Q4 2020 Square Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the square fourth quarter 2020 earnings Conference call.
Like to turn the call over to your host Jason Lee head of Investor Relations. Please go ahead.
Hi, everyone. Thanks for joining our fourth quarter 2020 earnings call, we have Jack and read out with US today, we will begin this call with some short remarks before opening the call directly to your questions. During Q&A, we will take questions from our customers and addition to questions from conference call participants. We would also like to remind everyone that we will make any forward looking for.
On this call actual results could differ materially from those contemplated by our forward looking statements reported results should not be considered as an indication of future performance.
And you take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ also note that the forward looking statements on this call are based on information available to us as of today's day.
Disclaim any obligation to update any forward looking statements, except as required by law.
During this call we will provide preliminary gross profit growth results for the months of January and February. These represent for our gross profit growth results for January and current estimate for February performance. These numbers are not final as we have not yet closed our accounting financials for the month of February and our monthly results are not subject to interim reviewed by our auditors as a result actual January and February.
<unk> results may differ from these estimates.
Also we will discuss certain non-GAAP financial measures. During this call reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally this call. Its entirety is being audio webcast on our Investor Relations website and audio.
<unk> of this call will be available on our website shortly with that I'd like to turn it over to Jack.
Thanks, Jason and thank you everyone for joining us today.
2000, and Tony was a tough year for many our focus was to help our customers through at all which required us to adapt and evolve quickly.
This is an important attribute for any organization and I am.
We continue to demonstrate that.
We also took the opportunity to act more broadly by announcing our plans for our operations to be carbon net zero by 2030 and.
And launched our bitcoin and clean energy and net investment initiative, a 10 million dollar commitment to support companies that will help drive adoption and efficiency of renewables within the bitcoin and ecosystem.
We plan to reinvest any gains back into the funds and are exploring opening it up for <unk>.
For participation by like minded companies will share more details on our environmental and social initiatives next month, and our 2020 corporate social responsibility report.
In addition, today, we announced a $170 million purchase of bitcoin on top of the $50 million, we bought and the fourth quarter why are we doing this.
We believe the internet needs and native currency, and we believe bitcoin as it.
We believe it has the highest probability of empowering more people and the economy and a fair way.
We're doing a lot to ensure this from a products open source development and open and patent perspective, and by US owning bitcoin our incentives are aligned with skin in the game.
And now for some updates on our business cash.
I continue to see strong adoption, both for new and existing customers and December cash up had more than 36 million monthly active customers up 50% compared to last year.
We saw customers increase their usage of products beyond peer to peer transaction, including use of our visa cash card cash boost and bitcoin.
Boost is our instant rewards program within our cash card enables customers to receive unique discounts based on their location and other attributes and the.
Fourth quarter active brief customers spent double that of other visa cash card customers. We also recently launched a special based with a customer and locks up for receiving their first paycheck and the cash out and a bitcoin boost giving people a way to earn bitcoin on all cash card purchases.
As more of the World has discovered the value of bitcoin cash up continued its focus to make bitcoin more accessible and more useful.
One example of this is enabling people to change the default denomination unit from PTC <unk>, which is 100 per million of a bitcoin also known as assets to help people realize you don't have to own a full bitcoin and can stack stats and instead.
And the fourth quarter bitcoin volumes per customer increased more than two five times compared to the same period last year, mostly driven by buying activity of both existing and for your customers and.
In 2020, and more than 3 million customers bought or sold bitcoin and cash flow and in January 2021 alone more than 1 million customers about bitcoin for the first time.
Our seller ecosystem continued to grow up market and attract larger sellers as we saw mid market sellers used $2 five of our products on average in 2020.
Nearly all mid market sellers use our team management product to schedule staff and be real time performance and sales analytics for their workforces.
And then 2020 approximately half of our mid market <unk> came from sellers with integrations into our developer platform, which enables a data driven way to process payments using custom software building e-commerce experiences and connect with existing business systems.
Our sales team has played an important role and our growth of market and.
And the fourth quarter, 40% of Midmarket and <unk>, Kim from sellers and sellers about our broader ecosystem.
We use machine learning to identify those most likely to adopt more products and which of our solutions are likely to be.
The most relevant.
And this helped drive a 15% increase and product adoption among existing mid market sellers and 2020.
We plan to continue this work and intend to double our sales team in 2021.
So what's our focus for the year ahead.
For cash App system.
Expand our deposit capabilities and increase the quality of our costs.
Customer service all in order to strengthen our foundation and reach new customers.
We're also going to double down on our commitment to bitcoin and continue to look for new ways to connect our putting our omnichannel capabilities.
And globally and.
<unk> financial service offerings to sellers of all sizes.
And that over to Amrita.
Thanks, Jack and there are three topics I'd like to cover today.
