Block Inc (SQ) 2019 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Square First Quarter 2019 Earnings Conference Call.

I would now like to turn the call over to your host, Jason Lee, Head of Investor Relations.

Please go ahead.

Hi, everyone.

Thanks for joining our first quarter 2019 earnings call.

We have Jack and Amrita 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 closed.

We will begin this call with some short remarks before opening the call directly to your questions.

During Q&A, we will take questions from our sellers in addition to questions from conference call participants.

We would also like to remind everyone that we'll 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 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.

We disclaim any obligation to update any forward-looking statement except as required by law.

Also during this call, we will discuss certain non-GAAP financial measures.

Reconciliations to the most directly comparable GAAP 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 it over to Jack.

Good day, everyone, and thanks for joining us on our call today.

I wanted to start off just by talking a little bit about some of the highlights from the quarter and pass it off to Amrita for some of her comments.

So 1 quarter ended in 2019, what's been top of mind for me and us has been around our ecosystem that we're building.

This is our strongest competitive differentiator.

This not only benefits our customers, both sellers and increasingly individuals with the Cash App, but also benefits our internal teams.

For our internal teams, it allows us to move a whole lot faster.

Some examples of this is because we had and built the e-commerce API, we're able to very quickly build Virtual Terminal and get it to scale, and because we built the Cash Card that enabled us to build the Square card to offer a similar offering for sellers.

This quarter, we relaunched Square for Retail with an applet model.

This allows us to add features like invoices that were originally developed for Square point-of-sale directly to Square for Retail.

So generally, we're going to continue to invest into this ecosystem.

We do think it sets us apart from all of our peers and competitors in the industry.

It allows us to move faster and faster every single day.

We've been improving our tools for sellers to combine online and in-person sales.

We've been talking about omnichannel for quite some time.

This quarter, we launched the new Square Online Store, and we made it so that it has automatic syncing of both online and in-person data, so all of the seller's items, orders, inventory and prices are synced automatically, which is another result of our ecosystem and using our internal tools to have much more impact and to move faster.

We've also been increasing our product velocity in our markets outside the United States.

So Square Online Store launched in Australia, Canada, the U.K. and the United States.

Square Invoices launched in all of our markets at once.

We want to see more of our products do this.

And Japan has been a very interesting story.

I was in the country a few months ago, and we're starting to see a lot more tailwinds within the market rather than headwinds.

There's a few things fueling this.

One, the government is working to double card payments, and they're pushing and incentivizing both consumers and also sellers to use more digital means of payments instead of paper cash.

Two, we have a -- we launched Square Stand and our Square contactless and chip card reader in Japan.

This is a huge upgrade from the reader that we had in the market in the past.

It allows our sellers to automatically pair wirelessly or through a wire.

It allows them to hold their iPad and hook it up to the new Square Reader and just is an overall better experience than we were providing in the market in the past.

And three, we have a new partnership with SMBC, which is distributing our readers in all of the bank branches around the country.

So now any one of our Japanese sellers to be can go to their local bank branch, pick up a Square card reader and be in business.

And it is at parity with what we offer in the United States and our other markets.

This all combines with the fact that Japan is hosting the 2020 Olympics and International Rugby League (sic) [Rugby League International Federation] where you have a bunch of individuals from all around the world who are coming to the market, expecting to pay the way they know how to usually with card or with a phone, makes it a perfect storm of a situation where we can really see a potential for a lot of growth.

So we're really excited about Japan and our increased velocity in our markets outside the United States.

So with that, I'll hand it over to Amrita.

Thanks, Jack.

I'd like to share 3 highlights this quarter: first, we continued to deliver strong revenue growth at scale; second, we continued to build out our seller ecosystem, including the launch of Square Invoices as a stand-alone app; and third, we're raising revenue guidance for the full year 2019 on the basis of strong underlying trends across our business.

So first, driving growth at scale.

The momentum across both our seller and Cash App ecosystems drove total net revenue growth of 43% year-over-year or 39%, excluding acquisitions.

