PayPal Holdings, Inc. (NASDAQ: PYPL) Q4 2021 earnings call dated Feb. 01, 2022
Corporate Participants:
Gabrielle Rabinovitch — Senior Vice President, Corporate Finance and Investor Relations
Dan Schulman — President and Chief Executive Officer
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Analysts:
Tien-Tsin Huang — JPMorgan — Analyst
Darrin Peller — Wolfe Research — Analyst
Bryan Keane — Deutsche Bank — Analyst
Lisa Ellis — MoffettNathanson — Analyst
Jason Kupferberg — Bank of America — Analyst
David Togut — Evercore ISI — Analyst
Timothy Chiodo — Credit Suisse — Analyst
Presentation:
Operator
Good afternoon. My name is Joanna, and I’ll be your conference operator for today. At this time, I would like to welcome everyone to PayPal Holdings Earnings Conference Call for the Fourth Quarter 2021. [Operator Instructions] After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]
Thank you. I would now like to introduce your host for today’s call, Ms. Gabrielle Rabinovitch, Senior Vice President, Corporate Finance and Investor Relations. Please go ahead.
Gabrielle Rabinovitch — Senior Vice President, Corporate Finance and Investor Relations
Thank you, Joanna. Good afternoon, and thank you for joining us. Welcome to PayPal’s earnings conference call for the fourth quarter of 2021. Joining me today on the call are Dan Schulman, our President and CEO; and John Rainey, our Chief Financial Officer and EVP, Global Customer Operations. We’re providing a slide presentation to accompany our commentary. This conference call is also being webcast, and both the presentation and call are available on our Investor Relations website.
In discussing our Company’s performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. Management will make forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include our guidance for the first quarter and full-year 2022 and our medium-term outlook. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on our Investor Relations website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today’s date, February 1, 2022. We expressly disclaim any obligation to update this information.
With that, let me turn the call over to Dan.
Dan Schulman — President and Chief Executive Officer
Thanks, Gabrielle, and thanks everyone for joining us. Today, I’m going to highlight our 2021 results, but I also want to spend time discussing the opportunities and challenges we face this year. 2021 was one of the strongest years in PayPal’s history. Our revenues grew by 18% to $25.4 billion and our non-GAAP EPS grew 19% to $4.60. We surpassed $1 trillion in annual TPV for the first time in our history, ending the year with $1.25 trillion of total payment volume. We had a record 5.3 billion transactions in Q4 alone, up 21%. We added 49 million net new active accounts to exit the year with 426 million active accounts, including 34 million merchants. In the last two years, we added 122 million net new active accounts, and despite that spike in new users, our transactions per active account grew to 45 this past year, an 11% increase. And last, but not least, we generated $5.4 billion in annual free cash flow.
With all that said, 2021 was also a difficult year. It was a particularly hard year to forecast. eBay’s migration to managed payments happened faster than we anticipated. Overall, eBay put $1.4 billion of pressure on our top-line, reducing our revenue growth by 700 basis points. Ex eBay, our revenue growth was very strong, growing 29% on a spot basis for the full-year and 22% in Q4. Exogenous factors also did impact our results. Supply chain issues disproportionately impacted our cross-border volumes and our small business merchants. Inflationary pressures impacted spending within certain segments of our user base. Rising threats from COVID variants cut travel and event bookings, and the elimination of government stimulus had an impact as well.
ECommerce growth rates during the holiday season were lower than industry expectations, despite a strong two-year growth rate of almost 50%. And we are also lapping some of the strongest quarters of growth in our history. Even so we once again grew our market share and came within our revenue guidance for the quarter. 2022 is going to be a year of transformation and investment, as we transition from outsized growth driven by lockdowns during the pandemic and finalize the lapping of eBay’s managed payments transition. eBay’s transition will put an incremental $600 million of pressure on our top-line, approximately $400 million in Q1 and $200 million in Q2.
In the second half of the year, I look forward to being able to stop adjusting for eBay and letting the strength of our core results speak for themselves. Our growth ex eBay has consistently been above 20%. And our year-over-two-year growth rates have been remarkably stable, again demonstrating the underlying strength of our platform. If I take a step back to reflect, it’s clear we are in a significantly stronger position than when we entered the pandemic, with the world continuing to digitize the use of cash dissipating and the move towards omni-channel commerce accelerating.
Our vision of becoming an essential consumer financial super app across payments, basic financial services and shopping tools is more relevant than ever before. And our 10s of millions of merchants continue to look to us to provide a comprehensive platform for them to navigate the digital economy, where the lines between virtual and physical commerce are disappearing. The past two years have revealed new insights about our customers. We have seen their behaviors and expectations evolve throughout the pandemic, with corresponding impacts on the key drivers of our business model. Consequently, as John will discuss in more detail, we are shifting our emphasis more towards engagement and towards driving higher value NNAs. Consumers who are more engaged drive incremental sales for our merchants and they drive growth at much higher margins and ROI. Over time, we obviously still expect to grow our net new actives, but more in line with our pre-pandemic levels. At the same time, we fully expect engagement will increase above our current trend lines, while we accelerate revenue and EPS growth throughout the year.
