Q2 2019 Earnings Call

Good day, ladies and gentlemen, and welcome to the square second quarter 2019 earnings Conference call.

Now, let's turn the call over to your host Jason Lee head of Investor Relations. Please go ahead.

Hi, everyone. Thanks for joining our second quarter 2019 earnings call, we have jakone and read out with us today.

First we want to remind everyone of the format of our earnings call. We have published a shareholder letter on our Investor Relations website, which was available shortly after the market close we will begin this call with some short remarks before opening the call directly to your questions. During Q1, and we will take questions from our sellers. In addition to questions from conference call participants.

In addition to our shareholder letter we have filed a press release announcing our definitive agreement to sell the caviar, our food ordering platform to door Dash. This transaction is subject to certain closing conditions, including regulatory approvals. We would also like to remind everyone that we will be making forward looking statements on this call actual results could differ materially from those contemplated by our forward looking statements reported results should not be considered as an indication of future performance. Please take a look at our filings with the FCC 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.

We disclaim any obligation to update any forward looking statements, except as required by law.

Also during this call we will discuss certain non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally this call in its entirety is being audio webcast on our Investor Relations website, an audio replay of this call will be available on our website shortly with that I'd like to turn over to Jack.

Thanks, Jason Hello, everyone.

Few remarks from me before we turn it over to Amrita for some details on your questions.

So we've been able to accomplish something very few companies have the creation of not just one but two incredible customer ecosystems of scale.

We started the company by creating and building a seller ecosystem.

We did it again this time for individuals with the catch up.

Along the way we've seen a lot of opportunity to strengthen both of these ecosystems.

But those opportunities require more focus and more investment.

To increase our focus we decided to sell our carrier business to door dash.

This enables us to focus on serving restaurant and food sellers through a platform approach specifically, our orders a pie and square for restaurants.

Jordache was an obvious choice for us because of our pre existing partnership through order ZPI and catch up both companies have an alignment of interest to strengthen our partnership.

This decision will also allow us to increase our investment specifically in solar.

Our initial focus will be on go to market investment inclusive of hardware and sales and marketing.

Given our payback periods and ROI is for multiple products within the solar ecosystem, we see compelling opportunities for more growth.

The cash up ecosystem continues to exceed our expectations and just three years catch up revenue from basically $0 to 135 million excluding bitcoin.

We love you pick one.

And we saw a 3.5 million customers use cash card in June typically using it to purchase multiple times per week.

Our seller and catch up ecosystems have incredible roadmaps ahead to deliver on our purpose of economic empowerment.

And every time, we tightened our focus we get stronger.

These moves will enable us to move faster and much better.

With that turn it over to him Rina for some details.

Thanks, Jack there are four key highlights, which I'd like to call out this quarter.

First we continue to drive impressive revenue growth at scale.

Second we continue to see strong returns on sales and marketing spend and see further opportunity to invest at attractive returns and our seller ecosystem.

Third Kashyap has grown rapidly and is now a meaningful contributor to our overall revenue.

Fourth we believe the transaction to sell caviar will improve our focus and drive greater investment in our seller in cash ecosystems.

Let's expand on these points of it.

First we drove strong revenue growth at scale total net revenue grew 44% year over year to $1.17 billion in the second quarter. Adjusted revenue grew 46% year over year to $563 million, we saw broad based momentum across both sellers and cash after ecosystems driving our results.

As a reminder, we lapped a few events, which drove the tougher comp on revenue growth this quarter relative to the first quarter of 2019.

We lapped the acquisitions of Weebly, Investee, which closed in the second quarter of 2018. These acquisitions contributed two points to total net revenue growth and three points to adjusted revenue growth in the quarter.

And we also lacks the pricing change on cash App instant deposit.

Second in our solar business, we continued to generate strong return on investment from sales and marketing with further opportunity to scale at attractive returns.

We have seen payback period trend towards three quarters with continued positive revenue retention.

This results in a three to four X. return on investment for a new seller cohort within three years of Onboarding.