And adjusted revenue growth of 59% year-over-year or 49%, excluding acquisitions.

Within our seller ecosystem, GPV from mid-market sellers grew 50% year-over-year.

Mid-market sellers, which we define as those with over $0.5 million in GPV, are now 24% of overall GPV, up from only 6% 5 years ago.

Within our Cash App ecosystem, we're seeing powerful network effects at play.

We see strong growth in monthly active customers, with Cash App consistently ranking as a top 20 overall app in the iOS App Store, and we drive daily utility in Cash App.

We also saw growth in engagement as measured by transaction frequency per active customer.

With the compounding effects of growing reach and growing engagement per active Cash App volumes grew nearly 2.5x year-over-year.

Second, we continue to build out our seller ecosystem.

The proof point this most recent quarter was the launch of Square Invoices as a stand-alone app.

Invoices is a great example of our investment in scaling, an important product to our sellers.

This is a product that targets the large market opportunity with $1 trillion in consumer invoices annually in the U.S. alone.

We began Invoices 5 years ago as a feature in our Dashboard then added it to the Square point-of-sale app, and now, we've expanded the offering with a dedicated stand-alone mobile app.

Invoices has reached impressive scale, processing over $5 billion in GPV over the last 12 months with over 350,000 active sellers, and we see significant runway ahead.

Finally, we're increasing our full year revenue guidance to reflect ongoing momentum in the business.

We're raising our full year 2019 total net revenue by $60 million, and we're raising full year adjusted revenue guidance by $30 million.

This represents a 43% growth rate, an increase of 2 points compared to our prior guidance.

The increase was primarily driven by outperformance in Cash App as well as continued strength across our seller business.

We're maintaining adjusted EBITDA guidance of $405 million to $415 million.

We plan to use our momentum in delivering growth at scale to reinvest back into the business as we execute on our long-term opportunities of omnichannel, financial services and international.

And I'll now turn it back to the operator to start the Q&A portion of the call.

(Operator Instructions) The first question comes from Tien-Tsin Huang of JPMorgan.

So wanted to ask on the EBITDA upside this quarter versus your guidance.

Looks like it's bigger than usual by our count and is bigger than the revenue upside, I believe, as well.

So can you detail a little more for us what fueled the upside?

I heard Cash App and strength in seller.

Any more you can give us on that?

And then also again, like you said, Amrita, you're reinvesting but holding EBITDA guidance, which makes sense.

But where are you prioritizing your investments from here -- I'm curious between consumer and seller and everything else you guys have going on, what's changing in your priorities, if at all.

Sure.

Thanks for the question, Tien-Tsin.

So to explain what happened in Q1, our business is demonstrating success at scale across the portfolio.

We had strong adjusted revenue growth of 59% in the first quarter, and excluding M&A, 49% on an organic basis.

This is driven by both the outperformance in Cash App as well as broad strength across the seller business.

I'll break it down -- the revenue beat into the 2 component pieces between transaction-based profit and subscription and services.

From a transaction-based profit perspective, we grew 27% year-over-year in the first quarter based on the strength of the seller ecosystem.

We continue to see stable trends with positive revenue retention, a consistent 3- to 4-quarter payback period for new sellers and new cohorts of sellers increasing in adjusted revenue contribution.

And we're moving into even larger sellers.

As I just mentioned, GPV from mid-market sellers grew 50% year-over-year.

From an S&S revenue standpoint, we doubled organically year-over-year with broad strengths.

A couple of things to highlight there.

In particular, with Cash App, we drove outperformance.

As you've heard, volume grew nearly 2.5x year-over-year, which highlights the continued growth in terms of reach and engagement on the platform.

As you heard last quarter from us, our monthly actives in December, 15 million monthly actives was up more than 100% year-over-year.

And we continue to see that growth in terms of strong monthly active growth with revenues outpacing growth in monthly active customers.

Cash Card is an important piece of that.

Cash Card drove higher engagement in the quarter.

We saw rapid growth in Cash Card adoption within the customer base with increasing attach rates.