First I look at our performance from 2020, and and the fourth quarter, while we delivered strong gross profit growth.
Second and updated on our business through mid February and what this could mean for growth going forward and third I'll look at our cohort.
Economics for cash App, and seller, which give us confidence transaction are long term.
By 2020, being and Europe extreme uncertainty our results for the fourth quarter and full year speaks for our ability to both help new customers adapt during a dynamic environment and weak and your customers.
And 2020 gross profit with $2 seven 3 billion up 45% year over year for 48% ex rate over 2019 and also for.
<unk> our ecosystems.
Hello, and generated $1 five $1 billion and gross profit in 2020 and increase of 8% compared to 2019.
Our online channels delivered more than 15% <unk> growth year over year and became a growing portion of our 2020 up more than two and half time.
And year over year to one 3 billion.
Represents nearly half of the company's gross profit.
And continued to diversify cash ex business model with scale.
2019 cash that had only one.
And revenue stream with a $100 million and gross profit and in 2020, and we had for the approximately $100 million or more each of which screw and over 100% year over year.
2020 was also a year that we invested in our business and and our customers with compelling returns.
Adjusted and our customers and a variety of ways, including by accelerating critical product launches, allowing sellers to pause and software subscriptions and helping sellers and individuals.
Yes government funds and providing news for warrants for cash app customers through boost at the time they needed it most.
We also invested and our business by continuing to build out our team to drive product innovation.
And by deploying go to market initiatives to expand our reach.
Let's now turn to the fourth quarter for gross profit was $804 million up 52% year over year or for two 4% growth excluding caviar.
Looking at some other drivers for the first for the quarter for.
We're seeing growing engagement and monetization with cash app.
And our fourth quarter cash out generated $377 million and gross profit and increase of 162% year over year.
Cash flow benefits from the compounding effects of growing our customer base, while also increasing engagement and monetization per customer.
And we saw these dynamics drive growth and the fourth quarter, and we scaled our network to more than 36 million monthly transacting customers and increase of 50% year over year at the same time, we increased gross profit per monthly transacting active customer by 70% year over year, and a $41 and the fourth quarter.
By expanding the breadth of our product ecosystem for finding feature and continuing to build on our foundation, we have driven greater engagement across our ecosystem.
And 2020, and the fourth quarter, we increased adoption across all of our products beyond peer to peer for cash up newer customers are coming to cash app for our ecosystem and they are increasingly adopted multiple products such as cash card and bitcoin within their first month after onboarding.
Moving to seller, where our omnichannel offerings are driving growth.
Gross profit in the fourth quarter with $427 million up 13% year over year with <unk> up 6% year over year.
To help sellers adapt during the pandemic, we have continued to build out our omnichannel capabilities and these offerings are gaining meaningful traction.
And the channel and online sellers represented more than half of LNG, TV and our fourth quarter, which is up from one third two years ago.
Our mid market category, which consist for sellers with more than half a million dollars and annual GPU.
And where we see our largest market opportunity for the seller business and a focus area for our acquisition efforts, we saw strength here and the fourth quarter. Despite the impact of the pandemic.
Gross profit from our mid market sellers grew 27% year over year, which was approximately two times for gross profit growth of our overall seller business.
Looking at profitability adjusted EBITDA was $185 million and the fourth quarter and year over year increase was driven by gross profit growth and also benefited from the release of $43 million and transaction loss provisions related to our solar business as actual and loss rates trended more favorably than we had previously estimated.
Next we wanted to share early trends and our cash up and for businesses during the first quarter and.
What this could mean for growth going forward and.
And January cash App delivered gross profit growth of 164% year over year, a two point improvement from the fourth quarter.
And we achieved strong acquisition of customers and drove increased product adoption with our highest monthly total of new transacting customers for bitcoin stock brokerage and cash card.
January growth benefited from government fund disbursement, which began during the last few days of December and led to an increase and funds pulled and the cash app.
Based on trends during the first three weeks of February we estimate cash up to gross profit gross profit growth will be approximately 130% year over year growth in February decelerated compared to January and the impact from government funded person and normalized partly offset by continued strength and acquisition and peer to peer network volume.
We are watchful of broader macro trends and any new policies, which could influence the pace of growth.
As a reminder, we will start lapping, particularly challenging growth comparisons and the second and third quarter of this year.
And January our seller ecosystem achieved 15% gross profit growth.
Two point improvement from the fourth quarter, and <unk> grew 5% year over year.
For the first three weeks for February <unk>, PV was up 2% year over year, a three point deceleration from January but excluding the temporary impact of recent weather across regions and the U S. We estimate for LNG PV growth would have been comparable to January and we would've seen and improve and we've seen and improvement in certain regions where restrictions have eased.
