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Square (NYSE:SQ)
Q4 2018 Earnings Conference Call
Feb. 27, 2019 5:00 p.m. ET

Contents:

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Square fourth-quarter 2018 earnings conference call. I would now like to turn the call over to your host, Jason Lee, head of investor relations. Please go ahead.

Jason Lee -- Head of Investor Relations

Hi, everyone. Thanks for joining our fourth-quarter 2018 earnings call. We have Jack and Amrita with us today. First, we want to remind everyone of the format of our earnings call.

We have published a shareholder letter on our Investor Relations website which was available shortly after the market closed. We will begin this call with some short remarks before opening the call directly to your questions. During Q&A, we will take questions from our sellers in addition to questions from conference call participants. We'd 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 a discussion of the factors that could cause our results to differ. Also, note that the forward-looking statements on this call are based on information available to us as of today's date.

We disclaim any obligation to update any forward-looking statement except as required by law. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP 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.

Jack Dorsey -- Chief Executive Officer

Hello, everyone. Thanks for joining us. I wanted to start off with a few brief comments and then turn it over to Amrita for some prepared remarks. First and foremost, I want to welcome Amrita to her first Square earnings call.

We're thrilled to have her as our CFO, and really excited about the years ahead. I'm going to start with what we believe our core differentiator is, which is an ecosystem. We are an ecosystem of financial tools for both individuals and sellers, and we continue to prove the power and the uniqueness of that as time goes on. One of the things I'm most proud of over the past 10 years, Square turned 10 back a few weeks ago, is that we've shown a lot of discipline in long-term investments, and these longer-term investments that we made some bets on have really paid off.

A really good example of this has been the Cash App. Today, we're announcing that we have over 15 million multi active customers in December of 2018, and that's more than double year over year. This is an amazing to start building -- this is amazing to start building a ecosystem focused on financial services for individuals, but it also speaks to the power of building ecosystems so that we can build seller products faster as well. All the tech that we've built for the Cash App powers other product ecosystems as well.

So Instant Deposit came from Cash App technology, as did the Square Card. The Square Card has been another highlight over the past three months. This is a way for us to continue to serve underserved and unbanked sellers so that they can start a business without even going to a bank. They would be able to download the Register from the App Store or Google Play, and we give them an account where they can store the money and also a MasterCard debit card which they can use anywhere to grow their business.

A really good seller example here. C.C. Nedrow of Payton's Photography. She used Square since its earliest days, she's also been using Square Card to buy supplies as soon as she needs them, and she also uses Square Invoices, Square Marketing and Square Capital, and this really speaks to the power of the ecosystem.

People can come for one thing and then see a whole host of other financial services to help them stay in business and also grow their business. The most important thing about Square Card though is it enables them to quickly invest in their business and gives them access to their funds immediately so they can go off and do the right things for the business, whether it be buying more marketing or buy a new salon chair to add more capacity to their offering. One of the things we've found with our beta sellers for Square Card is that 40% of them didn't have a business debit card before, and this is meaningful because we found that a lot of sellers were mixing their personal bank accounts with what their business was doing, which is very, very hard to manage, took time away from their work and ultimately took time away from making more sales. So we believe this is going to be really powerful for sellers, and it really speaks to longer-term investments that we've made, the bets we've made and how they're paying off right now.

For the year ahead, we continue to focus on three things, and we're going to continue to strengthen our omnichannel offering. That means that we add strength to in-person payments, to mobile payments and also to online, and we're really excited about everything we're doing in financial services. This captures everything from Cash App to Square Card to Payroll to Square Capital. And finally, we continue to focus on the international markets that we're in, making them stronger, more complete and making sure that we find product markets for the majority of our ecosystem.

We're excited to continue to roll out more of our ecosystem tools and services to all of our markets. And with that, I'll turn it over to Amrita.

Amrita Ahuja -- Chief Financial Officer

Thank you, Jack. I wanted to start by saying that I'm thrilled to be a part of Square. I joined because I'm passionate about Square's purpose of economic empowerment. There's massive opportunity ahead for us, and Square's teams are moving with urgency, operational excellence and creative agility to serve our customers.

It's rare and meaningful to find such a strong alignment of doing good and doing well, and I'm excited to be a part of Square's journey. Our results for fourth-quarter and full-year 2018 highlight the momentum in our business. In the fourth quarter of 2018, we drove strong revenue growth at scale. Total net revenue was $933 million, up 51% year over year overall and up 47%, excluding acquisitions.

Adjusted revenue was $464 million, up 64% year over year overall and up 53%, excluding acquisitions. Net loss was $28 million in the fourth quarter, which includes the mark-to-market valuation of our strategic investment in Eventbrite. Excluding this impact, net loss was $12 million. Adjusted EBITDA was $81 million in the fourth quarter, up 97% year over year.

Our ecosystems for sellers and for individuals drove growth in the quarter. On the seller side, we maintained strong cohort economics with a three to four quarter payback period for new cohorts and positive adjusted revenue retention for existing cohorts. This underscores the continued efficacy of our go-to-market strategy as our business scales, both in acquiring new sellers efficiently and helping them grow once they join Square. Additionally, we drove momentum with larger sellers.

