PayPal CEO plans his exit, stock rises after earnings show ‘inflection point’

The company is in the midst of cutting expenses as it refocuses on its core strengths, through a plan announced last summer. PayPal announced last week that it intended to lay off 7% of its staff as it further dialed in on its priorities.

PayPal’s revenue for the fourth quarter rose to $7.38 billion, up from $6.92 billion a year before, and in line with the FactSet consensus, which was for $7.39 billion. The company generated $357.4 billion in total payment volume, or the value of transactions processed on its platform. Analysts tracked by FactSet were anticipating $360.3 billion.

Chief Executive Dan Schulman said in the company’s earnings release that PayPal had “a transformative year” in which it “invested in our platform to better serve our customers” but also streamlined the business.

Schulman, who has been with the company since 2014 and helped usher it into a life separate from eBay Inc.
EBAY,
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plans to retire from the CEO position at the end of the year, according to a separate statement, though he will stay on the company’s board of directors.

He told MarketWatch that he wants to devote more time to his outside passions, including politics, academia, nonprofit work, travel and being with loved ones.

Schulman said he was looking to make sure the board has enough time to search for a successor and that there was also enough time for a “smooth transition.” In addition, he wants to ensure the company is in a “strong position” when he leaves.

“The results we delivered in Q4 and the guidance for Q1 and the whole year show that we’re going to have a strong 2023,” he said. “That was really important to me as well.”

Schulman called the fourth quarter “a real positive inflection point” for PayPal as its operating margin and adjusted earnings per share grew for the first time in a year.

Shares were up about 2% in after-hours trading.

For the first quarter, PayPal executives anticipate about $6.97 billion in revenue, up roughly 9% on a currency-neutral basis and up about 7.5% on a spot basis. Analysts tracked by FactSet were expecting $7 billion.

PayPal’s management anticipates $1.08 to $1.10 in adjusted earnings per share, whereas the FactSet consensus was for $1.07. Looking to the full year, executives expect about $4.87 in adjusted EPS, up about 18% from a year before, whereas they previously said to expect at least 15% growth in adjusted EPS. Analysts were projecting $4.79 a share on average.

PayPal’s management now expects 125 basis points of adjusted operating-margin expansion, compared with a prior forecast of at least 100 basis points.

The company didn’t include a 2023 revenue forecast in the earnings release.

The company conducted $4.2 billion of share repurchases during 2022, representing 82% of its free-cash flow.