Q4 2023 Block Inc Earnings Call

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Nikhil Dixit: Making my project a celebrity. I keep building my little glimpse. Good day, ladies and gentlemen, and welcome to the Block fourth quarter 2023 earnings conference call. I would now like to turn the call over to your host, Nikhil Dixit, Head of Investor Relations. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Lynn.

Speaker Change: Yes.

Nikhil Dixit: Hi, everyone. Thanks for joining our fourth quarter 2023 earnings call. We have Jack and Amrita 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 conference call participants. We would also like to remind everyone that we will be making forward-looking statements on this call. All statements, other than statements of historical fact, can be deemed to be forward-looking.

Nikhil Dixit: These forward-looking statements include discussions of our outlook and guidance, as well as our long-term targets and goals, and we may decide to shift our priorities or move away from these targets and goals at any time. These statements are subject to risks and uncertainties, and 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.

Speaker Change: Statements reported results should not be considered as an indication of future performance. Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ.

Nikhil Dixit: Please 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 date, and we disclaim any obligation to update any forward-looking statements, except as required by law.

Speaker Change: So note that the forward looking statements on this call are based on information available to US as of today's date, we disclaim any obligation to update any forward looking statements, except as required by law.

Nikhil Dixit: Furthermore, the discussion during this call of Cash App's banking services refers to those offered through our bank partner. In these remarks, we will also discuss metrics related to our investment framework, including the Rule of 40. With the Rule of 40, we are evaluating the sum of our gross profit, profit growth, and adjusted operating income. 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 and on our historical financial information spreadsheet on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results.

Their discussion during this call of cash apps banking services refer to those offered through our bank partners.

Speaker Change: Within these remarks, we will also discuss metrics related to our investment framework, including ruler 40 with rule of 40, we are evaluating that some of our gross profit profit growth and adjusted operating income margins also we will discuss certain non-GAAP financial measures. During this call reconciliation to the most directly comparable GAAP financial measures.

Speaker Change: Are provided in the shareholder letter and our historical financial information spreadsheet on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results.

Nikhil Dixit: Finally, this call in its entirety is being webcast on our Investor Relations website. An audio replay of this call and the transcript of Jack and Amrita's opening remarks will be available on our website shortly. With that, I would like to turn it over to Jack.

Speaker Change: Finally, this call and it's entirely is B audio webcast on our Investor Relations website, an audio replay of this call and the transcript for Jack and read his opening remarks will be available on our website shortly with jet with that I would like to turn it over to Jack.

Jack: Thank you all for joining us.

Jack Dorsey: Thank you all for joining us. Last quarter, I focused our shareholder letter on how we're going to grow Square through four priorities. This quarter, our letter is about our Cash App strategy and our goal to become one of the top providers of banking services to households in the U.S. If you haven't already, please read that letter for details. As we did last quarter, to maximize time for your questions, we're going to focus our opening remarks on Amrita, providing more details on the financials. Now, on to Amrita.

Jack: Last quarter I focus our shareholder letter on how we're going to grow square through four priorities.

Jack: This quarter of letters about cash up strategy and I'll go to become one of the top providers of banking services to households in the U S.

Jack: If you haven't yet please read that letter for details as.

Jack: As we did last quarter to maximize time for your questions. We're gonna focus our opening remarks on named Rita providing more details on the financials overdone and Rita.

Rita: Thanks, Jack there are two broad topics I'd like to cover.

Amrita Ahuja: Thanks, Jack. There are two broad topics I'd like to cover. First, where we've been, in particular our performance for the full year and fourth quarter of 2023, where we saw strong growth and meaningful improvements in profitability, driving progress against our investment framework. Second, where we're headed. Our expectations for 2024, our guidance for the first quarter, recent trends we've seen, and ways we'll look to drive improvements on Rule of 40. Let's start with strong growth and efficiency in 2023 as we continue to drive toward our Rule of 40 target in 2026. We ended 2023 with $7.5 billion in gross profit for the year, up 25% year-over-year or 24% on a combined company basis. Our heightened focus on efficiency helped us improve profitability during the year. Adjusted EBITDA was $1.79 billion, up 81% year over year, and a 24% margin on gross profit, our highest ever. Adjusted operating income, which, as a reminder, includes expenses related to stock-based compensation and depreciation, was $351 million, our highest yet, representing a 5% margin on gross profit and compared to a loss of $145 million a year ago.

Rita: First where we've been in particular are performance for the full year in fourth quarter of 2023.

Rita: <unk> strong garage and meaningful interesting some profitability driving progress against our investment framework.

Rita: Second where we're heading our expectations for 2024 hour guidance for the first quarter recent transfer scene in Waynesville Lufkin drive improvements on remember for any.

Rita: Let's start with our strong growth and efficiency in 2023, as we continue to drive toward a ruler 40 target in 2026.

Rita: We ended 2023 with $7.5 billion in gross profit for the year up 25 per cent year over year or 24% on a combined company basis.

Rita: Our heightened focus on efficiency helped us improve profitability during the year.

Rita: Adjusted EBITDA with $1.79 billion up 81 per cent year over year, and 24 per cent margin on gross profit our highest effort.

Rita: And just had operating income, which as a reminder includes expenses related to stock based compensation and depreciation was $351 million, our highest yet representing a five per cent margin on gross profit and compared to a loss of $145 million a year ago.

Rita: Cash flow generation also improved this year as adjusted free cash flow for 2023 with $515 million up from negative $346 million a year ago.

Amrita Ahuja: Cash flow generation also improved this year, as adjusted free cash flow for 2023 was $515 million, up from negative $346 million a year ago. Taking the components together, we achieved a Rule of 29 in 2023 on a combined company basis, which was a few points higher than our guidance as of the third quarter. The other component of our investment framework is gross profit retention, which measures our ability to retain a customer over time and is an indication of whether our products, pricing, and support are valued by our customers. During 2023, Square and Cash App each achieved positive gross profit retention in aggregate across our annual cohort. Rare cohorts have strength in software and banking, which offset softness in processing volumes during the year.

Rita: Taking the components together, we achieved rule of 29 and 2023 on a combined company basis, which was a few points higher than our guidance as of the third quarter.

Rita: The other component of our investment framework is gross profit retention, which is our ability to retain a customer overtime and is an indication of whether our products pricing and support our valued by our customers.

Rita: During 2023 square and cashback, each achieved positive gross profit retention and aggregate across our annual cohort.

Rita: <unk> strength and software and banking, all set softness and processing volumes during the year.

Amrita Ahuja: Cash App benefited from growth and inflows per active user, driven by financial services products and monetization from pricing changes. In the fourth quarter, gross profit was $2.03 billion, up 22% year over year. Adjusted EBITDA was $562 million, and adjusted operating income was $185 million, both higher than our guidance, driven by continued discipline and discretionary spend. On a GAAP basis, operating loss of $131 million was impacted by a goodwill impairment of $132 million, severance expenses of $70 million, primarily related to our recent organizational restructuring, and lease impairment restructuring expenses of $34 million.

Rita: Cash that benefited from Golson inflows proactive driven by financial services products and monetization from pricing changes.

Rita: And the fourth quarter gross profit was $2.03 billion up 22 per cent year over year, adjusted EBITDA with $562 million and adjusted operating income was $185 million, both higher than our guidance driven by continued discipline and discretionary spend.

Rita: On a gap basis operating loss of $131 million with impacted by a goodwill impairment of $132 million.

Rita: Prince expenses of $70 million, primarily related to a recent organizational restructuring and.

Rita: <unk> restructuring expenses of $34 million.

Amrita Ahuja: Also, as a reminder, starting in the fourth quarter, we restructured our commerce efforts by moving our BNPL platform fully into Cash App. We are reflecting this change in our fourth quarter and 2023 gross profit results, as well as in prior periods. Let's get into the drivers for each of Square and Cash App in the fourth quarter. Square generated $828 million in gross profit, up 18% year-over-year.

Rita: Also as a reminder, starting in the fourth quarter, we restructured our Congress efforts by moving or B N P. L platform fully into cashback.

Rita: We are reflecting this change in our fourth quarter and 2023 gross profit results as well as prior periods let's.

Rita: Let's get into the drivers for each square in cash up in the fourth quarter.

Rita: Square generated $828 million in gross profit up 18% year over year.

Amrita Ahuja: Square GPV was up 10% year-over-year in the fourth quarter. While we experienced positive acquisition and stable churn of existing sellers compared to prior periods, GPV per seller continued to be affected by slower discretionary spend in the U.S. And consistent with what we shared last quarter, we've also seen a lower gross profit contribution from ramping cohorts of sellers. Within our Card Not Present volume, we saw solid growth in online volumes, up 11% year-over-year. However, this was partially offset by a decline in manual keyed entry or MKE volume, where a seller manually enters card information into a payment device either in person or over the phone. This has been an ongoing trend, with MKE volume now representing just 13% of square GPV in the fourth quarter of 2023, compared to more than 16% two years prior.

Rita: Squared G P V with up to 10% year over year in the fourth quarter, while we experienced positive acquisition and stable turn of existing sellers compared to prior periods G. P. V for seller continued to be affected by slower discretionary spend in the U S and consistent with what we shared last quarter. We've also seen a lower <unk> gross profit contribution from ramping co.

Rita: Hearts or sellers.

Rita: Within our card not pregnant volume visa solid growth in online Collins up 11% year over year.

Rita: This is this was partially offset by a decline in manual keyed entry or M. K E volume, whereas seller manually enters card information into a payment device either in person or over the phone.

Rita: This has been an ongoing trend with N K E volume now representing just 13% a square G. P. D. In the fourth quarter of 2023 compared to more than 16 per cent two years prior.

Amrita Ahuja: We expect the headwind from MKE transactions to remain for some time, although its impact should moderate as we expect software-enabled payments to become an increasing driver of our business. While square GPV growth has moderated, driven by GPV per seller and MPE declines, our banking products and vertical points of sale solutions delivered strong growth, with gross profit from these products up 28% and 27% year over year, respectively. Cash App generated $1.18 billion in gross profit in the fourth quarter, an increase of 25% year-over-year. Looking at the components of the inflows framework, which, as a reminder, does not include our BNPL platform.

Rita: We expect a headwind from M. K U transactions to remain for some time, although its impact should moderate as we expect software enabled payments to become an increasing driver of our business.

Rita: Whilst squared G. P V growth is moderated driven by G. P V per seller and M. K E declines.