Looking ahead, we expect to continue to observe variability related and the macro environment and regional shelter and place restrictions, which could impact our performance.
Also begin to lap the initial impact and the pandemic and the seller business in late March.
Hello, and gross profit growth faster than G. P V and 2020 and part due to higher transaction margins, which benefited from a greater mix of debit card not present transaction higher average transaction sizes and from our card present price change implemented in November 2019, we expect to lap these and exchanges for <unk>.
<unk> margins and for transaction margins to normalize towards the end of the first quarter. So Jason we may go faster than transaction profit and in person transaction presume and future quarters.
Finally, and 2021, we are investing for long term profitable growth given the opportunity.
Attunity ahead of us and we expect to increase non-GAAP operating expenses, excluding west costs by 41% year over year, or an incremental $800 million to $900 million compared to 2020 levels. We intend on continuing to invest where we see attractive returns even in the face of variability and macro trends and as a result, adjusted EBITDA margins may vary.
And depending on top line growth.
Both our cash App and seller ecosystems have delivered strong cohort economics and.
<unk> acquisition retention and paybacks and returns on investment.
Cash App is proved out and scaled our strong business model, we have acquired new transacting active customers for less and $5 and on average and paid marketing through 2020.
For existing customers, we have increased their engagement over time with gross profit retention of more than 130% for each and the last three years.
Non adult we've achieved strong returns on investment of six times or greater over a three year period.
With 2020 cohorts pacing ahead of even net.
And we intend to ramp up investment into new marketing channels and strategies and 2021.
We've also been encouraged by sellers cohort economics, we saw strong customer acquisition and 2020 on Onboarding, our largest cohort of new sellers on a gross profit basis, which is pacing at an estimated five quarter payback.
And the midst of the pandemic and 2020 gross profit retention stabilized and down approximately 10% year over year and the second half of the year. Our more recently acquired seller cohorts have seen a stronger rebound and gross profit and older cohorts, which is partly driven by stronger acquisition, a larger sellers and recent years.
Prior to the pandemic subtler had achieved positive gross profit retention and returns on an investment of three times over three years and seller stayed with square and grew their businesses with US looking ahead to a recovery. We plan to continue investing behind these strong returns to reach new sellers and drive growth.
In summary, we remain committed to our purpose of economic empowerment by continuing to serve our existing customers and reaching those and new markets.
And we're focused on driving long term profitable growth and are eager to invest behind at compelling returns and returns for both our cash app and seller ecosystems.
I'll now turn it back to the operator to start the Q&A portion of the call.
If you would like to ask a question. Please press star and the number one on your telephone keypad. Please limit yourself to one question.
Your first question is from the line of Tien Tsin Huang with Jpmorgan.
Yes.
Thanks, so much nice to speak to you all just.
Lot of good information here.
Big picture and maybe a simple question on on priorities, if you're investing a lot and it seems to make sense here.
Are you prioritizing and user acquisition first followed by improving engagement or product development across both ecosystems. Given what you are talking about here with low CAC and big Roy and I can definitely make the argument for you guys to spend more so and just your thoughts on acquisition versus Inc.
<unk> here in 2021.
Yeah.
Thanks for the question kitchen and.
We have historically shown and ability to do both when you think about our Tam expansion over the years from our last Investor day in 2017, two or more recently disclosed Tam opportunity of $160 billion, we've grown our Tam by $100 billion $40 billion and the seller business.
With new product launches and new geographic expansion and $60 billion on.
On the cash App ecosystem, and we see an opportunity for further Tam expansion investments and new products and new markets.
And all of that is while also growing the base of our customers.
Cash App grew by 50% and terms of monthly transacting customers at the end of this year to $36 million.
And we on boarded our largest cohort.
For sellers.
And during 2020 with each quarter growth on a year over year basis for our cohorts that you've added.
So we see an opportunity and both areas and we've shown again a track record of a focus on both expansion of opportunity as well as going deeper and our existing markets.
Maybe I'll explain a little bit about what we're seeing in terms of cohort economics.
That lead us to continue to want to invest in both areas. So as you mentioned, we're planning to invest 800 $900 million in terms of incremental investment in 2021, that's roughly 50% of that step up will go towards sales and marketing and about a quarter of it will go towards R&D across both ecosystem.
<unk>.
And the final piece will go towards G&A, which continues to build on the foundation for the company, but as we think about debt sales and marketing growth, what's giving us the desire and confidence to lean and here are the cohort economics, which are really compelling as you're thinking about the combination of both efficient acquisition.
And engagement on existing products that we have let alone engaged and other products that we could be building in that future and we are building for the future with cash App, we've seen a fixed assets.
And over three years on the back of <unk>.
And acquisition at less than $5 per customer again, calling upon our network effects very strong network effects.
