about at some point. But having all that data and information is a powerful asset and a competitive advantage for us.

Well, that is where we were going to go next, which is you mentioned previously, one of your top, do fewer things better initiatives is focusing on the branded -- the classic PayPal branded checkout experience. What are your areas of focus there in terms of improving that experience? And particularly put that in context from a competitive perspective, what do you think about in terms of deepening your moat relative to alternative checkouts?

Well, I think we say you do a pretty good job outlining it in your reports, actually. I steal from some of your stats, which I'll probably get a little bit wrong. But -- we have 35 million merchant accounts. It's probably at least 8x that of the next or just digital wallet. And those aren't turning, those are just continuing to grow. And look, this is a network effects business. I think the bigger you get, the more consumer accounts you have, the more merchants you have, the more valuable the network is. And like we intend to continue to double down on that. We obviously have a consumer preference. I already talked about that as well. And we, in general, have higher auth rates and lower loss rates. That combination is typically a trade-off, that is not a trade-off with us. For small businesses that accept PayPal versus others like for every 100 checkouts that come in, we will process 6 to 8 more, 6 to 8 more than competitors. That is gigantic in terms of an advantage, that we have. And that's why small merchants tend to want to accept us. And when we come on to a small merchant. We take a huge amount of share of checkout onto the PayPal button. But there are a lot of places that we can get better and need to get better. Because checkout is the PayPal like search is to Google. You never want to give up the primacy of that franchise. And there, as I mentioned, there are basic hygiene things you can do, better availability, lower latency. Some of our older tech stacks have higher latency. Every -- not even half second, but like look, just call it every half second, your conversion goes up substantially. And we've taken down latency, but we have more to go on that. Also, there is not enough in-line checkout. Again, a lot of that is legacy integrations where somebody clicks on PayPal, needs to pop out and then come back in. That just takes time, and it's not as streamlined as checkout needs to be going forward. And so we're just knocking that off one by one by one on replacing legacy code out there. Second thing is presentment, like where you presented in the page and part of what was happening with Buy Now Pay Later, hopefully, we'll talk about that later. But By Now Pay Later started to move up in the purchase stream. So instead of checkout occurring at the checkout page, it started to occur on the product page because if you buy this product, you can pay in 4 installments or whatever it may be. And so our buy now pay later, which is gaining share by leaps and bounds right now. We have 1.6 million merchants used buy now pay later. Approximately, 200,000 of them have put it upstream now, and that's helping share of checkout. And as I said upfront, the era of some of these companies using venture-based money to fund contra revenues to get placement, it's done. Like people have to become profitable. People can't continue to lose money on these things. And by the way, if those deals were profitable, we would have want them. It's that simple thing. I'm aggressive in the market, but we're the market leader. We are not going to chase after money losing deals. It's just not -- it's not the game that we're in. And -- at some point, there's money losing deals catch up to people, and they will. And so we're just going to continue to double down on placement with Buy Now Pay Later going further upstream. And then this is a ridiculous stat that I'm not thrilled with, but almost 50% of our churn, 50% comes from somebody not remembering their password and not being able to recover it. The reason it's so frustrating is, we barely use user name and password to verify who you are because all of your stuff is out on the dark web already. We know your user name and password is out on the dark web. And if that's how we verify you, we're going to have a ton of fraud on the system. And so it's the least valuable piece of information. We do about 200 data checks on every transaction to be sure who you say you are is really who you are and moving towards password-less checkout and identity and tethered identity is a really important initiative for us. And so all of those are things we're working on. And then eventually, what we're really trying to work with our biggest merchants right now is how do we take advantage of all the data and information we have in our vaults. And some people are right, telling me like, "this company has 11 million vaulted instruments," I am like, "okay, we've got billions of them." But what's important about that is for retailers, the biggest issue they have is not how can they improve conversion at checkout or make it even better at upstream. But when a consumer comes to a merchant's web page, less than 5% of them actually go off to a transaction. But imagine if we can give data and information, and we need to do this with regulators, privacy, all that kind of stuff, but allows a merchant to know who that consumer is and for them to tailor once that consumer comes on, like the offer and the web page that they're coming on to, if you can take that from 5% to 10% or 15% just obliterates the slight improvements that you're making at checkout. And nobody, nobody has the data and information at scale that we do to enable that next-gen checkout. And so we're working hard on trying to leverage that.

