Good day, ladies and gentlemen, and welcome to the Square First Quarter 2020 Earnings Conference Call. I would 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 2020 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 close.

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 statement. 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 statements, except as required by law. During the call, we’ll be describing preliminary gross profit growth results for the month of April.

These represent our current estimate for April performance as we have not yet closed our accounting financials for the month of April and our monthly results are not subject to interim review by our auditors. As a result, actual April results may differ from these estimates. 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. Additionally, as a reminder, we will we discontinue the use of adjusted revenue in the third quarter of 2019.

Following receipt of a comment letter from and discussions with the SEC, our statement of operations continues to disclose total net revenue, transaction-based costs and bitcoin costs determined in accordance with GAAP, which are the key components of adjusted revenue. There are no changes to any other GAAP or non-GAAP metrics.

We have posted a spreadsheet on our Investor Relations website with our historical financials and additional details related to our income statement. 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..

Hello, everyone, and thank you for joining us today. We’re going to start with a few remarks from me and Amrita, and then we’ll get to your questions. Before we begin, I want to share our gratitude for all those on the frontlines fighting the COVID-19 pandemic. We will not be able to do our work without the sacrifices you make every moment to do yours.

Thank you to our healthcare workers and everyone providing essential services around the world to keep us all healthy and safe. We acknowledge and we appreciate you. We’ve seen our customers rise to the occasion too.

While shelter-in-place orders have slowed foot traffic to our sellers, they found new ways to keep the doors open, retain staff and serve customers. Retailers, wine shops and QSRs launched online ordering by building websites in less than a day for delivery and curbside pickup.

Larger full-service restaurants opened community markets to sell raw ingredients, produce, and food staples through online stores even Michelin Star restaurants like Chez Panisse in Berkeley. Distilleries and tailors shifted to selling personal protective equipment like hand sanitizer and masks.

Hair dressers and beauticians moved to video appointments to advise on self-styling. Over the past six weeks, we’ve also seen Cash App customers come together like never before. Folks are donating the strangers in need through social media, fundraising for charities, small businesses and churches, and tipping artists doing online performances.

Artists like Luna FX and Jeffree Star asked people to post their cashtags, so they can send their fans money. Diddy hosted a 12-hour danceathon to help raise money for healthcare workers by pinning the cashtag DiddyDanceathon to his Instagram live all funds go into direct relief.

In March, we look critically at our roadmaps and decided to quickly reprioritize our work to advance some initiatives, originally slated later in the year. Within two weeks of the first shelter-in-place orders, we launched curbside pickup and delivery options in the Square Online Store and made them free for all sellers.

We eliminated fees for our software products in March and April, and launched a way for sellers to pause these subscriptions to help them cut cost temporarily and quickly unpause them when they rebound. We launched a gift card portal to help buyers search for Square sellers in their neighborhoods to continue to support them.

We launched a simple resource hub with information and advice, and gave our account management customer support and sales teams’ information to enable them to better help our sellers.

As the CARES Act stimulus was being drafted and finalized, teams across both our Seller and Cash App ecosystems moved fast to help sellers and individuals get access to government support as quickly as possible. First, Square Capital secured SBA approval to offer PPP loans.

We’ve built a new product that remove complexity from the PPP process by enabling sellers to quickly move through a simple application form. So far we’ve submitted $855 million in verified applications on behalf of 54,000 sellers and approximately, $520 million has been approved by the SBA to 45,000 sellers.

The average loan size to businesses in all 50 states is $12,000. 50% of the applicants were sole proprietors, 40% were employers. Cash App published straightforward FAQs to help folks understand the stimulus program and instructions on how to get their money fast, doubling our web traffic overnight.

From there, we worked with our partner banks to expand direct deposit access for Cash App customers, making it easy for people to get their money deposited directly, so they could send it to family or friends or use it to purchase whatever they need with their Cash Card.

In four weeks, the number of Cash App customers with direct deposit access grew from 3 million to 14 million. Now more than ever, we see the strength and value of our ecosystem strategy. It comes down to speed and trust.

Our tools have been – have proven to be simple enough that anyone current or new customers can quickly pick them up and adapt to many different challenges they may meet. And we have shown that we aren’t just here to provide tools, but help and support navigating complexity safely.

This is a transformative moment, and as a business, we have made the strategic decision to invest through this challenge to come out on the other side in the position of strength. We see significant opportunity to bring new sellers and individuals into our ecosystems, and build and launch new products to serve them both today and long-term.

And while we slowed non-essential hiring, we believe this is a unique opportunity to find great people. So, we’ve prioritized critical roles to help us. We’re working on something foundational to society and we’re really proud of our agility and heart through these times.

Thanks to all of our customers, our employees and you for the trust as we continue to build and serve. And with that, over to Amrita..

Thanks, Jack. I hope you all are safe and healthy with your families during this time. And I echo Jack’s comments with gratitude for those on the frontlines of this pandemic. There are three key items, which I’d like to share with you today.

