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Square, Inc. (NYSE:SQ)
Q3 2019 Earnings Call
Nov 6, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Square Third Quarter 2019 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 third quarter 2019 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.

On November 1st, we filed a press release and 8-K announcing that we completed the sale of Caviar, our food ordering platform to DoorDash on October 31st. Today, in addition to our shareholder letter, we have filed an 8-K that includes Caviar financial statements for the third quarter of 2019 and the preceding six quarters, which I encourage you all to read.

We would also like to remind everyone that we will be making forward-looking statements on this call. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please take a look at our filings with the SEC for 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.

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 discussed in the shareholder letter, we will be discontinuing the use of adjusted revenue beginning next quarter, following receipt of a comment letter from and discussions with the SEC. As background, we introduced adjusted revenue in November 2015 as a supplemental non-GAAP metric for investors to measure our business performance and growth, and provide greater comparability to other payment solution providers. Additionally, management uses adjusted revenue internally to measure the performance of our business.

Going forward, our statement of operations will continue to disclose total net revenue, transaction-based cost and bitcoin costs, determined in accordance with GAAP, which are the key components of adjusted revenue. We are also introducing new guidance measures this quarter on GAAP gross profit, as well as some of transaction-based cost and bitcoin costs.

We have posted an FAQ document on our Investor Relations website with further details on this reporting change, as well as the spreadsheet with our historical financials. There are no changes to any other GAAP or non-GAAP metrics.

Finally, this call in this 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.

Jack Dorsey -- Chairman & Chief Executive Officer

Good afternoon, everyone, and thanks for joining us. A few comments before I pass it to Amrita, and we answer your questions.

What makes Square unique is our focus on building a robust ecosystem. An ecosystem to us is a set of tools which solve critical problems for folks in remarkable ways, and more importantly, reinforce one another. For instance, a seller might come to Square, because we are the fastest and most elegant way to manage their payments in-store. And through that one move, they find a broader set of tools, such as capital to get a quick loan, a website builder to sell online, the most advanced register to put on their countertop, and payroll to pay their employees instantly via Cash App.

Likewise, an individual comes in the Cash App, because they receive some money from their front or a new employer. Not only do they find the fastest way to send and receive money, but also free Visa Card, they can use everywhere for purchases, and then some rewards program called Boost, a way to invest our money in the stock market or even bitcoin, and a way to quickly pay yoga teacher or dog walker. Having one of these ecosystems of scale is incredible, but having two that can interact with and strengthen each other is profound.

With the sale of Caviar to DoorDash complete, we've taken the opportunity to look deeply at how -- at how to best guide this forward. With the seller ecosystem, we built and shown a long-term profitable business when it has an expected adjusted EBITDA margin of nearly 30% for full year 2019, compare this to a margin of negative 9% in 2015, at the time of our IPO. Given the efficient payback periods and ROI for the tools in this ecosystem, we have decided to significantly grow our sales and marketing efforts this year and into 2020. Our investments will be focused on bringing more awareness to all the software tools we make available to sellers to run their entire business, in addition to managing their payments, and we will continue to prioritize investments to grow our seller network beyond our expectations.

Cash has been another incredible story. Excluding bitcoin, Cash App revenue was $159 million in Q3, up 115% year-over-year. Like seller, Cash App also has a broad portfolio of tools that reinforce each other, and this quarter we successfully redesigned the app to make all the much easier to find and use. Adding to send, store and spend, we introduced a new capability this quarter, investing, and did so in a way we believe is transformational. Today on the Cash App, you can purchase stock simply for free when the market is open or scheduled when its closed. So we wanted to solve a much bigger problem we saw. Most people can't even afford to buy one share of the company they want to own.

So we took everything we learn from bitcoin and fractionalize the stock market. Now someone who believes in Berkshire Hathaway A, currently trading above $300,000, and by $42 or even $1 worth of the company, and hold or sell it at any point. Others will offer this ability eventually, but none will match our ease or the fact that this one app serves most of the needs your bank did in the past. For many of the folks we serve, Cash App is the first introduction of the financial services. And for many more in the mainstream, it's the best replacement for a number of apps they had to otherwise cobble together to make work.