And we've seen strong volume and peer to peer and that continues to be a strong front door for us. But then also very strong gross profit retention at over 130 per cent for each of the last three years.
Maintain the vast majority of our customers and they've grown on our platform.
For the seller business. Similarly, we've seen cohort economics pacing, a five quarter payback three ex return on ROI over three years and historically prior to the pandemic positive gross profit.
And retention so we see an opportunity in terms of the cohort economics that we're driving to continue to lean in and finally, we do see and opportunity to drive further engagement with our existing products.
When we think about as we mentioned and our seller Inc.
And the salary ecosystem continued increasing mix towards mid market sellers larger sellers, who tend to adopt more products, two and a half products today, but we see an opportunity for uplift when our sales team uses AI and ml technology.
Basically a 15% uplift and product adoption and similarly for cash App, we've seen and the first month that our cash app customers onboard into our ecosystem and increasing proclivity to adopt new products like stocks like bitcoin like cash card.
There is so much more opportunity here as we think about increasing product adoption for our current customer set to go even deeper to provide daily utility to those customers. So we're really focused on growth and have showed and our track record here driving both acquisition and engagement along with <unk>.
And.
For sure I appreciate the thoughts and metrics.
Okay.
Your next question is from the line of Darrin Peller with Wolfe Research.
Alright, thanks, guys and congrats on a good year and a tough obviously tough environment and for everybody.
But when we look at omni channel and online being greater than 50% of total total solar GPU clearly on online and Gordon <unk> President experiences are resonating and we saw a 12%.
<unk> growth overall, including cash flow business, and obviously helped by that mid market for larger and larger business client.
And I think it was up 27% there can you just touch on what's resonating with both can be much more card present.
Ventura to where you are now 50%.
Tommy has been pretty dramatic.
And when we think about all of that.
Where do you see that going in terms of sustainability and investments you can make enough to keep that keep that level of of really sustainable 60% plus per country. Thanks.
Thanks, guys.
Hey, Dan and thanks for the question.
So.
How many channels are a really big part of our strategy because it's not just focused on share.
Moving.
e-commerce or offline.
And for opportunities and every single way, but.
Business you might attract customers.
That's for thing is really its flexibility.
We are.
For now and seeing a lot more over mid market sellers and larger sellers utilize our API and platforms. So that they can build custom solution.
Really make sure that day.
Third.
Crafting the experience that they want.
We think there is a continued great.
<unk> here.
It's going to be a little.
For a big part of our focus on our roadmap for for some time.
As we add new capabilities for the platform as we add new.
Acids, and new channels for people to show and the second part that I think differentiates us as <unk>.
We're not just focused on one one vertical we are flexible enough to handle any vertical and as I've talked about on previous calls.
A lot of what we're seeing.
And typically restaurant.
Type businesses, who are doing.
And more retail things and vice versa and services for doing more retail and we don't really take a point on value.
Point of view on what category you should be running.
And make sure that we're just there to help you make the sale no matter, what you're trying to sell and whatever channel you are trying to solve for work.
So obviously, we saw a lot of this momentum with Covid.
As people open their eyes towards the rest of our platform and we quickly we prioritized a lot of our efforts to make sure that we can support that growth and then we could enable more of it.
But I don't I don't think that behavior is necessarily going.
Going away.
And I think and before Covid there were a lot of merchants, who were hesitant to try new things or the thing that was working they wanted to stick with.
For was a forcing function.
People out themselves to open their eyes and more.
And they found a lot more efficiency and they found a lot more sales because of it so we're.
We're going to continue watching and learning but.
We think this is a pretty stable pretty stable path for us.
And then what you have.
To add just to add to your point about investments and sustainability, we've seen over a 50% growth from our <unk> from our online channels for about an acceleration and that square online growth compared to 2019 and work.
Our product development and and feature richness when you think about mid market as well to your point that's.
You know a larger sellers now, 60% and seller and GP who are in.
And the fourth quarter up from 52% two years ago and with gross profit for mid market outpacing the blended seller average by two times and with our cohorts now coming in and the opportunity to continue to invest.
Yes.
Against the larger ecosystem, when you think about addressable market for our larger sellers were at less than 1% penetrated and that opportunity and there are three areas of investment first is marketing which is tough.
Talks about awareness marketing around the broader ecosystem, coupled with product specific campaign targeting.
Products that.
Resonate with larger sellers, whether it's vertical points of sale online restaurants et cetera. Second is the sales team will be doubling the size of our sales team and 2021.
So that we can.
Our outbound research REIT outreach to larger sellers and our current product as Jack mentioned, our developer platform is really key for.
For serving more complex seller needs a vertical software. Additionally, these are some of the areas that will be increasingly investing in to drive further opportunity here.
That's really helpful. Thanks for thanks.