And an increase in the frequency of usage per card active.

We also saw strength with Square Capital, with originations growing 50% year-over-year based on the core flex loan products.

And so for EBITDA, you saw the adjusted revenue beat flowing through to the bottom line.

We also had some timing of expenses in the quarter, which we now expect to materialize later in the year.

And we plan to reinvest this upside back into the business for the remainder of the year.

We're optimizing for compelling reinvestment opportunities whenever they occur, and they're based on when it's the right time for our marketing and product development time line to reinvest.

So you'll see that flow through in future quarters.

Your next question comes from Darrin Peller of Wolfe Research.

I just want to touch again on the -- just given how strong subscription and services keeps holding up.

Cash App volume, it's good to see it was up 2.5x.

I mean, I guess that's showing -- the strength from the doubling of users is showing better engagement.

If you can just comment on how much that doubling is actually being monetized, how many of those users are now being monetized so far?

And how much does that contribute -- the Cash App drivers contribute to subscription and services?

And then if I could just add on, the business debit card you touched on, Jack, before, I mean, how has that been going so far?

It seems like a good opportunity to kind of add more revenue after a tough comp here -- from up here.

Thanks for the question, Darrin.

I'll start off with your question on Cash App.

You're right, we saw strong growth in subscription and services in the quarter, doubling on an organic basis.

With respect to Cash App, what we're really focused on is driving a strong business model which we're seeing play out here through network effects, through engagement growth, all of which should lead to meaningful revenue growth.

And we're beginning to see that play out now in our financials.

The opportunity here is vast to enable access to financial services for the over 65 million [adults] in the U.S. alone that are unbanked or underbanked.

And clearly, with our success consistently in the top 20s in the iOS App Store, we're achieving mainstream scale.

So the way we think about the business model for Cash App is first, driving reach.

The network effects within the business and the frictionless onboarding that the product teams have focused on have driven really efficient acquisition at scale.

And you've seen that play out with the doubling of the monthly active.

You also see that in our financials.

What we spend to acquire in monthly active is a fraction of what traditional financial institutions spend, and that's inclusive of ongoing P2P costs.

From an engagement perspective with Cash App, we've talked about how the product velocity and the speed of mobile -- developing on the mobile platform has enhanced the daily utility of the app.

Our teams have released Cash Card, Boost, direct deposit, cryptocurrency, all within a relatively recent time period.

And another proof point of that daily utility is if you look in our filings, you'll see that we've tripled the amount of customer-stored funds within Cash App, and that obviously Cash App volume is growing even faster than monthly actives as we shared.

Cash Card is a big part of this where we're driving engagement and higher lifetime values.

From a monetization standpoint, we have a number of business models in place today, as you know, Instant Deposit, Cash Card, Cash for Business, P2P funded through credit cards, cryptocurrency.

But this is just the beginning.

The hard part is the engagement, and our team is nailing that.

So as we launch more features, as we launch more services, as we grow daily utility, we believe monetization will follow.

And Darrin, this is Jack.

On Square Card, just to remind everyone, this is a card that we enable sellers to receive.

And basically, it allows them to download the Square Point of Sale and get a place to store their money and also a card that's MasterCard-branded that they can use anywhere.

So basically, they don't have to make a trip to the bank just to get in the business which is pretty cool.

And we -- one of the biggest reasons we did Square Card was to give our sellers faster access to their funds.

It's been a consistent theme throughout our history.

The faster we give access to funds, the more people can make smart decisions about how to build their business, so it ultimately leads to these businesses growing over time.

So we found in our early pilot that over 40% of Square Card sellers did not previously have a business debit card, so they're actually mixing their business funds for their shop with personal funds.

So this also allows them to segment those funds.

The early read on this, just one interesting metric that we can share, is that active Square Card sellers are spending over 20% of their GPV through the card.

So this is pretty excellent and a strong leading indicator that there's product market fit and something that provides a lot of utility to get access to their funds to actually focus on what matters most, which is building their business.