Finally, we've shown what a thoughtful and deliberate approach has paid off. We started this Company over 10 years ago with helps of solving only one critical need sellers had. We saw the opportunity to build a rich ecosystem around that to serve multiple needs and ended up building two of those ecosystems. I'm really proud of how far we've come, and given everything we've proven to ourselves, and all the positive signals in our business, I'm really excited to accelerate our investments to grow these ecosystems together. Each of these businesses have massive potential when taken alone, but the magic really lies in how they will work together. This is a fundamentally new idea and our entire focus now is on being the greatest and most inclusive financial ecosystem to serve all needs.

And with that, I'll turn it over to Amrita.

Amrita Ahuja -- Chief Financial Officer

Thanks, Jack. There are four key highlights that I want to share today. First, we continue to drive strong revenue growth in the third quarter, and recently completed the sale of Caviar. Second, given sellers strong profitability profile and attractive returns, we are increasing our investments in go-to-market and also aligning our team's efforts to prioritize the highest return product opportunities in 2020. Third, as the Cash App service has scaled, over the past three years, it has built a strong business model with compelling cohort economics that have improved the ecosystem margins each of the last three years. Fourth, we are raising our guidance for our business ex-Caviar in 2019, and providing a preliminary outlook on growth and profitability in 2020.

First, our strong revenue growth. In the third quarter, total net revenue grew 44% year-over-year to $1.27 billion. Adjusted revenue grew 40% year-over-year to $602 million, and gross profit grew 42% to $500 million. We saw continued strength from the seller and cash businesses, offsetting underperformance from Caviar in the quarter. We also had a sizable EBITDA beat in the quarter, driven by our core business performance, as well as the timing of certain expenses. We completed the transaction to sell Caviar to DoorDash on October 31st. Caviar is included in our reported financials for the entire third quarter and will be included in part of the fourth quarter. Excluding Caviar from the first three quarters of 2019, we would have seen our year-over-year growth for total net revenue and adjusted revenue increase by 1 point and 2 points respectively.

Second, given sellers strong profitability, we are capturing the opportunity to invest a compelling returns and orienting the team to address the highest return product opportunities in 2020. In the third quarter of 2019, our seller ecosystem generated $918 million of total net revenue, and $364 million of gross profit, which increased 27% and 26% year-over-year respectively.

As we're investing more in go-to-market, we're seeing good early results, and I wanted to call out a couple of examples. First, our marketing campaigns this year have driven an uplift across key indicators, including awareness, web traffic and revenue contribution from new seller cohorts. Second, reducing the pricing on our newer hardware devices, Square Register and Square Terminal, has resulted in an uplift in unit sales, which is bringing new sellers into our ecosystem.

From a product perspective, as we think ahead the work we have to do in 2020, we are aligning our seller teams to our key priorities of omni-channel, global and financial services. We have recently decided to pull back resources on the marketplace product that supports Eventbrite's core online processing volumes in 2020. We are exploring other opportunities to partner with Eventbrite, although we don't expect these to be meaningful to GPV in the near term. While the originally contemplated Eventbrite deal would have contributed to GPV, the impact to revenue would have been de minimis. Given this, we have decided to double down on the higher potential return opportunities in our core focus areas to strengthen our platform and our ability to address multiple customers who contribute to meaningful revenue growth.

Third, Cash App has a strong business model with compelling cohort economics. As with the seller business, it starts with efficient customer acquisition. For Cash App, this comes through peer-to-peer network effects. Next, like seller, Cash App retains the majority of our active customers through our strong product appeal. We then cross-sell our new products and features across our base to drive more money movements and higher average revenue per customer, which our new tabs redesign will help us do more effectively.

All of this leads to cash having achieved positive revenue retention for each of its monthly customer cohorts since 2015, said differently, if Cash App did not acquire another new customer, revenues would still grow from the existing base. Low customer acquisition costs combined with positive revenue retention drive compelling cohorts in payback economics. Dynamics that are very similar to what we have seen in the seller business. This has provided a strong foundation for rapid and efficient growth while expanding margins as Cash App is scaled. We expect dynamics to continue to improve as we scale our customer base and launch new products like Investing.

