Dan Schulman
President and Chief Executive Officer at PayPal
Thanks Gabs. Hi everyone, thanks for joining us on today's call. Well, we obviously have a lot to cover in the next hour and I want to be sure we have plenty of time for your questions, so let me jump right into my remarks. In a difficult macroeconomic environment with the overall growth of e-commerce continuing to slow, we still managed to grow our 2022 revenues by 10% FXN to $27.5 billion. We grew our TPV by 13% FXN with our branded checkout volumes growing in line with global e-commerce growth and we processed over $1.35 trillion of volume on our platform.
Our non-transaction related opex grew by 2.7% for the year, down from 20% growth last year as we operationalize the reduction of over $900 million in costs in both our transaction expense and non-transactions opex. And throughout the year, we drove 3,900 basis points of improvement in our non-GAAP EPS growth rate from negative 28% in Q1 to positive 11% in Q4. We returned $4.2 billion of capital to shareholders in the form of share repurchases, representing more than 80% of our free-cash flow, which totaled $5.1 billion in 2022.
In the quarter, we set several new milestones and we returned to operating margin expansion and positive earnings growth. For the first time in our history, we exceeded $7 billion of revenue in the quarter, meeting our guidance of 9% FXN growth with the revenues of $7.4 billion. In addition for the first time ever, we exceeded 6 billion transactions in a quarter, resulting in 51.4 transactions per active account, growing 13% Year-over-Year. We delivered $1.24 in non-GAAP EPS, $0.05 above the midpoint of our guidance as I mentioned growing at 11%.
The quarter was clearly a positive inflection point and is a direct result of our intense focus on cost discipline and the pursuit of profitable growth. I'm particularly pleased with the team's progress to rightsize our cost structure. For the quarter, our non-transaction-related opex declined Year-over-Year by 6% and we are exiting the year with a run-rate ahead of our planned $1.3 billion of savings in 2023. We grew our non-GAAP operating margin to 22.9%, up 115 basis points from a year ago and up sequentially through the second quarter in a row.
As we look towards 2023, I want to lay out our thinking about the year ahead. First, we have identified an incremental $600 million of cost savings on top of the $1.3 billion of cost savings previously identified. This includes the very difficult decision to reduce our headcount by 7% as we continue to improve our processes and sharpen our focus. We also continue to reduce our external vendor spend and real-estate footprint. We now expect that non-transaction-related opex for the full year will decline in the high-single digits Year-over-Year, driving approximately 125 basis points of margin expansion and 18% non-GAAP EPS growth.
The second point I want to make is that we have designed our cost structure and EPS growth targets based on what we believe to be a very conservative planning assumption of mid-single-digit FXN revenue growth rate in order to give high confidence in our ability to deliver our EPS. And the third and final point is that our actual revenue expectations are well higher than that planning assumption. As you can see from our Q1 guide of 9% FXN growth with Q1 non-GAAP EPS anticipated to grow by 23% to 25% to $1.80 to $1.10. I want to emphasize another point and that is we are confident that our 2023 cost structure enables us to continue to fully invest in our high-conviction growth initiatives.
We are putting significant resources behind the modernization of our checkout experience in order to defend and grow our market share in our branded checkout business. This includes a drive towards password-less, one-click, native in-app experiences, as well as supply the next generation of advanced checkout using our data and AI capabilities. Although this will be a multi-year initiative and will take time given the scale of our base and our legacy integrations, I am extremely pleased with the progress we made last year.
We will continue to deliver scale growth for Braintree. And last year, we made significant progress in modernizing our architecture and capabilities. These improvements resulted in a substantial number of new sales and incremental volume from existing accounts. In addition, we have an impressive pipeline of opportunity for 2023. In the first half of this year, we intend to fully ramp our unbranded offering to small and mid sized businesses either directly or through channel partners.
The launch of PPCP or PayPal complete payments will meaningfully expand our unbranded total addressable market by as much as $750 billion and enables us to drive incremental share with higher margins than our Braintree enterprise service. On the consumer side, we will continue to enhance our digital wallet value proposition. We are focused on the end-to-end customer experience from on-boarding through the entirety of the consumer life cycle, utilizing more advanced forms of AI to drive optimal consumer choices.
In the past two years, we have introduced a significant number of products and services. For instance, our Buy Now Pay Later services is driving significant lists in checkout and incremental TPV, and it's now one of the most popular Buy Now Pay Later services in the world with almost $200 million loans to over 30 million consumers since launching in 2020 and with approximately 300,000 merchants, putting our Buy Now Pay Later upstream on their product pages.
