Square, Inc. (NYSE:SQ) Q3 2019 Earnings Conference Call Transcript
Nov 06, 2019 • 05:00 pm ET
[Operator Instructions] And your first question comes from the line of Tien-Tsin Huang from JP Morgan. Your line is open. Again, your first question comes from the line of Tien-Tsin Huang. Your line is open.
I hope you can hear me. Sorry about that. Thanks for the disclosure, a lot to digest. On 2020, I'll ask -- just can you give us an idea on the growth between the two ecosystem, seller and cash, and I'm curious if you can give us some idea here. Thanks for the EBITDA margin disclosure on seller. You know how quickly you can scale the Cash App margins and can that ultimately approach the margins you're seeing on seller, that is Cash App versus seller? Thank you.
Thanks for the question, Tien-Tsin. So I'll start off on the growth for 2020 between seller and Cash. As noted in the prepared remarks, we're expecting low 30% gross profit growth, which is similar to what we would have expected for adjusted revenue. Two things to keep in mind there. First, our exit rate from 2019, in the fourth quarter, adjusted revenue and gross profit guide implies a 37% growth rate and 36% growth rate respectively, excluding caviar.
And secondly, we are making meaningful investments into the business, with payback period of about four quarters, particularly for the seller' sales and marketing investments. So to break it apart between Seller and Cash. With Seller, we're expecting steady revenue in gross profit growth in 2020 from the current Q3 baseline that you heard of about 27% and 26% growth respectively. But again, keep in mind, these investments that we're making tend to have a four-quarter payback. So we'd expect to start seeing the impact on top line numbers towards the end of 2020 as we add new cohorts into the seller ecosystem.
For Cash App, we've reached pretty significant scale representing a quarter of our revenue in the third quarter very rapidly. The growth in 2019 has been greater than 100% on the topline, and now with this over $600 million annualized revenue run rate, naturally growth rates at this level, you'd expect to come down over time. The biggest drivers for Cash App, as you know, Instant Deposit and Cash Card, will be growing in 2020 off of a larger base as those two business lines have ramped rapidly during 2019. And ultimately, we're focused on growing revenue scale on a dollar basis here. That said, we're continuing to invest aggressively into both our Cash App ecosystem, as well as our Seller ecosystem, and we think we're in the early days there in terms of customer acquisition and in terms of the product roadmap. So we'd expect to continue to see strong and growing contributions from Cash App going forward.
With respect to margins, just quickly. We see attributes in the Cash business that are very similar to what we see in the Seller business, in terms of efficient customer acquisition, in terms of retaining customers over the