Our forecast for 2022 is appropriately measured, giving — given the difficult comps in the first half in an unpredictable macroeconomic environment. We’re going to focus our energy on what we can control, including key products and go-to-market initiatives that will enable us to capture the numerous opportunities that are inherent in the secular shift to digital. At the same time, we will drive increased operating leverage in order to enter 2023 with revenues and non-GAAP EPS growing at over 20%. The underlying fundamentals of our business are strong and our team is executing to win. Last year, we launched more products and experience for our customers than any other year in our history. We integrated Honey into the new PayPal app to help consumers shop and discover deals and new brands.
We expanded our checkout capabilities to help consumers pay on their own terms, whether in store with QR codes, over time with Buy Now, Pay Later or with the emerging funding sources like cryptocurrencies or reward points. And we acquired Happy Returns to anchor our post purchase process and make returns easier and more affordable. We expect these investments will continue to drive increasing engagement. We are intently focused on taking our best-in-class checkout experiences to even greater heights. Through our investments, we are making it faster and easier to check out with some of the highest authorization rates in our history. Today, more than 70% of the top North American and European retailers, including more than 80% of the top U.S. retailers accept PayPal or Venmo at checkout. We continue to grow our market leadership in branded payments, with our average share of checkout among top merchants continuing to increase.
Last quarter, we signed new or expanded agreements with Instacart, Gap Inc., DoorDash, Adobe, Oracle and Salesforce. Buy Now, Pay Later is a perfect example of the type of investment we are making to give shoppers and retailers more reasons to engage with PayPal. Buy Now, Pay Later is available in eight markets, including with Paidy in Japan. We continue to see rapid consumer adoption with $3.2 billion of Buy Now, Pay Later TPV in Q4 alone, a $13 billion run rate with Q4 growth of over 325% year-over-year. We’ve processed 54 million loans globally since launch, with 13 million unique consumers and 1.2 million merchants using our Buy Now, Pay Later services. Venmo had a solid finish to the year, and closed out 2021 with more than $250 million of revenue in the fourth quarter, up 80% year-over-year. We are still at the beginning of our monetization journey, with Amazon implementing the option to pay with Venmo later this year. And Venmo is turning an important corner, and in Q4 helped to drive the sequential increase in our overall take rate. As always, we’ve got a lot of work ahead of us.
We are fortunate that we have so many assets to leverage in the future that is clearly moving in our direction. We have a two-sided network at scale. We are one of the most trusted brands in the world. We have tremendous financial strength with a strong balance sheet, and we anticipate generating approximately $6 billion of free cash flow in 2022. We have a seasoned and experienced team with strong relationships with customers, regulators, and policymakers around the world. I want to thank the PayPal team for all they do, for staying focused, innovating at scale, delivering more products than ever before with record platform stability and availability in a time where our payment volumes have nearly doubled over the past two years. I’m excited about building on the underlying momentum of our core business, and I know our team feels that same sense of purpose and optimism.
And with that, let me turn the call over to John.
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Thanks, Dan. I’d like to start off by thanking our customers, partners and employees for helping us deliver an outstanding year following our record-breaking performance in 2020. There are several important points that I want to discuss today. I’m going to discuss a pivot in our strategy to focus more on engagement and what that means for our net new actives going forward. I also want to discuss why we are taking a more conservative outlook for 2022 for both revenue and earnings. And lastly that we don’t believe either of these items will prevent us from achieving the revenue and earnings growth rates, along with our free cash flow objectives in the out-years of the period contemplated in our medium-term guidance.
But first, I want to spend a moment discussing our Q4 performance. 2021 certainly had its ups and downs, but when one steps back and looks at our overall performance, it was really an amazing year. TPV grew 33%, revenue grew 18%, and we generated $5.4 billion in free cash flow. We also added 49 million customer accounts, ending the year with 426 million. And our engagement metric, transactions per active account grew 11%, an acceleration of approximately 10 percentage points from 2020. Remarkably in 2021, growth on our platform, excluding eBay accelerated meaningfully on top of extraordinary performance in 2020. TPV growth accelerated more than 500 basis points to 38%, and revenue growth accelerated more than 600 basis points to 29%. Since 2019, our volumes ex eBay have nearly doubled, and overall, we’ve consistently grown volumes well ahead of industry growth rates.
We also advanced our leadership position in checkout. Since the start of the pandemic on average, our share of checkout among the largest publicly traded merchants has increased by nearly 200 basis points. Further, in the U.S., consumer adoption of our digital wallet is several times higher than the next nearest wallet. And our merchant acceptance leads all other checkout buttons by an even more sizable margin. By any measure, we are a leader in digital payments. There are only a handful of companies that generate the amount of revenue and free cash flow growth that we do annually. And we are confident that our long-term market opportunity is greater than ever. In the fourth quarter, total payment volume grew 23% to $340 billion. eBay volumes in the quarter declined 45% and represented 2.7% of total volumes versus 6% last year.