In April we launched a marketing campaign to increase brand awareness for squares ecosystem of products to help sellers manage and grow their business.

We are encouraged by early returns from this campaign, including improved top of funnel metrics around awareness, which has led to growth in sign ups.

Third our cash App ecosystem has driven meaningful monetization and attractive unit economics.

We see strong momentum and durability across three key factors.

The network engagement and monetization.

Cash have delivered $135 million in quarterly revenue, excluding bitcoin, while we are improving the efficiency of our cash ecosystem. We continue to invest given the rapid growth as a platform and compelling unit economics.

What we see is one low and stable acquisition costs for new customers, even as we scale into mainstream populations into greater engagement and monetization per active customer across multiple revenue streams driven by increased attach rates on key products that provide daily utility.

And as we launch new features we see further opportunities to cross sell into large and growing into our large and growing customer base with minimal incremental acquisition costs.

Finally, we have entered into an agreement to sell caviar, which will allow for improved focus and greater investment in our seller and Kashi ecosystems.

Well, we have seen attractive returns.

With the pending sale of caviar, we are maintaining our full year 2019 guidance for 43% adjusted revenue growth year over year.

And 60% adjusted EBITDA growth year over year at the midpoint.

We will update our guidance after the close of the transaction.

Similar to prior quarters, we intend to reinvest outperformance back into the business to capture the long term opportunities ahead of us.

We expect most of our incremental seller ecosystem sales and marketing expenses to land in Q3 and the early part of Q4, when we know businesses make decisions and spend can be more effective prior to the holidays.

We expect these investments to benefit us and drive growth in the future.

I will now turn it back to the operator to start the Q and a portion of the call.

And at this time, if you like to ask a question. Please press star one of your telephone keypad.

Just I wanted to ask a question we ask that you limit yourself to one question falls for just a moment to compile the trending roster.

Your first question comes from the line of Darrin Peller with Wolfe Research.

Hey, guys. Thanks for taking my questions and I just want to start off on the cash jobs, because if you get more data points around.

How much is being monetized and maybe start off if you could help us understand.

The curve and the maturity of that modernization is it 20, given you talked about past quarter being at about 23%.

Of the actual cash have users where is that is that something that could perceive much higher from here.

And then maybe you could help us understand the breakdown of revenue across the cash out between the different sources, you highlighted whether its because quarter others clearly seems like it's growing well just curious what's your what's working for us.

Thanks, guys.

Thanks, so much for the question.

So we are very pleased with the performance that we've seen from the cash have team. Their FERC is focused first and foremost on growing the network and growing engagement and daily utility on cash out and we believe and we've seen that lead to monetization and this catch up has scaled from negligible revenues three years ago to now an annualized rate of over half a billion dollars in revenues. So we can unpack that a little bit for you.

And I think you're asking specifically about how the opportunities with cash card and the ability to grow that attach rate in those revenues associated with cash card overtime, maybe if you take it back right one step and look at overall monetization for cash shop.

Two years ago. When we were very early in the life of monetization of cash that we disclosed I think this is in the second quarter of 2017 that over one third of users monetized and that was pre cash card now weve seen significant growth in that number with the addition of these new monetization and engagement levers like cash card like bitcoin and a number of other levers.

With cash card in particular, we disclose the three and a half million active we continue to see growing attach rate for cash card from period to period and we think we're in the early days of that we're also seeing really strong metrics around usage and engagement with multiple transactions in a given week for everyday purchases.

So this is a really great proof point for us around customer engagement and driving retention and opportunities for cross sell into this large and growing audience.

Into the future.

In terms of just I think the last part of your question was around breaking down revenues for Kashyap.

We have half a dozen revenue stream.

And we believe that we are in the very early days of that the two biggest around instant deposit and cash card and we've got four other growing revenue streams and given we're in the early days and this team has demonstrated strong product velocity, we envision many more into the future.

All right. Thanks, guys.

Your next question comes from the line of Bryan Keane with Deutsche Bank.

Hi, I just wanted to ask about caviar, if we could.