First, on our first quarter results, we achieved strong growth in January and February prior to the significant slowdown in our Seller business in the last two weeks of March. Second, on trends in April, we saw early signs of potential stabilization and improvement in our Seller ecosystem with continued strong momentum in Cash App.

Third, we believe it’s now more important than ever to invest behind our mission of economic empowerment and service of our customers. First, I’ll look at our overall first quarter results. We achieved strong growth in January and February prior to the slowdown in Seller in the last two weeks of March.

Overall, in the first quarter, gross profit was $539 million, up 36% year-over-year or 40% growth year-over-year excluding Caviar. These growth rates are about 10 points lower than what we observed through January and February prior to the impact of COVID-19. Our Seller ecosystem gross profit grew 18% year-over-year in the first quarter.

This includes the last two weeks of March, where Seller GPV decelerated sharply to a decline of 39% year-over-year. Card-present volumes were down approximately 60% year-over-year in the last two weeks of March, while card-not-present volumes were less affected.

Additionally, we refunded all March software subscription fees for our sellers to support them during the COVID-19 pandemic. And beginning in mid-March, we paused new core flex loan offers for Square Capital given lower visibility in this disruptive time.

Cash App delivered impressive growth in the first quarter with gross profit up 115% year-over-year. While we saw a modest deceleration in peer-to-peer volumes in Cash Card spend from COVID-19 in March, overall growth remained strong with Cash App gross profit up 112% year-over-year in March. A key driver remained efficient new customer acquisition.

In March and then again, in April, Cash App set new highs for its number of net new monthly transacting actives. For our bitcoin and stock brokerage products, the market volatility helped increase adoption and drive strong volume growth during the quarter.

Turning to profitability, net loss was $106 million and adjusted EBITDA was $9 million during the first quarter with two key factors to call out.

First, the primary impact in the quarter was a significant increase in reserves for transaction in loan losses, which reflected an estimate for the anticipated impact of COVID-19 on future losses related this Seller transaction processing and Square Capital.

We recognized actual losses could vary based on severity and duration of the impact of COVID-19. The second lesser factor was the slowdown in high margin revenue in our Seller ecosystem in the last two weeks of March. The macroeconomic environment we are experiencing is unlike anything we have seen.

Our focus is on our customers and communities that have been meaningfully impacted. We also recognized there could be a wide range of outcomes for our financial results in the second quarter and the remainder of the year depending on the length and severity of COVID-19.

Therefore, we are not providing second quarter full year revenue or earnings financial guidance at this time. Instead, we wanted to share with you what we are seeing in real-time with an update on business trends from April, including early signs of potential stabilization and improvement in Seller GPV with continued momentum in Cash App.

In our Seller ecosystem, we expect gross profit to be down approximately 35% year-over-year in April. Seller GPV was down 39% year-over-year in April.

While we saw a decline of approximately 45% year-over-year from the last week of March through the first half of April as trend line stabilized at these levels, we have seen improving growth rates since mid-April. We recognize it’s still early and we continue to see daily volatility, but we’ve been encouraged by these recent trends.

We believe this improvement coincides with a few potential factors. One, existing sellers adapting as they shift to omnichannel commerce. Two, acquisition of new sellers. Three, the timing of Easter. And four, a benefit from government stimulus efforts.

While GPV from in-person activity was down significantly year-over-year in April, card-not-present GPV achieved positive year-over-year growth, as we saw sellers adapt their businesses and leverage many of our omnichannel offerings.

Square Online Store was an area of strong growth in acquisition with weekly GPV up more than 5X since mid-March and with the strongest adoption by sellers in two of the hardest hit verticals; food and drink and retail. Notably, we saw over two-thirds of Square Online Store GPV come from our recently launched pickup and delivery service.

Additionally, we have taken measures to support our customers and protect our companies through COVID-19, measures that will impact Seller top-line results in the second quarter, but we believe benefit us and our customers for the long-term.

We waived subscription fees for our sellers in April and offered the option to pause subscription billing temporarily to allow our sellers to better manage costs. For Square Capital, while we paused offers for new core flex loans, we intend to reopen flex loan origination where we see stability in the coming weeks and months.

As you heard from Jack, we started distributing loans in the second round of PPP. While there is a tremendous amount of work happening here to support our sellers, we don’t expect capital to contribute materially to revenue and gross profit in the second quarter.

Turning to cash outperformance in April where we expect gross profit growth of over 100% year-over-year.

Cash App’s strong performance was broad-based as we achieved our highest monthly totals for net new transacting active, peer-to-peer volume, Cash Card spend, new direct deposit transacting active, bitcoin and stock brokerage volumes and stored funds.

After modest initial deceleration in late March, Cash App peer-to-peer volumes and Cash Card spend improved during the first half of April as we saw customers seek new used cases for sending money and shift commerce to e-commerce channels.

During the second half of April, the CARES Act stimulus programs helps drive even stronger growth across various Cash App products. In particular, we saw strong adoption of direct deposit and Cash App customers compared to March. April direct deposit volumes grew by 3X and new direct deposit transacting actives grew by 4X.