In the fourth quarter, larger sellers made up 51% of overall GPV, up from 47% in the fourth quarter of 2017. GPV from this group grew 39% year over year. One reason larger sellers come to Square is for our omnichannel solutions as 30% of our larger sellers serve their customers via more than one channel on Square. For individuals, we drove rapid growth at scale for Cash App.

As Jack mentioned, we had more than 15 million monthly active Cash App customers in December 2018, which more than doubled year over year. We've been delivering growth at scale and operating leverage in our business which enables us to reinvest and drive product velocity, which, in turn, can generate meaningful revenue in the long term. Products launched in the last five years represented 37% of total net revenue and 51% of adjusted revenue in the fourth quarter, up 15 points from a year ago. Now turning to guidance for full-year 2019, we expect total net revenue to be within a range of $4.35 billion to $4.41 billion and adjusted revenue to be in the range of $2.22 billion to $2.25 billion.

At the midpoint, this represents 41% year-over-year adjusted revenue growth, which is remarkable given our scale. For full-year 2019, we expect adjusted EBITDA of $405 million to $415 million, which represents growth of 60% at the midpoint. Given the massive opportunity ahead of us, we continue to reinvest in the business to drive long-term growth, guided by financial discipline. We're excited to expand our seller and consumer ecosystems to provide more people with more tools to participate in the economy.

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

Questions and Answers:

Operator

[Operator instructions] Your first question comes from the line of Darrin Peller from Wolfe Research. Your line is open.

Darrin Peller -- Wolfe Research -- Analyst

Thanks, guys. Nice job on the quarter and look forward to working with you, Amrita. Let me just start off, guys. So the subscription and services growth continues to be, obviously, extremely strong, and Cash App seems to be just a very big part of that.

The numbers you gave were really helpful. If you could just give us more insight into the driving forces behind the growth in Cash App numbers and how sustainable it is. And then maybe a better breakdown on the revenue sizes of each aspect to that correlated to the Cash App? And then maybe if you can even give what percentage of Cash App users are monetized so far, just could at least to help us.

Amrita Ahuja -- Chief Financial Officer

Darrin, I look forward to working with you as well. So let me start by sharing a little bit about the strength of the business model for Cash App and then I'll share a little bit about the monetization as well. So we're very pleased with the progress that we've seen with Cash App. We are driving meaningful revenue contribution, along with network growth and network engagement.

And that is driven by the strength of the business model we see here. And just to underscore some of those points, we see a massive opportunity ahead of us to enable access to financial services. There are over 25% of U.S. households are unbanked or underbanked and clearly, as a top 20 app in 2018, Cash App is now achieving mainstream scale.

In terms of the dynamics underlying the business, we see really strong network effects which, when you combine that with frictionless onboarding which the team has been very focused on, drives efficient acquisition at scale. And then we're also seeing really strong engagement with Cash App which we measure by transactions per active, which is also increasing -- increase the compounding effect when coupled with the increasing reach of the overall app. We're continuing to drive daily utility for that engagement through new features like Card, Boosts and Direct Deposit, and this team is just executing very well at a high level right now. We're delivering new and refined products with quality and speed.

The speed with which we can deliver, given the mobile platform, is obviously greater than what you see with traditional financial services experience. And it's that rapid iteration which drives, not only product velocity, but scale and daily utility. So that's just a little bit about why we're excited about the underlying trends and momentum that we see with the business model for Cash App. From a monetization perspective, there are a number of revenue streams and a variety of levers that we have in the business and we've really just gotten started.

There's four to highlight today. Obviously, Instant Deposit, which is similar to the Instant Deposit product in our sellers' business, enables instant access to stored balances. There's Cash Card, which the last number that we had mentioned was $3 billion of annualized spending as of the second quarter and which continues to grow rapidly, where we make interchange. There's P2P when funded with credit cards, and then there's cryptocurrency where we make a spread.

And again, we're just at the beginning of this opportunity. There will be future products and services and opportunities to build engagement which we can eventually monetize for the future.

Jack Dorsey -- Chief Executive Officer

The only thing I would add there -- sorry, Darrin, the only thing I would add there is we're starting to see the network effects play out. So the P2P aspect, I think, the biggest driver of growth for us is the product itself has inherent network effects. And you can see this yourself on Fridays of weeks inside the United States where we do see a huge surge in downloads because of payday. And people are utilizing the money they have in Cash App to send friends, families, landlords, causing another download and another -- up into the network.

So that has kept us in the top 20 at the App Store for quite some time. We reached No. 1 not too long ago this year, but I think the biggest driver is really going to be how the network is spreading and just the inherent network effects that it has in the business. And as we add more utility and more financial services, such as the card or sort of balance or Instant Deposit, ATM, it just becomes a much, much more durable relationship.

Darrin Peller -- Wolfe Research -- Analyst

Just quickly. I mean, do you guys ever disclose about what percentage of the 15 million users have actually been monetized in some way? I'm just trying to figure out how much runway. And it seems like it's very early, obviously.

Jack Dorsey -- Chief Executive Officer

No. Yes, we haven't disclosed that. But as Amrita said, over those four areas into the Deposit, Cash Card, P2P and cryptocurrency, we just have a ton of levers to pull on in terms of where the app takes enrollment.

Operator

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

Bryan Keane -- Deutsche Bank -- Analyst

Hi, guys. Congrats on the quarter. I wanted to ask about Square Card for business. Can you just talk a little bit about how it differentiates itself from the competition and how you plan to drive more small business engagement there? And then secondly, just looking at the guidance.