So we think there's a long runway here.

As I said earlier in my opening, this is all based on Cash Card functionality and that system.

So we've learned a ton through our Cash Card, and we expect to take all those learnings and make it better for our seller audience.

Your next question comes from the line of Eric Ciancaglini, a Square seller.

It's Eric Ciancaglini.

Again, I'm a Square seller.

The name of my business is Chank's Pizza Cones.

We actually serve pizza in a cone shape.

And my question is so we use Square Payroll, and I'm also a Square shareholder.

And I'm just -- I'm curious to know your strategy for adding Payroll to the Square services.

Was it mainly because you see an ability to drive additional revenue through users that use Square now?

Are you focusing on capturing new users as more of a strategic move for bigger market share?

Thank you for the question, Eric, and thanks for using Square.

We traditionally just look at what are the most critical needs for sellers and is there anything that we can build that would be differentiated in the market that's bringing some new value.

And with Payroll, we looked pretty deeply at a lot of the time that was being spent just managing employees within each one of our seller's shops.

We already had an ability to use timecards within our register.

It just felt like a natural move to also figure out how to use that system to pay people as well.

And it really speaks to something we want to do more of and see more of as kind of -- see a lot more overlap between the seller ecosystem and the individual ecosystem that we're building with cash.

So one of the things that we did for Payroll, for instance, is employees can be paid via the Cash App.

So we believe it's an extremely easy and fast way to get paid but also to utilize your money much faster as well for those employees.

So as we looked at the opportunity and we saw where we could add some value, we decided to do it.

But generally, that's how we think about strategy going forward is identifying really critical needs and where there are gaps within our ecosystem and then figure out like what we can bring to the table that's unique and differentiated and much stronger than what's out there today.

Your next question comes from the line of Josh Beck of KeyBanc.

I wanted to follow up on the seller card, sounds like nice product market fit with the stat that you gave there.

How should we think about the adoption curve?

It seems like you have a very good channel to these sellers through the dashboard, e-mail or otherwise, so it feels like the adoption curve could be fairly strong.

So how should we think about that?

And then secondly, when we think about the build with the Square pipeline, obviously, you have a really good relationship with Eventbrite where it's more of an online gateway capacity.

How should we think about the pipeline of opportunities there?

Yes.

Thanks for the question, Josh.

So on Square Card, I don't believe we've done much in the way of traditional marketing or any sort of push outside of the product itself.

So we do think there's a lot of opportunity to make it known that we are doing this.

But right now, we're making sure that the sellers that we see that would really benefit from it have access to it.

So there's a number of things we can do, both in terms of onboarding but also with sellers that are currently utilizing Square to surface this much higher.

As I said, we just haven't prioritized that yet because we still want to make sure that the product feels really amazing, works, provides utility, and then really turn on the gas.

So that's where we are in the adoption curve.

It's still early, and we're getting a lot of really great feedback from our sellers.

It's -- I think it's one of our most well-received launches in recent times.

So -- and it's something that we definitely exceeded our expectations in the results so far.

On Build with Square and Eventbrite, yes, we see Eventbrite certainly as an amazing partner but also a prototype of another marketplace.

We have a marketplace within Caviar.

We have a marketplace within Eventbrite.

And we do believe that we should be building within our developer platform more opportunities for marketplaces like Eventbrite.

So we get to learn a lot from this partnership and that will lead to more opportunities outside of any one company, but any marketplace that exists can utilize our services.

So that's ultimately the goal.

Your next question comes from Jim Schneider of Goldman Sachs.

I was wondering if you can maybe comment on the further development and traction you're getting with your vertical-specific software, specifically things like Square for Restaurants.

I think there was some anecdotal evidence that, that's -- you have some competitive takeaways there.

So maybe talk about how that is going as well as the traction on your sort of other more traditional retail solutions.

Any kind of metrics you can provide as an update on that front will be helpful.

Yes.

So just backing up a little bit.

When we think about vertical points of sales, we don't just limit ourselves to Square for Retail and Square for Restaurants.