Rita: Your banking products and political points of sale solutions delivered strong growth with gross profit from these products up 18, 28 per cent and 27% year over year, respectively.

Rita: Ketchup generated $1.18 billion in gross profit in the fourth quarter, an increase of 25 per cent year over year.

Rita: Looking at the components of the inflows framework, which as a reminder, does not include our B N P. L platform.

Rita: As of December Ketchup had 56 million monthly transacting active up 9% year over year.

Rita: Inflows per transacting active average $1137 in the fourth quarter of 8% year over year, driven by increasing adoption of our financial services products over the past year <unk>.

Amrita Ahuja: As of December, Cash App had 56 million monthly transacting active users, up 9% year over year. Inflows per transacting active averaged $1,137 in the fourth quarter, up 8% year-over-year, driven by increasing adoption of our financial services products over the past year. Cash App Card continued to increase its scale and introduce customers to financial services within Cash App. It reached 23 million monthly active users, representing more than 40% of our total active base in December and going 20% compared to the prior year, more than twice as fast as overall monthly transacting volume. Monetization rate was 1.48%, up nine basis points year over year and five basis points quarter over quarter. Improvement from the third quarter was driven by a number of factors, including an increase in Bitcoin ghost profit from pricing changes implemented during the quarter.

Rita: <unk> card continue to increase it scale and introduce customers to financial services within Kasha Ketchup card reached 23 million monthly active representing more than 40% of our total active based in December and going 20 per cent compared to the prior year more than twice as fast as overall monthly transacting active.

Rita: Monetization right with 1.48% up nine basis points here over here and five basis points quarter over quarter <unk>.

Rita: Improvement from the third quarter was driven by a number of factors, including an increase in bitcoin gross profit from pricing changes implemented during the quarter.

Rita: Turning turning to our B N P L platform, which contributed $242 million in gross profit to cash up in the fourth quarter.

Rita: G M V from our B N P. L platform with $8.6 billion in the fourth quarter of 25 per cent year over year, driven by strength across are paying for offering as well as single use payments, which allows customers in the U S U K and Australia to shop by the after pay up at merchants, we don't have a direct relationship with and pay.

Amrita Ahuja: Turning to our BNPL platform, which contributed $242 million in gross profit to Cash App in the fourth quarter. GMV from our BNPL platform reached $8.6 billion in the fourth quarter, 25% year over year, driven by strength across our pay in four offering, as well as single use payments, which allows customers in the US, UK, and Australia to shop using the afterpay app at merchants we don't have a direct relationship with and pay using BNPL. Losses on consumer receivables were 1% of GMV, consistent with historical ranges.

Rita: Using D N P L.

Rita: Bosses on consumer receivables were 1.41% of G. M V consistent with historical dangerous.

Rita: Jack included in his letter integrating commerce payments tools is a key focus for US next year, and we see powering B N P. L through ketchup card as a significant opportunity.

Rita: Turning to our guidance.

Rita: We've committed to achieving our rule of 40 target and 2026.

Rita: Primary objective in 2024 is to deliver it an improvement from the rule of 29, we achieved in 2023 on a combined company basis.

Rita: To achieve this we have put forward an initial guidance that we intend to exceed by at least one point of outperformance during the year either on gross profit growth or adjusted operating income margin or both.

Amrita Ahuja: As Jack included in his letter, integrating commerce payments tools is a key focus for us next year, and we see powering BNPL through CashUpCard as a significant opportunity. Turning to our guidance, we've committed to achieving our Role of 40 target in 2026.

Rita: As we did last year, we are working to identify growth opportunities and additional efficiencies that further progresa towards me with 40.

Rita: For the full year 2024, we were expecting at least $8.65 billion in gross profit or at least 15 per cent growth year over year.

Amrita Ahuja: Our primary objective in 2024 is to deliver an improvement from the Rule of 29 we achieved in 2023 on a combined company basis. To achieve this, we have put forward initial guidance that we intend to exceed by at least one point of outperformance during the year, either on gross profit growth or adjusted operating income margin, or both. As we did last year, we are working to identify growth opportunities and additional efficiencies that further progress us towards Rule of 40. For the full year 2024, we are expecting at least $8.65 billion in gross profit, or at least 15% growth year over year. By ecosystem, we expect Cash App to grow faster than Square but for growth to moderate from 2023 as we implement pricing changes and other initiatives that improve our cost structure.

Rita: By ecosystem, we expect <unk> to grow faster than square, but for gross to moderate from 2023, as we laugh pricing changes and other initiatives that improved our cost structure.

Rita: As we looked at 2024 and beyond we are focusing our efforts on driving engagement to product adoption and product velocity.

Rita: Within square, we expect software and integrated payments and banking to be continued drivers of growth.

Rita: We believe the work we've put towards our new strategic priorities and the investment behind several go to market initiatives can improve this teller acquisition over the next few years.

Rita: On profitability, we're raising our full year guidance and now effect adjusted operating income of at least $1.15 billion compared to our preliminary guide of $875 million.

Rita: And adjusted EBITDA of at least $2.63 billion versus $2.4 billion.

Amrita Ahuja: As we look to 2024 and beyond, we are focusing our efforts on driving engagement through product adoption and product philosophy. Within Square, we expect software and integrated payment and banking to be continued drivers of growth. We believe the work we put towards our new strategic priorities and the investment behind several go-to-market initiatives can improve seller acquisition over the next few years. On profitability, we're raising our full-year guidance and now expect adjusted operating income of at least $1.15 billion compared to our preliminary guide of $875 million, and adjusted EBITDA of at least $2.63 billion versus $2.4 billion. This represents a year-over-year margin expansion of approximately nine points on adjusted operating income and seven points on adjusted EBITDA.

Rita: This represents year over year margin expansion of approximately nine point unadjusted operating income and seven points an adjusted EBITDA.

Rita: As we continue to focus on managing Cock, we expect to achieve leverage on share based compensation expenses as a percentage of gross profit compared to 2023.

Rita: This guidance on growth and profitability is based on the visibility we haven't to our business today with no significant changes to the macro environment.

Rita: Lastly, our guidance for the first quarter of 2024.

Rita: We expected to deliver between $2 billion to $2.02 billion in gross profit or 17 per cent growth as I'm in point.

Rita: For square, we expect gross profit N G. P D to moderate slightly compared to the fourth quarter is 18% and 10% respectively.

Rita: <unk> is your weather has periodically impacted squared G. T V in the U S and particularly in January where we saw it driving three to four point moderation in growth.

Rita: In certain regions experienced in Paxton person volumes, particularly within food and drink in retail.

Amrita Ahuja: As we continue to focus on managing costs, we expect to achieve leverage on share-based compensation expenses as a percentage of gross profit compared to 2023. This guidance on growth and profitability is based on the visibility we have into our business today, with no significant changes to the macro environment. Lastly, our guidance for the first quarter of 2024. We expect to deliver between $2.02 billion in gross profit, or 17% growth as a minimum point. For Square, we expect gross profit and GPV to moderate slightly compared to the fourth quarter's 18% and 10% risk factors. So far this year, weather has periodically impacted Square GPV in the U.S., and particularly in January, where we saw it drive a three to four point moderation in growth.

Rita: For Cashback, we expect growth can be driven by active and inflows proactive in the first quarter <unk>.

Rita: We expect the gross profit growth rate to moderate compared to the fourth quarter is 25 per cent is will be laughing tougher tougher comparisons.

Rita: Looking at profitability, we plan to deliver both quarter over quarter and year over year growth with adjusted operating income of $225 million to $245 million and.

Rita: And adjusted EBITDA $570 million to $590 million.

Rita: The respective mid points represent margin of 12 per cent and 29 per cent.

Rita: And year over year growth of 361% and 57%.

Rita: Menstruating or a continued focus on driving profitable growth.

Speaker Change: With that I'll now turn it back to the operator to start the Q and a portion of the call.

Speaker Change: Thank you if you would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw that question again press Star one and we ask that you. Please limit yourself to one question for any additional questions. Please re cute your.

Operator: And certain regions experience impacts to in-person volume, particularly within food and drink and retail. For Cash App, we expect growth to be driven by active users and inflows per active user in the first quarter. We expect the gross profit growth rate to moderate, compared to the fourth quarter's 25%, as we'll be lapping tougher comparisons. Looking at profitability, we plan to deliver both quarter-over-quarter and year-over-year growth with adjusted operating income of $225 to $245 million and Adjusted EBITDA of $570 to $590 million. The respective midpoints represent margins of 12% and 29% and year-over-year growth of 361% and 57%, demonstrating our continued focus on driving profitable growth. With that, I'll now turn it back to the operator to start the Q&A portion of the call. Thank you.

Speaker Change: Your first question comes from the line of <unk> Wang from J P. Morgan. Please go ahead.

Wang: Thank you. Thank you. So you have to really quickly here on cause I Wanna ask how quickly you can <unk>.

Speaker Change: 24 really product work. This is a question here in your letter Jackie talk about.

Wang: Closing product gobs, and ketchup and reclaiming leadership in engineering and design. It squared help how quickly can you get there.

Speaker Change: Let me see some miserable benefits too.

Speaker Change: And 24.

Speaker Change: <unk>.

Speaker Change: Yeah of course.

Speaker Change: And every one of them.

Speaker Change: We've been going through nurses to support how we work so we could lose much pressure.

Operator: If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw that question, again, press star one. We ask that you please limit yourself to one question.

Speaker Change: And that's Inclusively square and ketchup and title and activity. So you should expect too much harder protocol city <unk>.

Speaker Change: <unk>, we're square in particular, we've been doing a lot of.

Speaker Change: This is our number one priority to ensure that we can we.

Tin Hsien-Huang: For any additional questions, please rise. Your first question comes from the line of Tin Hsien-Huang from J.P. Morgan. Please go ahead.

Speaker Change: We can move much faster with some features and future gaps the have held us back from surgery customers, namely with food and both of them. We have for example, and pretty off.

Jack Dorsey: So you acted really quickly here on cost. I want to ask how quickly you can attack growth in 24. Really, product velocity is the question here. In your letter, Jack, you talk about closing product gaps in Cash App and reclaiming leadership and engineering and design at Square. How quickly can you get there?

Speaker Change: This year and win win those.

Speaker Change: <unk> elements unlock this is going on with a whole bunch of speed <unk> restaurants retail.

