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spk08: Good day, ladies and gentlemen, and welcome to the Square Third Quarter 2021 Earnings Conference Call. I would now like to turn the call over to your host, Nikhil Dixit, Head of Investor Relations. Please go ahead.
spk10: Hi, everyone. Thanks for joining our Third Quarter 2021 Earnings Call. We have Jack and Amrita with us today. We will begin the call with some short remarks before opening the call directly to your questions. During Q&A, we will take questions from our customers in addition to questions from conference call participants. 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 SEC for 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 the forward-looking statements except as required by law. During this call, we will provide preliminary gross profit growth results for the month of October. These represent our current estimate for October performance as we have not yet closed our accounting financials for the month of October, and our monthly results are not subject to interim review by our auditors. As a result, actual October results may differ from these estimates. Also, we will discuss certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call 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 would like to turn it over to Jack.
spk03: Thank you all for your time today. In our seller ecosystem, we continue to build upon our omni-channel capabilities, and those efforts have enabled us to attract and retain larger sellers while also helping our existing sellers grow a market. This quarter, we enhanced our Square Invoices product to help sellers more efficiently run their business. Square Invoices enables sellers to easily build clients and get paid quickly in person, online, or over the phone. In the third quarter, we introduced Square Invoices Plus, a new subscription product with more advanced features designed for larger and more complex businesses. We also continue to expand our geographic reach, launching a full stack of integrated seller tools in France in September, our most robust market launch yet. French businesses can now sell online and in person with Square's integrated suite of products, including Square Point of Sale, Square for Restaurants, Square Online, Square Terminal, Square Stand, Square Reader, and more. We're excited about France, given its strong small business environment, increased usage in contactless payments, and its fast-growing e-commerce sector. Switching to Cash App, we've reached a major milestone this quarter in expanding our offerings to families by serving teens, an entirely new demographic for Cash App. With its launch, customers in the U.S. between the ages of 13 and 17 get access to Cash App's massive P2P network, the Cash Card, direct deposit, and boost, all with parental or guardian approval. By lowering the age barrier, we hope to expand access to the financial system to 20 million teens in the US and equip them with the tools they need to participate in the cashless economy, which is especially important now as transacting with physical cash becomes less relevant in the increasingly digital world. With Cash App, families can help their teens learn about how to manage the money they earn from the allowance, jobs, and chores with the appropriate protections in place. As we've talked about, our strength lies in our ecosystem model, especially as our ecosystems connect together. In the third quarter, we launched Cash App Pay in the U.S., a new contactless payment method for online and in-person transactions. With Cash App Pay, individuals can seamlessly pay with their Cash App account at Square Cellars using the QR code or tapping a button on their mobile device to check out. As contactless options in QR codes have become more mainstream, Cash App Pay has become a top requested feature by both Cash App customers and Square sellers. This integration further expands Cash App's commerce capabilities and helps us meet customers where they are, providing more flexibility in their payment options. Cash App Pay also enables us to offer sellers a new and innovative way to bring commerce to life for their customers. Lastly, we continue to serve our purpose of economic empowerment in all that we do. But we want to build on that strength to explore opportunities beyond our existing ecosystems to serve new markets. We have a few emerging initiatives we're investing behind into 2022. For example, with the acquisition of Tidal, we're building tools for artists, starting with musicians. We also recently created a business called TBD in order to build an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services with a focus on Bitcoins. We plan to share detailed plans with a white paper later this month. We announced two more Bitcoin initiatives as well, a consumer Bitcoin hardware wallet and a Bitcoin mining system. Both are focused on helping Bitcoin reach a mainstream audience while at the same time strengthening the network and ecosystem. We will build both in the open in collaboration with the community, sharing all of our decisions, progress, and questions along the way. We see each of these long-term opportunities that we will be learning from over multiple years. And with that, I'll turn it over to Anita.