I know seasonality plays a role, but it looks like the first quarter EBITDA margin guidance at the midpoint is somewhere around 10.3%. That'd be down from 11.7% a year ago. So just trying to figure out, is there extra investments going in that's driving margins down a little bit year over year?

Jack Dorsey -- Chief Executive Officer

Yes. Thanks for the question, Bryan. Square Card is one of the things I'm most excited about this year just because we've identified a real pain point in a seller's life and in sign up for Square. One of the things we ask for traditionally is to link a bank account so that you can receive your funds after you swipe your customer's credit cards.

And now, you can literally download the Register and download our app and we offer a place to store your money, but more importantly, we give you an opportunity to get a card that you can customize. That's a MasterCard which you can use anywhere. And we think this is a pretty powerful in the same way that Instant Deposit was because it gives access to funds. And access to funds is so critical for any small business.

If they can quickly access their money and spend it to grow their business in whatever situation they find themselves in, we tend to see that their sales increase. So we think this is -- well, I don't know if anyone else offering anything like this, especially with the breadth of our ecosystem. So I think it's inherently unique and highly differentiated. I can't think of a simpler sign-up flow to get a card that's customized for your business, but also is a simple way to start so you can start a business without even having to go to a bank, which is pretty powerful, pretty profound and really cool.

And we don't think this is just for small businesses. We think this can scale, and we're really excited about adding more functionality on top of the card.

Amrita Ahuja -- Chief Financial Officer

Bryan. It's Amrita. I'll take the guidance question for Q1. I want to emphasize two things.

First and foremost that we focus on the full year in terms of how we manage the business and in terms of how you should be looking at it from a guidance perspective. And secondly, that there is some seasonality in Q1 which is why we really focus on the full year. So again, just to grant you the numbers for the full year, we expect to grow over 40% on the top line and 60% on the bottom line, delivering similar margin expansion to what we delivered in 2018, which, at 2.2 -- over $2.2 billion of revenue is pretty remarkable growth at our scale. From a Q1 perspective, we're showing 55% adjusted revenue growth year over year, but it is important to note that there's some seasonal trends in that business that particularly affect our seller business, which impacts sequential growth and revenue -- and profitability.

So from a revenue perspective, we see a seasonally slower quarter in Q1 relative to the Q4 holiday season which, again, impacts profitability. And these seasonal trends, Bryan, have been in the business for each of the last three years, if you look back. Also, from a timing perspective, we are making deliberate investments in our business earlier in the year, beginning in Q1, which we expect to drive growth for the medium to the long term.

Operator

Your next question comes from the line of Tien-Tsin Huang of JPMorgan. Your line is open.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Thank you. Welcome to the call, Amrita. Just, Jack, I just wanted to get your perspective on some things. I know you just said you're excited about Cash Card.

But looking back to last year, Instant Deposit really carried the load and I'd say a surprise to the upside in 2018. So looking at this year, what products do you think are best positioned to drive lead growth in '19? In other words, what's this year's Instant Deposit?

Jack Dorsey -- Chief Executive Officer

Yes, I think -- so a few things here. One, I'm really proud of how far Cash Card has come. That was a significant bet for the company. We're going against major incumbents.

It did require a lot of thoughtfulness, a lot of push on our side and a lot of patience as well. And we continue to see every single day that proving out. But the most important thing is it allows us to move superfast with other products like Square Card, and we're not like lollygagging around and just like being slow development anymore because we can move fast because we have all of this infrastructure at our disposal that allows us to build something like Square Card in a very short timeframe when considering our past 10 years. So I think the thing apart from Square Card and just everything that we can place on top of it and reach the Seller Community in the same way that we're reaching individuals with Cash App is, I think, people are finally starting to see the power of our ecosystem.

And they're not just seeing us as separate parts and separate tools, but the entire ecosystem. So I think the biggest driver is, as we make more of those connections and more of those integrations, people see it as one unit, and that starts with our customers, but certainly our shareholders, our investors and folks from the industry, we don't have a lot of competition in that regard. I think we're fairly unique in the ecosystem we're in. And this ecosystem, I said, is not just for under services, but it's also around our developer platform as well.

So as a developer coming to our platform, you get to access online, you get to access In-App and you get access hardware all in one place. And as we continue to improve that experience, we just provide a much more powerful option, not only for developers and their small business customers, but their larger merchant customers as well. One of the real strengths of the developer ecosystem for us has been an ability for a larger seller to take the parts of our ecosystem that they want, custom fit it into their shops or their restaurants, connect it with legacy systems they may have so it's not disruptive to their business and continue to carry on without missing a beat. So we think it's a really powerful equation, and you'll see us continue to add to the ecosystem equation to continue to strengthen that as a unit rather than just like the individual parts.

So that gets me super excited this year.

Amrita Ahuja -- Chief Financial Officer

Tien-Tsin, thank you so much for the welcome. Maybe I'll underscore a couple of the points that Jack made with a few of the things that get us excited about the momentum we have carrying us from a very strong 2018 into 2019 and some of the focus areas for us in 2019. As we've said, we're coming into '19 from a position of strength, exiting 2018 with 61% growth and $1.6 billion of adjusted revenue. And that growth, that scale, was driven by a diversity of growth levers.