Fourth, we are raising the guidance for our business ex-Caviar in 2019, and providing our initial outlook for revenue and profitability in 2020. As a reminder, as Jason noted, starting next quarter we will no longer be reporting or guiding to adjusted revenue. We provide certain adjusted revenue measures this quarter only as a transitional bridge. You can find additional information on this change in our shareholder letter and on our Investor Relations website.

There are two factors impacting our updated full year 2019 guidance of $2.24 billion to $2.25 billion in adjusted revenue. First, underlying trends in our seller and Cash App ecosystems increased the top end of our guidance by $15 million. Second, the timing of the Caviar sale and it's underperformance reduced our guidance by $45 million. These offsetting factors result in a net decrease of $30 million to the top end of our full year 2019 guidance, though again, what we are managing going forward is a core business with strong momentum heading into the fourth quarter. We are maintaining our guidance 60% adjusted EBITDA growth in 2019. We plan to reinvest Q3 outperformance given the returns we see and the opportunity to drive future growth.

Turning to 2020. Based on our preliminary outlook, we expect to achieve year-over-year gross profit and adjusted revenue growth in the low 30% range, on a pro forma basis, excluding Caviar. In 2020, we expect adjusted EBITDA margins to be roughly flat compared to the 18% adjusted EBITDA margins implied by our updated 2019 guidance. We expect to reinvest the entirety of the 2 points of EBITDA margin unlocked by the sale of Caviar. A key investment area in 2020 includes sales and marketing spend into the seller ecosystem. We expect to invest over $75 million in incremental seller sales and marketing over 2019 levels, targeting payback periods to remain within four quarters. Additionally, 2020 guidance includes a larger than normal office expansion related to our Oakland office, as well as additional regional expansion, which will add an incremental one time step-up of $50 million of operating expenses.

Finally, we plan to host an Investor Day in mid-March. Since our last Investor Day in 2017, we have more than doubled our revenues and gross profit scale, tripled our EBITDA and scaled two unique ecosystems for sellers and individuals. In our 2020 Investor Day, we will provide a deeper update into our long-term vision, our market opportunity, strategy and business model for the seller and Cash ecosystems, and our long-term financial model. We'll provide more information on Investor Day in the coming months.

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

Questions and Answers:

Operator

[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.

Tien-Tsin Huang -- JP Morgan -- Analyst

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.

Amrita Ahuja -- Chief Financial Officer

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 toward 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 long-term, and in terms of positive revenue retention. And because of that, we've been able to increase cash margins, each of the last three years and we would expect to do the same in 2020. So over the long-term, we see a very positive trajectory there as well.

Tien-Tsin Huang -- JP Morgan -- Analyst

All right. Very clear. Thank you.

Amrita Ahuja -- Chief Financial Officer

Thank you.

Operator

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

Darrin Peller -- Wolfe Research -- Analyst

Hey, thanks guys. Just given that 30% margin disclosure on Seller, and obviously the backdrop of the lift it from Caviar sale and margins, maybe just help us understand the priorities around the investments in terms of US seller versus omni-channel versus international? How can we think about the magnitude of the payback you're expecting and what that could mean in terms of just revenue inflection, and we appreciate the guidance on 2020?

Jack Dorsey -- Chairman & Chief Executive Officer

Thank you. So I'll start off and Amrita can follow with some mismatches (ph) as well. But I think the most important thing is, we have recognized a pretty compelling opportunity specifically within Seller, and we have found a lot of efficiencies in our model and we found a lot of areas that we can really focus on in sales and marketing that we think will move the needle for us in meaningful ways. So a lot of -- a lot of what we've identified, it's certainly continuing to build upon the product and being the best product out there, but we think we could do a much better job in supporting it, around awareness, but externally.

But more importantly, awareness internally to our customers today. So as we are set apart by the ecosystem nature of our business. The most important thing is that our sellers find all the tools that would help them run their entire business, and that's where we -- where we could do a whole, we could do a lot better job, both in terms of the product experience itself and showing people the right tools to fit the right needs with marketing via email or direct response and also with our sales team in account management.

Our goal here mainly is to focus our sellers and make them aware of everything that we have to offer, because if we have sellers who find value in multiple services and products from us, we build a much more durable relationship with the seller. So that's the immediate goal, but the net is, we see a pretty significant opportunity to accelerate our investment and really grow that -- grow the overall base.