spk05: Thanks, Jack. There are three topics I'd like to cover today. First, a look at our performance in the third quarter of 2021. Second, an update on our seller and cash app ecosystems in October. And third, a look at where we intend to invest in the fourth quarter of 2021 and in 2022, given the compelling growth opportunities ahead. In the third quarter, gross profit was $1.13 billion, an increase of 43% year-over-year or 51% on a two-year taker basis. Adjusted EBITDA was $233 million. Both Seller and Cash App showed strong fundamentals during the quarter. Seller generated gross profit of $606 million, up 48% year-over-year or 29% on a two-year taker basis. A few growth drivers to call out here. First, we've made strides growing up market as our ecosystem has resonated with larger sellers. In the third quarter, mid-market sellers, or those with more than half a million dollars in annualized GPV, grew gross profit nearly twice as fast as our overall seller business on a two-year taker basis and have surpassed micro sellers to make up our largest segment of GPV. Our momentum with mid-market sellers in recent quarters has been driven by acquisition of larger sellers, as well as our ability to help small sellers grow on our platform. Second, software and integrated payments remain the fastest growing product in the seller ecosystem on a gross profit basis, as sellers value the breadth of our ecosystem. Square invoices in particular experienced strong growth, processing $12 billion in GPV over the last 12 months, up nearly 2x from two years ago. CashF generated gross profit of $512 million, up 33% year-over-year, or 104% on a two-year CAGR basis, with strong engagement in inflows. Inflows, or money pulled into our ecosystem, achieved strong growth on a two-year CAGR basis, even as most government disbursement programs ended. Product adoption has been a key driver of overall inflows, and we continue to see an increase in the tax rate for products using cash cards. In the third quarter, cash card actives brought in approximately 70% more inflows each month than non-cash card actives. We also saw an increase in paycheck deposits as we've made direct deposit and bank transfers easier and more visible to customers. Next, we wanted to share an update on our business through October and what we're seeing real time. As a reminder, we believe two-year CAGRs will better reflect underlying trends in our business. For sellers, we expect gross profit in October to grow by 45% year-over-year, or approximately 30% on a two-year CAGR basis, relatively in line with growth in the third quarter. Seller GPV was up 24% on a two-year CAGR basis. We've been encouraged by relatively stable growth rates in the past two quarters, though we recognize there are still impacts from COVID in certain parts of the U.S. and our international markets, which could impact GPV trends. For Cash App in October, we expect gross profit growth of greater than 35% year-over-year or greater than 90% on a two-year CAGR basis. As we had expected, we saw normalization in the two-year gross profit CAGR from July to October as government disbursements ended. On a year-over-year basis, gross profit growth has been relatively stable, around the 35% range from August through October. We've seen strong engagement here across our broader ecosystem of products and are enthusiastic about our recent launches and product roadmap. Which brings me to our intended investment for the fourth quarter of 2021 and a preliminary view of our focus areas for 2022. In the fourth quarter, we expect to increase non-GAAP operating expenses, excluding risk loss, by approximately $115 million compared to the third quarter. Looking to 2022, we see significant investment opportunities across our business and remain focused on driving long-term profitable growth. Next year, we expect to grow non-GAAP operating expenses by approximately 40% year over year compared to 2021. or approximately $1.3 billion of incremental spend across product development to build out our team, sales and marketing to drive acquisition, and G&A to expand support in each of our ecosystems. This figure excludes impacts from after pay, which we expect to close in the first quarter of 2022. Let's take a look at where we're focusing our investments. For seller, we'll be investing behind our strategic priorities of enabling Omnichannel, growing globally, and growing up market with larger sellers. Given the strong growth in lifetime value and gross profit per customer that we've seen over time in our seller business, we're comfortable lengthening our payback period up to the six-quarter range as we scale sales and marketing and increase our mix of go-to-market investments across international, brand awareness, and our sales teams. For Cash App, our strategic priorities remain strengthening our network, driving engagement, and attracting more inflows into our ecosystem. Heading into 2022, we're focused on advancing these priorities by investing behind new and emerging product areas. First, enabling more commerce for our customers, including our recent launch of Cash App Pay and potential future opportunities with Afterpay following the closing of the transaction. Second, providing more financial services by expanding our product set and unlocking new info channels in the Cash App. And third, improving the health of our platform and promoting positive behavior by growing support and expanding access. Finally, as Jack mentioned, we now also have emerging areas of growth that we're investing behind, and we'll be tracking the progress against milestones over multiple years. These include title, TBD, the hardware wallet, and Bitcoin mining, which we expect will in aggregate represent roughly 5% of our incremental step up next year for approximately $140 million in overall non-GAAP topics. As we look ahead, we're excited for what the future holds for our company. We're going after a large and growing addressable market, and we see strong signals on how our products resonate for our customers with compelling unit economics. As a result, we are deliberately investing to reach new audiences, increase the utility for existing customers, and expand our product set as we have done over time. I'll now turn it back to the operator to start the Q&A portion of the call.
