Jamie Miller
Executive Vice President, Chief Financial Officer at PayPal
Thanks Alex. Moving to slide seven, PayPal delivered another strong quarter of results. The underlying stability and consistency of the business is encouraging and we remain focused on advancing our transformation to drive durable profitable growth. Change takes time and we still have a lot of work ahead, but the team is making steady progress on top of an already solid foundation.
Looking at the high level financial results in the quarter. Revenue increased 6% on both a spot and currency-neutral basis. Transaction margin dollars accelerated slightly from the second quarter. In addition to a nearly three point benefit from interest on customer balances, branded checkout, Venmo, Braintree and better transaction loss performance contributed to growth in the quarter. Our focus on price to value is paying off with Braintree again contributing materially to transaction margin dollars even as volume and revenue growth deliberately slows. Non-GAAP earnings per share were $1.20, representing 22% year-over-year growth. Relative to our guidance, outperformance was driven by a number of factors, including continued optimization of transaction loss, Venmo and improvements in credit.
Turning to slide eight, our operating metrics reflect another quarter of progress. Total active accounts increased by nearly $3 million from the second quarter to $432 million. Monthly active accounts continued to show steady progress, up 2% year-over-year to $223 million with contributions from PayPal consumer accounts and Venmo. Transactions per active account, which is a trailing 12-month number were 61.4 in the third quarter, up 9%. Excluding PSP processing, transactions per active grew 5%.
Moving to slide nine, total payment volume grew 9% on a spot and currency neutral basis to $423 billion. Looking at the breakdown by product, global branded checkout volumes grew 6% on a currency neutral basis in the third quarter, consistent with the mid-single-digit growth we've seen for the last three years. Within branded checkout, we continue to see strength across large enterprise platforms, marketplaces and international merchants.
As Alex mentioned, our team is hard at work to drive wider coverage of our most modern best-in-class checkout experiences. We are particularly focused on small and medium businesses and mobile, both critically important areas for us to improve our positioning. PSP processing volume grew 11% compared to 19% in the second quarter. As part of our price-to-value strategy, we are moving deliberately and making decisions that prioritize healthy profitable growth rather than targeting a high proportion of processing volume at low or even negative margins.
What this looks like in practice with some of our largest enterprise customers is often a renegotiated agreement that reduces our total share of payment processing to a more balanced level. So for example, from 95% to 75%, but with better economics and with a greater breadth of products and services. This means we are driving Braintree transaction margin dollar improvements and more strategic partnerships, but with lower volume and revenue growth.
Moving to more financial detail on slide 10. Transaction revenue grew 6%, on a spot basis to $7.1 billion, driven primarily by Braintree, branded checkout and Venmo. Other value added services revenue in the quarter increased 2% to $780 million and interest on customer balances continued to be a meaningful tailwind to OVAS and credit revenue was under less pressure compared to the past three quarters.
We have now fully lapped the actions taken last year to tighten credit underwriting and reduce on balance sheet risk. We're seeing better performance across the portfolio and have now started to modestly grow merchant originations. We'll continue to prudently manage the portfolio's exposure with the goal of sustaining our balance sheet light business model, while providing our customers with more ways to manage their cash flow spending and borrowing needs.
Transaction take rate declined by 4 basis points to 1.67% compared to a 3 basis point decline last quarter. Improvements in Braintree and Venmo monetization benefited transaction take rate. These were offset by large enterprise and marketplace growth within branded checkout, foreign exchange and faster payouts growth.
Turning to transaction margin dollar growth, as I said earlier, interest on customer balances, branded checkout, Venmo and Braintree were the largest contributors. Results in the quarter continued to benefit from efforts to optimize transaction loss performance with more advanced data analytics and some transaction expense favorability.
Non-transaction-related operating expenses increased 3% as we continue to actively manage our cost structure while reinvesting in key growth initiatives, including marketing that was deferred from the first half of the year and the rollout of new products and initiatives like PayPal Everywhere. Non-GAAP operating income grew 18% in the quarter to $1.5 billion. Non-GAAP operating margin expanded 194 basis points to 18.8%, benefiting from transaction margin expansion as well as expense leverage.
PayPal generated $1.4 billion of free cash flow in the third quarter. We completed $1.8 billion in share repurchases, bringing the total number of share repurchases over the past 12 months to approximately $5.4 billion. Finally, we ended the quarter with $16.2 billion in cash, cash equivalents and investments and $12.4 billion in debt.
Moving to guidance on slide 11 for the fourth quarter and the full-year 2024. We continue to assume a relatively consistent macroeconomic and consumer spending environment for the remainder of the year. For the fourth quarter, we expect revenue to grow by a low single digit percentage. This is directly related to Braintree merchant negotiations and ongoing efforts to drive quality profitable growth. As I mentioned earlier, this is a deliberate action and a continuation of the strategy we've articulated throughout the year, where we have accepted a lower near term Braintree revenue profile in exchange for better margins as we have renegotiated agreements. As a result of these efforts, we expect lower Braintree volume and revenue growth in the fourth quarter and through 2025 before reaccelerating from the reset baseline. This is a healthy profitable trade-off for the business that benefits transaction margin dollar growth and build stronger, more strategic relationships.
We expect higher non-transaction opex growth in the fourth quarter as we have intentionally concentrated more of our discretionary investment spend, particularly in marketing during the back half of the year and in the holiday season. This is strategically timed to support key initiatives, including the go-to-market of new products and innovation, as well as ongoing marketing and brand campaigns for PayPal and Venmo. Due to this timing, we expect fourth quarter non-GAAP EPS to decrease by a low-to mid-single-digit percentage. 2024's full-year non-transaction opex growth rate, which we now expect to increase in the low-single-digit range is a reasonable way to think about the opex profile for the business next year. But like this year, we expect some unevenness in any given quarter.
Moving to the full-year in more detail. We are raising our guidance for transaction margin dollars and non-GAAP earnings per share. This increase reflects outperformance in the third quarter as well as strategic reinvestments back into growth initiatives. We now expect 2024 non-GAAP EPS to grow in the high-teens and full-year transaction margin dollars to increase by a mid-single-digit percentage. We have seen steady profitable growth from our branded checkout business and the teams are advancing our checkout initiatives. I'm encouraged by the rollout of innovation, the initial impact of our price-to-value strategy, ongoing product enhancements in areas like Venmo and P2P, and the customer response to the launch of PayPal Everywhere.
As we move into the fourth quarter and beyond, we expect to continue making progress, but there are a few factors to keep in mind. Through the first three quarters of the year, growth in interest on customer balances and improvements to transaction loss were an approximately 4-point percentage benefit to transaction margin dollars. Beginning in the fourth quarter, we expect minimal benefit from growth in interest on customer balances and then a headwind beginning in 2025 due to interest rate cuts. We are also planning for some normalization in transaction losses as we roll-out new products. We now expect full-year non-transaction operating expenses to increase in the low single-digit range with ongoing cost efficiency helping to fund our strategic growth investments.
As we move into next year, our focus will be on striking the right balance between investment and productivity, seeking to largely fund long-term investments through savings generated from better deployment of tech and automation. We continue to expect 2024 free cash flow of approximately $6 billion and continue to plan for $6 billion of share buyback this year.
In closing, I'd like to thank the PayPal team for their ongoing dedication as we drive meaningful change to strengthen our foundation for profitable growth. We are continuing to execute and we're making good progress. And we're excited to share more with you at our Investor Day in February.
With that, back to you, Alex.