Amrita Ahuja -- Chief Financial Officer

And just to add to that, Darrin, with respect to the sizing, the $75 million of incremental seller, non-GAAP sales and marketing in 2020, just to size that relative to that number in 2019, it's a 2 times increase over 2019's incremental spend on both a dollar and a percentage basis. We have a large -- large and fragmented addressable market for both Seller and Cash, and we see tremendous attractive opportunities to invest into that, specifically on Seller. We see three primary areas of investment as we think about our strong brand awareness of 80%, but our relatively low product awareness of 9%.

We can see ways to move the needle across marketing, across sales, and across hardware pricing. Specifically on marketing, we're investing in campaigns that improve our awareness of the broader product set beyond just payments. We already initiated some campaigns this year in April, and then again in September and October, and we've seen some encouraging early results in April, we reached $7 million businesses and we have driven an uplift across indicators like awareness, web traffic and revenue contribution. So we would expect even with this elevated spend in 2022 to still see around a four-quarter payback overall as a blended payback across all of our investments.

Frankly, today, we believe we are too efficient in the US at a three-quarter payback and in -- across some products even less than a three-quarter payback. So we see opportunities here to expand the funnel even further from a sales perspective, see strong ROI comparable to marketing. So we want to lean in there in 2020. And then from a hardware perspective, as mentioned in the prepared remarks, we see that when we flex pricing on compelling products like terminal and register, we're able to attract more sellers. So those are the three primary ways that we look to deploy incremental funds in 2020.

Darrin Peller -- Wolfe Research -- Analyst

Okay. Thanks guys.

Jason Lee -- Head of Investor Relations

Thank you.

Operator

Your next question comes from the line of Beatrice Kalra [Phonetic] from Square. Your line is open.

Beatrice Kalra -- Square -- Analyst

Hi, good afternoon. So I'm a Square Seller, and I'm -- my business is called housing works workshop. And as a retail business, it would be helpful to see sales and inventory in one report. Has Square considered creating a report that would provide the sales in the inventory and also software percentages?

Jack Dorsey -- Chairman & Chief Executive Officer

Yeah. Thanks, Beatrice, and thanks for using us. This is a request we get from sellers a lot, and we know that managing inventory is -- it's pretty difficult and exceedingly complex, and we believe that ultimately it's our job to remove a bunch of that complexity to make it easier. So while I can't share the full details yet, heading into next year, we're looking to spend some time adding new reports like this, and more broadly, looking at opportunities to remove more and more complexity from the task of inventory and reports, because ultimately if we simplify, things were given time back so that you can focus more on your customers and your business.

Beatrice Kalra -- Square -- Analyst

Great. Thank you.

Jack Dorsey -- Chairman & Chief Executive Officer

Thank you.

Operator

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

Josh Beck -- KeyBanc Capital Markets -- Analyst

Thank you for taking my question. I wanted to ask about Cash App. You gave the revenue growth rate which is very helpful, 115%. Maybe if you could just help us think through the composition of drivers and maybe how that's changing over time as either new products are introduced like stock trading or the TABS (ph) redesign or direct deposit, and just how that can ultimately influence the growth composition of the drivers there?

Amrita Ahuja -- Chief Financial Officer

Hey Josh. I'll take that. So yes, we had strong revenue growth for Cash App in the third quarter, up 115%, with gross profit actually up even higher at 125% year-over-year. We're seeing, as discussed, strong unit economics and cohort economics here. The primary drivers, in terms of monetization levers across Cash App. We have a half a dozen of them, but the two primary ones are Instant Deposit and Cash Card. However, when we manage our product feature set across the ecosystem, we think about both engagement drivers and monetization levers. And things like Investing, enables us to introduce new engagement drivers into the ecosystem that have the potential to raise awareness and raise the daily utility for Cash App, which then impacts the other levers that we have in Cash App around monetization.

An example of that, that we've seen more recently with our bitcoin product, which we launched about a year ago is that bitcoin active have a 2x attach rate to Cash Card, which means that when you're using the app on a more regular basis and when you're finding daily utility in the app, you're finding other important uses that we can provide you within the app. And so the TABS redesign was another piece of that to provide increased discoverability and navigation to many of those new products that we've launched over time.