We had positive revenue retention and a consistent three to four quarter payback period for new sellers. We saw new cohorts of sellers driving higher levels of adjusted revenue and an increasing mix of larger sellers. And then as you've heard, we have tremendous scale in our Cash App ecosystem now at over 15 million monthly actives of two times year over year. We're seeing growth from Instant Deposit but we're also seeing meaningful growth from Cash Card, and we see a future opportunity to continue building out that Cash App ecosystem driving further engagement.

So 2019, just quickly to take off some of the key focus areas for us to drive that over 40% adjusted revenue growth over $2.2 billion, we're going to take a long-term approach, as we always have, to our strategic priorities. So 2019 will be a continuation of that. We will be focused on launching and scaling new products as ever. So some of the things you might see, investing in our seller ecosystem with vertical-specific offerings, restaurants, retail services, continuing to scale our recent launches, including the expansion of the developer platform, Square Card and Terminal where we're seeing strong, early traction on both.

And all of those products are really going to help enable us to reach new customers and new segments while increasing engagement across the ecosystem.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

All right. Good stuff. Thank you both.

Operator

Your next question comes from the line of Quest Skinner. Your line is open.

Unknown speaker

Hello. How are you guys today? Very amazing to hear all of this. I've been with Square for over a year now, and I have a Square Card and Cash App. But one thing I can say is I know it's made it easy for me to quickly buy my supplies, my materials.

But what other services would you guys be planning to offer that would allow me to transition from my traditional banking system completely over to this new infrastructure which you're designing?

Jack Dorsey -- Chief Executive Officer

Yes. Thank you, Quest, and thanks for letting us feature you during the Square Card launch and also on the earnings letter. So the way we think about developing forward is looking at the most critical pain points that our sellers and our customers experience, and then figuring out very, very simple accessible ways to solve some of those issues. And we do have a breadth of services that we're excited about in that regard.

Everything from Payroll to Square Capital that you can imagine, handling more and more of the needs that you might have from a traditional banking partner that we could save you a trip to. So with the Square Card, we're going to learn superfast and make sure that we're identifying areas where we could be helpful. One of the things I'm proud to say in this Square Card is we've decided to like really recognize and honor the Seller Community that naturally builds. So one of the things we did is anytime you use your Square Card at another Square seller, that seller doesn't pay the fee.

So we handle that 2.75%. And we think that's awesome as a way to give back to our sellers. But things like that where we can be creative, where we can really solve critical needs for folks is what you're going to see more of. We're open to ideas as well, so keep them coming.

Unknown speaker

Got it. Thank you.

Jack Dorsey -- Chief Executive Officer

Thank you, Quest. Appreciate it.

Unknown speaker

Have a good evening. Appreciate it. Thank you. Appreciate you, guys.

Operator

Your next question comes from the line of Dan Perlin of RBC.

Dan Perlin -- RBC Capital Markets -- Analyst

Thanks. Good evening. I had a question. If you could give us some sense around the interchange economics for Square Card versus Cash Card.

And then secondarily, I'm wondering, are you seeing users on the Cash Card side where previously they're were Instant Deposit users kind of converting over to being Cash Card users with the idea that you're kind of porting the cost burden to the merchant in this interchange model versus charging a consumer for an Instant Deposit?

Amrita Ahuja -- Chief Financial Officer

Dan, thanks for the question. So the first part of your question with regard to interchange economics. Of course, as a business, prepaid debit card where Square makes money is on the interchange on the purchases. The interchange is publicly available through MasterCard spread tables.

What we're really focused on is driving greater utility, which leads to higher engagement and ultimately drives higher customer lifetime value. That's a similar approach to what we took with Cash Card, similar with Square Card.

Jack Dorsey -- Chief Executive Officer

I'm sorry, Dan, could you just repeat the second part of your question? I didn't fully understand it.

Dan Perlin -- RBC Capital Markets -- Analyst

Sure, sure. So you historically had Instant Deposit, which is something you charge the consumer for, but you can move those funds to your Cash Card so that you can utilize those anywhere MasterCard is accepted, which is great. The question is, is Instant Deposit a long-term viable business model? And let's just say it hits the maturation curve, is Cash Card the way in which to move that consumer over so that they're no longer being charged, you're basically taking the economics and pushing that onto the merchant. Does that make sense?

Jack Dorsey -- Chief Executive Officer

Got it. Yes, that makes sense. So just to clarify some things, so you can store money within the Cash App. And if you want to move into your bank account, that's where Instant Deposit takes place.

So we charge 1.5% to instantly move into your bank account, otherwise you wait two, three days for it to transfer. We have seen -- we do have the Cash Card which allows Instant Spend and we do have economics from that as well. We generally want to be agnostic, but we believe that keeping people within the Cash App in that ecosystem is generally positive, first, for the customer and also for us because of the other financial services that we're going to continue to look at and add and the utility that we're going to add to the card. So a lot of it has to do with just making sure that we're providing something that has daily to lead the folks from peer to peer to the card.

But if they want to go to their traditional banking instrument, they can do that and they can do that for free with a delay or they can do it instantly with Instant Deposit. So we see these things as complementary. And we're even more confident in that because right now, we have four areas where we monetize the Cash App as well. So it provides enough diversification that we have for it.

Dan Perlin -- RBC Capital Markets -- Analyst

Thank you very much.