Jack Dorsey: And when might we see some measurable benefits to growth in 24? Yeah, across the board, in every one of our business units, we've been going through an exercise in order to simplify how we work so we can move much faster, and that's inclusive of Square and Cash App and Title and TBD. So you should expect much higher product velocity across the board. With Square, in particular, we've been doing a lot of platform work. This is our number one priority to ensure that we can move much faster with some features and feature gaps that have held us back from certain customers, namely with food and beverage. We have, for example, pre-auth coming this year.

Speaker Change: Services and I believe we'll we'll be able to push you in the head and <unk> really good outcomes.

Speaker Change: February we're gonna benefit a lot from <unk>.

Speaker Change: The banking relationships.

Speaker Change: <unk>.

Speaker Change: Mhm.

Speaker Change: We've been we've been focused we've been focus a lot of her we've been pulling the throat I should say.

Speaker Change: Banking relationships for quite some time.

Speaker Change: And we have proven no tomato and.

Speaker Change: Success of the ketchup card.

Jack Dorsey: And when those platform elements unlock, it's gonna unlock a whole bunch of speed across restaurants, retail, and services, and I believe we'll be able to push really hard and see really good outcomes. On the Cash App, where we're gonna benefit a lot from is the focus on the banking relationships. Rob.

Speaker Change: And it's really.

Speaker Change: A lot of our efforts in order to N as as I said I'm not sure how the local bank bank or <unk>.

Speaker Change: Rodriguez to make sure that we are the best choice.

Speaker Change: The first choice for anyone looking <unk>.

Jack Dorsey: Okay. We've been pulling the thread on banking relationships for quite some time. And we have proven the model with the success of the Cash App Card. And it's really focused a lot of our efforts in order to, as I said in the shareholder letter, bank our base. So our strategy is to make sure that we are the best choice and the first choice for anyone looking who's making under $150,000 to see Cash App as their primary bank. And that has to do... One of the biggest signals is that they...

Speaker Change: <unk>.

Speaker Change: To $150000 to see ketchup as.

Speaker Change: Their primary bank and that has to do.

Speaker Change: What are the biggest signals is that the.

Speaker Change: The majority of their direct deposit is growing into ketchup.

Speaker Change:

Speaker Change: We're gonna move very fast because we have a much more focus roadmap.

Speaker Change: [noise] against.

Speaker Change: Banking in particular.

Speaker Change: And is resetting the letter and a lot of details I think we'll see very positive outcome Oh comes from that focus and allows us to go to <unk> parts, two and three cause that surgery, which is on.

Jack Dorsey: The majority of their direct deposit is going into cash up. So we're gonna move very fast because we have a much more focused roadmap, and the roadmap against banking in particular. And as we said in the letter, and in a lot of detail, I think we'll see very positive outcomes from that focus, which allows us to go to parts two and three of that strategy, which is on..., on families, and also becoming a social bank. Cash App is inherently social. We have this incredible network effect by starting with peer-to-peer. And we have this opportunity to make it even more social and really look deeply at local payments and local commerce, in particular. And that's where the intersection with Square comes into play.

Speaker Change: Families.

Speaker Change: And also becoming.

Speaker Change: Social bank ketchup is inherently social.

Speaker Change: We have this incredible network effect through starting with peer to peer.

Speaker Change: And we have this opportunity to make it even more social and really look deeply at the the local.

Speaker Change: Payments and local commerce in particular, and that's where the intersection square it comes into play.

Speaker Change: We're gonna start.

Amrita Ahuja: We're going to start putting our Square customers first and foremost in the cash app, and you really see the power of our combined ecosystems and the combined network. And I just add, Chintan, just to tie this together with our 2024 outlook, you know, our guidance philosophy is to guide based on our current run rate trends in our business, what we're seeing in the business quarter to date as earnings and the known expense and growth levers that we've incorporated into our plan entering the year. So a lot of the refocus strategy and key growth initiatives that we're discussing are not included in our 2024 expectations, given how recent they are, and that they provide us with opportunities to outperform relative to this initial guidance, whether it's the product platform or go-to-market experimentation within the square business or the cash app bank to base strategy. We're hard at work on each of those elements.

Speaker Change: Putting her or square customers first and foremost and the ketchup and you really see the the power.

Speaker Change: Mm of or combined ecosystems in the combined Newark.

Speaker Change: And I just add tinton, just to uhm tie this together with our 2024 outlook or guidance philosophy is to guide based on our current run right trends in our business, what we're seeing in the business quarter to date as of earnings and the known expense and gross levers it we've incorporated into our plan.

Speaker Change: Entering the air So a lot of the refocus strategy and key growth initiatives that we're discussing are not included in our 2024 expectations. Given how recent they are <unk> they provide us with opportunities to outperform relative to this initial guidance, whether it's the product platform or go to market experiment.

Speaker Change: Nation within the square of business or <unk> Bank the base strategy.

Speaker Change: Hard at work with each of those elements and we expect those to deliver for us as we get into later in the year 2025, and beyond but still early days.

Trevor Williams: And we expect those to deliver for us as we get into later in the year 2025 and beyond, but these are still early days. Your next question comes from Timothy Chiodo from UBS. Please go ahead. Great, thank you for taking the question. I wanna dig in a little bit to the Square distribution approach.

Speaker Change: Your next question comes from the line of Timothy T O dough from U P. S. Please go ahead.

Speaker Change: Great. Thank you for taking the question I wanted to get in a little bit to the square distribute should approach you've talked about building out the vertical outbound sales teams and also potentially experimenting with local in market sales teams and also saw in the shareholder letter you mentioned the revamped referral program, but maybe you could expand.

Jack Dorsey: You've talked about building out the vertical outbound sales teams and also potentially experimenting with local in-market sales teams. And also, Saul, in the shareholder letter, you mentioned the revamped referral program, but maybe you could expand upon how Square views the potential to partner with banks and ISOs. So adding bank partners for distribution, adding ISOs to get broader coverage across the nation, and the various considerations, and how you sort of view the potential for that in the future. Thank you.

Speaker Change: And upon how square views the potential to partner with banks and I. So so adding bank partners for distribution, adding I suppose to get broader coverage across the nation and the various considerations and and how you sort of use a potential for that.

Speaker Change: In the future. Thank you.

Speaker Change: Yep, We're we're definitely open this we tried this in the past and her first few years as a company.

Jack Dorsey: Yep, we're definitely open to this. We tried this in the past in our first few years as a company. As many of you know, KP Morgan Chase was one of our earliest investors in our Series B, and we had Square Readers in every single branch in the United States. But it wasn't that effective, uh, the, I think the, um... That particular strategy just did not work because the expectation of the customer coming in, especially for business banking, for whatever reason, was off.

Speaker Change:

Speaker Change: Many of you know J P. Morgan Chase was one of her earliest investors or <unk>.

Speaker Change: And we had square readers in every single branch in the United States.

Speaker Change: It wasn't that effective.

Speaker Change: Think the.

Speaker Change: That that particular strategy did not work because the T X.

Speaker Change: Meditation is a customer coming in.

Speaker Change: Especially for business banking for whatever reason was was off.

Speaker Change:

Jack Dorsey: That's not to say that all these channels don't work; obviously, they do work for a few of our competitors, and we're certainly open to them and open to exploring them. I think the biggest thing that is really important for Square is certainly our go-to-market approach, but our product itself is where I want to put a lot of our focus. One of the things that we're doing soon is we now have about four or five apps in the app. It's pretty confusing to direct people to the App Store, and when they get there, it's hard for them to find what they want.

Speaker Change: That's not to say that all the channels don't work obviously it does work for a few of our competitors.

Speaker Change: And we're certainly open to them and open to exploring I think the the biggest thing that is is is really important for square.

Speaker Change: Is certainly the uhm or go to market approach, but our our product itself.

Speaker Change: That's where I Wanna put a lot of <unk> and one of the things that we're doing.

Speaker Change: Soon is we're right now we have about four or five apps in new Hampshire.

Speaker Change: It's pretty confusing to direct people to the App store and and when they get there.

Jack Dorsey: Really, you know, it's a function of Apple's search results as to whether they find us or not, the app they need, especially if they're a restaurant or retail or services organization. So what we're going to do is we're going to go back to having one app, which is going to be called Square. And we can easily say to anyone that you can go to Square, or you can download Square; you'll have everything you need. The interface, and navigation, and features will dynamically shift based on the type of merchant you say you are and shift over time as you get more and more sophisticated with the software.

Speaker Change: Really.

Speaker Change: Function of apples search results as to whether they find this or not the <unk>.

Speaker Change: Especially if the restaurant or retail or a services organization.

Speaker Change: We're gonna do is we're gonna go back to having one which is gonna be cold square.

Speaker Change: And we can usually say to anyone that you can go to school or you can download square you have everything you need the interface and navigation and features will dynamically shift based on the type of merchant you say you are.

Speaker Change:

Speaker Change: And shift over time, as you get more and more sophisticated with the chauffeur.

Jack Dorsey: And we can also obviously help folks with our sales team to guide them through, but I think generally it'd be a whole lot simpler. We have had massive success with self-serve, and as we do add referral engines and become more targeted specifically within food and beverage and restaurants. Having a much simpler way to get the app, to use it, and to get up and running, whether you're a micro-merchant, just one person, a sole proprietorship, or all the way up to multi-location, multi-country. So that's the goal, and we'll accomplish all that this year. And I think that's really gonna unlock a ton of growth and make anything that we do from a distribution standpoint, whether it be through ISOs or bank partnerships, or, what I think is more important, through very targeted channels for restaurants and services and retail, it's going to make it that much better.

Speaker Change: We can also obviously help fix for third ourselves team to guide them through but I think generally it'd be a whole lot simpler with massive success professor.

Speaker Change: And as we do add referral engines and be more targeted with them, specifically within food and beverage and restaurants.

Speaker Change:

Speaker Change: Having a much simpler way to get the up to use it and to get up and started whether you're on my connection just one person sole proprietorship, where all the way up to Multilocation multi multi country. So so that's the goal and will realize all that this year.

Speaker Change: And I think that's really gonna unlock a ton of growth.

Speaker Change: And make anything that we do from a distribution standpoint, whether it be through I suppose or bank partnerships.

Speaker Change: What I think is more important through very targeted channels for restaurants and services and retail.

Speaker Change: It's gonna make it that much better and most importantly will focus on retaining which is a big a big effort. The other thing that I think will help us retain.

Jack Dorsey: And most importantly, we'll focus on retaining, which is a big, big aspect. The other thing that I think will help us retain, which is a core part of our strategy, is number four: banking. We have nine products within the market. They're only going to get stronger.

Speaker Change: Which was a core part of our strategy number four is banking.