And any sense of revenue or EBITDA.

I'm guessing the EBITDA.

Margin for KBR is lower than the overall.

Company average so trying to think about that and maybe the growth rate of those revenue and EBITDA.

Fast.

Hi, this is it.

And then.

We're going to reinvest those proceeds were exactly inside of cash are we thinking about reinvesting those thanks.

Thanks for the question, Brian So let me help you break it down a little bit on caviar, we'll be able to share a lot more with the relevant financial statements, including and excluding caviar upon the close of the transaction expected to happen later this year.

But just to give you.

A little bit of boundaries as you kind of model the business from a revenue scale perspective perspective caviar is the second largest component of our subscription and services revenue stream, where we did $251 million in revenue in the second quarter. We've now disclosed to revenues for cash up the vast which was the number one driver of our subscription and services revenue stream.

Capital is the third so you can kind of benchmark within their backing into a figure within range for caviar.

From a margin perspective, as a delivery platform caviar has lower growth lower gross margin profile than the remainder of our revenue streams related to subscription and services.

There are ongoing costs associated with caviar, including fees for careers in the revenue share with restaurants.

That have made it the largest component of subscription and services based costs.

But again, we will update you on in the future upon the closing of the transaction on further details there and then.

And in terms of the reinvestment of proceeds you mentioned cash up.

Catch up is pretty amazing network effects right now.

And we benefit a lot from them. So a lot of our focus as we think about these two ecosystems between solar and cash is going to be on go to market and solar we think there is there's a lot of opportunity.

Based on our payback periods and return on investment within multiple products within this whole ecosystem.

And that will be inclusive of.

Hardware, but also more we can do with with sales and marketing so.

As we've as we've been looking at the business and looking at New World, where we do have the ability to focus on just two ecosystems instead of instead of three.

We're we're really we're really compelled by a number of the opportunities on the seller side and continuing to.

Build out more and more of the cash up roadmap, which continues to address some critical needs that people have in excess accessing the financial system.

All right very helpful. Thanks, guys.

Thank you. Thank you.

Your next question comes from the line of tension Wong with Jpmorgan.

Thanks. Good afternoon, just wanted to ask on on GPV in your plans to invest more in the.

Cell ecosystem like you just said I know GPV growth in percentage terms, because a lot of attention, but youre still adding a record notional amount that you can be if im doing the math.

Right. So my question is do you feel confident that you can keep adding.

Whatever 5 billion on volume.

A quarter and can that actually accelerate with the seller ecosystem system investments that you are talking about.

Thanks.

Thanks for the question tendon.

On you know we're focused with these investments on driving both top of funnel through awareness and Activations, along with cross sell across the ecosystem.

GPV picks up one piece of one ecosystem it picks up primarily of payments piece of the seller ecosystem keep in mind as people think about GPV that we don't include things like Kashyap GPV in this figure and we also don't include.

The other revenue streams around subscription and services as a part of GPV, which is why we as a company manage the business to our revenues and we think about revenue growth when we're driving investments.

Revenue grew 46% in the quarter and that fully registered revenue grew 46% in the quarter to $563 million that really captures the full breadth and value of the ecosystem.

We then GPV some of the pockets of growth that we've seen that were very encouraged by include around our larger sellers, who now are more than half of our GPV mix Midmarket sellers, which are the largest sellers that we serve with over half a million dollars. In GPV also grew and actually grew at the fastest rate, which was 45% year over year.

And we believe we have multiple levers of growth ahead on GPV, including across the rest of the business.

And a lot of that is related to some of the newer payment channels that we've developed that are growing faster than the base GPV amount. So think about things like our vertical point of sale offerings around retail and restaurants, our developer platform and omnichannel products, but again I would anchor you to thinking about the overall revenue growth for our business is that captures the breadth of offerings that we have for our sellers and individual customers.

Got it understood. Thank you.

Thank you.

Your next question comes from the line of Dan Donlan with Nomura.