spk08: Thank you. Ladies and gentlemen, we will now take questions. To ask a question, you will need to press star 1 on your telephone keypad. Again, that will be star 1 on your telephone keypad to ask your question. And to withdraw your question, press the pound key. And as a reminder, please limit yourself to ask one question per participant. Thank you. Please stand by while we compile the Q&A roster. We have the first question. It comes from the line of Chenxin Wang with JP Morgan. Your line is now open. You may ask your question.
spk00: Thanks so much, and thanks for the update. I wanted to ask about Cash App Pay, if that's okay. And I know, Jack, you've been talking about connecting the two ecosystems. So how important is this in that effort, and what's the strategy to grow this payment method overall? I've been thinking that you'll need to drive more inflows like direct deposit to really get it going. So maybe if you don't mind updating us on the inflow strategy, that'd be great. Thanks.
spk03: Yeah. So... I would first see this as a focus on the importance of Cash App moving more and more into a commerce relationship. So, you know, we have these incredible viral loop and network effects and peer-to-peer. And now we get to look forward towards being more of a commerce front end. Fortunately, we have another ecosystem at scale that focuses on sellers and omnichannel commerce. So it's easy for us to test a lot of these theories out and actually scale them up over time. Obviously, we do believe that having these multiple ecosystems is our ultimate superpower and differentiator. So, you know, have both ends of the counter, two different audiences and sellers and individuals is really important. There's a thesis behind Afterpay as well, and that probably represents some of the largest potential we're connecting ecosystems, but any connection we make between these ecosystems strengthens the overall value of a broader ecosystem. And we think our value to customers and the company generally as well. In terms of direct deposit, direct deposit is one form of input. We've done a lot to make sure that we are making it more accessible, we're putting it more upfront in the interface, you'll notice a bunch of navigational changes that were made for more of a focus on direct deposit. But, um, generally, you know, there's, there's a number of ways people get money into, um, cash out, not just the paycheck, but, um, tax refunds, uh, stimulus checks. Um, and we want to make sure that it's, uh, intuitive and easy for all those and be ready for when people want to scale. I think the other announcement to look towards in this light is what we just did for families. So allowing any parent or guardian to turn on Cash App for their kids, who can also use peer-to-peer, direct deposit, and the Cash Card, unlocks an entirely new population for us. And we'll still benefit from those base level network effects that have grown. And I cash up in the first place. So we have, you know, we're going after this problem in multiple ways, interface, new products and features like cash up for families. And then taking every opportunity we have to connect our ecosystem. So the thing that I think is most interesting here and cash up pay is that it really allows us to open the door around Cash App being the commerce front end.
spk08: All right, thank you. And next question, we have the line up, Darren Collar of World Research. Your line is now open. You may ask your question.
spk09: Hey, thanks, guys. Nice trends. I just want to start off and kind of follow up on Tingen's question around Cash App a bit. You know, just given the impact of stimulus, it's likely running off a bit now. I think it's still impressive to see two-year caterers at 104%. I'd just really love to hear what your view is on the drivers of incremental engagement per user, like sort of touching on the new capabilities and strategies from here on out for cash app, really pre-after pay, along with the potential levels we'd be able to reach. Just thinking about what the potential engagement transaction levels, revenue per user, you know, where that can go over the next, couple years. Thanks, guys.