Josh Beck -- KeyBanc Capital Markets -- Analyst

Okay. Very helpful. Thank you.

Operator

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

Bryan Keane -- Deutsche Bank -- Analyst

Yeah, hi guys. I saw the GPV stabilize this quarter at over 25%, even a slight acceleration on our math. Just curious what drove the strength, because it had been slightly moderated in the past few quarters and it sounds like you expect similar GPV growth in 2020. So with the investment now in Seller, will we see an acceleration eventually in the revenues and GPV from that line in fourth quarter 2020 and maybe in the 2021? Thanks.

Amrita Ahuja -- Chief Financial Officer

Hey, Bryan, thanks for the question. Yes, we drove strong GPV growth at scale in the third quarter, up 25% year-over-year to $28 billion. And if you look at the last four quarters combined, we've driven over $100 billion in GPV.

To break down what happened in Q3, there is a few important drivers to discuss across both existing and new sellers. Existing sellers are a source of strength for us, as they have been historically with positive revenue retention across all cohorts. And then our new sellers, we have three drivers, as we saw new sellers adding to the Square platform. First, larger sellers GPV growth was in line with Q2, up 34% year-over-year and now comprises 55% of total GPV as a mix. Second, we're focused on expanding our total addressable market. In our shareholder letter, you saw us calling out new omni-channel use cases like stadiums, as an example. Third, we had strong growth in the quarter from international markets, where we actually had an acceleration in the third quarter versus the second quarter. Though these markets are still relatively a small part of our business, growth in international continues to outpace the US.

As you look ahead to 2020, of course, we don't guide to GPV, but couple of things for you to keep in mind on the trajectory of GPV in Q4 and into the future. First is, remember, we implemented the pricing change on our Seller business for card present transactions on November 1st, and we'd expect that to have an impact on GPV growth in the fourth quarter and into 2020. Although from a revenue and transaction margin perspective, we expect neutral to positive impact.

And then, again, thinking longer term, the investments that we're making in our Seller business in terms of sales and marketing today, we're seeing encouraging early signs around them, but we do expect a payback period in the four quarter range, which means that these incremental investments would add incremental absolute dollars of GPV in late 2020 and into 202.

Bryan Keane -- Deutsche Bank -- Analyst

Okay, helpful. Thanks so much.

Amrita Ahuja -- Chief Financial Officer

Thank you.

Operator

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

Lisa Ellis -- MoffettNathanson -- Analyst

Hey, good afternoon guys. A follow-up on Cash App is more of a strategic question. How do you think about how Cash App is differentiated from the sort of like avalanche of other sort of neo banks that are popping up like a chime or discover direct banking? And then, maybe more broadly, you just announced the ability to purchase fractional stocks, like, what is the pipeline of additional services that you're planning to launch the Cash App, but should we be expecting instalment lending, perhaps, there may be a credit card offering some -- a credit related offering? Thank you.

Jack Dorsey -- Chairman & Chief Executive Officer

Yeah, thanks for the question, Lisa. There is a -- there is a lot out there as you point out. And one of the things that I'm really excited about is just like Square, we've taken on a bunch of the complexity of connecting together the most critical needs in one place. And what that means is that people can come to it for very different reasons.

As Amrita pointed out earlier, like some people come to the Cash App, because it's the easiest way, the fastest way to buy bitcoin, and that allows for us to show them the other attributes it offers as well, including sending and receiving fiat money, storing money, getting the Cash Card that they can use anywhere Visa is accepted or go to an ATM to get paper cash out. and what is important about this is, we're not just an app for one specific thing, but a lot of the critical needs you might have that you would typically look to from a traditional bank are built right in the apps.

So you can go to the app store, and you can download this app and you come in and you have so much incredible capabilities right away, entirely new capabilities like investing the fractional shares. So in terms of -- in terms of the competition and how we think about building, it really goes back to the Square story of putting all these things together in one experience. We believe is very strong and they actually play off each other and reinforce one another in very interesting ways too. So we think that's a real strength.