Thanks, guys.
Now a question from a cash up customer.
I'm, sorry, if I mispronounced Ignacio DFS cars.
Hello.
And you and everyone. My name is Ignacio <unk> zone, and I'm, a car show customer number for <unk>.
And the servicing platform called Onda.
Cash up to invest and stocks and bitcoin and money to friends as well as spending using.
Using the cash card. My question is with contract plan to provide more education for customers and it's investing product for example, adding more and the financials and illustrating and research reports regarding the stock.
Yes. Thank you. Thank you for being a customer we do we do plan on adding more educational resources, we think.
Big part of what we did both with Bitcoin and also with with our stocks product is making sure that people have the information available to them to make informed decisions.
And we've done this recently by putting news articles right and the up so you'll be able to see all the latest bitcoin news or all the latest news on any particular stock. Thank you visit.
And.
And we created to instructional books for for both the core and then for stocks.
And we think there is a lot of opportunity to do even more within the product and also as we look at improving our customer service as I mentioned in my opening remarks.
For us there's going to be more opportunity to do things there as well. So we think and education is a big part of what we need to do and it's definitely on the robot.
Perfect. Thank you so much.
Your next question is from the line of Lisa Ellis with Moffett Nathanson.
Good afternoon, and thanks for taking my question good stats here on cash App.
I believe a year ago, the growth profit mix within cash App was roughly 60% instant deposit if I'm remembering right, 30% cash card and about 10% and bitcoin and other miscellaneous fees.
But obviously a lot has happened and the last year and I know you called out the high adoption rates of some for the other products over the course of the last year can you give some updates on what the current GP mix looks like for cash App and and how you see that evolving. Thank you.
Sure. Thanks for the question Lisa.
So.
Let me sort of step back and talk about the strong unit economics and the growth of the business model over time, and I spoke a little bit earlier already to efficient acquisition driven through network effects for growing our customer base, while also growing the per customer engagement and monetization.
And so were strong retention within cash app retention at over 130%.
And <unk> gross profit per customer growing 70% and year over year to $41 and the fourth quarter.
When you think about how we've been able to do that and the <unk>.
Both and the breadth of the platform for cash App with now for revenue streams and driving more than $100 million. Each approximately 100 to more than 100 million H and gross profit in 2020 versus only one back in 2019.
And that includes as you mentioned some of them instant deposit cash card cash for business and bitcoin now.
But we still think where and the early day as customers have used multiple products on the platform. They have generated three to four times greater gross profit historically and this has led to our growing gross profit per customer and we're still early here cash card.
As has our strongest adoption to date and still remains at roughly one and for in terms of adoption from the monthly active phase two into the broader monthly activation and monthly cash card usage and bitcoin is at about one and 10.
So we see a real opportunity and drive adoption further adoption into our existing base of our products and with our existing base of customers and then layer on top of that the opportunity to grow the customer base and grow the products that over time.
And one of the really interesting ways that I think cash App has.
To drive.
That net sort of differential product adoption and the booth.
Aspect of cash card boost and then and interesting lever for us its been a powerful tool to drive engagement and adoption not only with cash card.
But also to graduate our customers to a broader ecosystem of products. So that we can diversify their experience provide greater daily utility and ultimately build multiple revenue streams within.
Our our app within as you think about booth as a tool within cash card.
Differentiated and that it provides and expand access really to instant rewards no credit profile of fee required and those rewards can be personalised customer and real time, and so it has been and acquisition tool for us and it's also been an engagement driver boost active spend two times more.
And their cash card than other cartons active but what we've started experimenting with and the fourth quarter is how boost as a differentiator and tool to graduate customers, the broader and broader ecosystem of products and the fourth quarter as bitcoin demand was growing we launched a bitcoin boost where cash card customers can get reward.
Bitcoin and what we saw there was it half the customers boosted were new to bitcoin and nearly a third of those who are new and a bitcoin went on to purchase their makeup first bitcoin purchase and the following month. Similarly, we drove a boost with paycheck deposits, where we launched a unique booth for new direct deposit customers.
And we've experimented with flash foods for a given time or for a merchant that will broadcast over social media and so those have given greater awareness within the cash app ecosystem.
And the broader product set which I think is a key lever that we have moving forward and how we can influence product adoption and ultimately growth those multiple revenue streams within cash app.
Terrific. Thank you.
Sure.
Your next question is from the line of Timothy Chiodo with credit Suisse.
Great. Thanks, a lot for taking my question I wanted to touch on credit credit Karma, maybe you could give some added context around the tax filing opportunity for cash app, whether it be retention and reactivation.
Users and also how this could be something that we really should look for in Q1 for years to come and then also a little bit more on the potential to turn some of these users into direct deposits starting with your cash refund and then obviously hopefully payroll down the road.