And excluding eBay, volumes grew 28% on a currency-neutral basis. Revenue in the quarter increased 13% to $6.9 billion. Revenue ex eBay grew 22%, which is two points ahead of our medium-term growth outlook. This strong performance was broad-based across Braintree, Venmo, core PayPal and our credit products. Relative to the fourth quarter of 2020, U.S. revenue grew 27% and international revenue decreased 1%. Supply chain shortages and eBay’s transition adversely impacted cross-border volumes and foreign exchange fees. Ex eBay, International revenue grew 11%. Importantly, on a currency-neutral basis, the two-year compounded growth rate for revenue in the quarter remained consistent with the fourth quarter of 2020, underscoring the strength and consistency of our business. In the fourth quarter, total take rate was 2.04% and transaction take rate was 1.88%.
Notably, both increased sequentially, reversing an approximately two-year trend of sequential take rate declines, both product mix and pricing benefited our performance. In the fourth quarter, our volume-based expense performance was strong. Transaction expense increased three basis points as a rate of TPV to 87 basis points, driven by volume mix, particularly our growth in Braintree volumes and Q4 seasonality, which increases credit card mix relative to other funding instruments.
Transaction losses improved one basis point to nine basis points, which matches the best performance we reported in our history. Credit losses were one basis point as a rate of TPV versus three basis points last year, driven by our mix of originations, portfolio performance, and $9 million in reserve releases. At the end of the quarter, our credit loss reserve coverage ratio was approximately 9%. In total, we released $312 million of reserves in 2021. Transaction margin dollars increased 6% to $3.6 billion and ex eBay grew 18%. Transaction margin as a rate declined 365 basis points to 52.3%, and our non-transaction related expenses grew 10% in the quarter.
On a non-GAAP basis, operating income was flat in comparison to last year and operating margin declined 291 basis points to 21.8%. Non-GAAP earnings per share were $1.11. We ended the year with cash, cash equivalents and investments of $16.3 billion. In addition, free cash flow increased 38% in the fourth quarter to $1.6 billion, and we repurchased $1.5 billion of stock in the quarter. I’d now like to discuss our net new accounts and provide more context for our performance and our expectations for 2022. For the quarter, our guidance contemplated generating about 12.9 million net new actives on an organic basis. We had a slower than expected finish to the year and came in below our target. There are three factors that contributed to this, which I will discuss in increasing order of magnitude.
First, the more muted end to the year for eCommerce growth, driven by both supply chain challenges,as well as pullback in spending by lower income consumers affected consumer growth. Second, in the back half of the quarter, we also changed course on some of our customer acquisition strategies, including incentive-led campaigns. And lastly and most impactful to the quarter, there were certain accounts that we disqualified or excluded from our net new active number. For context, we regularly assess our active account base to ensure the accounts are legitimate. This is particularly important during incentive campaigns that can be targets for bad actors attempting to reap the benefit from these offers without ever having an intent to be a legitimate customer on our platform. In the fourth quarter in connection with the increased use of incentive campaigns throughout 2021, we identified 4.5 million accounts that we believe were illegitimately created. This number is immaterial to our overall base of 426 million customer accounts, but it affected our ability to achieve our guidance in the quarter.
Now I want to shift to how we’re thinking about net new active accounts in 2022, which is separate and apart from the factors impacting Q4. I’m going to start with the headline here and then provide some explanation. We are evolving our customer acquisition and engagement strategy, and we now expect to add 15 million to 20 million net new customer accounts this year. In addition, we no longer believe that the 750 million medium-term account aspiration we set last year is appropriate. I’ll explain. Over the past two years, we’ve added more than 120 million customer accounts to our platform. This is without question, remarkable growth, and a complete step change from our trajectory prior to the pandemic. Our strategy for this has been two-fold, continue to add net new actives and increase the engagement of our customer base.
Last year, given the strong user growth, we pursued a strategy to retain those customers most likely to churn, as well as attract many more new customers. We also leaned into incentivized customer acquisition tactics to a much greater extent than we ever have in our history. At the same time, we’ve continued to focus on and invest in areas that deepen our engagement with our customers, particularly as we continue to add new products and services. To assess the effectiveness of these strategies, we look at the impact on customer behavior in the months that follow account creation, in essence, looking at the ROI or return on that investment spend from their expected contribution to TPV, revenue, and operating income. These programs are very successful in generating account creation, but overall, these customers have lower engagement and a higher propensity to churn and have not met our required level of return. This dynamic compounds over time is it requires increasing investment simply to keep minimally engaged users on our platform.
Similar to a lot of businesses, we have Pareto dynamic in ours, where the vast majority of our volume comes from about a third of our customer base. What this means is that unlike a subscription model, where more users equates to more revenue, in our business, that relationship is much more attenuated. In assessing our marketing effectiveness, our engagement initiatives were considerably more successful than the incentive campaigns. We successfully moved customers up the engagement continuum into higher levels of engagement throughout the year. These strategies had strong returns and over time will be important contributors to achieving our long-term revenue per user objectives.
Moving forward, we will continue to grow our users, but our focus will be on sustainable growth and driving engagement. To be very clear, this is a choice on our part. We could increase our spend and accelerate our net new active trajectory, however, we believe there are better ways to achieve our financial results. We strongly believe that we are making the right decisions in redirecting our spend toward high-value customer acquisition and engagement channels. That said, over the next 12 months, as these less engaged customers naturally roll off, it will materially reduce our quarterly net adds. Over the next couple of quarters, we plan to supplement the disclosure of net new actives with the addition of monthly active unique user and ARPU metrics. These metrics have a more meaningful correlation with our financial results, and we believe this incremental disclosure will allow you to better assess engagement on our platform and the degree to which our strategies are working.