We have Invoices, for example.

We have Appointments.

So this is a broader ecosystem of what we see in terms of vertical adoption.

And the extra points of sale with Restaurants and Retail, Restaurants, we're pretty pleased with the adoption and what we're seeing.

And one of the things that we believe is another one of our differentiators is how self-serve our system is and our ecosystem, and this is proven with Restaurants.

65% of Restaurant sellers have self-onboarded, which is amazing because it really de-taxes a bunch of work we might otherwise have to do with customer support or account management or sales.

So that's a great sign that we're building the technology in the right way.

It's intuitive, people can figure it out and get it up and running.

You pair that with the average NOI GPV of a Restaurant seller.

It's over $650,000.

So we are reaching large restaurants, and they are onboarding themselves.

So those 2 data points are excellent in our view.

On the Square for Retail side, as you probably have been following, we had to do a little bit of a reboot here.

One of the things we did well with Square for Restaurants is we took a lot of time talking with restaurant owners and operators and just really decomposed everything that they had to work with every single day and what was frustrating them and how we could improve it.

And that made a product that found some pretty significant product market fit right away.

We did not do that with the original Square for Retail.

So we rebooted the whole thing following that pattern, and we're seeing some equally good results from that move.

In contrast, about 85% of Retail sellers self-onboard versus the 65% on Restaurants.

And nearly 40% of those sellers are new to Square, which is excellent.

Average NOI GPV of Square for Retail seller is nearly $250,000.

So again, we continue to be attractive to the very small and the very large with the exact same software.

And this is out of intent of wanting to build something that we -- that scales from the very small to the very large.

Was that -- I don't know -- was that your whole question or did I miss something?

It was.

It was.

And then maybe -- that's great.

Maybe one for Amrita.

Just philosophically, as you approach the EBITDA guidance, I think you had previously talked about kind of seeing similar margin improvement from a margin percentage basis as we saw last year.

Obviously, you're taking up your revenue but leaving EBITDA the same.

So maybe -- I understand the timing of expenses part of it, but maybe just give us an update about how you're philosophically thinking about the EBITDA margin piece of the equation.

Sure.

Our financial priorities remain the same, which is driving long-term top line growth and growth in absolute dollars of adjusted EBITDA.

We have a number of levers in our business to achieve this.

First, given the opportunity we see and given the efficiency of returns we see in the investment in our business, we're being very deliberate in reinvesting into those opportunities.

So in our '19 guidance, you see that we're leading with this.

We're maintaining our EBITDA guidance of 60% year-over-year growth at the midpoint while raising guidance on revenue to 43%.

We focus on financial discipline.

We focus on operating excellence, and you've seen that play out with OpEx leverage in our business.

And we expect over time adjusted EBITDA growth to continue to outpace adjusted revenue growth as it has for each of the last 5 years.

Again, our reinvestment that we're focused on includes investing into the Cash App, which is -- historically we've been investing in, and it's bearing fruit in a meaningful way now as well as investments in our seller ecosystem, which are driving growth.

You're seeing that play out with things like investments in hardware through Square Register and Terminal, investments in software and payments with Virtual Terminal and Invoices, and scaling launches of our more recent launches like Square Card, Developer and Online.

So ultimately, these investments are supported by a strong business model with positive attributes related to the efficiency of those investments and multiple monetization levers down the road across both seller and individual ecosystems.

(Operator Instructions) The next question comes from Lisa Ellis of MoffettNathanson.

I had a question about the Square Online Store, phenomenal to see that launch this quarter, the relaunch of Weebly.

Can you talk about when you're looking -- a little more detail on that like when you're looking at your seller base, do you have a sense for what proportion of that base are candidates for adding the Online Store, how you're going after them from a sales and marketing perspective?

And then also a little bit of a sense of how the economics of one of those sellers changes when they add the Online Store.

I mean, is it like a double of the type of revenue you're seeing?

What's -- can you just dimensionalize that for us a little bit?

Yes, Lisa.

Thank you for the question.

