PayPal Holdings, Inc. (NASDAQ:PYPL) Q4 2022 Earnings Call Transcript

Daniel Schulman : I’ll start off and maybe Gab can follow on that. And thank you for the question. So there are a number of high-margin businesses that we add on to Braintree. Braintree itself is a lower-margin business. And by the way, we’re serving the highest end of the customers that always have a lower margin structure for us. But a lot of the higher-margin businesses that we had into PayPal or things like risk-as-a-service, we’ll be introducing FX-as-a-service, payouts is a higher margin. We’re expanding Braintree into both Europe and South America, which are higher margin for us. So we expect to see unbranded, as a whole, that margin structure move up. And then as we go into the small and midsized merchant with unbranded, that obviously is a much higher margin.

PPCP, is more of a call it sort of a mass customization platform. Braintree really is a customized platform because each one of those merchants have unique needs that we need to customize for. Gab, is there anything else that you’d add?

Gabrielle Rabinovitch : Yeah. I mean, to Dan’s point, the geo mix, the merchant mix and the value-added services layer all are margin-enhancing to bring to overall. I’d also say we’ve talked about investing in the platform. And a lot of those investments that we’re making are really to allow us scale that business more efficiently over time. So each incremental piece of volume will actually cost us less to profit as a process. We’re also doing a lot on our own side in terms of how we think about processing as efficiently as possible and doing everything we can to make sure that, over time, we’re going to scale those volumes as efficiently as we can. And so I would think about it as a multiyear dynamic in terms of how we think about the progression of Braintree again, sort of as we move more out of the U.S. down into a slightly smaller merchant set overall. In addition, as we layer on the value-added services and the margin profile really does come through.

David Togut : Thanks for that. Congratulations, Dan.

Daniel Schulman: Thank you so much. Okay. Well, I think we’re a little over the top of the hour. I just want to thank everybody for your great questions. Thank you for all the e-mails that you’re sending me already. Again, we’re going to work quite closely. We’re focused on executing against our plan, and look forward to speaking to all of you again soon. Thanks again for your time. Take care. Bye-bye.

Operator: This concludes today’s conference call. You may now disconnect.