I’d now like to discuss our financial guidance for 2022 in the context of our fourth quarter performance and the initial outlook we provided in November. Overall, revenue performance for the quarter came in about how we had expected. October was a strong month buoyed by some expected pull-forward in holiday shopping, however, the back half of the quarter was weaker than we expected. Consistent with the reported sequential decline in seasonally adjusted retail sales and consumer spending in December, we experienced a softer end to the quarter.
The impact of Omicron and the effect of inflationary prices combined with lack of stimulus is having an impact on spending and by extension, our business. This impact is most pronounced on our lower income cohorts and has continued into the first quarter. The persistence of inflationary effects on personal consumption, labor shortages, supply chain issues and weaker consumer sentiment have led us to adopt a more cautious outlook. On last quarter’s call, we preliminarily indicated high-teens revenue growth for this year, and said that if we had to pinpoint it, it would be around 18%. We have an incredible business, but we are not immune to the vagaries of the economy. Based on our more conservative stance today, we are starting the year with an expectation for revenue growth in the range of 15% to 17%.
If these issues do not improve, it could cause us to be toward the lower end of that range. Should we see improvements relative to what we’re seeing right now, it could result in being toward the upper end of that range. The environment continues to be difficult to predict, and this guidance provides our best estimate of the likely range of outcomes. In addition, as we discussed when we reported our third quarter results, our earnings growth in 2022 will be constrained by lapping the release of the credit reserves and a very low effective tax rate last year. In 2021, we released $312 million in credit reserves. This benefited operating margin by approximately 125 basis points and earnings per share by $0.21. Our effective tax rate was 10.5% last year, resulting from favorable discrete items, settlements and resolutions, and benefited earnings per share by approximately $0.33 for the year. This is compared to an estimated tax rate of 16% to 18% this year. In the aggregate, these factors totaled $0.54 of EPS pressure year-over-year and represent a 12 point headwind to earnings growth this year.
At the same time, continuing to invest in innovation and our go-to-market strategies is essential. Over the last two years, we’ve invested nearly $1 billion over and above our historical spend in areas like engineering, technology, marketing and customer support, all of which have generated tremendous returns for us. This year we’re focused on leveraging these investments, while continuing to innovate at scale, strengthening our competitive positioning and advancing our leadership in digital payments. Importantly, we expect to deliver solid leverage in our non-transaction related expenses in 2022, which will be offset by volume-based expense growth, predominantly related to our changes in our credit reserves. As a result, we expect operating margin to be in the range of 23% this year. And for the year, we expect to deliver $4.60 to $4.75 in non-GAAP earnings per share.
In the first quarter, we’re up against our hardest comps, as we grew revenue 31% and non-GAAP EPS 84% in Q1 last year. The first half of last year benefited from stimulus, stronger consumer confidence and a greater contribution from eBay. For the first quarter, we expect revenue to grow approximately 6% to $6.4 billion and non-GAAP EPS to be $0.87, which represents about a 30% decline from last year. As we progress through the year, our revenue growth will accelerate. We plan to deliver at least 20% revenue growth in the fourth quarter and exit the year at a top-line growth rate in line or ahead of our medium-term target. In addition, while the trajectory of the economy has been difficult to predict and may give rise to short-term deviations in our expected performance, over the long-term, nothing has changed as it relates to our confidence in our business and our expectations for performance beyond 2022. That said, when we laid out our medium-term outlook one year ago, underlying the assumptions was a more normalized steady state expectation for overall economic activity and consumer demand. Our medium-term targets simply did not contemplate inflation at a 40-year high and supply chain issues not seen in my lifetime. As such, 2022 is now off to a slower start than we previously anticipated and we are taking a more conservative stance on the year. We continue to believe that our revenue and earnings growth rates, as well as our free cash flow objectives are achievable in the out-years of the period contemplated in our medium-term guidance.
I want to close with these thoughts. We arguably just had one of the best years in our history when you examine our financial metrics, eclipsing $25 billion in revenue and generating almost $5.5 billion in free cash flow. By virtually any measure, we are a market leader in digital payments and we’ll continue to grow faster than the market. There are very few companies of our size with our global reach, with our growth rates and cash generation. But we are in a dynamic industry and one that is constantly evolving, even more so because of COVID and we are evolving with it, notably, our strategy as it pertains to engagement and net new actives. And even with the broad diversity of our business, we are not completely insulated from macroeconomic factors that while may be impacting short-term performance have nothing to do with the long-term intrinsic value of our business. We’re going to continue to innovate to grow to increase our relevance to customers and focus on the things that we can control to continue to create value and be a global leader in digital payments.
Thank you. I’ll turn it over to the operator for questions. Operator? Operator, we can…
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Tien-Tsin Huang from JPMorgan. Your line is now open.