So we're also pretty pleased with the launch of the Square Online Store.

It does capture a lot of the intent and interest of the thesis we had with Weebly.

The biggest underlying trend here is that we are seeing sellers all over not -- want to optimize their sales for anywhere their customers are, so that is in-person, that is online and also within mobile apps.

So our strategy is to make sure that feels very fluid and they don't really have to think about where their customers are coming from, which puts a lot of the emphasis on how the Dashboard works and consolidates everything, how we sync data across all those channels.

And we've tried to make it as effortless as possible, and there's still some work to do there.

So far, we have seen about 70% of Square online sellers have used Square before expanding online.

And as we've seen generally, when a seller does go online and -- or an online seller goes off-line, they do increase their sales and that is good.

I don't have the exact metrics around what those look like.

But we are -- we're making sure that: one, our sellers know that this option is available.

It's an easy flip of a switch.

And if they want to do anything a little bit more custom or personalized to their business, they can utilize our API or hire a developer to utilize the API.

So marketing ideally starts within the product, but we're going to continue to experiment and test as well.

And anything you want to say, Amrita, about the economics?

We know that 30% of our larger sellers serve their customers via more than 1 channel on Square, so we're very focused on expanding our opportunities across going deeper within sellers and providing new ways that sellers can onboard.

Your next question comes from Rayna Kumar of Evercore ISI.

(inaudible) and if you can speak about some of the other markets you're interested in entering?

Rayna, we didn't hear your full question.

Caught you at the end, and it's very muted.

Okay, let me try again.

There you are.

There you are.

What's your progress been in some of your international markets like the U.K., Canada and Australia?

And if you can also discuss some of the other markets you may be interested in entering.

So I'll start there.

One of the reasons we believe was very interesting to us is because they are operating in markets that we're not in, and that gave us a lot more understanding and learning and to help us make better-informed decisions about what -- where to go next.

Right now, we are so focused on making sure that we have more and more product parity with the United States around all of our markets.

So Japan is the most notable recent example of this where, as I said earlier, we do see a lot of tailwinds now, especially with the government incentivizing both consumers and also merchants to adopt digital money and move away from paper cash.

So we've been in that market for quite some time and it's the first time we've seen that broad-based government support as well as other events coming up that will put much more focus on Tokyo and also on paying with cards and also phones.

So we're pretty pleased with that.

And then in terms of more broadly, we're working to make sure that we can launch more and more of our products in all of our markets.

Square Invoices, the app launch in all of our markets at once.

So that's what we want to see a whole lot more of.

And we continue to make progress around the world with the markets that we're currently in.

Maybe Amrita can speak to some of the details.

Sure.

So as Jack mentioned, we are really focused on increasing our product velocity for launches outside of the U.S., and that really means completing our feature set, bringing what we've worked hard to build here in the U.S. to our international markets.

Again, you've seen that more recently with the global launch for Invoices as a stand-alone app, and 25% of Invoices downloads to date actually come from outside of U.S. You see that with the launch of the Square Online Store across the U.S., U.K., Canada and Australia.

And you see that with the hardware launches that Jack mentioned in Japan.

We see strong Net Promoter Scores in most of our international markets, anywhere from 60 to 80 across the U.K., Canada and Australia.

And we've got ongoing brand campaigns in each of our international markets now.

We launched a brand campaign in the U.K. and saw efficiency from that.

And now that we're reaching feature completeness across our portfolio and some of the other markets, we're beginning to roll out those brand campaigns across the other international markets.

Overall, it's a large opportunity for us.

We see $6 trillion in household spend across our current international markets, which is 2x what it is in the U.S. So we see a big opportunity ahead of us, and we'll try to continue to execute.

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

Wanted to ask, as Square moves up the market to the mid- to large clients, I assume Square is likely replacing incumbents.

So curious on what's winning versus the competition?

Is it all just the omni solution you guys could provide?

And just thinking do you guys have enough in the sales channels to go after that larger market?

Yes.

I'll start off.

