Square, Inc. (NYSE:SQ) Q4 2019 Earnings Conference Call - Final Transcript

Feb 26, 2020 • 05:00 pm ET


Square, Inc. (NYSE:SQ) Q4 2019 Earnings Conference Call - Final Transcript


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Amrita Ahuja

December of 2017. While this is strong monetization for a consumer app, we believe we have room to grow further by continuing to increase the attach rate on Cash Card and further cross sell new products to come.

In both our Seller and Cash App ecosystems, we've achieved compelling unit economics with strong retention and payback periods. This is a result of our ability to build and integrate remarkable products, find efficient channels for customer acquisition and deepen relationships with our customers over time. 2020 is an important year for us as we continue innovating and investing to bring new customers into both our ecosystems in the U.S. and globally. Turning to our financial guidance for 2020. We expect to achieve total net revenue of $5.90 billion to $5.96 billion and gross profit of $2.44 billion to $2.475 billion or 34% year-over-year gross profit growth at the high end of the range, excluding Caviar. These figures are ahead of the preliminary expectations we shared on our third quarter call as the business has continued to execute at high-growth rates even as we've scaled.

We expect our 2020 transaction profit margins as a percentage of GPV to be relatively stable compared to 1.08% in 2019 as we expect any benefit from the pricing change to be largely offset by mix shift to larger sellers. We expect to generate adjusted EBITDA between $500 million and $520 million, consistent with the preliminary guidance we provided on our last call. Similar to 2019, if we deliver top line outperformance during the year, we do not intend on increasing our adjusted EBITDA guidance and instead plan on reinvesting that upside back into the business where we see opportunities to benefit long-term profitable growth. Our EBITDA guidance includes strategic investments across both ecosystems, including the previously outlined sales and marketing spend for our Seller ecosystem, which we expect to achieve a 4-quarter payback on our overall 2020 spend and to return multiples over time based on the strong returns we see.

Additionally, as previously mentioned, 2020 guidance includes a larger-than-normal facilities expansion related to our Oakland office as well as additional regional offices, which will add an incremental onetime step-up of $50 million to our operating expense base. Over the medium to long term, we expect to continue to drive leverage from our G&A expenses as we have historically. Finally, we're hosting our Investor Day on March 18 in San Francisco, where we will provide a deeper update on our long-term vision, market opportunity, strategy and business model for the Seller and Cash ecosystem and long-term financial outlook.

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