Speaker Change: We have nine products within the market, they're only going to get stronger.

Jack Dorsey: It's the thing that truly differentiates us from our peers. And, you know, we'll We not only have an ecosystem that serves our entire business, but we have the equivalent of a business banking account, just like there are JP Morgan Chase branches that they used to go to in the past. They can get a card. They can get a credit card.

Speaker Change: Thing that truly differentiates us from root beers.

Speaker Change: And you know will.

Speaker Change: We not only have an ecosystem of service or an entire business.

Speaker Change: But we have the equivalent of a business banking account just like this <unk> branches that they're going through in the past that can get a card that can get a credit card that can get a line of credit they can get alone because we've been doing it for quite some time and that is to integrate it all into one start with one of <unk> is.

Jack Dorsey: They can get a line of credit. They can get a loan, as we've been doing for quite some time. And that it's integrated all into one stack with one app download, hugely unique, and also hugely important to our sellers. So, I think it's going to be amazing. Thanks, Jack. Your next question comes from Darrin Peller from Wolf Research. Please go ahead.

Speaker Change: Hugely unique and also hugely important to tour so so.

Speaker Change: I think it's going to be amazing.

Speaker Change: Thank you Jack.

Speaker Change: Your next question comes from the line of Darren Keller from both research. Please go ahead.

Darren Keller: Hey, guys. Thank you just thrown in a little bit more on direct deposit. It obviously is moving to the forefront.

Darrin Peller: Hey guys, thank you. Just to hone in a little bit more on direct deposit, it obviously is moving to the forefront around Cash App for your strategy. Look, I mean, we obviously see a notable set of banking assets you've been able to package for your MAUs. But if you can just expand on what you see actually driving adoption or accelerated adoption of direct deposit now getting that 2 million to say 5 or 10 million users versus, I know there's been some prior, to make that happen. And then Jack, maybe just what timeframe would you consider a success of an increment? Fibers

Darren Keller: Around cash out for your strategy on it and like I mean, we obviously see a notable set of banking assets, you've been able to package for you're gonna use but if you can just expand on what you see actually driving adoption or accelerated adoption a direct deposit now getting that 2 million to say five or 10 million users versus I know there's been some prior times.

Darren Keller: To make that happen.

Darren Keller: And then Jack maybe just what timeframe would you consider a success on this front in terms of an incremental maybe five or 10% a casual user taking on direct deposit.

Darren Keller: I think the biggest driver is going to be easy connected banking features that does this work and that people can trust.

Jack Dorsey: I think the biggest driver is going to be easy, connected banking features that just work and that people can trust. We want to make sure that people see Cash App as reliable, as dependable, as something that they trust their money with and their full direct deposit of their paycheck with. Trust is the one input, but a big factor of that is the output, so what can I actually do with it? And the Cash App card has been one of our most successful products within Cash App. It's extremely easy to get a card.

Darren Keller:

Darren Keller: We wanted to make sure that people see ketchup as reliable as dependable.

Darren Keller: Something that the trust and their money within their full direct deposit of their paycheck with and.

Darren Keller: Trust is is the the one input, but a big a big factor of that is <unk>, what can I actually do with it.

Darren Keller: And the ketchup card has been one of our most successful products within catsup.

Darren Keller: It's it's extremely easy to get a card it's extremely easy to personalize it to use it to change it.

Jack Dorsey: It's extremely easy to personalize it, to use it, to change it, to give it to family members. So there's a lot that's attractive about it. There are some gaps that we're missing that traditional banks offer that we do not. But really, the roadmap is filling those gaps and doing so in an intuitive, well-designed way that feels fresh and benefits from technology to give time back to the customer. And then as people see that, and as people use it, and they talk with their friends and their families about it, that's the growth. That's how direct deposit is growing. And people, you know, again trust us more and more to put more of their paycheck in the cash app because they know they can use it in very traditional ways that are reliable, but also entirely new ways. And it all fits together perfectly and seamlessly.

Darren Keller: To give it to family members. So there's a lot that's attractive there there are some gaps in we're missing the traditional banks offer that we do not.

Darren Keller: Really the roadmap is filling those gaps in doing so intuitive.

Darren Keller: Intuitive well designed way that feels fresh and.

Darren Keller: Benefits from technology.

Darren Keller: To give time back to the customer and then as people see that.

Darren Keller: And as people use it and they they talk with your friends and family about it.

Darren Keller: That's that's the growth that's that's how direct deposit.

Darren Keller: Gross and people you know again trust us more and more to put more of their paycheck.

Darren Keller: And the cash that because they know they can use it and very traditional ways that are reliable, but also entirely new ways and it all fits together perfectly and seamlessly.

Jack Dorsey: Um, so expectations, uh... We want to move as fast as possible. The fact that we're no longer focusing on expanding globally for right now, that we're focusing on building our base in the United States. This is the foundational base for our other two priorities, which are moving more upmarket with families, which we've seen some early results and positive signs from, and then really going after. You know, being a social bank, starting with peer-to-peer but expanding beyond that and really getting into neighborhoods and local communities and focusing a lot more on commerce.

Darren Keller: So expectations.

Speaker Change: We went to move as fast as possible.

Speaker Change: The fact that we're no longer focusing.

Speaker Change: Expanding globally for right now, we're focusing on banking our base in the United States is going to allow us to move much faster than I think we'll see how it comes much faster than we have traditionally and this is the basic foundation for our other two priorities, which is moving more up market with families.

Speaker Change: Which we have seen some some early.

Speaker Change: Positive signs from and then really going after.

Speaker Change: You know being <unk> being a social bank, starting with peer to peer, but expanding beyond that and really getting into neighborhoods and local communities and focusing a lot more on commerce. So all of these tools at up to desire, we believe too more.

Jack Dorsey: So all these tools add up to a desire, we believe, to put more money... more of my money with Cash App and use it there. And hopefully, you know, more and more it becomes 100%. And Darin, just to go a little bit deeper on some of the actual features that we think will be compelling for customers. You know, we've got a bunch of features; we're rolling out more features to give customers an experience beyond what's available in the market today. So today, we think our direct deposit offering is differentiated with no fees or minimums, early direct deposit availability, and the benefit of our active money being in the broader cash up ecosystem where they can send spend on cash up card or cash up pay, invest it, etc.

Speaker Change: More a month.

Speaker Change: Where my money with ketchup and and and use it there and hopefully.

Speaker Change: More and more it becomes 100 per cent.

Speaker Change: And there and just to go a little bit deeper on some of the actual features that we think will be compelling for our customers.

Speaker Change: We've got a bunch of features we're rolling out more features thinking customers an experience beyond what's available in the market today. So today rethink our direct deposit offering is differentiated with no fees are minimum early direct deposit availability and the benefit <unk> money being in the broader cash up ecosystem, where they can send spend on <unk>.

Speaker Change: A card or cash that pay dust it et cetera will also focus on the new products and features that drive engagement. So for example, we recently launched free overdraft coverage up to a certain amount we introduced yield on savings balances and allowed for automatic paycheck distributions.

Amrita Ahuja: We're also focused on new products and features that drive engagement. So, for example, we recently launched free overdraft coverage up to a certain amount, we introduced yield on savings balances, and we allowed for automatic paycheck distribution. So we're prioritizing launching products that customers expect from us before they start bringing in more of their money. Today, there are about 2 million paycheck deposit actives as of December, about, you know, 3% of our monthly actives.

Speaker Change: Were prioritizing launching products that customers expect from us before they start bringing in more of their money today.

Speaker Change: Today, it's about 2 million paycheck deposit active as of December about three per cent of our monthly active but this will be one of the key kpis along with broader inflows proactive that we're focused on driving forward as part of our bank the day strategy.

Amrita Ahuja: But this will be one of the key KPIs, along with broader inflows per active that we're focused on driving forward as part of our bank to base strategy. Your next question comes from the line of Mike Ng from Goldman Sachs. Please go ahead. Hey, good afternoon.

Speaker Change: That's great. Thanks, guys.

Speaker Change: Your next question comes from the line of Mike <unk> from Goldman Sachs. Please go ahead.

Mike: Hey, good afternoon. Thank you very much for the question I think are 2024 outlook implies opex growth of about 4% would you just discuss your confidence in being able to achieve that at least 15% gross profit growth against the backdrop of this tight cost management and then what signals are you looking for when deciding whether it.

Michael Ng: Thank you very much for the question. I think your 2024 outlook implies OPEX growth of about 4%. Would you just discuss your confidence in being able to achieve that at least 15% gross profit growth against the backdrop of this tight cost management? And then, you know, what signals are you looking for when deciding whether to invest in OPEX more aggressively again? Thank you.

Mike: To invest in Opex more aggressively again, thank you.

Mike: I can start maybe with a reminder of kind of a key areas of operating expense leverage that we've been pursuing and which we believe still continue to have opportunity against.

Amrita Ahuja: I can start maybe with a reminder of kind of the key areas of operating expense leverage that we've been pursuing, and which we believe still continue to have opportunity against. And that, you know, those constraints are clarifying for us, actually, in supporting, you know, further scoping, prioritization, and operational excellence in how our teams operate. But the key category is one, personnel.

Speaker Change: And that you know those can change or clarifying for us actually in supporting you know further scoping prioritization and operational excellence and how our teams operate with a key categories thing one personnel, obviously, you heard from us last quarter or constraint around people, which at the 12000 per.

Amrita Ahuja: Obviously, you heard from us last quarter about our constraint around people, which at the 12,000 person cap, which we're currently operating under and expect to for some time. That unlocks a tremendous amount of leverage for us, both from a non-GAAP operating expense perspective, as well as from an SBC perspective, and you see that reflected in our expectations for 2024. And that constraint, again, is what leads to stronger prioritization and focus in the areas that will impact our customers the most and ultimately lead to profitable growth. The other key focus area for us is around corporate overhead expenses, where we've already seen an opportunity to get more efficient, whether it's things like third-party spend booth vendors, real estate, T&E, data and cloud fees, professional fees, etc. We have an opportunity to continue to refine how we operate to make sure that we are operating with the greatest amount of discipline, constraints, and efficiency.

Speaker Change: Person cap, which were currently operating under.

Speaker Change: And expect to for some time that unlocks a tremendous amount of leverage for us.

Speaker Change: Both from non-GAAP operating expense perspective, as well as leverage from an S. P. C perspective, and you see that reflected in our expectations for 2024.