So we continue to see that largest sellers find value and utility in our base offerings.

So we built products with intent of the same software scaling from very small to very large, and that continues to resonate even with larger sellers.

And we continue to see larger sellers self-onboard.

We continue to see them take advantage of the broader ecosystem.

So all these things combine towards what differentiates us from our competitors.

But if I only had to pick one, it would be the ecosystem, and just like all of the tools in one place and how quickly we're moving to add new tools or to improve them.

We continue to see large sellers also utilize our API in significant ways.

This has been a very strong offering for larger sellers because they can hook up legacy systems and can also customize entire point-of-sale but still use our hardware, which you can't find at any of our peers.

And then I'll pass it over to Amrita.

Yes, sure.

I'll just add to Jack's comments.

We're focused, as he said, on building products that serve larger sellers.

Whether you look at our hardware products like Square Terminal or Square Register, both of which overindex to larger sellers, Square Terminal with $165,000 GPV, Register with $300,000 GPV, or the Developer platform, as Jack mentioned, which overindexes to mid-market sellers.

And then the verticals, which Jack had earlier mentioned, overindexing to larger sellers.

We are also trying to reach sellers from a marketing standpoint.

So we've got products that address larger sellers and smaller sellers, and then we want to reach from a marketing perspective these larger sellers.

So just in April, just last month, we launched a new ecosystem marketing campaign reaching 7 million small- and medium-sized businesses across the U.S. focused on expanding awareness of the full breadth and ecosystem of products that Jack was referring to.

We know that over 50% of larger sellers already use 2 or more of our products, but we're focused on continuing to grow that through this ecosystem marketing campaign and continuing to build out strong products that address this market.

Your next question comes from Ramsey El-Assal of Barclays.

I wanted to ask again about online, your online strategy.

Obviously, you're advantaged in terms of linking online and off-line sales for retailers, and I get that's what makes Square Online Store compelling.

Can you do something similar at other platforms like WooCommerce or Magento or Shopify, those types of commerce platforms?

I mean, is there a bigger e-commerce like omnichannel addressable market you can go after by kind of opening up and working to integrate online and off-line through those folks?

Yes.

We have focused more on omnichannel rather than just pure e-commerce because that's really where our sweet spot is with sellers.

But you can imagine us favoring one more in the future, given how much activity is happening with e-commerce.

So all this is going into our strategy around the Developer platform.

We want to make sure that we're testing the very small but also the very large.

Eventbrite is a good example of the very large where we are testing a marketplace's strategy within -- on top of the Developer platform.

So we do believe that there's a ton of room here, and we just want to make sure that we are optimizing for the best experience first.

We don't believe that we need to be first to market to win customers.

We just have to provide something that really adds differentiated value to the marketplace, and that's where we're focused on and that's what we've proving out.

Your next question comes from Bob Napoli of William Blair.

The purchase volume, while very impressive at 27% growth, has decelerated somewhat.

There are -- you've certainly waken up a lot of competitors in the space, Jack, and they're investing more heavily to compete with Square.

Are you seeing more competition, whether it's -- and I know you built the ecosystem and others are trying to build something similar to that.

But are you seeing more competition, whether it's from Clover or TSYS or other merchant acquirers or fintech companies?

Yes.

I mean, we are definitely seeing competition on the edges.

We have a lot of firms out there that are making solutions around payments, around payroll, around delivery, around everything that we serve, P2P or whatnot.

But again, I think it really comes back to this concept of ecosystem and how all these things tie together.

And we have built, I think, a fundamentally new model within finance that we benefit a lot from, and we do expect people to copy aspects of it.

But we want to make sure that we're focused on being the best out there.

And really focusing on the quality of the experience, the elegance, the fact that it is intuitive, so it's self-serve, that it works seamlessly with all tools that we provide and also third-party tools.

And that continues to win.

But we do expect competition on that dynamic, but we -- I think we have a pretty good and proven track record of being able to scale that into something that is meaningful both for sellers, individuals and also us.

And Bob, just on your GPV point, just to give you a little bit of context there.