Operator

Your next question comes from the line of Steven Kwok of KBW. Your line is open.

Steven Kwok -- KBW -- Analyst

Thanks for taking my questions. I guess the first question I have is just around the momentum of moving upmarket into large sellers. Can you just talk about how that's going? It seems like the GPV is currently about 50% of live sellers as of right now. What do you expect that to go over the next couple of years? What's the opportunity you're seeing?

Jack Dorsey -- Chief Executive Officer

Yes, I'll take the first part of your question and then pass it over to Amrita for comments as well. But generally, we're pretty excited about what we're seeing with larger sellers. A big factor in this is our developer platform, making sure that larger businesses have access to our full suite of tools and ecosystem and can custom fit it into their needs. So if they just want to use a hardware, they can just use a hardware and then can integrate it to their own systems, whether it'd be newer systems or legacy systems.

We're also pretty excited about the size of merchants that are utilizing our various services. So a Square Terminal seller, for instance, is annualized GPV is around 190k, registered seller is about 300k. Restaurant sellers, 650,000. So we're reaching some larger folks.

One good example of this and for all of you New Yorkers is Joe & The Juice. They use Square in over 50 of their stores and they have a custom point of sale that was developed specifically for their business. They used our SDKs to make it work and to make it look good and to make it something that they don't have to worry about. So we're reaching folks at scale because our products scale from the smallest of sellers all the way up to the largest.

And that's really been our thesis, is that we want to build a system that enables a seller to grow and that they never have to outgrow us, and we want to support them along every path of that journey, and that's how we think about the broader roadmap.

Amrita Ahuja -- Chief Financial Officer

Steven, just to add to what Jack said. We do see ongoing momentum with larger sellers. In the fourth quarter, 51% of our GPV came from larger sellers. That GPV is up 39% year over year.

And really, it's driven by the products that we offer that continue to serve larger sellers. And as Jack was saying, that cohesive ecosystem model that really focuses on omnichannel capabilities because we can provide that all-in-one solution to manage the complexities of managed payments, multiple locations, employees and tracking many customers, that's what's really going to drive this growth. And just to give you a couple data points around that. For omnichannel, 30% of our larger sellers sell through multiple channels with Square.

And with that seamless integration that we can provide, over 50% of larger sellers use two or more products, and that's obviously something that we can continue to grow. Finally, self on-boarding. Because of the frictionless onboarding, we can offer over 80% of our larger sellers self on-board. So we're going to continue to make progress there.

Steven Kwok -- KBW -- Analyst

Great. And I have a quick follow-up just around the license. I know you guys recently reapplied for one. Can you just talk about the timeline around it? And thanks, and welcome aboard, Amrita.

Jack Dorsey -- Chief Executive Officer

Thank you, Steven. We don't have any updates on the time line. We're working closely with the FDIC right now and Utah DFI as they review our applications, and we'll give you updates as soon as we have them.

Amrita Ahuja -- Chief Financial Officer

Thanks, Steven.

Steven Kwok -- KBW -- Analyst

Great. Thanks for taking my questions.

Operator

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

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, guys, and welcome, Amrita. Maybe just to start with a margin question for you. I wanted to get some perspective.

Just as we think conceptually beyond 2019, as you mentioned, this year, we should see a similar amount of EBITDA margin expansion in the business as we did last year. What's your view kind of more medium to long term? I mean, is this the right ZIP Code? 200, 250 basis points a year? Do you think there can be some acceleration in the rate of operating leverage as we look out further? And then maybe just kind of unrelated, maybe this one's more for Jack, but just wanted to get a quick update on the non-U.S. markets, latest trends there. And any plans to add more countries in 2019?

Amrita Ahuja -- Chief Financial Officer

Jason, thanks. So with respect to your question on long-term margin expansion, we're being very deliberate and purposeful in how we reinvest for growth and as ever continuing the financial discipline that Square has shown over the years. We've talked about a long-term margin goal of 35% to 40% at Investor Day, and we continue to see strong underlying drivers and momentum in our business. We have a massive opportunity in front of us to invest across our top three focus areas that you heard: omnichannel, financial services and international, and we're driving real results.

With margin expansion, for each of the last five years, OPEX leverage of over five points in 2018. So as we head into 2019, we're going to continue to see margin expansion. And if we can continue to execute against our roadmap for delivering new products that scale, we will continue to see growth that can lead to margin expansion and operating leverage that can lead to margin expansion. And finally, I'll just say, we have confidence in our overall business model, positive dollar-based retention, continued payback period of three to four quarters, multiple monetization levers across sellers and individuals and an ability to flex levers across variable costs, whether that be sales and marketing and support.

All of those things will, we believe, continue to drive growth for us over the long term in terms of margins.

Jack Dorsey -- Chief Executive Officer

Jason, so we have no immediate plans for new markets, mainly because the markets that we're in are some of the biggest markets in the world and we see so much more opportunity to really strengthen them. One, in particular, for instance, is Japan. With everything happening around the Tokyo 2020 Olympics, the market -- and with the government pushing for more electronic payment adoption, we think that's going to be a significant focus for us and something that we can see a lot of benefit from. But I will remind everyone that one of the interesting things about the acquisition of Weebly was how global they were and how much insight that gave us into where we can make new moves and how we might open entirely new markets or just might deploy parts of the ecosystem that we would be able to move much faster than our in-person credit card terminals.