This helped drive customers to store more than $1.3 billion in aggregate cash balances during the month, which roughly doubled compared to the beginning of January and was up 1.4 times month-over-month.

While we are encouraged by Cash App’s results in April, we will continue to monitor how customer behavior normalizes post stimulus in this dynamic macro environment. Turning to my final topic, our investment framework and key factors that impact profitability. First, as I mentioned earlier, we have high incremental margins in our Seller business.

As a result, decreases in Seller gross profit will largely flow through to profitability.

Second, transaction in loan losses in future quarters are determined by two primary inputs; actual losses on first quarter volumes, which could prove higher or lower than our first quarter results and estimates for expected losses on volumes generated in subsequent periods.

Both of these inputs may vary depending on the length and severity of COVID-19 impact. As it relates to second quarter volumes, we and our sellers have taken steps to mitigate risks in this new macro environment, but this is an area we continue to watch closely.

Third, while we have reviewed our operating expenses and taken steps to pull back discretionary expenses where appropriate, we believe it is now more important than ever to invest in our mission of economic empowerment and service to both sellers and individuals.

We have pulled back certain non-essential spend around Seller marketing, hiring for non-critical positions, facilities build-out, travel, company events and other discretionary expenses, leading to an expected reduction in 2020 non-GAAP operating expenses of $75 million to $125 million compared to our initial expectations for 2020 product development, sales and marketing and G&A.

For the second quarter, we expect non-GAAP, product development, sales and marketing and G&A in aggregate to be in line with first quarter spend.

We intend to pursue originally planned Cash App investment given strong performance, and as a reminder, a large portion of Cash App’s operating expenses such as P2P costs are non-discretionary and expected to scale along with the growth of the platform.

While we are being appropriately deliberate with our investments in our Seller ecosystem, we’ve seen encouraging early signs of attractive returns on marketing that can lead us to add back investment to reach new customers.

We deferred our global brand campaign and shifted our sales and marketing messages to prioritize targeted omnichannel products and multi-product awareness campaigns.

We saw early signs, early results in mid-March and April that indicate the quality of new sellers improved from pre-COVID levels as recent cohorts of sellers were larger on both the volume and gross profit basis. We believe our Seller ecosystem is significantly differentiated, especially in times like these.

Our portfolio of products enables sellers to quickly move between offline and online commerce in an integrated and seamless manner, speed up money movement and communicate with buyers in a way that few other companies can offer. For Cash App, this is a unique moment, in which new customer – consumer-driven commerce habits are taking shape.

The Cash App team is focused on crafting new experiences with a demonstrated product velocity that hasn’t flowed in this time of great disruption. Jack mentioned our teams’ efforts around the stimulus, the resulting inflection on direct deposit is meaningful.

Direct deposit customers have generated revenue which is multiples higher compared to customers who only use peer-to-peer.

As Cash App was added more products, we’ve expanded the addressable market opportunity as customers have increased their adoption of those products, their lifetime value has increased, which has driven improvements in Cash App’s profitability over time, and we believe it is still early days.

Finally, our strong balance sheet with $3.4 billion in liquidity at the end of the first quarter and a recently upsized revolver, affords us the opportunity to be deliberate and long-term-oriented as we invest. The work we do to serve our customers has never been more urgent or important.

We believe the investments we make today to support our existing customers amplify our go-to-market approach reaching new customers and strategically and selectively hire great talent will enable us to emerge stronger as we look ahead to a recovery I’ll now turn it back to the operator to start the Q&A portion of the call..

[Operator Instructions] Our first question comes from the line of Tien-Tsin Huang from JPMorgan. Your line is open..

Great, thanks. Thanks so much for this data. I wanted to ask, I think you sort of touched upon, both of you did, just how you’re approaching risk management on the Seller side both for Square Capital and underwriting in general? It sounds like you are skewing a little bit bigger, which is helping on the quality as you suggested.

So just anything else to add to that? And then also just to clarify, because I’m getting some questions on it. The first quarter EBITDA, how much was driven by the higher loss reserve? And I presume that should stabilize if the volumes stabilize.

And looking ahead, is it fair to apply a decremental margin that look like your incremental margin when things are going well, I think that was in the 60s. All else equal, is that a good starting point to think about that all else equal? Thank you..

Hey, Tien-Tsin. I can start this off. Maybe I’ll start us off with your second question around EBITDA impact for the first quarter and then we can tackle the rest of your questions. With respect to EBITDA in the first quarter, which was $9 million, there were two primary impacts.

The larger of the impact was related to risk loss reserves, which we will speak to in a moment. The lesser of the impact was the top-line impact and the flow through to margin there. As you noted, high incremental margins on our Seller business, which benefits us obviously as revenues grow.

And then we saw the impact in the other direction in terms of decremental margins in the last two weeks of the quarter for Q1. Q1 ex-risk loss, EBITDA would have been up. Even with the impact of the last two weeks of March, EBITDA would have been up 30% year-over-year. The risk loss clearly is the larger impact for Q1.