spk05: Hey, Darren. Happy to take that one. I think it's instructive to look at where Cash App is focusing from a priority perspective, both an aggregate across the ecosystem as well as from a product development perspective to inform where we can see potential future growth. So as ever, as we head into the fourth quarter and into 2022, our strategic priorities remain strengthening our overall network, driving engagement, and attracting more inflows. And to advance these priorities, we'll continue investing behind product development, sales and marketing for customer acquisition, and support and operations, which underpins the entire platform. From a product development perspective, we're prioritizing a few longer-term focus areas, which I think really get to your question around how we drive long-term growth, ARPU, and lifetime value for our customers by ultimately driving greater utility for our customers. So first, from a commerce perspective, as you heard from Jack, We're at the beginning of building out a commerce platform for Cash App. You see that with Cash App Pay. You see that with Teams. You see that with what we're going to be doing in the future with Afterpay and other new experiences to drive greater utility and engagement. From a financial services perspective, we're expanding our banking capabilities, including new inflow channels into Cash App and exploring new products like Borrow to help drive engagement and attract more inflows into the network. From a health perspective, we're scaling support, we're expanding access, and we're doing this responsibly to encourage good behavior on our platform, which again, further strengthens the network effects and the ability for people to bring funds in and use them across multiple products. we're building up full stack teams dedicated to each of these areas in 2022 and you'll see that in our hiring plans in product development to drive continued product roadmap velocity from a marketing perspective we're investing to drive acquisition for new customers with a focus on reaching higher lifetime value customers and newer demographics And as we've seen gross profit and lifetime value per customer grow historically, we've begun to increase our customer acquisition costs above the historical $5 range, which we believed was too efficient given the opportunities that we see ahead. So some of the levers that go into that to drive investment in 2022 and future growth, paid marketing, this is where we can ramp our paid channels. and is a growing portion of our spend referrals, which makes enhancements. We're going to make an enhancement to the overall referral program and use it as a way to cross-sell our ecosystem as well. and awareness, which grows the ability for people to come in and adopt products beyond peer-to-peer. And it includes reaching new types of customers beyond our existing demographics. And it advances Cash App's lifestyle brand as a true differentiator. And finally, support and the foundation on which our platform is built. The growth of Cash App has outpaced our investment, frankly, with customers adopting more and more products. And in 2022, we're going to grow our health team. We'll continue to build out our support and our infrastructure to align with Cash App's astounding growth. Part of that is deposits and limits, initiatives to reduce friction around inflow sources and add new inflow channels And part of it is some of the more recent things you've seen, like we recently launched in-app support messaging to all customers, and that's quickly become the majority of inquiries. We'll be dynamic with the spend, we'll track returns, but we're excited about these initiatives, strategic initiatives and investment areas to drive future growth for us, ultimately driving utility and engagement with the Cash App ecosystem.
spk08: Thank you. Next question, we have a question from a Square seller, Andrea Aguirre from the Art of the Donut. Your line is now open. You may ask your question.
spk04: Hello, my name is Andrea. I'm a business owner here in San Antonio, Texas. I own the Crafted Donut Shop, and we use mainly all Square features available at the moment. My question was, rolling from a food truck to a brick and mortar location, as we continue to expand, one of the most important things is to ensure that we have all the integrated products we need to roll up market. And can we expect to see Square introduce features as we look to expand?
spk03: Yeah, 100%. And thank you for using Square. So, you know, we built our ecosystem with exactly this in mind. We started close to 13 years ago with a very simple solution of accepting credit cards. And that was meant for, you know, sole proprietors and the smallest of businesses. But we want to make sure that we were able to scale ahead of our seller's ambitions. So if they decided to get a physical location, They decided to have multiple locations, hire more employees, all those things. We didn't want to get in the way of that. So all of our tools are meant to scale from the very small to the very large and progressively disclose more and more sophistication as the complexity of your business increases. One of the recent areas that we wanted to help solve is around employee management. And we've acquired this company called Crew that allows our sellers to have a messaging platform so that they can help manage all their employees and all their needs so they can continue to focus on what's most important, which is their customers. So it's really important to us that we're not getting in the way of any of our sellers' growths. And I think we show that by... being supportive of the very small but also of the largest like stadiums who have thousands of vendors of all sizes working in the room.
spk08: Thank you. We have the next question comes from the line of Lisa Ellis of Moffett Nathanson. Your line is now open. You may ask a question.
spk07: Good afternoon. Thanks. I'm going to switch over to the seller ecosystem. You called out sellers' international expansion in the prepared remarks, particularly the recent expansion into France. Can you just remind us how much of sellers' GP is derived from ex-U.S. markets and how fast that piece is growing? And looking forward maybe for Amrita, where your priority investment areas are looking internationally as you look into 2022? Thank you.