So we're looking -- we're certainly learning as fast as we can and we're taking all the information and prioritizing it. But we believe there's so much opportunity in the markets that we're in that we're going to continue to double down on them.

Operator

Your next question comes from the line of Pete Christiansen of Citi. Your line is open.

Pete Christiansen -- Citi -- Analyst

Thanks you, and welcome, Amrita. Jack, I appreciate your comments on the power of the ecosystem. And I guess if you look at a lot of your competitors out there, particularly these converged payment type of offerings that somewhat look like a Square, I mean, some pundits believe that there's less stickiness in this type of solution, that it's easy to switch from one seller solution to another. And now you're starting to see increasing usage of interchange plus pricing.

Do you view that as a threat? And how does Square think about competing against more competitive pricing in similar competing products?

Jack Dorsey -- Chief Executive Officer

Yes, thanks for the question, Pete. So we've seen this before. And we've definitely seen much larger competitors come into our space with much more aggressive pricing than we were offering, and we did see a short term kind of interest in what they're doing and maybe some customers switching over. But after months, we saw those same customers switch back.

And the reason why is the quality of our software, the simplicity, the pairing with our hardware and the broader ecosystem. I think the -- I believe the ecosystem is extremely sticky because it builds durable relationships. If we're just offering and we're just focused on providing payments in the Register, certainly there are so many other competitors out there. But when people come in for payments in the Register and then they use Payroll or their restaurant and they use Caviar or these are marketing and really getting offers from Square Capital, it's really hard to find that mix anywhere else, and that builds durability.

So even if we see a decline in one particular part of a service, we still have a strong relationship with the rest of the services. So unlike a lot of our single-focus competitors, a customer can fire them and it fires the entire company, whereas they may fire one part of our ecosystem but still use three other things. So we think that adds a ton of resiliency, a ton of durability of the relationship, but it's all the function of how well we continue to strengthen this, and that's our focus. Like, we know we're building an ecosystem, we know that this is our core differentiator above all else, and we benefit not only from x amount of customers, but internal customers, too, with our speed of development.

Pete Christiansen -- Citi -- Analyst

That's helpful commentary. And then I'd just like to follow up any development with the new installment product. We get questions a lot about what percentage of volume is Square's high-ticket volume? And I realized an installment product would actually increase that over time, but it would be helpful to see where we are in that development roadmap.

Jack Dorsey -- Chief Executive Officer

Yes, we are still pretty early on it so we're still testing a lot. We're excited about it because it does give -- we launched it as -- it looks like a customer benefit, and it is, but it's really a seller tool, and the more they can offer their customers to enable them to be ready to purchase what they intend to purchase, the more sales a seller makes. So we think that's pretty critical, and something that we want to continue to strengthen. But there's a ton for us to learn right now, and we're still playing with a bunch of the variables to make sure that we get it right so that our sellers, customers see it and they see the utility and signing up for it and that they're really pushing on it.

Amrita Ahuja -- Chief Financial Officer

And Pete, just to add, in the third quarter -- I'm just going to add to that. In the third quarter, we saw 10 million transactions or installments on Square that were greater than $250.

Operator

[Operator instructions] Your next question comes from the line of James Schneider of Goldman Sachs. Your line is open.

James Schneider -- Goldman Sachs -- Analyst

Thank you. Good afternoon, and welcome, Amrita. I wonder if you could maybe just pick up and provide a little bit more commentary on the long-term margin expansion outlook you provided earlier. Maybe tell us how you're thinking about it in the medium term.

Obviously, it sounds like you want to invest and develop the biggest possible franchise, the revenue scale that the company can possibly get to. But how should we think about the bounds of margin expansion? Specifically, are you solving for EBITDA growth? Or are you solving for the largest potential revenue base and revenue working TAM?

Amrita Ahuja -- Chief Financial Officer

James, thanks for the question. So what we're focused on is driving growth on the top line and absolute dollar growth on the bottom line. Just to speak more a little bit about the track record that we've developed here around financial discipline. We've delivered margin expansion in each of the last five years.

In 2018, we had $257 million in EBITDA, up 85% year over year with 16% margins. That was five points of OPEX leverage and two points of EBITDA margin growth. And again, the track record of the things, the types of things that we're investing in, are driving results. We're launching new products and we're scaling new products.

And those results have been remarkable in the last few years. I think it's important and worth underscoring so that you understand how we think about this for the long-term reinvestment profile for the business. Our new products launched in the last five years now account for 51% of adjusted revenue. That's 15 points higher than where it was a year ago.

We've built out an entirely new ecosystem with Cash App in the last few years. That's now 15 million monthly actives. That's purposeful investment over a period of time that's gotten us to this point now where we can scale and reach mainstream status. And we did all this while also delivering, not only top-line growth, but margin expansion in the business.

So as we think about the long term here, that's what our focus is, continuing to put out great products and scaling them over time. And that ultimately will lead to absolute dollar growth.

James Schneider -- Goldman Sachs -- Analyst

And then maybe one for Jack. Could you maybe provide any kind of update in metrics in terms of the traction your vertical specific software solutions are getting in terms of penetration of sellers, whether that be Square for Restaurants or Appointments, etc.?