Yes.
We saw a pretty obvious opportunity and acquiring credit karma.
As we've talked about on these calls and.
Roadmap consists of making sure that we're focused on.
And as critical needs for.
For our customers and accessing the economy and.
Providing them really simple tools to empower them.
Taxes, obviously, a big part of that.
And anything we can do to make it easier for.
For people to manage and.
And they file their taxes.
Something we're setting up for.
More than 2 million individuals probes for other Texas using credit Karma I, just want to share and.
A lot of these solutions are pretty pretty complicated and time consuming and as we.
We've done with all of our products within cash flow and throughout the salary ecosystem.
We wanted to take a very strong point of view that it should be simple for work really hard and simplify them as much as we can.
And.
As.
As to your other question.
We think any of these.
Any of these critical solutions to problems people are having.
Generally accessing financial system will lead to using other products and our ecosystem. This is our whole strategy.
People might come in because they receive money from our friends and using the peer to peer aspect and then may discover.
And the ability to buy stock or buy bitcoin and.
Described with us they can get the card and.
And they can get their paycheck deposited to it and now they can for all the taxes with it so each one of these things and we believe positively reinforces the other.
And we have we have people who are hiring us to serve multiple jobs and sort of being dependent and overly dependent upon just one which would be a single point of failure for us. So.
We think there's a lot of opportunity here and we're starting with cash App based there's probably more we can do for yourself.
Other side as well.
It's a really strong start and we're pretty excited about.
Great. Thanks, a lot.
And it sounds like you've kind of touched on it I was wondering if there was anything you could mention in terms of maybe there is an opportunity to leverage the credit karma tax filing assets into the seller ecosystem, but it sounds like maybe ex.
Down the road.
Yes, it does.
Sales of our ecosystem and the fact that we have to.
A lot of what we built for cash flow.
And I won't be able to find this way easily into and the seller and vice versa and we've.
We've demonstrated that in the past so.
Total internal efficiencies and.
Actual future sharing.
And as time goes on.
And for taking my questions.
And as a reminder, please limit yourself to one question. Our next question is from the line of our sheets and robot with Baird Hi, Good afternoon, and thank you for taking my question.
And so you disclosed Jack.
<unk> is at 36 million up two 2% and two year over year.
And now as you know.
And look at your user base today, and do competitive benchmarking how much overlap do you see between cash App users and users of other similar platform and also how does the customer acquisition and engagement and Ghansham disciplined versus a good sectors. Thank you.
Yes.
So I.
Back to the previous century city and ecosystem move for tools and.
Cash and solutions for people.
Just being.
And congrats.
<unk>.
Okay.
The current purchase but for.
And the simplest and easiest and most of it.
Successful path for each.
We believe it's going to be the strongest approach and of course, there's and.
Theres, probably some overlap.
And many of those but.
And our thesis and what we're driving towards those were and you find everything.
And in one place and a super easy and.
And you can do things because of the connections that you can't do on other platforms.
Because they are all in one off thorough and one service.
And ultimately is the winning for winning service and the winning quick so.
We imagined and Theres a lot we can do and we have shown as we've shown some of these things like the boost program and.
Tied to direct deposit.
Other services just aren't able to do.
So in terms of acquisition.
Don't have to be.
Focus on just one thing we need to we need to show that.
Someone coming in for peer to peer does the easiest way to send money ever and.
And once they once they come in for that debt.
It's very simple for them to discover everything else that we offer so we're really looking internally and inward and.
How do we make.
All of these features more accessible and bringing them to the surface for people so they take and.
So they can activate them right away and start using them and not have to go to multiple apps to do things.
And the things they want to do every single day.
And the same is true sales out for cash flow.
I must share for the solar business is wrong.
Okay.
Yeah.
Your next question is from the line of Josh Beck with <unk>.
Thanks for taking the question I wanted to follow up a little bit more on boost it certainly seems like it's expanded beyond rewards program and you're finding lots of other use cases to drive new product adoption.
The other thing and this seems to be happening is requiring a lot of scale with respect and they use with respect to spending patterns spending category. So.
And I'm curious.
Have you had.
For progressive much on the advertiser discussions in terms of maybe one day to help fund some of those rewards or should we really think about it as it's really and a heavy and.
Instrument and multi product adoption phase and monetization perhaps.
Advertising contribution is something that that's further down the road.
Yeah and according to.
Sorry, sorry and manner.
You're pointing to the potential but our focus right now is we.
We think there's a lot of experiments that we can run.
That will indicate like.
Ultimate directions that we should go with a based program.
I'm really excited about the location aspect.
Being able to understand.
And one is and.
Specifically like what local sellers around them.
And offer them for reward that they're actually going to value and actually going to use and for you. So instantly.