spk03: And maybe I'll start this off and then you can follow. So as we look at a new market for sellers, we want to make sure that we're, number one, looking at the market and understanding the level of small businesses and entrepreneurship within each one. And then we want to invest in brand and product awareness. And then after that, it's not just launching one product, but getting to parity across all of our products, across all of our global geos. And then finally, look at expanding into new markets where we think there's a high potential for success. Because we do require a partnership with a local bank and there's differences in local regulatory, this has to be a very deliberate decision. So We've made very conscious choices around what markets we're in and why. And there's still a lot of opportunity for us to open more of our products in more of the markets that we're already in, such as Square Loans, in more of the places that we already exist. So that is our focus. So it's a balance between getting parity in the markets that we're in with all of our products, but also looking at entirely new markets as well, France being the nearest one.
spk05: And Lisa, I'll add that our markets outside the U.S. have seen strong growth in the third quarter despite periodic lockdowns. We saw those markets growing faster than the U.S. So they are growing, those international markets are growing as a mix of our solar business. And they continue, to your point about next year and our future strategic priorities, they continue to be a key focus area for us and investment opportunity for the future. As I said, sellers' strategic priorities as we look ahead are enabling omni-channel, going global, and growing up markets. On the going global piece to your question, it's a key part of our sales and marketing initiatives for next year and a key piece of why we're comfortable expanding our paybacks up to the six-quarter range as we see a greater mix of spend in sales and marketing towards brand spend and international areas. What those key sales and marketing investments are, brand and awareness to drive reach and top of funnel demand, particularly with larger sellers and across the breadth of the ecosystem. performance, which continues to be our largest percentage of NICs, and then global. Scaling sales and marketing in these markets outside the U.S., which is growing faster than the U.S., and where we've seen paybacks improve over time. We'll be ramping our spend in these markets outside the U.S. in 2022, given the new geographies that we're in, including France, Ireland, and with the beta in Spain, as well as potential new launches for the future. We expect these areas to have lower ROI in the early years and improve over time, and we see them as a critical strategic area for us for the future that we want to invest into, given the strong product market fit and how our products are resonating in these markets. It's also a key piece of the investments we make, of course, in product development to localize and expand these services and features for each of these markets. closing the product gap that Jacque was talking about in these international markets, and from a support perspective to make sure that these sellers can reach us with any of their needs across international as well as the U.S. So key focus area for us and very strategic for the future.
spk08: Thank you. Next question comes from the line of Timothy Chiodo of Credit Suisse. Your line is now open. You may ask your question.
spk11: Great. Thank you for taking the question. I want to dig into the large seller approach in 2022 and beyond. And I'm really bringing this up in light of the potential for a more bundled approach to work with those large sellers, and that's including some of the big online enterprise customers that have relationships with Afterpay. So I was hoping we could talk just a little bit about that full suite or bundle of offerings that could be sold into those large seller, whether it's Buy Now, Pay Later, the Cash App Pay button, or your more traditional payments processing or unbranded, if you will. And then, of course, other services that Square offers. And really, the thought being there is it might allow Square to have a more competitive or sort of a unique angle when talking with those large enterprises.
spk03: Yeah, this is exactly it. As I said earlier, this is one of our biggest strengths is that we do have ecosystems that are cohesive. They're very broad in their tool sets. So it allows us to reach sellers in a much more cohesive way, especially given the maturity of our developer platforms. So even if I am a larger seller and I have legacy tools or tools that are very custom and specific to me that can still integrate with Square in a way that's needed are definitely going to the number of stadiums that we've turned on as proof of that. And that also shows the potential for bundling, as you say. We believe that after closing the transaction, Apple Pay can add really direct commerce across both sellers and individuals. We think it's a really smart connection between the two ecosystems. Obviously, Afterpay has done very well with larger retailers, and that's both on the seller side and also on the individual side. We think there's natural homes within our seller business and also Cash App. So back to the comment on Cash App Pay, the more Cash App is seen as a commerce front end from discovery, to transactions um the stronger our relationship um it brings and that's not just on the cash upside but also on the square seller side and as we look to integrate after the transaction closes we have an even more opportunity thank you next question we have the line of trevor williams of jeffries your line is now open you may ask your question
spk15: great thanks good afternoon and I'll throw another one in on the cash app so as we look at the size of your user base like 40 million monthly actives that puts you at a scale that very few banks are close to I mean how do you think of the benefits of scale or what competitive advantage a larger user base gives you beyond just having more users to monetize when you have a network effects on the peer-to-peer side, but just trying to get at how a larger user base can unlock a higher level of monetization. I mean, the benefit from when you plug in Afterpay, that seems pretty clear, but just thinking more on Cash App as a standalone today, really what the scale advantages are. Thanks so much.