And let me talk through some of the puts and takes with respect to our transaction and loan losses and then we can see if there is more of your question that I’ve missed.

So with respect to transaction and loan losses, we booked $109 million in the first quarter, primarily driven by the Seller transaction processing volume in the first quarter, along with our capital loans on balance sheet of just over $160 million.

And the way you can look at that is for both of those two areas, the reserve that we took, which is an estimate at this point, the reserve that we took is about 4X higher than the prior quarterly run rate on a dollar basis. So think of Q4. What we took in Q1 was about 4X higher.

And to give you a sense of what we’re tracking, we watch charge backs on the Seller side related to non-delivery of goods as one indicating – leading indicator of losses. And what we’ve seen so far in charge backs is actually less than 2X normal levels.

However, we know that what we see here is very much dependent on what happens in terms of the duration and severity of the COVID impacts and that we could see additional losses. Hence, we set a provision in reserve that’s 4X the typical levels. On the capital business, similar sort of approach.

$22 million provision on the capital loans on our balance sheet, which is about 4X the prior run rate on a dollar basis, but only about 2.5X from a loss rate basis. And similarly, seeing lower in terms of current repayment flows than what we actually booked in the expectation that there would be further impact from COVID.

And to your question, we have taken risk mitigating measures to manage our exposure in this very dynamic time.

Some of the things that we’ve done on the Seller business are manage our exposure related to higher risk sellers, including assessing some of the industries and products that have been releasing disputes, managed our sellers, for instance, SMS reminders to help assess Square Contract Service, which is a legal framework for extended payment terms.

On the capital side, we’ve paused core flex loan originations for now. But as we see stabilization across verticals, across geos and plan to reopen our core flex loan product in the coming weeks and months.

And in terms of the future outlook here in terms of risk loss, there are a number of puts and takes, obviously that I mentioned in the intro remarks, there’s the actual losses that flow through in Q1, which could be higher or lower than the reserve assumptions that we have made, there’s future GPV level, and there’s the mix of products that we serve and the mix of verticals and then there is these actions that we’re taking to mitigate our risks as we look forward.

So this is an area that could be variable, but we’re very, very focused on monitoring here and taking proactive measures to manage our risk..

The next question comes from the line of Darrin Peller [Wolfe Research]. Your line is open..

Hey, thanks guys. Glad to hear you’re all doing okay. Look, first just addressing the questions we get around the resilience of your customers.

Is there any early indications you can give us into sense merchants that – the numbers that are managing through this versus perhaps not maybe the mix of merchants we should expect on the other side of this? And then really more importantly looking through 2020, you guys clearly have some of the better omnichannel technology.

So can you comment on the kind of inbounds you’re getting from your merchants to help them with your tech and omnichannel? And what does that mean for market share for Square versus the industry on the other side of it?.

Hey there. I’ll start us off on what we’re seeing to start and then Jack can jump in on where we believe our ecosystem is differentiated.

So what we’re seeing so far in terms of the diversity of our ecosystem, because you’re right, we serve a variety of verticals, we serve across a number of geographies, some with shelter-in-place measures, most with shelter-in-place measures and some that are easing both domestically and internationally, and we serve a variety of products across our ecosystem.

So, let me try to tease apart bit of what we’re seeing across all of that. At the aggregate level, what we saw in the back half of March and then through April was Seller GPV down 39% year-over-year, but it’s important to tease apart the nuances when you look on a week-by-week basis.

The last week of March and the first half of April was down about 45% year-over-year. In the back half of April, we’ve seen improvement that has rebounded above that blended 39% year-over-year number. We believe it’s driven by three main factors.

First, existing sellers adapting to contactless commerce and we’ll talk through some of the products that we have that have really served our sellers in this time and enabled them to stay open and interacting with their buyers. We’ve seen new sellers join our platform in this time because of the differentiated aspects of our ecosystem.

And we’ve seen the impact of both the timing of Easter and the potential impact from the government stimulus programs, which have really started taking effect in mid-April.

From a commerce type perspective, which really speaks to the breadth of our ecosystem, we have seen positive year-over-year growth in our card-not-present products as sellers have adapted to contactless commerce solutions.

And now card-not-present products, which used to account for about a third of our volumes, now account for well over 50% of our GPV in April.

Some of the key outperformance to point out here include the online store, which since the launch of curbside pickup and Seller power delivery, I mentioned, our weekly GPV on the online store is about 5X what we had seen earlier in Q1.

As sellers are shifting their approach to contactless options, additionally, virtual terminal and invoices both achieved positive year-over-year growth, which may be partly related to the less impact we’ve seen in the services vertical, which really makes use of that product.

From a market standpoint or a geographic standpoint, we’ve seen a variety of outcomes across international markets, Australia interestingly, which has had the most success in reducing COVID cases is our first market, was our first market to return to positive year-over-year growth in the past 10 days that we’ve seen growth rates stabilize in that positive range.

And we have also seen, as I mentioned, in some of the states in the U.S. that in late April started easing shelter-in-place restrictions, early data that indicates a stronger uplift in those states versus the states with shelter-in-place measures in place.