Well, you just we're talking about a lot of -- I think you were saying technology-related initiatives you have underway. So I'm going to use that to transition to a couple of questions just around talent and leadership within PayPal, you just recently hired a new CIO coming in from Intel. Can you talk about your talent strategy right now? Where are you looking to add on the talent side?

We're trying to recruit Ryan to come in. But so far no luck. I'm kidding. So look, we're really fortunate to be able to hire Archie Deskus from Intel to be our EVP and CIO. She is a true professional, a real adult in the room. Has seen it all and seen it all at scale. And she is in charge of our entire infrastructure, which is massive, as you can imagine, when you're doing 20 billion transactions a year, but think of all the sub transactions that go on that don't even result in a transaction. So all the infrastructure piece of it, how much are we going to move to cloud, how much will remain in data centers, all of our employee-facing infrastructure, moving us from really what was customized PayPal kind of infrastructure to more industry standard infrastructure that will just enable us to be more and more efficient and more and more reliable. So fortunate to get somebody like Archie and, of course, Archie brings in a lot of talent behind her as well. In general, though, as no surprise to anybody, there's a huge talent war going on. And it's in the valley right now. Everybody's stock price disrupted. There's a ton of talent that is up for grabs right now. People looking for like who are the stable players, who are the market leaders, who is going to merge out of this strongest going forward. And we're fortunate to be in a position where we have very strong market position, market leadership and financials to back that. And we're able to land some very good product, very good engineering talent. And that's where we're really focused right now. It doesn't mean that we don't lose some as well because, obviously, we do because we're one of the leaders in payments, and we're always targeted as a result of that. But we're able to recruit quite nicely in this environment.

Turning to culture for a minute. I remember when you took over as CEO of PayPal and went through the transition to being a public company, culture was a major agenda item on your list as you are embracing choice and the idea of PayPal being an open platform. What are your initiatives around culture now? How are you looking to evolve PayPal's culture going forward?

Well, the whole initiative around choice is a big part of who we are going forward. There is no way any 1 company can satisfy all the needs of customers without partnering with other companies in the ecosystem. Our partnership with the networks, which is probably the first initial we did was just like the beginning of our partnership together. I do around Ryan a lot, but we obviously spend a lot of time together. We spend a lot of time together with all the networks. So like how do we further those partnerships? How do we take advantage of all of the capabilities that they're putting into the marketplace? And how do we bring those into our platform to better serve customers? There are some things that Visa is doing that will make interoperability across our base, whether that be Venmo and PayPal more seamless, and we're -- we think that's a big opportunity to do more together. Working very closely with FIs right now. We're probably the biggest digital distribution channel. Most of the FIs right now. And so that will continue that culture of working with others, just because you're doing a super app doesn't mean you're doing it yourself. For the most part, we are partnering and trying to make a seamless experience in front of the consumer or a merchant, but utilizing best-of-breed capabilities, both inside and outside of PayPal. Culturally, we are -- we have very much a values-driven organization. I think my #1 constituency is my employees. I think if you have a passionate, committed, talented set of employees, that's the best recipe for future success. They will serve customers better. And if you serve customers better, satisfy regulators. And If you're satisfying customers and you're satisfying regulators, you're going to satisfy shareholders and like that idea of like how do we take care of them from their physical health to their mental health, to their financial health is a big deal. And it's why we have such high engagement scores inside the company.

All right. Keeping an eye on the clock, I'm going to transition to our wrap-up questions. I have 2 of them, but they're doozie. So let's get going -- The first one -- Let's talk about the revenue growth outlook for PayPal. So your revised outlook now has PayPal exiting 2022 at mid-teens revenue growth. But obviously, that has been a revision over the last 3 to 6 months. So what gives you confidence in this level of growth now that it's achievable and sustainable over time?