So in the first quarter, GPV was $23 billion, up 27% year-over-year.

Over the trailing 4 quarters, we had approximately $90 billion of GPV.

What we're seeing drive growth there -- outsized growth is a couple of things.

First, larger sellers, which we've been talking about.

We see continued strength there.

Over half of our GPV mix now comes from larger sellers and mid-market sellers as we share this growing 50% -- or grew 50% year-over-year in the first quarter.

We have multiple levers of growth within scaling our new payment channels.

A couple of examples of that.

Invoices, as we discussed, $5 billion in GPV over the trailing 4 quarters is growing much faster versus the blended overall GPV rate.

And some of the products that Jack was referencing, developer verticals online, these are all relatively younger products, and they're growing meaningfully faster.

So we're going to continue to push them.

But GPV is only 1 measure of the value that we provide to our sellers.

When we think about the ecosystem, we think about adjusted revenue, which is how we measure our business and how we incent our teams to grow.

And again, adjusted revenue grew 59% year-over-year, which captures, we think, the full breadth and value of the ecosystem beyond just payments, including also subscription and services.

Your next question comes from Dan Perlin of RBC Capital Markets.

The transaction cost as a percentage of GPV was a little bit better than what we had anticipated.

And conversely, the profit dollar associated with that in the profit margins was also better.

The question I really have is, is there something that's happening in the result of Cash App or Cash Card that is changing this funding mix so to speak as we think about that?

And if so, is this trend something we should be tracking a little more closely like commensurate with the Cash App growth?

Thanks for the question, Dan.

No, Cash App, you should think of as separately from transaction costs.

As a reminder, both GPV and transaction profit growth exclude Cash App.

Separately, as you've heard us say, Cash App has continued to outperform and drove revenue growth for us and for the overall business, with volumes up 2.5x nearly year-over-year.

But I would think of that separately from a transaction cost perspective.

And that's true for Cash Card as well?

That's right.

Your next question comes from James Faucette of Morgan Stanley.

Jack, I wanted to ask kind of an industry question of you.

We've seen obviously a move to consolidate some of the upmarket merchant acquirers and participants in the market.

And I know in the past, you've indicated that you didn't feel like you could achieve everything that you wanted to if you were part of a bigger organization.

I'm wondering how you're thinking about consolidation and if it makes sense for Square to be looking at doing something similar or its own M&A activity, et cetera in the States or do you prefer still a very much an organic approach to the market?

Well, a bit of both, if I'm understanding your question correctly.

We do see that others are consolidating and acquiring, but they do so in a fairly typical pattern than we've resisted, which is looking at just the parts of the equation instead of building a greater ecosystem.

So we do have a significant M&A strategy in terms of looking for really great teams, really great products.

And if we determine that they will help ecosystem or add a new potential solution that a seller is facing in a critical way or an individual within Cash App is facing in a critical way, then we will acquire it.

We tend to do much smaller ones than our peers because we've managed to find like really great teams that every single person in the organization is really high impact.

And that's what we want to optimize for ultimately, but it comes down to we're constantly looking at the horizon of what companies are out there, start-ups, current companies and making decisions based on what we see in the quality of the people, the quality of the work, the quality of the product.

We haven't historically taken a position of just buying revenue or buying customers.

We want to buy technology, and that is what we're focused on.

So I do think we'll continue to see consolidation but that doesn't worry me.

What I want to push on is like we continue to enrich our ecosystem and make it stronger and stronger and stronger.

By doing so, we add resilience, we add durability.

We're hired for multiple jobs by a seller, by an individual rather than just be dependent upon one.

So all of these things are what we want to drive, and M&A is certainly a channel to do so.

I'd like to turn the call back over to the company for closing remarks.

Thank you, everyone, for joining our call.

I would like to remind everyone that we'll be hosting our second quarter 2019 earnings call on August 1. Thanks again for participating today.

Ladies and gentlemen, thank you for participating in today's program.

This does conclude the program.

You may now disconnect.