Jack Dorsey -- Chief Executive Officer

Yes, so Square for Restaurants is definitely the bright star here. We learned a lot from that launch, mainly because we really focused on getting as much feedback as we could from restaurants themselves. We had a bunch of workshops with restaurant owners and staff to make sure that we're getting the flow exactly right. And it's a great launch, but it is just a start.

We serve a very particular type of restaurant. We don't serve all restaurant types right now, and we continue to learn how we can build the software so that we can attract larger and larger restaurant sellers as well and continue to look for ways to integrate Caviar. In terms of retail, we had to do a bit of a reboot on just how we think about retail. We saw a lot of issues with the original interface and just have been rethinking a lot of that to make sure that we're solving retailers' needs, and we've been applying the same things that we learned from restaurants into the retail space.

And Appointments continues to thrive. We want to make sure that we're available in all platforms, that we're accessible to everyone who wants to use the app, and that there's deeper integration with the ecosystem as well. So generally quite positive, and they're all really, really great starts. The one thing that I would point to in a metric standpoint for Restaurants, in particular, is that over 60% of our Square for Restaurants sellers are self on-boarding.

That's exactly what we want throughout all of the verticals. We want to push as much as possible to self on-board. It's easier for our sellers, obviously much easier for us, and that it speaks to the simplicity and elegance of our interface. So we have a very high bar set right now, and we're going to be applying it across the other two verticals as well.

Operator

The next question comes from the line of Tom McCrohan from Mizuho. Your line is open.

Tom McCrohan -- Mizuho Americas -- Analyst

Thanks and welcome, Amrita, to the team. I had a question on the Cash Card. Is there any metrics you can provide around the average balance that people are keeping in their Cash App? And maybe any trends there as they're growing? And relatedly, is there any update on the Boost program and how that reward program might evolve over time?

Jack Dorsey -- Chief Executive Officer

Yes. So we're not disclosing the average balance that folks keep, but I will give you some other points. Like, so we are seeing mainstream adoption, we are seeing appeal with people aged 18 to 34, and one interesting thing we're seeing is that we're seeing a lot more increased engagement through higher average transactions per customer, and we're increasingly seeing people using Cash App as a primary spending tool, and this is really interesting because we do see people who are using the Cash App as their way to transact, and it starts with friends and family and moves on to the Square Card, to the merchants that they go to all the time where we have a Direct Deposit functionality where people can actually deposit their payroll right into it as well. So we continue to add features that make us a first consideration, and in many cases, the primary tool as well.

So we're going to continue to build that out and strengthen even more.

Tom McCrohan -- Mizuho Americas -- Analyst

Excellent. And if I can have a quick follow-up on product development expenses and kind of trends there. You spent about 31% of revenue, adjusted revenue on product development, and you entered the year with 35% or so guidance for revenue growth, end of the year, 53%, largely due to the returns you got on the incremental product development expenses. And I just want to understand how you're thinking about the return on those dollars spent.

So you had pretty -- and on an absolute dollar basis, you had a $600 million of incremental adjusted revenue this year largely because you spend money creating products that people want, and it seems like the guidance implies you're going to have an additional incremental $600 million of revenues next year and this year, in 2019, for maintaining similar levels of product development. So I just want to make sure you're thinking about that way in terms of getting the return on each incremental dollar spent on product development, you're seeing the same returns looking forward as you did in the past.

Jack Dorsey -- Chief Executive Officer

Sorry, before we get into that, I forgot your question on Boost. We're pretty excited about this program. We continue to add new merchants to it. We're not aware of any other debit card program that enables instant cash back at favored merchants, and we think there's a lot of incentive both for consumers and also our seller partners on it.

Amrita Ahuja -- Chief Financial Officer

And then, Tom, thanks for the question on product development. I'd bring -- if you to look back at our track record here in the products we've developed and scaled over the past five years, again, products over the last five years now accounting for 51%, have adjusted revenue up 15 points year over year, an entirely new cash ecosystem. We're going to continue to lean in from an investment perspective with the product development in driving velocity around launching and scaling new features. Top priorities, obviously omnichannel, verticals, developer platform, Weebly, eCommerce integration.

From a financial services perspective, it's continued growth on Cash App and Square Card. And then obviously, international will continue to scale as well. So again, strong track record, and we'll continue to execute against the long-term strategic priorities.

Operator

Your next question comes from the line of Chris Brendler of Buckingham. Your line is open.

Chris Brendler -- Buckingham Research -- Analyst

Hi, thanks. Thanks for taking my question and welcome, Amrita, as well. I'd like to ask about the growth in volume this quarter. It accelerated slightly sort of in line with estimates.

But if you look at the mix by sellers, continued slowdown in the micro seller, the actual sequential acceleration in mid and large sellers picked up a little bit. So I was wondering if there's anything macro that you're seeing at that level in the micro seller. Or is it just the business is shifting away from micro and that's why you're seeing all of the slower growth here.

Amrita Ahuja -- Chief Financial Officer

Chris, thanks for the question. So yes, growth and volume, assuming you're talking about GPV there. We drove strong GPV growth at scale, up 28% in the quarter, up 30% year over year, going from $65 billion in 2017 to $85 billion. We're focused on serving all of our sellers.

And many of the things that we're doing in terms of products and services to serve larger sellers also matter for micro sellers. And we're very focused on that community as well. I wouldn't read too much into the specific mix of micro there because there's a lot of different ways that we can grow with micro. And some of the ways actually help the business grow and push them into the larger seller category.