Hey, guys. Thanks for taking my question just a quick housekeeping question. The event right is that included in GPV for this quarter.

Thanks for the question Dan event bright is still in testing phase. So I wouldn't think of that as a material contributor to GPV in the second quarter.

We are working hard at work on building out a long term solution omnichannel solution for event right.

And expect to launch in the back half of this year.

Got it and then maybe a question for you and maybe for Jacques too I mean, we've been getting we've been doing a lot of work on the cash cash app in the ecosystem, but can you maybe give us like one concrete example, Jack.

Of how the ecosystem kind of helps you get both sides of the transaction, both the sellers and the consumers, which which I believe is sort of the the Holy Grail of this whole thing.

I agree with you.

We we do see a lot of opportunity there like so so our first focus is to build the individual ecosystems solar ecosystem and the cash up ecosystem theres a lot of strength and both ecosystems.

Our addressing.

Critical needs so within solar its payments and register and capital and appointments and square for restaurants and square for retail and whatnot.

And our developer platform on the cost side.

It's everything from from.

Peer to peer to the cash card to be coin too.

It's instant deposit too.

A host of a host of other services that help people on a daily basis like direct deposit as well.

So we have seen some crossover between these two ecosystems and we do think that there is a lot lot of power and connecting them.

We have been paying some of our payroll.

Customers through the cash up which is beneficial to both the seller and the cash out because system.

Some time ago, we started paying caviar couriers.

Through the catch up which is beneficial to.

Caviar and soon to be that the jordache ecosystem and also the cash app ecosystem, and we have been doing more and more.

Consideration around.

Boost as well and where that fits into to that to that ecosystem as well. So we do believe there is a ton of connections between these two.

And some of this.

Focus and investment will definitely be answering that question, making those connections much much stronger.

And again, we ask that you limit yourself to one question.

Your next question comes from the line of Jason Kupferberg from Bank of America Merkel at Merrill Lynch.

Hey, guys. So you did as we've become accustomed to seeing you did beat the high end.

Of your revenue guidance for the second quarter here now typically historically, that's been accompanied by a raise in your annual revenue guidance. We did not see that this quarter. So just wanted to get an understanding of what the thought process is around.

The second half and where.

You may have a little bit of.

Uncertainties slash caution, perhaps that might have led you to decide to not change the full year outlook. Despite another very strong quarterly performance.

Hey, Jason Thanks for the question and answer with respect to the revenue with respect to the revenue raised.

I'd urge you to remember that this quarter, we announced the transaction with caviar and so we will update you post the closing of this transaction, which we'd expect to happen later this year with respect to guidance for the rest of the year.

Also remember, we raised guidance last quarter by $30 million or two points of growth, which was obviously more than the beat that we had last quarter and finally, you will recall that of course, we're driving growth for the long term and so the investments that we're making in the back half of this year, we expect to.

Drive growth for us into the future.

Your next question comes from the line of Chris just Christensen with Citi.

Thank you for taking my question.

Jack can you I appreciate the refocus.

Into the core the core ecosystem here.

But can you give us a sense at least the competition seems to be getting tougher.

With other cloud Pos players, but also on the seller side.

It is this more of a response to things like that and and perhaps maybe you can at least qualitatively give us a sense of how retention is holding up and the seller channel. Thank you.

Yeah, I'll take the first part and Rita.

Well into the second.

We I mean really this is this is not looking externally is looking internally, we just see a ton of opportunity based on or.

The strength of our payback periods and the return on investment of multiple products within the solar ecosystem, particularly and rethink.

You know just doing some small things like a focus on go to market through hardware and also through.

Sales and marketing will have a very very good outcomes. So we want to pull the thread on that.

And we do believe that the.

You know the thing that's still sets us apart from all of our competitors is the cohesiveness over ecosystem.

The fact that I can come in for one tool and see an array of other tools that will help with your second question question, which is around retention or we do have a number of sellers who use multiple products.

At once and find.