And really powerful idea.
And we can expand that even more.
By opening up down the line, but this is another area where it shows the strength of having these two ecosystems both on the server side and and also on the individual side.
But we're still we're still in the phase of making sure that we're building a product that.
People value that.
And is extremely easy you don't even have to think about it and.
Order to use it.
And.
Continue looking for opportunities too.
Broaden it but right now focused on making sure all the capabilities and the attributes are there and it's just getting stronger and the ability to be dynamic and how we should spend with respect to boost the way we built the program as a flexible dynamic and potentially.
On a week by week basis.
About less than 5%.
And of cash card transactions were boosted in the fourth quarter, so above its weight frankly in terms of its and building.
Plenty to impact the broader ecosystem given.
Yes.
And utility extend.
Working on expanding our merchant relationships, we've seen boost the ability to drive away.
Selling and low customer acquisition costs for various partners. So we'll continue to be working with them.
On cash card spend more broad suite, we've seen average debt.
Fourth quarter on a year over year basis.
Continued mix of spend being very diverse across food grocery gas utilities retail.
And our president and and mobile wallet use cases during COVID-19 and so there are multiple ways and means.
And we can use.
The card program, coupled with the boost program for our customers and increasingly potential.
And for merchants as well.
Okay sounds like lots of levers there so.
The context from for both of you have a great day.
Yeah.
Your next question and just in Milan, and Dan <unk> with me.
Thank you and thanks for taking my question.
And so.
Jack in the past and talked about kind of the Holy Grail being connecting the two ecosystems.
Jack.
Okay.
And we think this is maybe and attempt to think about how to connect it to ecosystems and then down.
You can offer like and alternative checkout and can you talk about kind of the long term strategic.
Of this move and what it means for the future. Thank you.
Yes.
The team did an amazing job growth cash free cash out so we wanted to.
Cash is cash.
Cash is definitely rich culture, and we wanted to make sure that we're upsizing that as much as we can.
We have a really cool customer base.
And.
Other cash up and we wanted to.
And for the people could.
Express and various ways and that's why we were.
We launched a parallel.
And then it also gave us an opportunity to demonstrate.
Both the power of having.
And.
Company and also.
To be able to pay for it to cash up correctly and.
This is a.
This is obviously early.
But you can imagine where where it might go as we.
Make it even faster we make it easy even easier.
And I think it draws for.
On the on the cash IP for the system and how does the acquisition.
So our ecosystem.
And that has an opportunity is there and when you pair with things like what we can do with boost.
And as well.
We have a pretty powerful way to to drive a lot of traffic and connect with us. So.
And as we've talked about and this call.
And I think Theres a lot of.
A lot of opportunities between the two ecosystems.
And we are going to explore the most important ones.
We've done a lot of.
Internal connections between the two ecosystems and now we're focused on more of the customer facing connections and.
And I believe there are quite powerful so and I think both cash up and.
And so.
So the business has an opportunity to strengthen each other and.
For we're showing net off a little bit with cash free cash flow, but there's a lot more income.
Thank you well, thanks again amazing results I appreciate it.
Thank you.
Your next question is from the line of George for me all of.
Thank you for taking my question and congrats on very strong results again.
And just wanted to ask the strength that youre seeing.
And the.
With the mid market sellers, how vertical specific is that or is it sort of broad based I think we have a number of very vertical specific solutions out there that <unk>.
Org design and resonate with somewhat larger.
Merchant and it also the the 40% of sales coming in from.
From your your your sales force efforts, what was that number maybe a year ago. Thank you.
Yes.
Yes, maybe I can start us off here and thanks for the question George.
And what we're seeing with mid market color is.
Yeah.
Particularly during COVID-19.
You think about the pairing of strengths and our omnichannel efforts as well as strength moving of market, we've been able to progress and our ability to serve restaurants. You can think about just even more recently the a couple of products that we've launched where net.
How many restaurants adapt quickly and that's changing environment without having to charge market, placing for them and you can think of that as the interactive kitchen display system on demand and seller power delivery and QR codes for self service that helps us unlock helped.
Help sellers adapt restaurants adapt and help us lock unlock going upmarket with restaurants, when we think about verticals that have found success.
Relative speaking success and this environment and we have seen the strongest year over year growth and verticals like health and fitness home and repair and retail verticals and the fourth quarter as well as those verticals has helped you know have continued to find ways to adapt and this challenging environment and.
And as we think about the sales team.
And again looking given the strong returns and we've seen year five quarter payback historically with the sales team we wanted to do.
Double down on that and this year, we expect to double the size of our sales team this year.
And that 40% sort of engagement of our of our mid market sales coming via the sales team has grown over time as we've enabled greater efficiency for our sales teams through AI and ml technologies.