We only have a week of data so far and obviously there is a lot to look at here, a lot of considerations around health metrics and otherwise. But this is an area that we will continue to monitor. Across the diversity of our Seller base, and as you noted, we serve sellers across every vertical, millions of businesses and widespread across the U.S.

in particular. We’ve seen impacts from COVID-19 in a number of different ways. While all industries have experienced year-over-year declines in GPV, the services vertical, as I mentioned, like home and repair and professional services has been the most resilient.

And we’ve seen verticals that have been hard hit like food and beverage and retail make use of those omnichannel products that I was mentioning earlier. By seller size, so maybe my final point before Jack chimes in, by seller size all five segments were impacted.

Micro sellers’ growth declines are now more comparable to larger sellers, but what you see with micros is both higher churn and higher same store sales growth. So still, nuance across the system, but serve a diversity across verticals, geographies and products..

Hey, Darrin. Hope you’re well. Yes. So, we are seeing a lot of opportunity here. We are seeing sellers switch to Square from our competitors because of the omnichannel ecosystem. In terms of inbound, so the first and foremost was just how do I run my business online, and we were able to quickly help people shift.

And a lot of these sellers wanted to get online and wanted to sell online, but just didn’t make the time to do so. So this was kind of a forcing function to show them all the benefits of being online.

And I think what that ultimately does is they will have a lot more attention online as the offline comes back and be much stronger businesses because of it, which is awesome. We’ve also seen some calls from very large sellers, which have increased since March. It’s been up over 30%.

And they are coming to us because of the omnichannel ecosystem as well. We saw just one example. We had a chain of breweries which was struggling to adapt with the pandemic. And they came to us to install their online business with the competitor. Instead, we were able to get them up and running much, much faster. So they switched everything to us.

So it’s really important to emphasize that as we come out of this, we do believe that a lot of sellers are going to get creative and they’re not just going to be in the retail category or in the restaurants category or in the services category, they’re going to merge these things, and Square is the only one out there that actually covers all the verticals with all the critical tools to actually be creative and serve your customers in new ways.

So we’re seeing larger sellers at scale. We’re seeing our current customers and we’re seeing new customers who see this omnichannel offering and want to go with us because we’re easier.

And I do believe that the speed at which we’re able to move and the volume we are able to move with the PPP program for our sellers versus the rest of the financial institutions will be a net positive for us in terms of a goodwill halo, attracting a lot of sellers our way because there are very, very rich seller networks of sellers asking another seller what tools to use and why.

What’s the company like. What have they done well for you in the past and what have they done poorly. So I think how we’ve handled our sellers and supported them throughout this time will be a huge win for us in terms of retaining, but also newer sellers as well..

And just to add a final point to that.

Some of the marketing results that we’re seeing that I mentioned earlier are showing that those new weekly seller cohorts that we’re attracting since the middle of March are larger both in aggregate across the cohort and on an individual seller-by-seller basis versus pre-COVID levels, which really shows to underscore the point Jack was making that we believe we’re a differentiated ecosystem that’s attracting not only larger sellers, but broader sizes of cohorts of sellers in this very dynamic time..

All right, that’s helpful. Thank you..

Your next question comes from the line of Dan Misuraca from Red White & Que. Your line is open..

Hi. I’m a Square seller with Red White & Que Smokehouse here in Kearny, New Jersey. Regarding Inventory, Square Online Store shows sold out on the website once an item inventory hits zero. But for business like ours, we have a variable amount each day.

As more quick service restaurants like us, Red White & Que shifts to Square Online Store during the COVID-19, we’re seeing more for a flexible inventory management system.

Are there plans to build out features like this for quick service restaurants using Square Online Store?.

Yes. Hey Dan, this is Jack. Thanks for using Square, and hope you’re staying safe. This is something we’re actively working on. Inventory is a big focus area for us and we accelerated a bunch of our roadmap in order to support curbside pickup and delivery.

And we need to make sure that we’re adding the option to organize orders by fulfillment channel out of the site on mobile without the app, modified delivery zones.

So we’re getting a ton of feedback in this time on what’s working and what’s not working in regards to inventory and generally with the system as we’ve shifted to this new world, and we’re working as fast as we can on it. So, I appreciate the feedback and we’re on it..

Your next question comes from the line of Lisa Ellis from MoffettNathanson. Your line is open..

Good afternoon. Good to hear you guys’ voices. My question is on related to Cash App and the transaction activity you’re seeing there. Last week Visa reported that their U.S. debit volumes were actually trending positive low-single-digits in late April due to some of the stimulus spending.

Are you seeing similar trends like that on the Cash Card? And then looking forward, do you expect Cash Card volumes to remain pretty resilient because they’re tied to non-discretionary spending or how are you thinking about the employment impact there? Are a lot of the Cash App users some of the folks that unfortunately we’re seeing unemployed currently.

What is your outlook in general for the transaction activity on Cash Card? Thank you..