You know that the ability to just download one app and so when you have an entire universe of tools to solve all the critical needs of their one would have right. There is very compelling very easy and very fast and something that continues to be a competitive differentiator for us. So we now get the opportunity to really focus on these two ecosystems.

And we see a lot of opportunity within seller, we continue to.

Beat our expectations within cash both.

Both ecosystems of.

Some incredible Roadmaps ahead.

And especially for this year, which I'm really excited about.

Which bring both to a significant strength, but.

As the previous caller indicated we think there's even more opportunity in connecting the two.

And having a positive reinforcement cycle between those those two ecosystem. So.

This really allows us to focus on.

Two critical constituencies.

That I think strengthens both ecosystems and adds a lot of value to the company.

And Pete I'll, just add to the retention point the last time, we shared a full deep dive with you about our seller business back in Investor Day, two years ago, we talked a lot about paybacks ROI and retention and if you look at how the business has evolved since then the dynamics in our seller ecosystem remain largely the same or better you know we talked about paybacks at that time in the four quarter range were now seeing them trend to the three quarter range. We see return on investment that is also at very significant levels. We see positive revenue retention for our existing cohorts, we see new cohorts joining at higher revenue levels. All of these drivers have led to our seller ecosystem driving a very attractive profitability profile, even as the business has scaled and it's because of that skilled level of profitability. It's because of the strong unit economics is because of the strong ROI is that we have the confidence to invest in this business in the back half of this year and into next year.

Thank you appreciate the color.

Thank you.

Your next question comes from the line of Jim Schneider with Goldman Sachs.

Good afternoon, and thanks for taking my question with respect to the investments you plan to make money on the seller ecosystem can you, maybe just give us a little bit of color about the dimensionality that in terms of how much of this is about going after new sellers and adding to the total number of sellers, especially larger sellers and how much of that is about kind of extending the.

The ancillary product offerings, and additional subscriptions and services to the existing base. Thank you.

So the way we think about this is building one tool for.

All types of sellers all sizes of sellers.

We want to make sure that we're enabling.

The.

The seller, who is just getting started on their house boat all the way up to a seller with 40 locations.

To be able to sell within.

Within a within the ecosystem so.

Our focus right now is going to be on.

Hardware.

Sales and marketing.

And then there will be continuing to reach out to the very small and and the very large.

And.

Of course, we're going to balance that with making our product better and better the big focus for US right now is on the developers platform and the pie.

We continue to see a lot of benefit from.

Taking a platform approach this is especially true as we move caviar to door dash.

As Jordan succeeds, we also succeed in a restaurant succeed.

By using the orders epi in the orders hub the orders manager.

Other restaurants. So this is something that we we feel very confident in.

And Jim just to add to that and some of the sales and marketing efforts that we've already seen.

This year has delivered positive traction so as an example, our brand marketing campaign in April reach 7 million sellers and while it's still early that positive early traction.

We delivered top of funnel much top of funnel metrics like awareness and conversion for new sellers that were really encouraged by when we look at other markets, where we have invested in this way with brand awareness in our international markets. Those brand awareness campaigns have actually driven greater efficiency in our direct performance marketing spend as well. So I think as Jack mentioned, you will see us.

Lean in on areas like hardware top of funnel brand awareness as well as some of the direct performance related marketing to drive the full ecosystem here.

Thank you.

Thank you.

Your next question comes from line of Canada, Canada Scott's attended Arts.

Hello, I am a square seller and my business is cans that are from Oakland, California, and my question is will square ever offered some classes specific to entrepreneurs that business owners can attend.

That is a that is a great idea.

We Anthony also thanks, Thanks for using square, we have actually started a program called self made.

Which is a series of free nice schools.

And for the first additions were in Atlanta in Pittsburgh, and we do believe we're going to bring us.

Serious Oakland and 2020, so next year, we should have some classes for you on social media marketing.

So on your web site online store and everything you need to.

To start and run and grow your business.

Thanks you.

Thank you.

Your next question comes from the line of Harsha kilowatts with Bernstein.