We have introduced savings bill pay, new forms of giving, more ways to send international remittances, new debit and credit cards, rewards and customized deals and offers all within a single app. And we are now integrating these disparate services to what we hope will be a seamless user experience that is customized across both Venmo and PayPal with the ultimate goal of driving data usage. We need to reestablish P2P as a core anchor for PayPal and Venmo. It is a key driver of usage and often establishes the amount of balance in individual consumer holds in their wallet.
The more people store in their balance, the more they use checkout and the better our overall economics. We're trying to meaningfully enhance the overall P2P experience including revamping the onboarding experience, reducing declines, and introducing more value-added capabilities. I'm proud of all the team has done to responsibly innovate. We've made significant strides in upgrading our legacy infrastructure and retiring our technical depth. Eight years ago, we were primarily in monolithic C++ stack. By the end of Q1, we will have completed a full payment stack replatforming, leveraging a modern architecture and the latest software engineering methods.
We had record platform availability in 2022 and we put out approximately 80,000 software releases. Our increased productivity and focused efforts are enabling us to make significant progress every quarter in upgrading our merchant base to our most advanced checkout flows. In 2021, approximately 20% of our top 100 merchants were on our latest checkout experiences. At the end of 2022, one-third of our top 100 were in our latest checkout integration. And in 2023, we are targeting to be approximately 50%. And despite an increasingly competitive environment, we are confident that in total, we continue to hold share across our core markets.
As we look ahead to 2023, we built our plan to assure proper staffing of our key initiatives, but we also know that we must have a mindset of continuous productivity not just last year, not just this year, but in the years ahead. So difficult to accurately assess how the year ahead will play out in terms of e-commerce growth. If you ask 20 experts, you get 20 different opinions. Our baseline assumption is that discretionary spend will remain under pressure and global e-commerce growth will be slightly positive Year-over-Year.
That said, we are seeing signs that inflation is beginning to cool and it's logical to expect that discretionary spend versus non-discretionary spend will begin to increase. To be clear, we have not built any recent positive economic news into our forecasts. But as I mentioned, our Q1 is off to a much stronger start than we anticipated with branded checkout volumes accelerating nicely from Q4. Longer term, the secular tailwinds that have benefited our business have not changed and we are confident that when e-commerce growth starts to turn and grow it more historical double-digit rates, we will be extremely well positioned to capitalize on that shift and drive even higher revenue growth with increased margins.
Finally, I'd like to address my plans around CEO succession. Some of you have noted I turned 65 last month, albeit I will say a very young 65. The Board and I discussed CEO succession multiple times a year. And I have informed the Board that I plan to retire from serving as the President and CEO of PayPal at the end of this year. I thought there were two important considerations in terms of timing. First, I wanted to be sure that PayPal had positive momentum and was in position to deliver a solid year of performance, so I can't be sure I wasn't leaving the company in a difficult position.
And second, it is important to me that the Board have enough time to conduct a thorough search and have a reasonable transition period. In a global business as complex as PayPal, there are important relationships with government officials and regulators across the world, with the CEOs of our partners and with the CEOs of our customers that will need to be thoughtfully transitioned. I feel that a year gives the Board enough runway to find the next leader of PayPal in time for an orderly transition.
Of course, I will be flexible in my time-frame in order to assure we seamlessly on board the idea of next leader of PayPal and I look forward to continuing to serve on the PayPal Board. I'm eager to see the next CEO build on all we have accomplished in the last eight and a half years and seize the immense potential ahead of us. In the meantime, I will remain fully focused on maintaining our momentum and executing on our plan.
Since our IPO, PayPal stock price has outpaced the S&P 500 and as you can see in our investor deck, our revenues, TPV, earnings, and free-cash flow have all tripled in size during that same time-period. However, I feel confident that now is the time where our business has hit multiple positive inflection points. By the end of this year, we will have the appropriate cost structure to ensure that we deliver profitable growth with consistent and healthy non-GAAP EPS growth. And more importantly, we are confident we have the right roadmap in place to drive continued improvements in our customer experiences so that we remain a global leader in digital payments.
In this current environment with so many of our competitors struggling to make money, we see a path to emerge from this economic downturn in a position of increased strength. We are quite encouraged as we look out at 2023 and beyond. I want to thank all of our employees for the outstanding work and passion they display everyday. We still have a lot to accomplish, but we are finally at the point where 2023 can be a transformational year for our customers and our shareholders.
Thank you. And with that, I'll turn the call over to Gabs.