Hey, Lisa. I’ll start us off. Thanks for the question. April was a strong month, as you heard for Cash App overall. And including for Cash Card where we saw Cash Card’s highest monthly total for both orders and for volumes of spend across the Cash Card.

Following the deceleration that we saw in late March, growth troughed around the end of March and spend began to rebound in early April even before the stimulus payments, which roughly came in about mid-April. Ahead of the government stimulus programs, customers explored direct deposit functionality and engaged with the app.

We saw significant increase in Cash Card orders and a growth in active across the active base for Cash Card. And that was prior to the second IRS portal release on April 15.

As the stimulus payments were disbursed, we saw a material increase in volumes per card active as Cash App serves really a critical need here by helping customers access and use their funds rapidly. The uplift in weekly spend has continued in the second half of April, although still below pre-COVID levels.

And we’re seeing the spending behavior on Cash Card shift toward more card-not-present and online commerce, as you can understand, given shelter-in-place measures. We’re also seeing elevated non-discretionary spend; grocers, health and wellness, retail away from bars, restaurants, entertainment, transportation that we would have seen pre-COVID.

And we believe the unique aspect that we have here with the Boost program has positioned us to help individuals where we’re using our ecosystem here to help benefit our customers and actively rotating our Boost awards offered to specific merchants and categories including things like grocery, pharmacies and Dollar stores.

In terms of the broader question about unemployment, we are very watchful here and we want to see what normalized spending looks like post the stimulus efforts.

So it’s probably too early for us to say, but we are very encouraged both in the growth of the base of users across Cash App and Cash Card and the depth of the engagement that we’ve seen through products like direct deposit in the last weeks and months..

Super helpful. Thank you..

Your next question comes from the line of Timothy Chiodo from Credit Suisse. Your line is open..

Thank you for taking my question. Also related Cash App and a little bit of a follow-up there on direct deposit. So yes, the Cash App stats across the board were pretty impressive, especially I think the direct deposit was really a standout.

The shareholder letter shows direct deposit active users up more than – it looks like more than 2X month-over-month into April and mentioned the stimulus checks being a big driver there of the direct deposit activity.

But what can you tell us about these users in terms of perhaps their propensity to continue to use direct deposit with their paychecks beyond the stimulus? And then as somewhat of a follow-up there.

What are some of the things in general that Cash App either has already done or is planning to do to help continue that strong adoption of a primary account usage? I did notice that you mentioned the eligibility increased from about 3 million to 14 million in terms of direct deposit, so that sounds like a pretty good start..

Yes. Thanks, Tim. I hope you’re well. We do believe direct deposit is a huge opportunity. And as we said in the opening, direct deposit customers are some of the most engaged on the platform. And they typically carry much higher balances and use more of our products like bitcoin and equities in addition to Cash Card and peer-to-peer.

We saw two significant bumps recently. Customers that received their tax refunds and depositor paychecks used our ecosystem a whole lot more and we saw an increase in P2P volumes and Cash Card spend in late February and also in late March.

And then in April, obviously, the government stimulus provided us an opportunity to help folks receive their money much, much faster. And our teams did work, as we mentioned, with our partner banks to expand the 3 million direct deposit accounts we had in February to 14 million. We also made sure that the interface is very clear.

So, when you click into the tab that is actually where the money is stored, you should see your direct deposit routing number right away. So just putting it upfront so that people know that this is a tool that can be used for tax, for your stimulus, for your paycheck at your job is critical.

And that does lead to people seeing Cash App ultimately as a primary account, not needing to go to a bank branch regarding to going to the App Store, signing up and they are in business.

And it’s not just around peer-to-peer and storing money and using on the card, but the people, who are using that money to buy equities, using that to invest in product and also buy bitcoin has been pretty incredible. So, this is part of the reason why we think the ecosystem strategy is so strong. We’re not just a peer-to-peer app.

We’re not just a stock purchasing app. We’re not just a bitcoin app. We have everything in one.

And everything that is interesting in terms of how I think about my own personal finances and spend my money is all in one simple straightforward app that we will continue to make better and add more adjacent features that complement some of these critical needs that people are telling us they have..

And Tim, just to add a couple metrics to this topic; from March to April, we saw direct deposit volumes grow by 3X. From March to April, we saw new direct deposit transacting active grow by 4X. And from March to April, we saw our stored funds grow from $945 million across the base of Cash App users to over $1.3 billion.

So clearly, this is a product that’s resonated. And we believe we’re in a transformational moment right now, where new commerce standards, new banking habits, new ways of conducting financial services and commerce are taking shape. And Cash App, along with our Seller business has an opportunity to serve our customers uniquely in this moment.

So, while I think it’s early for us to say what happens or what changes with the curve of direct deposit in the future, this is a key priority for us and encouraging signs that we’ve seen in the month of April here..

Great. Thanks a lot, definitely noted on the metrics, the change to the interface and more features to come. So, thanks a lot..

Thank you..

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

Yes. Thank you for taking the question, and really impressive work that you’ve done for your consumers and sellers. I wanted to ask a higher level question on Cash App.