Tien-Tsin Huang — JPMorgan — Analyst
Hi, thanks so much. I wanted to drill in on the NNAs again, if you don’t mind. Just what drove the decision here to focus on engagement, focusing on quality instead of growth in NNAs? Just trying to gauge your confidence when expanding ARPU as implied in the guidance both this year and I suppose in the mid-term now that the 750 million is off the table? Thanks so much.
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Sure, Tien-Tsin. I’ll start and Dan might want to jump in. Look, I’ll start with some context. We — we’re a data-driven business. And if you just look at the last year, we did almost 20 billion transactions on our platform. And each of those transactions has hundreds of signals about that transaction, what was the size of the transaction, was it — what was the price point, was it on a mobile device, it was at a repeat customer, did it happen after a P2P transaction, and that informs our strategy. And we analyze that, it informs the strategy, we measure the results, and it creates this feedback loop that we then refine and pivot our strategies as well.
And what we’ve been able to see is that when we asses the strategy around trying to retain these very low engaged users versus attempting to move people up maybe from the medium engaged user to the high engaged user group, the ladder is much more effective, it’s much more effective for us to focus on engagement. And I think it’s important to note, we are not a subscription model business, where there is a direct relationship between our net new actives and the amount of revenue. As I noted in my prepared remarks, there is a Pareto dynamic in our business, where the vast majority of our volume comes from about a third of our customers. And so we think that we need to pivot to evolve with the feedback that we’ve received and go achieve our medium-term guidance a different way than what we initially have laid out.
But importantly, there is very encouraging signs that we see around engagement, and we’ve talked about some of those. But when we, for instance, add a — provide a separate product or service for a customer and they are engaging with us in a different way, the ARPU for that customer increases appreciably. And so this is a pivot in our strategy, we think it’s appropriate for our business, but it does not mean that we don’t have confidence in our medium-term outlook as it relates to both revenue and earnings and free cash flow.
Dan Schulman — President and Chief Executive Officer
Yeah, maybe I’ll just add a couple of things onto John’s response. First of all, we did put on 122 million NNAs over the last two years, which is obviously substantially more than what our pre-pandemic levels were. And within that, there are always a number that are low engaged or have done one transaction and nothing else. And we drove some programs, incentive-based programs to see if they would reengage and then engage back with the base. And what we found is that they would do one transaction and then fall dormant again.
And so our view is spending money on lower value NNAs that are not engaged in the base becomes an increasingly expensive proposition over time and does nothing for our revenue growth. In fact, this year when we’re saying that we’re going to do 15 million to 20 million, it’s probably going to be about 20 million incremental one-and-done customers that roll off, that does nothing to our revenue, that is actually just people coming out of the base that were never engaged. Over time, we feel like our NNAs are going to revert more back to pre-pandemic, which was in the 30 million to 40 million a year range. And could that change slightly, could that be more as we go into more international penetration, we’re seeing some very encouraging signs, as John said, with a digital wallet, where if somebody adds one more service to the digital wallet, their average revenue per active goes up by 25%.
The average revenue per active of the digital wallet user is two times that of a checkout-only. And so we really feel like we are going to invest our dollars in the best way to drive our revenues and our earnings and in the most efficient way. So we have great confidence in the medium-term outlook. And this shift is one that doesn’t mean that we won’t bring on tens of millions of NNAs every quarter. It just means that we’re not going to throw marketing dollars at low value subscribers coming in, and that, as John mentioned in his remarks, is a conscientious choice that we’re making.
Tien-Tsin Huang — JPMorgan — Analyst
Yeah, that’s it. Very clear. Appreciate your thoughts.
Dan Schulman — President and Chief Executive Officer
Yeah.
Operator
Thank you. Your next question comes from the line of Darrin Peller from Wolfe Research. Your line is now open.
Darrin Peller — Wolfe Research — Analyst
Hey, thanks guys. Can you just — can you touch on the assumptions for your revenue guidance? I know your 15% to 17% is obviously lower than the prior 18% as of — expected as of a few months ago. So maybe John or Dan, if you could just touch on the magnitude of ARPU expansion or consider, and perhaps any color on the take rate or other factors, and just maybe any assumptions that might be conservative here? And also, John, just the cadence and trajectory, I know you talked about exiting the year at 20% plus growth rates, obviously, it’s great to hear, just we need a good ramp as the year progresses. So anyway, thanks guys, any color on that would be helpful?
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Sure, Darrin, you packed a lot into that one question. I’ll try to get most of it. So look, as I noted, we are adopting a more conservative stance on the year, and that’s informed a lot by what we’ve seen over the last 8 to 10 weeks in our business. And I think underlying the outlook that we have for 2022 is eCommerce growth, the consensus estimates that we see are in the kind of the 10% range. And so that’s sort of a fundamental assumption to start with. As I noted in my prepared remarks, we’ve seen weakness around spending in our lower income cohorts. And imagine for us, it’s the percentage of our user base is pretty similar to what you see just like in the U.S. overall. So it is a large percentage of our user base. And this was a cohort that certainly benefited from stimulus in prior periods, earlier this year, and we’re seeing the effects of inflationary pricing around that where there is a more elastic demand curve around that.