Hi, Good afternoon. Thank you for taking my question I wanted to ask about Omni channel. This has been a bush for you since the Weebly acquisition, but is also a fiercely competitive market and many 50 years, whose business is primarily E. Com are now moving in still the can you talk about the competitive differentiators in online how does the Walden How's weebly fitting in there.

Yeah. So so we believe that omni channel is a big.

Strategic.

Value for us and something that we want to continue to invest and grow.

We believe this because we do have a lot of our sellers offline and online who either want to so.

Online or for a lot of online businesses are considering more experimental ways of selling like pop up shops in physical retail. So we want to make sure that we're a place where you can come to you can download an app opened the service up.

And.

Everything you need is right there.

I think what differentiates US is it's not just about ecommerce it's about all these channels, including mobile.

So that so it can bring all the channels together from offline mobile and online in one place in one dashboard and have all the suite of other tools that we offer.

Including appointments capital.

Customer relationship management.

Everything needed to to really grow the business not just to make sales, but actually grow the business and provide insights into it and thats, what we want to continue to strengthen.

And we see a lot of opportunity.

In continuing to invest in increasing our investment.

Around online store omni channel.

In the form of.

Sales and marketing.

Which will complement everything that we're doing around hardware and hardware sales as well. So we do think there is a lot more room for us here.

Hence why the moves today, we're so were so important.

And we'll benefit will benefit so much from.

Your next question comes from the line of James Faucette with Morgan Stanley .

Thank you very much you guys have talked about.

Increased marketing and and and efforts and obviously a lot of that has been dedicated to catch up and expansion of services, but wondering if you could talk about the campaigns that you launched in the K last year and how effective that was in and how you're looking at expanding marketing efforts international Internet to the international markets you've identified versus in the U.S. Thanks.

Yes, so in the UK. This continues to be a focus for us and we want to make sure that we.

We have a remarkable product with some of the market.

We have been investing in brand campaigns.

In the UK.

And this is driven efficient customer acquisition with the cost to acquire a new seller down by over 50% compared to prior year. So we are you know we are learning as quickly as possible.

And as you know, we're not first to the market in the UK, we we strive to be the best and we strive to continue to bring more and more of our ecosystem.

To the market.

We have managed to launch multiple products at lunch within the UK, which was a huge milestone for us and we'll continue to look for opportunities to showcase the uniqueness of the UK market and everything that's happening within the UK.

Through marketing and also through earned media, which continues to create a flywheel, where more and more people are aware of square.

And and utilizing it.

And just ask James to add on the international expansion part of your question and our approach to international markets is step one make sure that we have a full suite of products and fill in any gaps that we see there.

Step two to drive brand awareness campaigns to the people understand square and the full breadth of our ecosystem in step three to drive greater performance media to drive conversion. So we're still in that ramp.

But with some of the.

Product offerings that we released earlier this year and with things to come you will see us continue to fill in.

Product gaps internationally have a full suite of offerings internationally, and lean and therefore to sales and marketing increasingly.

Thank you very much.

Thank you.

Your next question comes from the line of Ramsey El Assal with Barclays.

Hi, Thanks for taking my question.

I wanted to ask about your distribution model in international markets and how it's evolving are you.

Does it look and smell different in these different markets is it.

More partnerships in some in more direct sales and other and just a quick bolt on to that question I was just wondering if the Q3 guidance.

It was impacted by any changes in your expectations around wind event bright would roll out.

Yes. Thanks for the question. So I think every every market is going to be unique and.

Japan is a really good example of this where we feel very confident now.

In our success in the country, because we have a lot of tailwinds from the government, who is providing subsidies for both sellers and buyers to shift to digital and card payments.

We have a number of events coming up in Tokyo that bolster the number of global travelers into into Tokyo, we're expecting to use cards.

Every merchant that they go to within the city and within the country. So.

That is required a very different approach from what we have seen in the UK and what we've seen in Australia.

So each one is going to be slightly different and.

We have folks on the ground, who are aware of what the best channels are within each market.

And.

And in some cases it is more drexel in some cases more more partnership. So we were just going to be flexible and agile.