When you look at the newer customers that you’ve may be pulled in, in the last month or so, is it expanding the audience in addressable market in any ways? And obviously, I had some really good stats on the online store, any sense to give us how many sellers have actually lit up that product that would be really helpful? Thank you..

Thanks, Josh. I do believe that it is expanding the audience pretty dramatically. Cash App has been something really special for us and that it has a lot of association with a pretty strong culture.

It’s not seen as just a traditional financial app, it’s seen as part of the culture in many ways and we’re seeing that play out, especially now during COVID-19.

As I mentioned in my opening remarks, like all the donating that’s happening on social media, the fundraising, the tipping to artists and musicians, this is all pretty new, and we’re looking at this closely and we’re taking the opportunities to form partnerships that there are some, like we announced a partnership with Spotify, which lets listeners contribute and send money to artists that post their cashtag on their artist page.

And more than 25,000 artists have already linked their Cash App account with Spotify. And we saw more than 100,000 tips in the first week since the launch. Another big area is gamers. We’re seeing a lot of activity in regards to Cash App on Twitch. In the first quarter, we launched our Twitch channel and we’ve grown our follower account to over 180,000.

But what’s interesting about this is like there’s a lot of similarities between what we’re seeing around music and also gaming and how Cash App is being used in both. So, we have reached a very mainstream influential audience.

And because of the simplicity, because of how we handle the stimulus check and because of everything that you can do within the app inclusive of buying stocks and bitcoin and the Cash Card, we think we’ll benefit and draft off a lot of trust, a lot of love for what it offers and what it can do. And word of mouth is definitely our friend here.

So, we consistently see the Cash App in the top 10 of the App Stores and consistently, see it rise as new people broadcast are in use of it. So, there is a very nice viral loop that is inherent in the system that continues to compound and grow favorably.

On the second question, how many sellers have used the Square Online Store; Amrita, do you want to take this?.

Sure. I’ll hit that one and maybe, just one final point before I do that on the cash opportunity. If you remember, Josh, we released some slides in late March related to addressable market across both our Cash App ecosystem and the Seller ecosystem. Cash App ecosystem addresses over 100 million people in the U.S.

with a target age of between 15 and 39, which represents $60 billion of opportunity across just the product areas that we serve today. So, we envision a really significant runway ahead for Cash App. And Cash App in the month of April at various points was in the top five of the iOS App Store in terms of downloaded apps only behind some chat apps.

So, clearly resonating, as Jack said, in this sort of cultural moment that we’re in. Turning to your second question on Square Online Store, we can speak about Square Online Store, and then let’s level up and talk about broader our CNP offerings, our card-not-present offerings.

So, Online Store, we haven’t provided a usage number in terms of active sellers, but on a weekly GPV basis up 5X since mid-March, pre-COVID effectively. And our most recent weekly GPV run rate was at $59 million or $3 billion on an annualized basis.

And now the daily sign-ups that we’re seeing to Square Online Store are higher in number than what our typical sign-ups would have been for the point-of-sale app pre-COVID. So clearly, resonating and resonating for new sellers as well as existing sellers.

But again, I would think about our broader omnichannel strategy rather than just focusing on the online store. And more broadly, our card-not-present products, as I mentioned earlier, now over 50% of our volumes versus a third of our volumes prior to COVID.

And that spend is not just for online store, but invoices, virtual terminal, parts of our developer platform with the e-commerce API, and this has been an area of strength for us with positive GPV growth year-over-year in the month of April..

Very helpful, Jack and Amrita. Thanks so much..

Thanks, Josh..

Thank you..

Your next question comes from the line of Jason Kupferberg from Bank of America. Your line is open..

Hi. This is Cathy on for Jason. Thanks for taking my question. And I just wanted to get an update on Seller churn and whether you found specific programs or initiatives with sellers to be particularly effective? And perhaps, if you have any new products or initiatives coming maybe to complement some of the existing ones you already have? Thank you..

I can maybe, start us off on this one. So, in terms of churn, it’s typically a variable figure for us given the large portion of micro-sellers that we serve, who may be seasonable – seasonal.

So, given the noise that we see today and how early trends are shaping up, the main indicator I’d point you towards, would be change in gross profit or change in GPV growth, which as noted for the Seller business is in that minus 35% or minus 39% range for the month of April.

We’ve noted earlier on the call that the back half of April, we’ve seen improving trends based on existing sellers transitioning to new forms of commerce, based on new sellers coming in, based on stimulus efforts.

We’ve also noted that certain areas with easing shelter in place measures we’ve seen further improvement and what we’ve seen in terms of number of unique cards and number of unique sellers in the back half of April has also improved, which to us, indicates that we have sellers, who are able to reopen their business in the back half of April.

So, those are kind of the trends that we’ve seen around churn. In terms of the key things that we can do for our sellers, I think a lot of them have been noted on this call. Sellers are looking for omnichannel solutions that enable them to interact with their buyers in new formats, whether that’s with commerce, online, invoices, et cetera.

They’re also looking for cash flow and opportunities to bridge them in this really disruptive time.