Certainly, with higher income cohorts, you’ve got a more inelastic demand curve and that’s a lower percentage of our base. But generally speaking, I don’t think people are going out and buying boats with Venmo, maybe they are, but this has had an impact on our business. And so when we provide that range of revenue guidance for the year, if this persists and doesn’t improve, then it’s going to be at the lower end of that range. If it improves appreciably, then it’s the upper end of that range. And so if you take the midpoint, we do have some expectation that some of the supply chain issues and inflationary pressures that we’ve seen right now improve in the back half of the year.
With respect to cadence, the first half of the year clearly is the most difficult from a year-over-year comp perspective, and most notably because of the impact that eBay has on our business. Dan talked about in his prepared remarks sort of the impact that it has $600 million in the first quarter. As we get that — I’m sorry, first half, I’m sorry, first half. As we get past that and also at the same time begin to see some of the benefit from some of our new product initiatives roll out through the year, the second half will be much better, and look, we want as much as anyone to demonstrate to all of you the power of our business. And so we are very much looking forward to the back half of the year in an exit rate that is much more in line with our medium-term guidance.
Dan Schulman — President and Chief Executive Officer
Darrin, I think also if you uncouple the headline revenue numbers from our revenue numbers ex eBay and look at it whether it would be in the fourth quarter 22% revenue growth ex eBay growing over 27% revenue growth ex eBay from a year ago. And you look at that two-year CAGR, it’s about 25% CAGR. You look in the first quarter, which is our low quarter of the year, and ex eBay, we are growing revenues 13% on top of 38% revenue growth ex eBay a year ago, add the two up, you have got a two-year CAGR of about 25% again.
So what I was saying in my remarks is that our business ex eBay is remarkably consistent and our two-year CAGRs are also remarkably consistent. And so we are lapping eBay, which goes away by the end of June as we go into the back half of the year, and we are also lapping our two strongest quarters of growth in the first and second quarter. And just as we look at the math of that and then on top of that, obviously, all the initiatives that we are doing, we see growth rates exceeding 20% plus as we exit the year. And I think if you look behind the headline numbers, you can see those numbers have maintained their strength quarter-over-quarter.
Darrin Peller — Wolfe Research — Analyst
Great, understood. Thanks guys.
Dan Schulman — President and Chief Executive Officer
Yeah.
Operator
Thank you. Your next question comes from the line of Bryan Keane from Deutsche Bank. Your line is now open.
Bryan Keane — Deutsche Bank — Analyst
Hi, guys, thanks for taking my question. I wanted to ask about the take rate, it did stop, I think a two-year decline. And just thinking about it going forward with the Venmo monetization, especially Pay with Venmo being a factor, thinking about pricing, if there is any other benefits domestically or internationally there? And then mix, P2P verse branded and Braintree, it looks like from the guide that take rate, the moderation of take rate going down also alleviates there. So just thinking about those factors, John, maybe you could help us with that?
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Sure. Well, we were pleased to see the sequential increase in take rate in the quarter versus the third quarter. And I do think it sort of underscores some of the strength in our business, particularly around pricing and also, as Dan noted, Venmo, quite excited to see that Venmo having achieved its roughly $900 million in revenue last year that it’s starting to be a contributor to take rate. And we’ve been — but we’ve been saying this for some time, we are glad to actually show the results. I don’t think it’s fair to assume though that, Bryan, that every quarter, we’re going to see a sequential increase going forward, but it’s a step in the right direction.
I think maybe a better way to think about take rate for this year is really looking at the factors that drove the year-over-year change, and, of course, year-over-year take rate declined. But if you look at that decline of 17 basis points, roughly half of that was related to eBay, and certainly that goes away as we get in to the back half of the year. The other next largest contributor, which was about five basis points — four basis points or five basis points related to that decline was a decrease in foreign exchange fees that we monetize on cross-border transactions. And so that sometimes goes up. So if you look at like the core business, there is actually a very small change in what’s happening with take rate, and so quite pleased about that. And I think it really, like when you also overlay on that, the pricing change that we made that contributed to that, I think it underscores the value proposition and how that resonates with our customer base.
We’re seeing users becoming more loyal to brand ecosystems like ours. And look, when side-by-side given the choice to choose PayPal or other wallets, more than 50% of the time, people are choosing PayPal. And so this shows the strength of our business, the ubiquity, the network effect of it and that’s translating into the effect on our take rate. And frankly, we’re just pleased to see that we don’t have some of the noise that’s been persisting in that comparison over the last couple of years and we’ll get into much cleaner compares in the back half of next year.
Dan Schulman — President and Chief Executive Officer
Yeah. And I think I’ll just expand on one part of John’s remarks. I mean, if you look at Venmo exiting the year with $250 million of revenues growing at 80% plus, I mean, as we think about Venmo revenues this year, we can see their revenue is growing another 50% plus as their average revenue per active continues to grow. And so I think when we look at a bunch of things that before were putting pressure on take rate and now we’re seeing the opposite occur. I think that obviously bodes well at least on the pressure on take rate, if not the stabilization of it.
Bryan Keane — Deutsche Bank — Analyst
Great. Thank you very much.
Dan Schulman — President and Chief Executive Officer
Yeah.