Speaker Change: That constraint again is what leads to stronger prioritization and focus in the areas that will impact our customers. The most and ultimately lead to profitable growth. The other key focus area for us is around corporate overhead expenses, where we've already seen opportunity to get more efficient whether it's things like third party spending.

Speaker Change: Vendors real estate T any.

Speaker Change: Data and cloud fees professional fees et cetera, we.

Speaker Change: We have an opportunity to continue to refine how we operate to make sure that we're operating with the greatest amount of discipline constraint and efficiency.

Amrita Ahuja: And then, as we look longer term, of course, there are new technologies like AI that we can be leveraging in house, not only in terms of the products that we're serving our customers but that deliver efficiency to our teams internally, whether it's customer service or sales or engineering and design. And then, of course, structural costs, which we've already made some headway on with some partner renegotiations last year, but we'll continue to pursue in terms of unit economic improvement across our base of products. So there are a number of different areas for us that we've already been digging deep into, and for us to continue to do that, that actually support our opportunity to continue to grow our platforms and grow our overall gross profit. Thank you, Amrita.

Speaker Change: And then as we walk longer term of course, their new technologies like AI that we can be leveraging uhm in-house not only in terms of the products or serving our customers, but that deliver efficiency to our teams internally, whether it's customer service or sales or engineering and design.

Speaker Change: And then of course structural costs, which we've already made some headway on with some partner renegotiations last year, but will continue to pursue in terms of unit economic improvement.

Speaker Change: Across our base of products. So there are a number of different areas for us.

Speaker Change: We've already been digging Nathan too and for us to continue to do that.

Speaker Change: That actually support or opportunity to continue to grow our platforms.

Speaker Change: Overall gross profit.

Speaker Change: Great. Thank you two things.

Jack Dorsey: Sorry, the two things I would add to that are just to emphasize what Amrita said about AI. I mean, you've all been hearing about AI constantly in all these calls in terms of efficiency, but it's going to be extremely impactful for us as we look at everything that we're doing and all the tools that we're building and how much more productive it makes all of our engineers. And I think in the very near future, our designers as well. That allows us to learn much faster, allows us to ship faster, allows us to correct mistakes much faster, and really be ahead of the market where we think our strength is, which is creativity and bringing all these very complex systems together. And the second thing is that, about three years ago, we were more in a mode of letting as many flowers bloom as possible, and it created a bunch of inefficiencies between all of our ecosystems. We had a lot of duplication between Square and Cash App, and these tools and these costs just weren't really great at all.

Speaker Change: Sorry, the the two things I would add to that is it's just a <unk> I mean, you all have been hearing they are constantly and all of these calls.

Speaker Change: In terms of efficiency, but it's it's going to be extremely thoughtful for us as we look at everything no we're doing.

Speaker Change: All the tools there were building and how how much more productive it makes all of our engineers and.

Speaker Change: I think in the very near future our designers as well that allows us to learn much faster and loves this ship faster. So I was just to correct mistakes much faster and really be ahead of the market.

Speaker Change: Where we think our strength is which is creativity and bringing all these very complex systems together and the second thing is about three years ago, we were.

Speaker Change: More than a motive letting as many flowers bloom as possible.

Speaker Change: And it created a bunch of inefficiencies between all of our ecosystem. So we had a lot of duplication between square and ketchup and.

Speaker Change: And these these tools and these cost just weren't really great at all and we've taken a <unk>.

Jack Dorsey: And we've done a ton of work to clean that up, and I believe there's even more to go. So I believe we can actually move much faster, ship much faster because of those two things and because we don't have such a dependence on this multitude of tools that are all different but effectively doing the same thing or solving the same issue. That's very helpful. Thank you, Jack. Thank you, Amrita.

Speaker Change: Done a ton of work to clean that up and and I believe there's even even more to go. So I I believe we can actually move much faster ship much faster because of those two things and because we don't have such a <unk>.

Speaker Change: Dependence on this multitude of tools, but.

Speaker Change: That are that are all different but effectively doing the same thing or for solving the same mucus.

Speaker Change: That's very helpful. Thank you Jack Thank you Maria.

Speaker Change: Your next question comes from the line of her <unk> from Bernstein. Please go ahead.

Harshita Rawat: Your next question comes from the line of Harshita Rawat from Bernstein. Please go ahead. Good afternoon.

Her: Good afternoon, I want to ask about gas sharpened callers gossip is growing rapidly yoga from a small base can you give us some color on the composition of these volumes for example, the disclaimer transfer online we've had some very interesting what can acquire partnerships to enable catsup.

Amrita Ahuja: I want to ask about cash app payments and commerce. Cash app payments are growing rapidly, although from a small base. Can you give us some color on the composition of these volumes, for example, within Square Merchants or online?

Harshita Rawat: You've had some very interesting Merchant Acquire partnerships to enable cash app pay recently as a payment option online. What are some of the most salient things we can do to kind of grow cash app pay penetration in e-com? And also, just related to cash app overall, can you also talk about the compliance investment group?

Bernstein: The payment option online what if something was saving thinks he can do to kind of crude ketchup. Please penetration calm and and also just related Kashyap. Overall can you also talk with a complaint.

Speaker Change: Thank you. Thank you.

Jack Dorsey: Yeah, I'll start off, Rashida, on Cash App Pay. We're really excited about the progress that we've seen over the past year and how quickly we've been able to drive growth as we've expanded to more and more merchants. This is a key part of how we will integrate commerce tools more broadly into Cash App over the next several years. We see Cash App Pay as a seamless way for customers to spend, especially online, and it provides more ways for our customers to spend beyond using Cash App Card.

Speaker Change: Yeah, I'll I'll start off Hershey dot on cash that pay we're really excited about the progress that we've seen over the past year and how quickly we've been able to drive growth as we've expanded to more and more merchants.

Hershey: This is a key part of how we integrate commerce 12, more broadly into cash up over the next several years, we see cash I pay as a seamless way for customers to spend especially online and and provides more ways for our customers <unk> beyond using ketchup card.

Amrita Ahuja: We ended December with $3 million in monthly actives and $2.5 billion in annualized GPV, which has more than tripled since what we reported to you last June. Growth here has been driven by recent partnerships such as DoorDash, Adyen, and Stripe. We have a strong pipeline as well of large merchants we're exploring to continue to expand our reach. Of course, Afterpay's enterprise sales team has been critical here and allowed us to scale quickly by leveraging existing relationships and the quality of their sales organization. I think the second part of your question was about... Cash App Commerce, or can you repeat the other part? Can we answer your question, Hershida?

Hershey: We ended December with 3 million monthly <unk>, and two and a half billion dollars in annualized G. P V, which is more than tripled since what we reported the last June growth here has been driven through recent partnerships such as door dash <unk> stripe, we have a strong pipeline as well a large.

Hershey: Merchant, we're exploring to continue to expand our reach.

Hershey: Of course after pays enterprise sales team has been critical here and allowed us to scale quickly by leveraging existing relationships and the quality of of their sales organization.

Speaker Change: Uhm I take the second part of your question what is about.

Speaker Change: Ketchup commerce or can you repeat the other two we answer your question hers yeah.

Speaker Change: Yeah. So just you know the confines and vacuum just more broadly <unk>, especially if you're focused.

Amrita Ahuja: Yeah, so just, you know, the compliance investment, just more broadly within Cash App, not just related to Cash App, especially as we focus now. No, within Cash App, I was just kind of thinking about some recent media reports. Yeah, absolutely. So, so, so compliance is a compliance, security, fraud, risk, these are all areas that are constant iteration. We're never going to build a perfect system.

Speaker Change: Sort of complaints investment more broadly across the company.

Speaker Change: No we've been cashed, yet, but it just kind of thinking about some <unk> date of birth congested.

Speaker Change:

Speaker Change: Yeah, absolutely. So so so complaints as a complaint security fraud risk. These these are all areas that are that are constant iterations, we're never going to build a perfect system.

Speaker Change: <unk>, we can only focus on philosophy and speed and any errors that we've had in the past.

Jack Dorsey: We can only focus on velocity and speed, and any errors that we've had in the past. You know, our goal right now is to make sure that we correct them quickly, and that we continue to build those learnings into the future. And then we stay 10 steps ahead of any adversaries. And that's been a big focus for us for years. But we put even more emphasis on this right now because we do want to earn more trust with the use case of banking and be that primary bank for people. And obviously, this is a big, big part of having that trust.

Speaker Change: Right now is to make sure that we correct them quickly and that we continue to build those learnings into the future and then we stay 10 steps ahead of any adversaries and that's been a big focus for us for for years, when we put it even more emphasis on this right now because we do want to earn more trust with the use case.

Speaker Change: Of banking.

Speaker Change: And being the primary bank for people and obviously this is a big big part of having no trust, we want people to trust that if they put 100 per cent of the paycheck into ketchup stroke deposit and utilize it that.

Trevor Williams: We want people to trust that if they put 100% of their paycheck into a cash abstract deposit and utilize it, that it's sound, and they can do everything that they want, without restriction, and that it just works. So this is a significant investment for us and will continue to grow. But we have entirely new technologies available to us now that make this work even more efficient, much better. And we can be far, far more exhaustive and far more precise in our approach than we have ever been in the past. Your next question comes from the line of Trevor Williams from Jeffries. Please go ahead.

Speaker Change: It's sound and they can do everything that they want with a restriction.

Speaker Change: And that it just works. So this is a significant investment for us and will continue to grow but we have entirely new technologies available to us now that makes us work, even more efficient much better and we can be far more exhaustive and for more precise.

Speaker Change: Approach than we have ever in the past.

Speaker Change: Okay.

Speaker Change: Your next question comes from the lineup Trevor Williams from Jeffries. Please go ahead.

Jack Dorsey: Great, thanks for taking the question. I want to follow up on the product pipeline for Cash App, especially around commerce and the new products you expect to layer in this year. In the letter, the Cash App card was mentioned as a way to distribute BNPL, which I think that's something we haven't heard from you guys before. If you could dig into that, and then just how much contribution, at least within what you're expecting for Cash App, that you're baking in from some of these newer initiatives around commerce within the full year outlook. Thanks.

Trevor Williams: Great. Thanks for taking the question I wanted to follow up on the product pipeline and catch up, especially around commerce and the new products you expect to layer in this year.

Trevor Williams: The letter cash up card was mentioned as a way to distribute B N P. L, which I think that's something we haven't heard from you guys before if you could dig into that and then just how much contribution at least within what you were expecting to cash out that your banking in from some of these newer initiatives around commerce within the full your outlook. Thanks.