Yes. Well, we obviously have to prove it. And I think, in general, talk less, act more. So -- but just to give a sense of why we believe that. First of all, there's just kind of some basic math, and eBay does go away. And was $1.4 billion last year of pressure on us, $1.4 billion of revenue. This year, it's $725 million, almost all of that in the first half. And so as that pressure goes away -- as that pressure goes away, naturally, our growth. It's okay. Naturally, our growth will continue to accelerate. Also, we aren't lapping the same comps in the first half, like stimulus has all gone away, and it's much easier lapping that also will add to our growth rate. And we also have a ton of initiatives, we've just talked about some of them that we're focused on and even little successes in those will drive revenue growth for us. We also are winning a ton of new big customers onto our platform, whether it be full stack processing or branded checkout and we know when those are coming in as well. So we feel as good as you can feel any time you're looking at the future, but we're trying to underpromise and overdeliver.

And let me just double click in there on the international markets, in particular, understandably since a lot of your investor base is U.S. focused. We all tend to be a little bit myopic, but actually, the U.S. business performance has been very, very strong and a lot of the weakness over the last couple of quarters has actually been outside the U.S., particularly, I know you've called out in the U.K. and in China. So can you just double-click on what gives you confidence in the reacceleration or at least stabilization in those markets?

Well, again, a lot of that has been eBay as well. So -- and that will go away. Again, I think we reported like negative 5%, and it was really positive 5% ex eBay. But if you look at China, which is one of our biggest international markets. China was growing at plus 20% a couple of years ago, and it's growing at like negative 20% now and even more. And so if you normalize, it's going at negative 20%. So a lot of that is supply chain. A lot of that's COVID shutdowns in China. One of the things that -- and I have said is, we're not trying to call when that turns around. I mean like we're not in the business of doing that. But inevitably, it will turn around. Inevitably, China ports will open, supply chains will open up and that will become from a headwind on international to a tailwind. U.K., U.K. like first quarter of last year was, I forget, like 53% or something, 56% growth. They were in lockdowns, it was like the highest growth that we had seen in the U.K. So we're lapping that. But in addition, you've got supply chain issues that are going on there and the war in Ukraine, which were one of the early ones to suspend our services in Russia. That's clearly affecting our cross-border demand and supply chains in Europe as well.

Okay. All right. Final one, let's -- so understandably, I'd say, some investors may be hesitant to invest in PayPal right now after the challenges and uncertainties of the past several months. So realizing that you are talking to many of them who have been investors with PayPal in many cases, since the spin. What would you tell investors and to address them right now, like meaning why -- what's the pitch for investing in PayPal now?

I think a lot of what we talked about is the thesis behind why I feel so confident and fortunate to lead a company like PayPal. We definitely -- I said got ahead of ourselves, but it was hard to forecast accurately. Coming out of the pandemic into a post-pandemic or all as we were talking about maybe back into a pandemic world knows exactly into difficult macroeconomic conditions that are at 40-year highs, I don't need to go through all of that. And geopolitical like a war breaking out. So we tried our best to predict that, and it wasn't easy. And our results were good throughout in that we were gaining market share. But the growth of e-commerce also was slowing as well. And we don't know what that growth of e-commerce is going forward. It needs to normalize. And that's why we've kind of given our guidance at the place that we did to try to be very realistic about the state that we find ourselves from a economic, e-commerce and digital payments landscape. But we have so many advantages as our company. We have scale. We've got consumer preference. We've got an incredibly strong financially solid company with massive free cash flow. We're going to generate another $5 billion of free cash flow this year alone. And -- it's in these really difficult times that I think market leaders like us can double down on our advantages and accelerate. And we have a huge amount of focus inside the company because we know we have things to prove. And we feel like we will live up to that challenge and deliver because our customers demand that of us. And we owe that to all of you as well. And so we're ready for that, and we're quite determined.

Good. Well, thank you, and we look forward to seeing where we are 1 year from now back on the stage. All right. Thanks, Dan. Thanks a lot.

You bet. Thanks, everybody. Appreciate it.