spk03: Yeah, I think number one, it gives us a lot more opportunity to strengthen our existing products, but also create new products on top of Cash App as a foundation. And those can be products for both individuals and customers, but also for sellers as well, as more and more commerce moves online and purely digital and is not found offline. We do have businesses using Cash App because it's a fast, easy way for them to transact, and it's familiar for their customers, and even that builds upon the network effect. But I guess I would directionally point you back to discovery. With a larger base of customers, we get more opportunity to introduce discovery features to our network, and we have the starts of those things and boosts, for instance, where we can highlight a particular activity or a particular seller, whether it be in your neighborhood or nationwide. And I think there's a lot more to come there. And we have the benefit of, again, having a seller network, an ecosystem that we can further turn on to all of our Cash App customers. And as we have more customers as we have a compelling product experience around discovery, local and businesses around me become real important, and they open access even to an even greater degree. So I think there's a lot of potential in having the scale we have, but I feel we can go much, much higher, and that's the intention, especially as we think about cash out outside the U.S. and the U.K., which really excites me as well as being more global.
spk05: And I had Trevor that I think, um, a key focus area for us is the engagement of this customer base. Um, you know, as we said back in June, nearly two thirds of those 40 million monthly assets that you will reference transacted each week on average. across our Cash App ecosystem. So the more we can do there to make this a daily utility, to make our ability to provide customers value on a regular basis and throughout the day, the more opportunity we have to drive further network effects, drive further engagement, and ultimately drive higher lifetime values, which then enables us to invest back into the ecosystem and provide value. differentiated value to these customers. So I think both the reach of the network and the driving continued engagement are key priorities for us.
spk08: Thank you. Next question comes from the line of our shooter, Robert Bernstein. Your line is now open. You may ask a question.
spk06: Good afternoon. Thanks for taking my question. Jack, I want to follow up on your prepared remarks regarding Bitcoin. Are you looking to expand into crypto beyond Bitcoin buy and sell, you know, for example, you know, buy and sell other cryptocurrencies and also enabling your users to kind of engage in DeFi and NFT ecosystems? Thank you.
spk03: We're not. Our focus is on helping Bitcoin to become the native currency for the internet. And we want to, you know, we have a number of initiatives towards that goal. Cash App is just one. going to be building a hardware wallet or exploring Bitcoin mining, a consumer device to mine Bitcoin at home or in a business or seller businesses, in fact. We believe this focus is important. We believe it's right. And a lot of it has to do with the resilience, the fundamentals, the principles that Bitcoin offers. And we also want to make sure that we're giving back to the community as much as possible. And this is also reflected in our approaches for Bitcoin wallet, Bitcoin mining, and our new business unit called TBD, which is focused on building a developer platform to enable more ideas around decentralized finance on the Bitcoin stack and on that stability that it offers and You know, all the resilience that's had over the decade plus. So we're going to release more details on what TBD is doing with a white paper on November 19th. And we're really excited about the direction and excited about our focuses.
spk08: Thank you. Next question comes from the line of Josh Beck of KBCM. Your line is now open. You may ask your question.
spk01: Thank you, team, for taking the question. I wanted to shift gears back to Cash App. Obviously, the demographic on the age is expanding and certainly getting into that 13 plus category. So I'm curious what you view as the defining elements of Cash App for that segment. Obviously, there are a couple of Private companies also focus on teens and tweens, if you will. So just curious on how you would frame that and where you see that opportunity headed in the next few years.