So there's a little bit of mix going on in sellers moving between categories. And also, when we think about serving the microchannel, we're micro sellers, we're focused not only onboarding but also growing with them, adding new products and services to the suite across the ecosystem. And 40% of our larger sellers started as micro. So if we can help them grow their business, we view that as success.

Chris Brendler -- Buckingham Research -- Analyst

That's great. And my follow-up would be the disclosure you have on Page 5 with the 30% omnichannel sellers sort of very impressive number, and there's a comment there is that 10% of your volume is coming from Virtual Terminal Invoices and eCommerce. Can you give us a sense of how much that's growing? I think there was a comment at one point, one-third of your volume potentially was card not present. So I just reconcile that 10% with the one-third being card not present from moving to its asset things.

Amrita Ahuja -- Chief Financial Officer

Sorry, Chris, can you clarify the question?

Chris Brendler -- Buckingham Research -- Analyst

Yes, just the -- so the Virtual Terminal Invoices of eCommerce on Page 5 contributed 10 -- more than 10% of Square's GPV in the quarter. That's a nice number to have. I also thought there was a prior comment that one-third of your volume was card not present. So if it's card not present, where does it go besides those Invoices and Virtual Terminal eCommerce API? I'm trying to get a sense of your eCommerce mix.

Amrita Ahuja -- Chief Financial Officer

Sure. This is an area that we continue to be focused on. I'm not sure I'd necessarily correlate those two different metrics together, but 10% volume though across Invoices, Virtual Terminal, eCommerce contributed more than 10% of our GPV in the fourth quarter, and it is growing meaningfully over time.

Chris Brendler -- Buckingham Research -- Analyst

OK. Actually, I was reading it wrong. It says more than 10% contribution in growth. OK.

And then any comment on eCommerce in terms of like the mix and health of your overall business?

Jack Dorsey -- Chief Executive Officer

We acquired Weebly to strengthen us. And just an update on the integration. We've been working hard to make sure that we're introducing Square sellers to the concept of Weebly and vice versa, focus a lot of the everyday efforts on eCommerce and thinking about just the right opportunities to brand and to make sure that people see these as one thing, and that's going to be our focus for the next few months.

Chris Brendler -- Buckingham Research -- Analyst

Thanks so much, guys.

Operator

Your final question comes from the line of James Faucette of Morgan Stanley. Your line is open.

James Faucette -- Morgan Stanley -- Analyst

Thank you very much and saying my thanks to you, Amrita, for internalizing so much of Square so quickly. It must have been a lot of hard work in the last month or so.

Jack Dorsey -- Chief Executive Officer

Pretty amazing.

James Faucette -- Morgan Stanley -- Analyst

I wanted to ask a couple of quick questions. First, on Square Capital. That came in a bit better than we had thought. And historically, we thought that there would be a bit more seasonality in that part of the business, but the originations were up sequentially.

So can you talk a little bit about what's happening with who you're extending credit to and under what circumstances? And if anything, around the economics of that business have changed in the last year or so. And then I did want to follow up on the ILC question. I know that you don't have an update on timing, but Jack, have you gotten any early feedback from the regulators, et cetera, on the application? And have they left you with anything incremental to think about there?

Amrita Ahuja -- Chief Financial Officer

Thanks, James, for the warm welcome. I'll start off on your question on capital origination. Our core platform product continued to perform really well. We had 72,000 loans in the quarter, totaling $472 million, which was up 55% year over year.

However, I think it's probably best to look at this business on a full year or a trailing 12-month basis because you do have some swings quarter to quarter. So on a full-year basis, we had $1.6 billion, which was about 36% year over year and cumulatively have now facilitated $4 billion in loans across -- 650,000 loans and 230,000 sellers. We have not changed our criteria with respect to risk, not taking on incremental risk. And with this product, as you know, we have a long track record of sort of financial discipline, prudent risk management.

We have short-term loans here, generally less than a year, so we have the ability to pivot quickly. We have a lot of data around the broader ecosystem around sellers to inform our models in real time to manage risk. So we believe we have a differentiated product. But again, at the highest level, I'd look at the full year as opposed to any given quarter.

Jack Dorsey -- Chief Executive Officer

James, unfortunately, I can't talk about any ILC updates, but I will say like we've enjoyed the process and the conversations, and we look forward to more direct relationship with regulators.

Operator

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

Jason Lee -- Head of Investor Relations

Thank you, everyone, for joining our call. I would like to remind everyone that we'll be hosting our first-quarter 2019 earnings call on May 1st. Thanks again for participating today.

Operator

[Operator signoff]

Duration: 60 minutes

Call Participants:

Jason Lee -- Head of Investor Relations

Jack Dorsey -- Chief Executive Officer

Amrita Ahuja -- Chief Financial Officer

Darrin Peller -- Wolfe Research -- Analyst

Bryan Keane -- Deutsche Bank -- Analyst

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Dan Perlin -- RBC Capital Markets -- Analyst

Steven Kwok -- KBW -- Analyst

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Pete Christiansen -- Citi -- Analyst

James Schneider -- Goldman Sachs -- Analyst

Tom McCrohan -- Mizuho Americas -- Analyst

Chris Brendler -- Buckingham Research -- Analyst

James Faucette -- Morgan Stanley -- Analyst

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