Speaker Change: Yeah, I mean, so we've been doing a bunch of work since we first acquired after pay as you all know we had more or less split the ord between square and ketchup we realized.

Jack Dorsey: Yeah, I mean, we've been doing a bunch of work since we first acquired Afterpay. As you all know, we have more or less split the organization between Square and Cash App. We realized last year that that was incorrect and that we should put the majority of it within Cash App because that's where the greatest benefit is going to be. And that's first and foremost in discovery within Cash App and discovery of commerce, whether that be global internet commerce, e-commerce, or more local commerce, such as Square Merchant. But we have an incredible asset in Afterpay, and we have an incredible asset in the Cash App card and that distribution. So we're looking for all the tools, all the financial tools that Afterpay has created will be right within Cash App and right within the card. And as I talked about on past calls, you can imagine, just as you would on the Cash Card today in the app, you can turn on Boost and get offers and see these things in real time and switch them.

Trevor Williams: Last year that that was incorrect.

Trevor Williams: And that we should put the majority of it within a cash out because that's where the greatest benefit is going to be.

Trevor Williams: And that's first and foremost in discovery and ketchup and discovery of commerce or that'd be global Internet commerce ecommerce or more local commerce searches so such a square merchants.

Trevor Williams: But we have incredible outside and after pay and we have an incredible asset and the ketchup card and that distribution. So we're looking for all the tools all the financial tools that after pay is created.

Trevor Williams: We'll be right within ketchup and right within the card and is it talked about on past calls you can imagine.

Trevor Williams: Just as you would on the coast guard today in the in the App you can turn on boost and get offers and see these things in real time and interchange them. We want that same sort of feeling for buy now pay later on the card itself.

Jack Dorsey: We want that same sort of feeling for Buy Now, Pay Later on the card as well. And this opens the door for our customers to treat every single merchant that they go to as a buy now, pay later entity, which is pretty awesome and pretty cool, and we're excited about it. So there's a lot there with the financial tools within Cash App and also, you know, within the Afterpay app itself in Australia.

Trevor Williams: This opens the door for customers to treat every single merchant that they go to <unk>.

Trevor Williams: Buy now pay later entity, which is pretty awesome and I'm pretty cool and we're we're excited about it. So there's a lot there was a financial tools or within cash up and and also you know within the after pay up itself within Australia.

Jack Dorsey: We have a lot of opportunity to continue to grow and to push, but this will be a year of much, much tighter integration and much more visibility of the Afterpay tools and the use cases within Cash App itself. And in terms of, you know, how we think about our outlook with respect to some of these newer products that we'll be launching later this year and in the next year, as I said earlier, our guidance is based primarily on our current run rate trends in the business and known elements around expenses and growth levers. And typically, we're moving quickly to improve our product velocity, but typically, as we launch these products, they take time to ramp up. So I'd expect to see greater benefits later in the year, but primarily heading into 2025 and beyond, as we move quickly against these commerce, banking, and financial services products within cash apps. Your next question comes from the line of Bryan Bergen from TD Cowan. Please go ahead.

Trevor Williams: We have a lot of opportunity to continue to grow and to push but this will be a year of much much tighter integration and much more visibility of the occupy tools and they use cases within ketchup itself.

Trevor Williams: And in terms of you know, how we think about our outlook with respect to some of these newer products that will be launching later this year and into next year.

Trevor Williams: <unk> said earlier, our guide is based on primarily on our current one right trends in the business and no and elements are on expenses and close levers and typically we're moving quickly to to improve our product philosophy, but typically as we watch these products. They take time to ramp so I'd expect to see greater benefits later in the year, but.

Trevor Williams: Primarily heading in to 2025 and beyond as we move quickly against these commerce in banking and financial services products within cashback.

Trevor Williams: Your next question comes from the line of Brian Bergen from T. D. Cowan. Please go ahead.

Bryan Keane: Great, thanks so much for taking the time to answer my question. Do your broader banking aspirations require you to do anything different on the banking license side? Or put differently, should your efforts on the banking side be successful? Can you still leverage partner banks? Or do you need to go with direct licenses?

Bryan Keane: Great. Thank you so much for taking my question Dear broader begging aspirations require you to do anything different on the bank licence Sun.

Bryan Keane: Progressive release, it should your effort to the bank because I'd be successful.

Trevor Williams: Which part of the banks or do you need to go with reckless.

Jack Dorsey: Thanks. That's a great question. It doesn't necessarily require us to do anything differently. We do have our financial services, our bank, and we're very excited about the expanded potential use cases that we can utilize it for, in addition to the ones today, which are around loans. So we want to make sure that the bank itself can help us provide more efficiency, provide speed, and much tighter integration so that we can have much more cohesive experiences. And it doesn't limit us from using partner banks. You can think of them as a portfolio.

Speaker Change: Okay. Great question. It it doesn't necessarily require us to do anything differently. We do we do have sort of financial services, our bank and we're very excited about the expanded potential use cases or we can utilize for it for in addition to the one.

Trevor Williams: Today, which which are on loans.

Trevor Williams: So we.

Trevor Williams: We want to make sure that the bank itself like can help us provide more efficiency.

Trevor Williams: <unk> speed uhm much tighter integration. So that we can have more much more cohesive experiences and it doesn't limit us from using partner banks, where you can think of these as portfolio.

Jack Dorsey: We can use multiple banks, including our own, to do various things in the future, and we have a lot more flexibility as that comes more online. And what's fully going to rule all this is the product experience that we can offer to people, and, obviously, that we can do it with new technology that makes it easier and much more profitable than a traditional bank could. So that is our focus. We don't see any significant changes in how we build products coming. Great, thanks very much. Your next question comes from the line of Ken Chikowsky from Autonomous Research. Please go ahead. Hi, good afternoon.

Trevor Williams: We can use multiple banks, including our own to do various things in the future.

Trevor Williams: And we have a lot more flexibility as that comes more more online and what what's really going to rule. All this is.

Trevor Williams: The product to experience that we can offer to people and obviously that we can do it with new technology that it makes it easier and and much more profitable than a traditional bank. Good so that is our focus and.

Trevor Williams: We.

Trevor Williams: I don't see any significant changes and how we build products coming up.

Speaker Change: Great. Thanks very much.

Speaker Change: Your next question comes from the line of Ken Schakowsky from My Thomas Research. Please go ahead.

Jim Schneider: Hi, good afternoon. Thanks for taking the question I think you mentioned in the corner of the letter that the 2022 in 2023 square cohorts are tracking 206 to seven quarterly payback period.

Ken Chikowsky: Thanks for taking the question. I think you mentioned in the quarterly letter that the 2022 and 2023 square cohorts are tracking to a six to seven quarterly payback period. How are you guys thinking about the payback period for 2024 and 2025? And if you can comment on how you're thinking about marketing spend in square for the year, that'd be great. Thanks so much.

Jim Schneider: How are you guys thinking about the payback period for 2024 2025.

Jim Schneider: And if you can comment on how you were thinking about marketing spend in square for the year that'd be great. Thanks, so much.

Speaker Change: Sure happy to to kick off on what we've seen recently and what we expect of moving forward you know and we Orient primarily to R. O Y the returns that we see over a four year period in how we go to market across the square.

Amrita Ahuja: Sure, happy to kick off on what we've seen recently and what we expect moving forward. You know, we focus primarily on ROI, the returns that we see over a four-year period in how we go to market across the Square ecosystem. And as we're able to attach more products to our customers, as they're able to grow on our platform, that extends the lifetime value of these customers and ultimately what we're able to invest in go-to-market initiatives to bring customers into the Square ecosystem. So I would orient you more to ROIs, where we've seen healthy ROIs of sort of 3X over four years in the past, and we'll continue to focus on Across our initiatives, you know, a key focus for us is the pace of experimentation across both sales and marketing.

Speaker Change: System, and as we're able to attach more products to our customers as they are able to grow on our platform that extends the lifetime value of these customers and ultimately what we're able to invest into and to go to market initiatives to bring customers into it into the square ecosystem. So I would argue more.

Speaker Change: R O y's, where we've seen healthy or wise it sort of three acts over four years in the past and will continue to focus on our ally moving forward.

Speaker Change: Across our initiatives you know it takes a key focus for US is the pace of experimentation across both sales and marketing, we're gonna Orient more of our spin and marketing to proven channels, but we'll have a number of our efforts from a team perspective on trying new things and small.

Amrita Ahuja: We're going to orient more of our spend in marketing to proven channels, but we'll have a number of our efforts from a team perspective on trying new things in small ways so that we can iterate rapidly and learn, whether that's in sales, where we've now deployed contracts, or where we're taking a local approach with referrals, or we're bundling our products differently, as we did with the restaurants essentials bundle We are doing a number of different things to drive cohesion in how a customer can onboard into the Square ecosystem. And as Jack mentioned earlier, some of the product initiatives around our single app strategy and our platform initiatives are key unlocks for us as we think about more efficient onboarding of customers into the broader ecosystem. The only thing I'd add there is a word.

Speaker Change: So that we can iterate rapidly and learn whether that's in sales, where we've now deployed contracts or where we're taking a local approach with referrals are aware bundling our products differently as we did with the restaurants essentials bundle to create simple pricing no one simple.

Speaker Change: Price for a set of customers across the restaurants vertical.

Speaker Change: We are doing a number of different things to drive you know cohesion and how a customer can onboard ended the square ecosystem and as Jack mentioned earlier the product initiatives around our single App strategy on our platform initiatives are key unlocks rest as we think about more efficient onboarding of.

Speaker Change: Summers and of the broader ecosystem.

Speaker Change: The only thing I've added.

Speaker Change: <unk> <unk>.

Jack Dorsey: As I said in the letter, we're doing a reorg with Square, back to a functional organization. And one of the results of that is going to be to bring, um, product and marketing much, much closer together. This is how we started the company, and we believe that the gaps that we had in the recent past really hurt our aspirations and our execution.

Speaker Change: As I said in the letter word we're doing a reward with square.

Speaker Change: To a functional organization and one of the results of that is going to bring this to bring product and marketing much much closer together.

Speaker Change: This is how we started the company.

Speaker Change: And we believe that the the gaps that we had in the recent past really hurt or aspirations in our execution Uhm and the reason why we wanted to make sure that there's a very very smooth the ramp from any marketing, though we do and.