spk03: Yeah, I mean, this is a really big launch for us because we're, you know, it's been a huge request by Cash App customers that we're finally able to fulfill. Obviously, this is to a much larger population that we don't have access to before 2019 in the United States. But then it's going to our fundamentals that are strong, the peer-to-peer fundamentals, you know, just receiving, being able to receive money from your friends or send money to your friends or from your parents, being able to get a cash card, design a cash card, even the cash card that glows in the dark, and being able to use it and take a, you know, my parents can send me my allowance or I can go in the workforce and actually use the direct deposit functionality. So most everything that you would expect from Cash App will exist with this feature set, but it'll have controls for the parents or the guardian. So we think it's a great way to get into the space. It's a to start. We definitely hope to expand it. But all the strength that we have in building the network effects of our business and all the products that we offer will benefit now from a much larger audience, and we'll continue to take on the responsibility and help that we have with things like Bitcoin and the savings account and cash card and stocks as we have with the main cash app. So we're always going to provide as much information as possible so people can be responsible and healthy with their finances. And that will definitely include how we think about cash app for families and for teens.
spk05: Josh, I would just add that I think some of the key differentiating factors for Cash App here is the scale of the network effects which drive the utility ultimately for these teens and for their families. And the aspirational brand that Cash App has cultivated through the years, which is truly authentic, certainly with Gen Z and certainly with this audience. And then third, as Jack said, the strength of the broader network, the fact that it's not just Cash Card. It's not just peer-to-peer, but there's so many other things that you'll be able to do over time which enables that sort of financial inclusion for this audience. And those are the things that truly differentiate Cash App for this product and for this audience.
spk08: Thank you. We have the next question comes from the line of Rensi LFL of Barclays. Your line is now open. You may ask your question.
spk12: Hi, thanks so much for taking my question this evening. I wanted to ask about an ACH acceptance tool that I think you guys announced earlier in the year in partnership with Plaid. And it's sort of at a high level. What are your thoughts more broadly on pay by bank and other types of payments that don't rely on the traditional card rails? And maybe if I can tack one on, are you planning to offer a pay with Bitcoin feature through Cash App Pay at some point? Thanks.
spk03: Yeah, so I think what you're referencing is maybe the sellers accepting ACH bank transfer payments. which definitely have a lower processing fee. So we're always looking for opportunities to add efficiency to the stack, both for sellers and for cash app. As soon as we have a foundational infrastructure and interface in place, we find ways to make it even more efficient and cheaper for our customers. In terms of cash app pay and Bitcoin and specifically Lightning functionality, probably in that realm, It's definitely something that the foundation will allow. As I said before, our focus is on helping Bitcoin to be the native currency for the internet. So currency aspects of it and of the network are really important to us, and we're going to do more in that space.
spk08: Thank you. We have the next question comes from the line of Brian Can from Deutsche Bank. Your line is now open. You may ask your question.
spk16: Hi, guys, and thanks for taking the question. Just wanted to ask about on the Cash App, how much stimulus is still impacting the numbers? Just curious on the saving rate for Cash App users and their balances right now. And I know you guys are doing several things to get balances up on Cash App. So just be interested in figuring out a little bit about that. Thanks.
spk05: Okay, happy to take this one. Maybe we'll hit balances quickly first. We saw customer balances slightly down quarter over quarter, up 143% on a year-over-year basis. We would really orient you, though, to look at inflows more broadly as balances are just a measure of growth at a snapshot in time at the end of the quarter. um and so what we really orient to as we think about the health of the the network is of course as we said overall network size engagement but also inflows what we've seen is that as we had expected as the government disbursements came to the end largely during the third quarter we found normalization in the two-year kager rate on gross profit from july to october On a year-over-year basis, though, we've seen relative stability from August to October in around that 35% range on a year-over-year basis. In October, we expect growth on gross profit of greater than 35% year-over-year and greater than 90% on a two-year, two-year basis. And then as we look ahead, of course, when we think about our customer spending power, which is ultimately what impacts inflows, what we're focused on for the long term is all those key priorities that we laid out for the year ahead around the commerce platform that we're building, around financial services, around the health of the network. which enables us to ultimately bring more deposits, more inflows into the ecosystem and enables our customers to then use them in more ways across the ecosystem. And I think ultimately that's in the medium to long term what drives inflows for cash out.
spk08: Thank you. We have the next question comes in the line of David Target of Evercore ISI. Your line is now open. You may ask a question.