And as mid market sellers have taken on more products on our ecosystem, we see as I mentioned earlier mid Mark hotel or taking out two and a half products on average and our ecosystem and we think Kevin and a variety of the breadth of products that we provide across hardware software and payments and financial services <unk> and <unk>.
Even greater opportunity to offer those additional products to larger sellers over time to be able to meet their more complex needs.
Thank you for the color.
Thanks.
Your next question is from the line of Dan Perlin with RBC.
Thanks, Good evening and Theres a lot to digest here. So I appreciate all the information that the question I have and.
Maybe for Amrita can you just talk a little bit about the cadence for this investment that you guys have outlined to understanding you you highlighted $110 million or so and the first quarter.
Suggests that maybe it's a little more backend loaded and I just feel like given all of this opportunity.
Space and accompanying it might have been bigger and then I think if im not mistaken you also took up behind that range, maybe 50 million and so I'm just wondering what would be the incremental opportunity that you saw that you wanted to seize upon thank you.
Sure Yeah. So the overall investment step up that we envisioned for 2021 at 800 900 previously we had said 800 to 850. This was really just about completing our annual plan process, our budgeting process and seeing opportunities to lean and given our strong with book really driven from a cohort economic and payback and.
Roy perspective that we were talking about earlier, so we see this as really just a refinement.
<unk>.
The earlier numbers and shared with you and a reflection of the opportunity ahead in terms of how those investments.
Spread across the business and then how they spread across the year and you think about the ecosystem we plan to invest.
Directly about 60% and of that step up into cash app, and 40% and the seller and in terms of areas of spend about half of the step up going into sales and marketing and about a quarter each and the product development and G&A has been and build upon the foundation and expand our product breadth.
In terms of timing as mentioned.
Q1 is an important quarter for us.
To lean into investments from a sales and marketing perspective, especially as you think about the seller ecosystem, where many sellers are thinking about who.
And who they are going to hire for there.
For the various means coming out of the holiday period and for that is an area that we want to invest but if you think about the broader 800 900 of course, there is a component there that's related to hiring and that hiring will stage throughout the year and and compound in terms of its impact throughout the year. So that's a little bit of a progression that you see as well from quarter to quarter.
<unk>.
Okay, great. Thank you.
Thanks.
Yes.
And our last question is from Jason Kupferberg with Bank of America.
And just a two parter on bitcoin first off the revenue there I think it was only up around 7%, 8% quarter over quarter, even though obviously the price of bitcoin skyrocketed and there's obviously been a lot of retail trade and so I was curious if there are any noteworthy callouts there and then just wanted to get your guys' perspective on pros and <unk>.
The bitcoin versus the types of Central Bank digital currencies that are being discussed and are actively by various governments around the world. Thank you.
I can maybe hit the first.
Topic that you had Jason in terms of bitcoin and quarter over quarter growth.
We've continued to see strong adoption with 3 million.
Customers across bitcoin.
Throughout the year for cash App and in January.
1 million new to bitcoin and.
A year in the March.
So increasing awareness.
And that's that building through time and.
I think youll see that reflected and the results as well with with Bitcoin gross profit, which is how we sort of anchor to the economic impact.
Our business Bitcoin and gross profit growing.
Meaningfully on a year over year basis, and also on a quarter over quarter basis.
And as we think about.
You know the opportunity as well from a volume perspective, bitcoin and the fourth quarter growth two five times on a year over year basis and cash app.
And continues to be.
Strong front door for us.
We see product adoption, increasing for customers and their first months on cash App. So we're excited about the opportunity that we see here, but but you're right. It's still early days only about one and 10 customers on cash app.
And the current product and we see an opportunity to grow that over time.
And our thesis around Bitcoin is really quite simple, we believe it or not.
We will have a native currency.
And the Internet has broken through so many barriers all around the world for every every industry and we do think money and currency are a big part of our future and.
And it doesn't take a lot to imagine.
Certainly.
That will exist and.
And then there will be.
It will be bitcoin and.
The reason why is it is completely open and it is driven by consensus.
And as something that anyone can see and no particular third party can can actually control and that really speaks to the principles of the internet and.
And as more people participate not only and investments, but also through products and through development.
And it gets even more trusted and more solid and more secure.
And something that more people can can utilize and that's that's our goal is to is to help for people.
I understand what the Recliners and what it can be used for and make it a whole lot more useful and accessible for anything that they want to do for me here.
And then.
For both clinical practice.
Thank you. Thank you.
And I'd like to turn the call back over to the company for closing remarks.
Thank you everyone for joining our call I would like to remind everyone that we will be hosting our first quarter 2021 earnings call on May six 2021, and thanks again for participating today.
Ladies and gentlemen, thank you for participating in today's program. This does conclude the program you may all disconnect.