As we as we.

Approach.

Every market.

And Ramsey with respect to your question on guidance. It does contemplate the beginning of the ramp up in the rollout of event pride in the back half of the year.

Okay. Thanks, so much.

Your next question comes from line of George Mihalos with Cowen and company.

Great. Thanks, Thanks for taking my question just wanted to ask on the on the net transaction yield that came in a little bit lower than what we were.

What we were looking for and down a little bit year over year is that a simple as the mix towards.

Larger merchant or is there anything else, we should be thinking about in the quarter when going forward.

Hey, George Yeah, you got it transaction margin was 1.06% of GPV in the second quarter, which is down two basis points year over year and it was you know as as expected. We discuss this back at last quarter that we expect transaction margins to come down slightly throughout the year as we continue to grow with larger sellers.

And because of that transaction margins are not a metric we use in isolation to measure success, we really orient again towards revenue.

In absolute dollars of revenue along with these efficiency metrics that we look at overall payback periods revenue retention et cetera.

Which help us focus on the growth of the overall ecosystem along with cross sell opportunities.

Your next question comes from the line of Lisa Elliott Ellis with Moffat Nathanson.

Hi, Good afternoon. Thanks for taking my question as a follow up from me on the sales and marketing investments in the seller ecosystem as you move up market and as you called out an increasing amount of your business is coming from greater than 500, K or the 125 to 500 K.

A lot of the competitors in that space heavily used channels like direct sales or Ais BS or bank channels as you're investing in your your go to market model up there. How do you think about some of those channels like what sort of squares view on your go to market strategy Your channel strategy in the upper market.

Thank you.

So so when you say of Martin you mean larger sellers to speaker is larger yeah larger sellers start like greater than 500 or even in the upper end of the 125 to 500.

Yes, so we have a we've seen a pretty unique dynamic I'll just point you to.

Square for restaurants and square for retail, where we saw that.

It is attracting a number of larger sellers and what's interesting.

And really compelling is the majority of them.

Over 70, 80%.

Our self serving into.

The into the opting into the service.

So self serve as important because it means that we have.

Enable people to.

We felt some intuitive interface, where they don't need a call, but they don't need help and they can just go right away and if we can make larger sellers.

Approach square as smaller sellers, two who just got the Fcrn and get it done.

That's a really scalable model and then sales and marketing.

And.

A lot of our account management really becomes an opportunity for us to cross sell.

And to show other tools within the ecosystem that.

Thats seller can use.

So we've we've benefited a lot from just having a really fast easy elegant an accessible product.

The seller of any size, Ken Ken can utilize.

And.

We we will always be open to.

Other models, but we have we think we have a lot of room to strengthen the the one that we have.

And Lisa just to add to that you know in particular, when we look at our sales approach looking at our sellers sales and marketing spend we see.

Strong returns and an opportunity to invest efficiently our sales and account management teams have had high returns on investment comparable to the overall return that we've already shared with you on sales and marketing which is already attractive.

And so we know that this team is to often touching up market sellers those larger sellers.

And sometimes have higher acquisition cost, but because of the higher lifetime value of those customers.

We see.

Strong returns on those investments with our sales team and an opportunity to invest further.

Perfect. Thank you.

Thanks.

Your next question comes from the line of Josh Beck with Keybanc.

Yes, thanks for taking the question I noticed some of the boost commentary in the letter calling out things like customer acquisition frequency.

Ticket sizes, you I think those are all really important elements for restaurants. So you have jordache I think thats a really encouraging.

Leading signal, but when you think about maybe the the tenor of conversations with other potential partners could you maybe give us a.

Sense and maybe some type of.

Timeline for how long it takes to attract others is it corridors is a multi year effort on that that'd be really helpful. Thank you.

Thank you Josh.

We're we're super happy with with what Bruce has been doing so as you know we started this with a very controlled approach, where we took it upon ourselves to create boost on and to learn as quick as possible continue to add features and functionality to the boost that allow more and more opportunities.