Operator
Thank you. Your next question comes from the line of Lisa Ellis from MoffettNathanson. Your line is now open.
Lisa Ellis — MoffettNathanson — Analyst
Good afternoon, guys. Thanks for taking my question. All right, well, it’s been a couple of tough quarters here coming out of the pandemic. You’ve highlighted, of course, in detail the shift from NNA growth to ARPU growth. But beyond that shift, just taking a step back, what are some of the other strategic and operational adjustments you’ve been making now over you’re making in order to adjust to this new world and reaccelerate growth as you look out later into 2022?
Dan Schulman — President and Chief Executive Officer
Lisa, there is sort of a little bit of conflation between end of pandemic and us entering into the eye of the eBay transition, which happened concurrently. So coming out of that, you’re lapping very strong growth quarters for us, and we are going into eBay and the pandemic is beginning to end, and people are conflating a lot of that, which is why I was trying to point out that the core business ex eBay has been pretty consistent as we’ve looked over the last several quarters.
And clearly, the lapping is going to have an impact, although a lessening impact in the first half of this year is until we move into the back half. I would say though the other big thing, Lisa, that we’ve talked about quite a number of times is sort of the ascendancy of digital wallets of financial super apps in the — in checkout. There have been numerous studies. JPM just put out one payments, just put one out, where you’re seeing digital wallets take increasing share at checkout. And clearly, there is no other digital wallet close to us in terms of scale, and there is overwhelming consumer preference for PayPal in those wallets. And our super app is showing extraordinarily promising early results. Now we only rolled that out fully in the middle of October across all of iOS and
Android, so we are three or four months into it. But what are we seeing, we’re seeing double the average revenue per active account when somebody uses our app versus just checkout. When somebody uses the app, they are — their propensity to churn is 25% less. The discoverability and first-time users of people coming into the app, crypto is up 40%, in-app donations are up 300%, people coming into our shopping tab is up 35%, people going from the shopping tab to merchants to shop is up over 700%. And so we are really encouraged by what we are seeing on the app. And by the way, the app, only about 50% of our base has the app right now. So it still has quite a bit of ways to go to penetrate and we want to spend marketing dollars on moving people into that app. And inside the app, like things like Bill Pay, like you and I have talked about many times, we’re seeing a 200% increase in first-time users there. We want to make sure that people can discover the services because every time they add another service, it grows ARPA by 25%.
And so we’re going to focus heavily on digital wallet. We’re going to continue to focus on checkout, because that checkout is the bread and butter of PayPal, and we have a best-in-class experience and we feel there are numerous ways. We continue to improve that. We’re going to increase Buy Now, Pay Later capabilities, which is on a tremendous role. And also move into a focused set of international markets from leveraging the LISC extension we just got in China for an incremental five years, leveraging off the Paidy acquisition in Japan, and really looking at markets like Mexico and potentially Brazil to accelerate. So a number of things that we’re very focused on.
And the final thing that I’d say that John mentioned in his script and I did in mine as well is that we think that there is the opportunity for significant increased operating leverage, utilizing our scale and having our opex growth move back more towards normalized growth that we had in pre-pandemic, which we think will help expand margins as we go forward. And that scale is clearly going to enable us to leverage improved unit economics going forward. And so those are kind of the operational changes, where we are focused and why we have such confidence that as we go through the year, you will see acceleration of revenues and earnings improving at [Phonetic] 20%.
Lisa Ellis — MoffettNathanson — Analyst
Very helpful. Thank you.
Dan Schulman — President and Chief Executive Officer
Yeah, you bet.
Operator
Thank you. Your next question comes from the line of Jason Kupferberg from Bank of America. Your line is now open.
Jason Kupferberg — Bank of America — Analyst
Thank you, guys. Appreciate it. I — so I know you said that you’re positioned to achieve the medium-term revenue and EPS targets over the last three years of the five-year guidance period. So are we to assume that you expect to be below those levels when we look at the five-year CAGR basis in its entirety? And I guess, if not, if you still think you can achieve these targets on the five-year basis, what would really drive the necessary increase in engagement? Thank you.
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Sure, Jason. It’s good to speak with you. I appreciate the clarifying question. So look when you — anytime you put out a longer range plan over multiple years, it’s rare than anyone ever assumes a business cycle in there and not that we’re exactly going through a business cycle, but we’re certainly seeing some macroeconomic pressures on our business that were not contemplated at the time that we did our guidance. So you are correct in that we have confidence that we can achieve those growth rates of 20% revenue and 22% earnings growth in the out-years beyond 2022.
But because we have not done that in the first two years of that, you are correct mathematically, that CAGR is much more — that compounded annual growth rate is much more challenging. But when you step back and you think about the core earnings power of the business, the core growth opportunities that we have, look, eCommerce is still going to grow. We’re still seeing a pull-forward around that. We’re still seeing the increase in digital payments, the primacy of the digital wallet, all of these things benefit us. And I would say even benefit us even more because of the scale and brand that we have. And so we shouldn’t conflate like changes in real disposable income of people with digitization trends which benefit our business. I would argue that our competitive positioning has never been stronger. And so we’re very focused in 2023, 2024 and 2025 and demonstrating that we can achieve those growth rates.