Jack Dorsey: And the reason why is that we want to make sure that there's a very, very smooth ramp from any marketing that we do, and that'd be targeting targeted or more out of home, and the actual signup flow and the customer experience that they get when they come to the website, or when they get a number to call one of our sales folks. So the organizational structure, I think it will help illuminate a lot of the issues we've had in the past, and we're focused on really making sure that they work together a whole lot better so we can move much faster. Great. Thanks, Jack. Thanks, Amrita. Your next question comes from the line of Bryan Keane from Deutsche Bank. Please go ahead.

Speaker Change: And that'd be targeting targeted are more auto home and the actual sign up for and the and the customer experience that they come they get when they come to the website for when they get a number to call one of our sales sales folks so.

Speaker Change: The the organizational structure I think will help.

Speaker Change: Eliminate a lot of issues, we've had in the past and.

Speaker Change: Refocus on really making sure that they they work together a whole lot better. So we can move much faster.

Jack Dorsey: Great.

Speaker Change: <unk>.

Bryan Keane: Your next question comes from the line of Brian Keane from Deutsche Bank. Please go ahead.

Bryan Keane: Hi guys, wanted to ask about the cash app monetization rate. I think it was up five basis points sequentially. If I recall correctly, I think you thought it would be more stable.

Bryan Keane: Hi, guys wanted to ask about the cash at monetization right.

Bryan Keane: Five basis points sequentially.

Bryan Keane: If I recall correctly I think he thought it'd be more stable sequentially. So I guess, what what kind of surprise and drove the outperformance in the amount of innovation right. I think you called out bitcoin and pricing. So just curious exactly on the pricing side, where that's coming from and then any color on how monetization Rachel trend as we go through.

Amrita Ahuja: So I guess what kind of surprise and drove the outperformance in the monetization rate? I think you called out Bitcoin and pricing. So just curious, exactly on the pricing side, where that's coming from.

Amrita Ahuja: And then any color on how the monetization rate will trend as we go through 2020? Sure. So what we saw in the fourth quarter was a nine basis point improvement year over year and five basis points quarter over quarter. To your question specifically on quarter over quarter, there are a couple different factors at play.

Bryan Keane: 2024.

Speaker Change: Sure. So what we saw in the fourth quarter was nine basis point improvement you over here and five basis point corner of a corner to your question specifically on quarter over quarter. There were a couple of different factors at play, but the primary ones were around bitcoin and within bitcoin. It was both the pricing of the product as well.

Amrita Ahuja: But the primary ones were around Bitcoin. And within Bitcoin, it was both the pricing of the product, as well as the price appreciation of Bitcoin itself, which benefited monetization rates on a sequential basis. As we look forward, you know, we see opportunities in 2024 around actives and inflows per active as the primary drivers of growth for Cash App in 2024. As we look longer term, we see opportunities around monetization rates as we go deeper in the financial services ecosystem and we attach more of these products to our customer bases. Our customers are taking on more and more products themselves. We see an opportunity to grow the monetization rate. But as we'll be lapping some of these pricing changes coming up in 2024, we don't expect, you know, a meaningful change in monetization rates, and certainly not at the meaningful level that we saw during 2023. Thank you. Your next question comes from the line of Pete Christiansen from Citi. Please go ahead. Thank you. Good evening.

Amrita Ahuja: The price appreciation of bitcoin itself, which benefited monetization right on a sequential basis uhm.

Speaker Change: As we look forward you know we see opportunities in 2024.

Peter Corwin Christiansen: Round active in inflows proactive as the primary drivers of growth for cash up in 2024.

Peter Corwin Christiansen: Look longer term, we see opportunities around monetization right as we go deeper in the financial services.

Speaker Change: Ecosystem and we attach more of these products to our customer base is our customers taken more.

Speaker Change: More and more products themselves, we see an opportunity to grow monetization right, but as will be laughing. Some of these pricing changes coming up in 2024, we don't expect you know meaningful change in monetization right and certainly not a meaningful level that we saw during 2023.

Peter Corwin Christiansen: Thank you.

Speaker Change: Your next question comes from the line of Pete Christiansen from City. Please go ahead.

Peter Corwin Christiansen: Thank you good evening. Thanks for the question I'm curious could could you walk us through the mechanics on the yield the savings product for direct deposit users in cash and.

Peter Corwin Christiansen: Thanks for the question. I'm curious, could you walk us through the mechanics of the yield, the savings product for direct deposit users, and the cash app? And Amrita, I'm curious about your thesis on, I guess, the relative unit economics for that particular product and how you see that evolving. Thank you.

Peter Corwin Christiansen: <unk> I'm curious your thesis on I guess, the relative unit economics for for for that particular product and how do you see that evolving. Thank you.

Amrita Ahuja: Yeah, you know, the overall strategy is that as customers, you know, save more of their funds with us, they make us more of their primary banking partner, and then we can offer them more financial services, some of which we monetize. We have had a history of thinking about our ecosystem in terms of the entirety of the value we provide with some products being free, like our tax product, our investing product, our peer-to-peer product, when you use And with a savings launch, where we're offering a yield for customers who direct deposit with us a strong yield for customers who direct deposit with us at four and a half percent and a more modest yield for customers who use the cash app card at about one and a half percent.

Amrita Ahuja: Yeah, you know the overall strategy is that as customers you know save more of their funds with us they make us more of their primary banking partner and then we can offer them more financial services, which we monetize we have had a history of thinking about our ecosystem in terms of the entirety of the value of <unk>.

Speaker Change: <unk> with Sun products being free like our tax product or investing product or peer to peer a product. When you use a debit card and some products being monetized and with a savings launch where we're offering a yield for customers, who direct deposit with us a strong meals for customers, who direct deposit with us at 4.5%.

Amrita Ahuja: And a more modest yield for customers, who use cash up card.

Amrita Ahuja: And about 1.5%, what we're providing as an incentive for our customers to bring more inflows into kasha and we see a strong correlation with inflows into cash up you know driving gross profit and customers being more engaged with the broader set of products across cash.

Amrita Ahuja: What we're providing is an incentive for customers to bring more inflows into the cash app. And we see a strong correlation with inflows into the cash app, you know, driving gross profit. And customers are more engaged with the broader set of products across the cash app. What we've seen so far, you know, look, it's the early days of these savings balances. We have balances from cash-up savings accounts totaled $200 million as of the end of the fourth quarter, representing 6% of overall customer funds.

Amrita Ahuja:

Speaker Change: What we've seen so far you know look at the early days of the savings balance is we have a balance is from cash that savings account totaled 200 million as of the end of the fourth quarter, representing six per cent of overall customer fun, but as we've introduced more recently the yield will be looking to more opportunities to attract savings and.

Amrita Ahuja: But as we've introduced more recently, yield, we'll be looking to more opportunities to attract savings and inflows and ultimately engagement with a broader suite of financial services. Thank you. Your next question comes from the line of Jason Kupferberg from Bank of America. Please go ahead.

Jason Alan Kupferberg: Inflows and ultimately engagement with a broader suite of financial services.

Jason Alan Kupferberg: Great. Thank you.

Jason Alan Kupferberg: Your next question comes from the line of Jason Cooper from Bank of America. Please go ahead.

Jason Alan Kupferberg: Thank you I was just looking to page 18 of the shareholder letter showing the the Kashyap gross profit mix I think at least some of that as a new disclosure, which we appreciate it shows you become a lot less dependent on instant deposit financial services, becoming a much bigger part of the pie I think it was 38% in 2023. So I'm just wondering as you execute on the bank the Bay.

Jason Alan Kupferberg: Thank you. I was just looking at page 18 of the shareholder letter showing the cash app gross profit mix. I think at least some of that is a new disclosure, which we appreciate. It shows you have become a lot less dependent on instant deposit, with financial services becoming a much bigger part of the pie. I think it was 38% in 2023.

Amrita Ahuja: So I'm just wondering, as you execute on the bank-to-base strategy, is there any kind of target in mind in terms of the percent of cash app gross profit that may come from financial services, say, by, you know, 2026 as you pursue the rule of 40 that year? And just separately, Amrita, any comments on free cash flow for 2024? Thank you.

Amrita Ahuja: Strategy is there any kind of target in mind in terms of the percent of Kashyap gross profit that may come from financial services say by 2026 as you pursue the rule of 40 that year and just separately them read a real quick any comments on free cash flow for 2024. Thank you.

Amrita Ahuja: Sure, you know, look, financial services at 38% in 2023, as a percent of cash app gross profit, versus 29% two years prior, is obviously a key growth sector for us within cash app, as you note in our new disclosure in the shareholder letter. And it's one that we're going to continue to focus on as we grow out the broader set of products, as you've been hearing today and as you saw in Jack's note in the shareholder letter. So that is one that I would continue to focus on. We have still seen growth in instant deposit and other parts of the ecosystem.

Amrita Ahuja: Sure you know look financial services at 38% in 2023 as a percent of cashback gross profit versus 29% you know two years. Prior is obviously a key growth factor for us with in cash at as you know in our new disclosure in the shower.

Amrita Ahuja: Hold her letter and it's one that we're gonna continue to focus on as we grow out the broader set of products as you've been hearing today and as you saw in Jack's note in the shareholder letter. So that is one that I would continue to focus on we still have seen a growth in instant deposit and other parts of the ecosystem.

Amrita Ahuja: But just not as fast as some of the financial services products, so we'll continue to invest in them. With respect to free cash flow, you know, I'd point you to the trend lines across EBITDA.

Amrita Ahuja: But just not as fast as some of the financial services products and will continue to lean in there.

Amrita Ahuja: Uhm with respect to free cash flow you know I'd Orient you to the trend lines across EBITDA, obviously, the free cash flow metrics.

Amrita Ahuja: Obviously, the free cash flow metric is a different calculation, but it's directionally consistent with where we expect to grow our profitability on an EBITDA basis. We also would expect to grow our free cash flow over time. Thanks. Your next question comes from the line of James Faucette from Morgan Stanley. Please go ahead. Thank you very much.

James Faucette: Different calculation, but it's Directionally, you know, where we expect to grow our profitability spot in EBITDA basis.

James Faucette: We also would expect to grow are free cash flow over time.

Amrita Ahuja: Thanks.

James Faucette: Your next question comes from the line of James <unk> for Morgan Stanley. Please go ahead.

James Faucette: Thank you very much just wanted to ask a question on the seller business. It looks like the the growth rate in the U S be celebrated a little bit the international continues to look quite good and just wondering how we should think about the trajectory of U S vs International anticipate the Max and and any.