And the PPP program, where we helped enable over $0.5 billion in loans in the past week, has also gone a long way to supporting our sellers and speaks to the strength of the ecosystem that we were able to move quickly and get this product up and running in just a few short weeks.

Within each of these products, you see features that are working towards supporting our sellers, whether it’s pre-populating applications in the PPP program for payroll sellers or it’s the order and pickup delivery product that was launched in the span of a few short weeks as well as on the cash business, where the Sprint towards enabling government stimulus and direct deposit accounts, our teams are working very, very hard.

No boondoggles happening at the company right now. Our teams are working very, very hard to enable new products, and features across supporting our sellers and individuals..

Kathy, this is also one of the areas, where the ecosystem strategy makes us a lot stronger. A seller may churn out of one product, but still be using two others or three others from us. So, they’re not churning out with the whole company, and as we add more of those critical functions and tools that gets even more and more durable.

So, a lot of the reason why behind the ecosystem strategy is exactly this.

But like everyone else, we’re learning as quickly as possible in partnership with our sellers on what’s working during this time, what they need, how they think about rebounding as more things reopen and all those learnings will be distilled into products and features going forward.

And we’re doing that with our current customers, our small customers and even our larger customers, who are rediscovering new ways and discovering our other tools like Ben & Jerry’s is a good example of this. These are point-of-sale across 200 retail shops and needed to pivot to online.

So, we showed – we demoed the Square Online Store and they’re rolling it out nationwide over the coming weeks. So, if you’re very small or very large, what we think, helps the most with retaining is making sure that people see our full suite of services and gain value out of them..

Great. Thanks for the answer..

Your next question comes from the line of Jason Friedman [ph] from Susquehanna. Your line is open..

Hi. Thanks for taking my question. Good to hear your voices. That Ben & Jerry’s making me hungry. I just want to ask, a part of the investment operating narrative has been about the cross-selling of Seller and Cash App.

And I was just wondering in light of the current business environment, how that may have affected your thinking on the cross-selling of Cash and Seller ecosystems? You had a lot of good use cases, Jack, in your prepared remarks. So, is that something that you’re moving forward in terms of your kind of time horizon? Thank you..

Yes. Great question, Jamie. So, we are moving forward. We did have to reprioritize our roadmap just to handle some of the issues that we’re presently seeing and challenges we’re seeing with our sellers and Cash App customers due to COVID. But we do believe that there is a lot of real strength that comes from connecting the two ecosystems.

They’re amazing independently, but as we look for those connection points whether they’d be a boost to local sellers, what we’ve done with our payroll product and paying employees with Cash App so they could access their funds immediately. So, there’s a number of those that we think are really interesting and potentially really impactful.

So, we wanted to make sure that we’re handling the present challenge first, but we’re definitely not taking our eyes off the ball in terms of how we connect these two down the line..

Thank you..

Thank you..

Your last question comes from the line of Ramsey El Assal from Barclays. Your line is open..

Hey, guys. This is Ben on for Ramsey, and thanks so much for taking the question. I guess, kind of wanted to follow-up on some of the earlier questions about the change in the product roadmap. I noticed international revenue had grown pretty nicely in the quarter.

And I guess, first, is that just due to a kind of a broader suite of products now being rolled out in all the countries? But more specifically, the question I’m kind of wondering is that what are the opportunities you see being pushed out? And kind of how does your roadmap specifically there change with everything going on right now?.

Maybe, I can kick us off with what we’ve seen from an international perspective in the first quarter and in April. From an April perspective, international GCV was down 20%, which was a deceleration versus prior COVID levels. From a first quarter perspective, GAAP international revenue was up 51%.

So, strong growth for us and consistent with what we had seen in the prior couple of quarters, where we had seen outperformance as our products are resonating internationally.

In terms of breaking down some of those trends related to COVID that we’ve seen in April, as I mentioned earlier, in April, in Australia, we’re now seeing positive year-over-year growth. From a UK perspective, we’re seeing modest declines, and Japan and Canada are still down year-over-year, but seeing improvement as well.

So, very consistent with the broader narrative that we’ve been sharing on this call so far from a COVID impact perspective. And obviously, our products continue to resonate there from an omnichannel perspective internationally as they do in the U.S..

Yes. And just to follow-up, we’re not going to take our focus off growing outside of the United States; we’re making sure that our ecosystem is sound and comprehensive outside the United States. We have done a lot of good work over the past few quarters, but there’s a lot more to do. And we – the same needs that we see during this time in the U.S.

with COVID we’re seeing globally as well and we want to make sure that the thing that sets us apart is this ecosystem and it helps us set us apart, not just in the United States, but everywhere. And we’ve learned a ton from the U.S. on how various products took off, and that helps our sequencing around these roadmaps.

So, we can be more sure of the impact as we put the work into actually do the work to launch..

Great. Thanks so much for taking my question..

Thank you, Ben..

Thank you..

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’ve been hosting our second quarter 2020 earnings call on August 5. Thanks again, for participating today..

This concludes today’s conference call. You may now disconnect..