Jason Kupferberg — Bank of America — Analyst
Okay. Appreciate the clarification.
Operator
Thank you. Your next question comes from the line of David Togut from Evercore ISI. Your line is now open.
David Togut — Evercore ISI — Analyst
Thanks so much. This was touched on a bit earlier, but given the 2022 headwinds you’ve discussed, what are some of the structural changes you see sustaining as we enter 2023, for example, you’ve called out 20% plus expected revenue growth as you exit 2022? And then related to that, with the pivot to increase focus on growing engagement, what’s the timeline of new applications we should watch for in the expansion of the PayPal super apps?
Dan Schulman — President and Chief Executive Officer
Where to start?
John Rainey — Chief Financial Officer and Executive Vice President, Global Customer Operations
Yeah. Well, maybe I’ll start with the first part of your question, David, on some of the structural changes, and we covered this a little bit in a couple of questions. But we continue to see a movement, particularly in checkout or gravitation towards digital wallets versus other ways to pay. And, in fact, in some studies, it would suggest that PayPal is second only to debit in front of credit in terms of preference from consumers. And as I noted earlier, like you’re beginning to see more and more preference for brand ecosystems. And we think that’s only going to become more relevant as we go forward, which is part and parcel to why we’re emphasizing our digital wallet strategy so much, because when someone is using our app is using our digital wallet, they’re much more likely to be engaged with us in other parts of our ecosystem, including offline transactions. And so all of these things I think are structural changes related to the pandemic that getting the timing precisely correct on when we reach that, that pivot or that step function change is sometimes difficult. But I don’t think anyone would argue that we are continuing down that trend and it’s only been accelerated during the pandemic.
Dan Schulman — President and Chief Executive Officer
I’ll just add to it a couple of things. One, obviously, we feel like supply chain issues will work their way through. This actually is impacting quite profitable revenue streams for us like cross-border. When we look at export out of China, that’s double-digit negative and it’s typically double-digit positive for us, and that will turn its way around going forward. So we know some of these things are temporal and will change over time, but we wanted to be measured in the guidance that we put out for this year.
And on the digital wallet, we put out a ton of new functionality out there. A, we’ve just started to ramp the high-yield savings product that we’re introducing with Synchrony, that started at the end of January. We are aiming to be 100% ramped with that by the end of Q1, early Q2. We’re — have quite a number of people on the waiting list for that. And we want to really spend a lot of our efforts this year, enhancing each of those various products and services to create best-in-class value propositions around every single one of them. I think we have a really comprehensive good first step of our digital wallet. I think each of these areas can be linked better to each other, the value propositions can improve, we’ll add incremental features over time, but really our opportunity this year is to expand our app penetration because we see what happens when that occurs. And then when people are in the app introducing to more and more services because that has a tremendous amount of leverage in the business model.
David Togut — Evercore ISI — Analyst
Thank you very much.
Dan Schulman — President and Chief Executive Officer
Yeah, you bet.
Operator
And we have time for one last question from Timothy Chiodo from Credit Suisse. Your line is now open.
Timothy Chiodo — Credit Suisse — Analyst
Great. Thank you for taking the question. When we think about your revenue growth, we like to think about what Venmo could contribute, and then we like to think about what the onus is on sort of the rest of the business, if you will. I know you mentioned that Venmo did roughly $250 million in Q4, and I think it was around that $900 million for the full-year. Dan, you alluded to this earlier in terms of growth for next year, what could you tell us in terms of what is implied for next year’s or for fiscal 2022 in terms of Venmo growth and revenue monetization, and how that might look into 2023 and beyond as well?
Dan Schulman — President and Chief Executive Officer
Yeah. I think this year, we’re contemplating 50% plus revenue growth for Venmo on top of what it did this year. Obviously, they’re continuing to add incremental services. Eventually, you’re going to see Venmo have a lot of the capabilities that the PayPal super app has, because that consumer base loves Venmo or wants to live more and more of their financial life on the app. We have over 83 million people using Venmo right now in the United States. Think about that as a percentage of the population, yeah, it’s one like out of every three and a half people in the U.S. is using Venmo right now.
We obviously have plans to take that overseas. We’re going to be rolling out Pay with Venmo with Amazon, with Starbucks, with DoorDash, I mean, there are quite a number of very high-profile merchants that are going to be implementing Pay with Venmo on top of all of the things that they did last year. And so we’ve got a lot of promise yet to go as I mentioned. I feel like we are in the beginning stages of the monetization progress, team is executing extremely well against both their objectives, but really importantly, against the roadmap as well. And so I think you just continue to see Venmo grow. And by the way, when it grows, obviously, its ARPU grows, and as I mentioned in my remarks, it starts to add to our ability to grow take rates, certainly that adds to an upward pressure on take rate as opposed to a downward one.
I think that was our final question. I do want to thank everybody for all of your great questions. We really appreciate it. Realize there is a lot of information that we put out today. We want to thank you for your time as well. And we look forward to speaking with all of you soon, meeting with you in-person. And again, thank you for your time. Take care, and bye-bye.
Operator
[Operator Closing Remarks]