spk14: Thanks so much. I'd like to better understand your closed-loop strategy with Afterpay. We've been following your BNPL pilot and cash app, which appears to be defaulting payments to stored balances. Given your stored balances were around $2 billion at the end of 2020 and constantly being refilled, it seems that BNPL with Afterpay at Square Cellars could generate significant transaction margin benefits. Can you help us better understand your closed-loop strategy with Afterpay?
spk05: Sure, I can jump in on this one. You know, I think what we're focused on ultimately is the product experience for our customers. And the commerce platform that we're building, which, you know, this payment type enables us to drive things like in-app discovery within Cash. And as we've seen with Afterpay, that with their own app, they've been driving historically a million leads a day to some of their enterprise merchants. So when you think about beyond just the payment type that BNPL enables or even things like Cash.pay enables, Really, the strategic imperative here for us is the commerce enablement that the integration of Afterpay enables for us with both Cash App and with our seller ecosystem. Of course, there will be opportunities to think about cost savings over time, but the strategic focus is on commerce and in-app discovery for us.
spk08: Thank you. We have the next question comes in the line of George Michalis of Collin. Your line is now open. You may ask your question.
spk13: Great. Thanks for taking my question. Just wanted to ask, as it relates to Cash App and the importance of the Cash Card, can you remind us how penetrated Cash Card is within the Cash App ecosystem? And then maybe, Amarita, you can kind of update us on the breakdown of different revenue sources within Cash App, the Instant PDP, Cash Card, and the like. Thank you.
spk05: Sure. So to hit cash card first, you know, we continue to see strong adoption here for cash card with our customers. It is our highest attached product outside of peer to peer. You know, what we had shared back in March is that 7 million customers within cash are using cash card on a weekly basis. We're seeing it drive regular utility for our customers. That rate of weekly usage had nearly doubled year over year, growing faster than the monthly active cash card customers. Cash Card customers are using the card for everyday purchases, for food, for transportation, at major retailers, really signaling that customers want to use Cash Card to manage their everyday expenses. Obviously, Boost is a piece of that with the unique rewards and offerings that we have here to drive that utility and awareness around card. And we've also been working on expanding functionality for CashCard globally. As of third quarter, customers can now use CashCard in person and online in many countries outside the U.S., And when we think about the importance of driving attached to products like Cash Card, what we see is that these customers are highly engaged across our ecosystem on other products. Historically, we've seen Cash Card Actives adopt nearly twice the number of products as non-Cash Card customers, which has led to greater money brought into Cash App overall. Obviously, we shared that stat that in this quarter, Cash Card Actives brought 70% more inflows into the ecosystem on average than non-cash card actives. And it was a key driver of overall inflow growth for us. So we see a real opportunity here to grow engagement and monetization both with cash card and beyond cash card as customers take on more and more products like investing and direct deposit. And I think the second part of your question is the breakdown of revenue sources. We continue to see a diversification in the utility of the different products we have within Cash App. And it's a key focus area for us. to drive that product adoption across Cash App as well as to drive ultimately monetization and regular engagement. And that is something that, especially as we look ahead, when we look at the product roadmap ahead, we expect to see even greater diversification over time.
spk08: Thank you. And we now have time for one last question. And that line comes from Ryan Coyne of Missoula. Your line is now open. You may ask your question.
spk02: Hey, thanks. It's actually Dan DeLev here. Sorry for the mess up from you, Duvo. Thanks for taking my question, Marie Dendrick. So really quickly, can you maybe quantify the potential upside from Credit Carmon tax for next year for the cash out, if any? Thank you.
spk03: Yeah, just to start, we, you know, the reason we did this is it helps expand our direct deposit strategy and brings more inflows into Cash App, gives more information to customers to understand how tax filing will work on Cash App this tax season. And, you know, we think there's a lot of opportunity to simplify a bunch of tasks that one has to do in the financial system. Tax is a is a big one. And we want to make sure that we have a successful product launch ahead of the tax refund season. So customers have a really seamless experience. And we're highlighting direct positive and another, you know, potentially powerful info for us.
spk08: Thank you. That will be the last question. Ladies and gentlemen, thank you for participating into this program. This concludes the program. You may all disconnect.
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