For ourselves, but also with partners and we do see a.

A very compelling horizon.

With with partners in particular.

We've we've had a lot of interest and again, we want to take on the mindset of making sure that we're running really controlled experiments. So we're creating value for both parties.

And our customers the one of the.

So.

Value propositions for the boost program is the fact that a lot of the people that we're serving have never had access to a rewards program and certainly one that.

Isn't.

It is easy and simple and as straightforward as what we we've done with boost so well make sure that we have a very high bar for our partnerships and that we're optimizing for learning on that comes through a lot of experimentation.

And so we are we're matching.

The transactions with.

Brands and companies and sellers that our customers love.

And and would be delighted to utilize so.

That's kind of the the thesis around it but we have.

Received a lot of interest and.

As you might have seen.

On Twitter, we are hiring lead roles for this for the sales function.

But we definitely expect this to be.

A full with a lot of opportunities for partnership on the line.

Really interesting business.

And Josh I, just want to help also on the funding and the economic side of the boost program just to clarify.

And we fund.

We have as part of a controlled rollout of the program as Jack was mentioning have funded a lot of us ourselves, but the cost flow in as contra revenue. So the $135 million that we disclosed this quarter in revenue. Excluding bitcoin is already net of any boots costs associated with our cash card program.

On and as we continue to attract partners as we did with jordache this past quarter, but as we continue to attract more that gives us even more opportunities to really strategically fund this program with with other partners and deliver value to our to our customers.

Thank you both very very helpful.

Thank you.

Your next question comes from the line of Steven Kwok with KBW.

Hi, Thanks, so much.

Taking my questions I had a quick question around the transaction advance losses.

But it seems like that for rate as a percentage of key TV has been ticking up a little bit was wondering is there anything specific that's causing that and is that the rate that we should use going forward.

Sure happy to help risk loss was relatively consistent year over year at 6% of adjusted revenue.

And this this line item for US is really driven by volume growth across each of our seller business, our cash business and our capital business and so just to.

Put a little bit of color on that you know seller GPV grew 25% as you saw this past quarter cash a we disclosed in the first quarter cash volumes grew almost a 150%.

And capital originations grew 36% this past quarter. So we've got strong volume growth across across the business.

And that is obviously what leads into the risk loss, which has stayed consistent year over year at that 6% of adjusted revenue on the seller business risk loss remains below <unk>, 0.1% of GPV and on our capital business with core flex loans loss rates are consistent with historical averages at less than 4%.

Got it that's helpful. Thank you.

Thanks.

Your last question comes from line of Brett Huff with Stephens.

Good afternoon, thanks for taking the question.

Quick follow up on the habitual nation and usage of the square cash up card.

I know that boost as a part of that but as you think about the economics going forward do you see yourselves delivering enough incremental value or enough incremental people to a merchant.

To shift the cost of those deals more and more to your partners and less and less coming from square and kind of whats the evolution of that so far.

Hey, Brett Yeah happy to help you know as as we share just a few minutes ago. We're in the early days of the booster program. We're about a year and I think we launched in May of last year, just less than a year. After the launch of the cash card itself.

And we continue to prove out the value here not only to consumers, where we see a strong incentive through boost to join into the cash card program, where as Jack said, we believe we have a really unique offering around instant rewards for our customers here as a prepaid debit card.

But also delivering value for merchants and so we're in the early days of that and this door Dash program in this past quarter.

Is this the first milestone the first proof point towards our ability to drive traffic and drive customers into merchants.

And the team continues to innovate here the cash team continues to be creative and experiment with booz.

There's all sorts of things planned in the roadmap for the future.

And that will be excited to share with you when the time is right, but we're in the very very early days here and we're excited great. Thanks for the time.

And at this time I'd like to turn the call back to the company for closing remarks.

Thank you everyone for joining our call I would like to remind everyone that we will be hosting our third quarter 2019 earnings call on November six thanks again for participating today.

Ladies and gentlemen, thank you for participating in today's program. This does conclude the program and you may now disconnect.