James Faucette: I just wanted to ask a question on the seller business. Looks like the growth rate in the US decelerated a little bit, but it's still quite good. I'm just wondering how we should think about this is the trajectory of U.S. vs. International. Any sense of...

James Faucette: Since his too.

Jack Dorsey: . Particularly the U.S. could be bottoming, and where you..., especially as you focus on product, et cetera, as Jack. Yeah, it's a big U.S. Sorry, U.S. growth is a big, big focus for us. And a lot of our focus right now is going to be on restaurants, food, and beverage. And as I said earlier, I think there are significant product gaps that we have a line of sight into, that will be unlocked this year, that we can move much, much faster on, from a development and product standpoint, that we'll see results from. And with much greater outcomes.

James Faucette: And what time from particularly the U S could be bottoming in and what are you thinking at that grocery back too, especially as you focus on product et cetera is Jack talked about thanks.

Jack Dorsey: Yep Yep.

Speaker Change: I'm sorry.

Jack Dorsey: U S growth is a big big focus for us and a lot of our focus right now is going to be on <unk> restaurant food and beverage.

Jack Dorsey: And as I said earlier like I think there are significant product episode or <unk> line of sight into there will be unlocked. This year that we can move much much restaurant from development and product standpoint.

Jack Dorsey: But we'll we'll see results from from.

Jack Dorsey: And much greater outcomes and will continue to push around the world of course, but I I really wanted to make sure that we advance even faster than we thought we were having to pass on the on the U S. I think that's really a function of all all the changes that were making with your how about the product is packaged and.

Jack Dorsey: And we'll continue to push around the world, of course, but I really want to make sure that we advance even faster than we have in the past in the U.S. I think that's really a function of all the changes that we're making with the organization, with how the product is packaged, and how we think about onboarding, in particular, and making it super easy for people, and then putting a much stronger go-to-market on top of that. Yeah, and I just add that, you know, in addition to our focus areas in the US, we can benefit from those product initiatives in international markets as well. And we're enthusiastic about what we see in the markets outside the US. We think we're less than 1% penetrated in those markets that we're currently in outside the US, with a long runway for growth. And we saw TPD growth in the fourth quarter in the markets outside the US grow 26% year over year, with gross profit growth about 28% year over year, now representing 13% of Square's gross profit. And obviously, that's grown over time.

Jack Dorsey: How do we think about Onboarding in particular, and making a super easy for people and then putting on a much stronger go to market on top of that.

Jack Dorsey: Yeah, and I just add the you know in addition to our focus areas in the U S. We can benefit from those product initiatives in international markets as well and we're enthusiastic about what we see in the market's upside the let me think where less than one per cent penetrated in those markets that we're currently in.

Jack Dorsey: Outside the U S with a long runway for growth and we saw.

Jack Dorsey: G P D growth in the fourth quarter in the market outside the U S 26% year over year.

Jack Dorsey: With gross profit growth about 28% year over year, now representing 13% of squares gross profit and obviously that's grown over time. So we have opportunities to continue to refine and push our product philosophy in the U S and ultimately that will help with a significant time opportunity that you see outside the U S as well.

Amrita Ahuja: So we have opportunities to continue to refine and push our product velocity in the US. And ultimately, that will help with the significant TAM opportunity that we see outside the US as well. We will now take our last question from Andrew Bosch from Wells Fargo Securities. Please go ahead.

Amrita Ahuja: <unk>.

Andrew Jeffrey: We will now take our last question from Andrew <unk> from Wells Fargo Securities. Please go ahead.

Andrew Jeffrey: Hey, guys. Thanks for squeeze me in.

Andrew Jeffrey: Hey guys, thanks for squeezing me in. I just wanted to revisit the direct deposit assumptions that you're kind of making. I mean, it's nice to see that, you know, the 6x data point for those who are depositing 2000 plus, but can you give us a sense of what the path to increasing that paycheck direct deposit mix ultimately looks like in 2024 and 2025? Are there certain unlocks you kind of need to achieve to see that ramp?

Andrew Jeffrey: Wanted to revisit the direct deposit assumptions that you kind of making I mean, it's nice to see that the.

Andrew Jeffrey: <unk> data point for those who are deposit in 2000 plus Bud.

Andrew Jeffrey: Can you give us a sense on what the path to increasing that paycheck direct deposit.

Andrew Jeffrey: Mix ultimately it looks like in 2024, and 25 are there certain unlocks you kind of need to achieve to see that that ran.

Andrew Jeffrey: I I think the the biggest unlocks are gonna be we're gonna be products and we.

Jack Dorsey: I think the biggest unlocks are going to be products. And, you know, we want to make sure that it's super easy to get into the cash app and to see what you can do with it from a banking relationship standpoint. Like, I want to put my money into something that I trust, first and foremost, and that has significant utility. And that the utility is broad, but also highly connected and works very fluidly. And that's what we want Cash App to be. We have a lot of the pieces already there.

Jack Dorsey: We we want to make sure that it's super easy to get and the ketchup and to and to see where you can do with it from a banking relationship standpoint.

Jack Dorsey: I Wanna I Wanna put my money into something that I trust person from us in the house.

Jack Dorsey: Significant utility.

Jack Dorsey: Utility is broad, but also highly connected and works very shortly and that's why we won't catch up to be we we have a lot of the pieces are we're gonna spend this year really focus on vacation.

Jack Dorsey: We're going to spend this year really focused on making sure they sing and they really work in a way that makes people feel great, in the same way that designing a Cash App card feels. We want that across the board for every single one of our features. And it really starts, as I said before, with trust. We need to make sure that Cash App is seen as reliable and dependable, and with a great customer base on top of it. And this is a constant iteration to make sure that we earn that trust.

Jack Dorsey: They sing and and they really work in a way that.

Jack Dorsey: It makes people feel great.

Jack Dorsey: In the same way that like designing a ketchup guard feels we weren't that across the board for every single one of our features.

Jack Dorsey:

Jack Dorsey: And it really starts as I said before with with trust, we need to make sure. The ketchup is seen as reliable as dependable.

Jack Dorsey: And with a great customer based on on top of it and and this is.

Jack Dorsey: Ah concentration to make make sure that we are not trust, but then it really comes back to like.

Jack Dorsey: But then it really comes back to like, Now that I have the input set, what are the outputs, and what can I do with my money on Cash App? But certainly, I would be able to do so in a traditional bank, but what's the plus plus? What can I do more within Cash App than I could do on another traditional bank? It really starts, I mean, as you know, with peer-to-peer and the fact that it's an app and works, and it's fast and easy and meets my expectations and, hopefully, in many cases, exceeds them, but there's a lot of work to get that right and a lot of connections we can make to do that, and a lot of it comes back down to just new functionality on top of what we already have.

Jack Dorsey: Now that I have the input.

Jack Dorsey: What are the outputs and what can I do with my money on catch up that.

Jack Dorsey: Certainly I'd I wouldn't be able to do in a traditional bank, but but what's the plus plus what can I do more of within catch up Tonight and I could do on.

Jack Dorsey: On another traditional bank it really starts I mean, as you know with peer to peer in the fact that it's an app and it just works and is fast and easy and.

Jack Dorsey: Meets my expectations and hopefully in many cases exceeds but there's a lot of work to get that right and a lot of connections. We can make to do that and a lot of it comes back down to just new functionality on top of what we already have.

Jack Dorsey: And Andrew I would.

Jack Dorsey: I put you to cash that card as well as a as a key.

Amrita Ahuja: Andrew, I'd point you to Cash App Card as a key proof point for us as we bring more awareness to our financial services capabilities and ultimately to direct deposit. In the same way that peer-to-peer is the awareness driver for overall Cash App, we see Cash App Card as the awareness driver for our financial services and banking products and direct deposit. What we've seen with Cash App Card, now at $23 million monthly active users, growing twice as fast as our overall monthly active base at over 40% attached, is that we're at true scale in terms of the ability to drive awareness here. We surpassed $1 billion in gross profit in 2023 for Cash App Card, and that growth was three times higher than instant deposit, where customers are sending their funds outside of Cash App.

Amrita Ahuja: Key proof point for us as we bring more awareness to our financial services capabilities and ultimately to direct deposit in the same way that peer to peer is the awareness driver for overall cash up we see catch up card <unk> S. S and it is the awareness driver for our financial services and banking products and.

Amrita Ahuja: And direct deposit when.

Amrita Ahuja: What we've seen with cash up card you know now at 23 nine monthly active growing twice as fast as our hall monthly active days, you know and over 40% attached.

Amrita Ahuja: Is that we're we're at true scale in terms of the ability to drive awareness here, we surpassed a billion dollars in gross profit in 2023 for cash up card in that close with three times higher than instant deposit where customers are sending their funds outside of cash out. So we're giving people more reasons to.

Amrita Ahuja: So we're giving people more reasons to keep their funds within Cash App. And what we've seen in terms of the behaviors and the engagement on Cash App Card has been healthy, not only with the growth and active users but also growth and spend per active user, which means that we saw meaningful growth in overall spend on Cash App Card in 2023. And finally, I point you to that strong engagement where customers using our banking products are ultimately more engaged. With Cash App Card monthly actives bringing in over two times more inflows, 2.3 times more inflows, and those direct deposit monthly actives bringing in seven times more inflows than a peer-to-peer active.

Amrita Ahuja: Keep their funds within cashback.

Amrita Ahuja: And what we've seen in terms of the behaviors any engagement catch up card has been healthy not only with a gross and active but also growth and spend per active which means that we saw meaningful growth and overall spend on cash up card in 2023.

Amrita Ahuja: And finally, you know point you to that strong engagement, where customers using our banking products are ultimately more engage with cash up card monthly active bringing in over two times more inflows 2.3 times more enclosed and those direct deposit monthly Atkins, bringing in seven times more enclosed in a peer to peer active so.

Amrita Ahuja: So there's a key thing, a kernel here that's working with Cash App Card that we can then bring people into the deeper suite of financial services and ultimately to direct deposit. Absolutely. It makes sense.

Amrita Ahuja: There's a key you know thing Colonel here, that's working with cash up card that we can then bring people into the deeper suite of financial services and ultimately to direct deposit.

Speaker Change: Absolutely makes sense. Thank you.

Jason Lee: Thank you. Ladies and gentlemen, thank you for participating in today's program. This does conclude the program. You may all disconnect. You know, I used to beat that block.

Speaker Change: Ladies and gentlemen, thank you for participating in today's program. This does conclude the program. He may I'll disconnect.

Jason Lee: [noise] feedback.