By Paige Smith, Bloomberg
PayPal Holdings Inc. plans to cut costs and jobs as new Chief Executive Officer Enrique Lores seeks to turn around the payments company that’s faced stiff competition in recent years.
PayPal is seeking to realize at least $1.5 billion in savings over the next two to three years, according to a statement Tuesday. The company also reported first-quarter adjusted earnings per share of $1.34, beating the average analyst estimate of $1.27.
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Lores, who took over as CEO in March, has been starting to put his stamp on the company that’s been struggling in recent years. Last week, PayPal said it reorganized its business lines and tapped executives Frank Keller, Alexis Sowa and Jeff Pomeroy for top roles as president of checkout solutions, interim head of consumer financial services and interim lead of payment services, respectively.
In a presentation Tuesday, Lores said that in his first two months on the job, he learned of the “opportunity to simplify operations” and saw the “potential to reduce cost structure.” He also added that the firm will seek to reinvest in modernizing its technology.
“We are taking deliberate steps to sharpen our strategy, simplify our organization, and improve both our growth trajectory and cost structure by focusing our investments where we believe they will have the greatest impact,” Lores said in the statement. “I am confident in our ability to put the company on a more durable path to long-term growth.”
Some of PayPal’s fintech rivals have also been cutting jobs. Coinbase Global Inc. said Tuesday it plans to reduce its workforce by about 14%, or about 700 employees. Earlier this year, Block Inc. said it would eliminate 4,000 workers, or nearly half of its staff.
San Jose, California-based PayPal reiterated its full-year earnings guidance. PayPal expects adjusted earnings per share to post a “low-single-digit decline to slightly positive” percentage change from last year’s $5.31, according to the presentation. Transaction margin dollars — which represents how much the company earns from processing transactions after expenses — is still expected to show a “slight decline” from last year.
For the first three months of the year, transaction margin dollars rose 3% to $3.81 billion, beating the $3.67 billion consensus of Wall Street analyst estimates.
PayPal has struggled despite its storied history as a financial-technology company. It was an early entrant in the world of digital payments, but the firm has since struggled amid fierce competition in the space from companies including Stripe Inc., Adyen NV, Apple Pay and Klarna Group Plc. Former CEO Alex Chriss attempted to prioritize innovation during his nearly 2 1/2-year tenure at PayPal, but Chief Financial Officer Jamie Miller said execution had “not been what it needs to be.”
A bright spot in the first quarter was the consumer-facing business Venmo, which saw total payment volume rise 14%. PayPal’s online branded checkout volume, however, has lagged, increasing by 2% in the same period.
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