(Bloomberg) -- PayPal Holdings Inc. jumped after saying it expects to record $900 million in savings this year from cost-cutting, which have included laying off workers and shuttering offices. The company also announced that activist investor Elliott Investment Management is now one of it’s largest shareholders.
Such savings will swell to $1.3 billion next year, the payments giant said Tuesday in a statement announcing second-quarter earnings. Expenses climbed to $6.04 billion in the period, in line with the average of analyst estimates compiled by Bloomberg.
PayPal has been in the midst of a series of management changes, and it announced Tuesday that Blake Jorgensen will take over as chief financial officer after John Rainey left to join Walmart Inc. earlier this year. The company said it is also conducting an external search for a new chief product officer following the departure of Mark Britto later this year.
“We continue to gain share as we execute across our key strategic initiatives, even as we drive operational efficiency across our business,” Chief Executive Officer Dan Schulman said in the statement.
The stock rose 9% following the announcements, after ending regular New York trading at $89.63. It has slumped 52% this year, steeper than the 18% decline of the S&P 500 Information Technology Index.
Schulman has been vocal about his plans to improve PayPal’s operating leverage -- or the ability to grow revenue faster than expenses.
Elliott said it took a $2 billion stake, making it one of the company’s largest investors. The two companies have entered into an information-sharing agreement and Jesse Cohn, a managing partner for the firm, said in the statement that he looks forward to working with Schulman and PayPal’s board.
“Elliott strongly believes in the value proposition at PayPal,” Cohn said. “PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near- and long-term.”
PayPal has been pressured in recent quarters by supply-chain disruptions and once-in-a-generation levels of inflation that hindered e-commerce spending. And EBay Inc., PayPal’s former parent company, has been rapidly moving payments away from its platform.
Payments volume climbed 9% to $339.8 billion, missing the $344.3 billion average of analyst estimates compiled by Bloomberg and the smallest increase in at least two years. Still, revenue climbed 9% to $6.8 billion, slightly topping the $6.78 billion average of analyst estimates compiled by Bloomberg.
To make matters worse, the company’s results in the quarter were hindered by a strengthening US dollar. Excluding the impacts of currency fluctuations, revenue climbed 10%.
PayPal said earlier this year it was pivoting away from a previous strategy of trying to add millions of new users. Instead, it is seeking to encourage existing customers to use its app more frequently.
The firm showed progress on that front: Transactions per active account climbed 12% to 48.7 in the quarter. It continues to expect to add roughly 10 million new users this year.
The company now expects total payments volume for the year to climb by 16%, compared with an earlier range of 15% to 17%, according to the statement. PayPal boosted its forecast for adjusted earnings per share for the year to a range of $3.87 to $3.97, compared with earlier guidance of $3.81 to $3.93.
New CFO
Jorgensen joins PayPal from Electronics Arts Inc., where he was both chief operating officer and CFO. He is also a former CFO of Levi Strauss & Co. and Yahoo! Inc.
PayPal also announced that its board authorized a new $15 billion share-repurchase program. The company now plans to buy back as much as $4 billion in stock this year.
“We are advancing our priorities and sustainably improving our cost structure,” interim CFO Gabrielle Rabinovitch said in the statement. “We are focused on creating value for our shareholders and strengthening our position as a leading global digital payments platform.”
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Author: Jenny Surane