In terms of fractional shares and what features are coming, we're really excited about this feature. As I said, we think it's pretty transformational and we do believe that this gives access to a part of the financial system that most have been left out of, and there is a number of things that we could do if you just look at the other services within Cash App to really bring this to even more light and into even more strength. And that's just not what our competitors can do, because they are focused on just one aspect of these financial services instead of considering how they all exist together and how they -- how they work together.

And in terms of future features for Cash App, generally, we're just constantly looking for critical needs, and where we can make things in order of magnitude better in terms of the experience or accessibility or how we might be able to reinvent the approach of how people thought about buying stocks, for instance. So that's what we're looking at. We have a bunch of experiments we're excited about, but nothing [Indecipherable] today.

Lisa Ellis -- MoffettNathanson -- Analyst

Terrific. Very clear. Thank you. Thanks a lot.

Jack Dorsey -- Chairman & Chief Executive Officer

Thank you, Lisa.

Operator

Your next question comes from the line of Harshita Rawat with Bernstein. Your line is open.

Harshita Rawat -- Bernstein -- Analyst

Hi, good afternoon. My question is on the competitive environment in the Seller business. There's a lot that have happened over the last few years in terms of growth of integrated players. There is now a lot of cloud-based POS providers out there, and of course there has been some consolidation. So can you talk about what you're seeing from a competition point of view now versus a few years ago?

Jack Dorsey -- Chairman & Chief Executive Officer

I don't think it's really any different from, when we started the company, we saw a lot of folks who were building solutions for parts of the ecosystem, but very few who are building an ecosystem. And that is what continues to set us apart, both on the seller side and also more recently on the cash side. We don't have a company that's just focused on one tool or one use case. It's really focused on how do we ensure a seller, number one, can run a business, and ideally, how do we help them make more sales. And a lot of our tools are really focused on looking for opportunities to help sellers make more sales, which is great for us, because if they make more sales, we grow the business and as we grow the business, we can help more sellers. And we just don't see much else for that out there.

What really sets us apart is, even if there are companies out there who are attempting to bite at the edges of an ecosystem, there are only doing it with one ecosystem like Seller. They don't have the equal pairing of individual ecosystem like Cash. So while we can -- we can focus on the strength of the Seller ecosystem, if you zoom out a bit, what's really powerful is that we have an app scale Seller ecosystem, and we have been app scale buyer ecosystem in Cash App, and they're in the same company. So this is very rare, and I don't know of many others, but how those capacity and that I think really speaks to our true differentiation and our true power and our true potential ahead.

As I said in my opening remarks, we do believe we have a lot of invention to bring to financial services, and we're guiding that invention by bringing more access to more people, and that's both sellers and now individuals through the Cash App. So I think it's quite strong, and I just don't see -- I don't see its component in the market.

Amrita Ahuja -- Chief Financial Officer

Harshita, just to add to that, you know, it's always been a competitive landscape, but we continue to gain share. Our volume is growing at 25% these days relative to the rest of merchant acquirers on average growing 5% to 8%, and the networks growing low double digits. So we are growing. We're growing fast and we're continuing to take share in a large and frankly still very fragmented market. And that just speaks to payment volumes. Our ecosystem, there is much more than that as Jack was saying. We have many more monetization levers beyond payments when you look at subscription and services for Seller, and when you look at the broader buyer ecosystem with Cash App.

Harshita Rawat -- Bernstein -- Analyst

Thank you very much.

Operator

Your next question comes from the line of Dan Perlin from RBC Capital Markets. Your line is open.

Dan Perlin -- RBC Capital Markets -- Analyst

Great. Good evening. I wanted to just parse out a little bit. I know you've talked about already, but the investments necessary to kind of capture the incremental seller. I'm trying to just think through larger merchants or larger sellers relative to different verticals or really just deepening the product penetration and it sounds like a lot of it is an awareness to drive deeper product penetration. I'm just trying to parse this three.

And then, the other just quick question is on the international side on the Seller. Can you just give us some idea about what those cohorts look like relative to the United States, in terms of, size, maybe level of sophistication and maybe even number of product purchase? Thanks.

Jack Dorsey -- Chairman & Chief Executive Officer

Yeah. Thanks, Dan. So in terms of the investments, I mean, fundamentally, we believe that we have a suite of tools for sellers of scale, scales from the very small to the very large, and where we don't -- we have a platform in API strategy that larger sellers can fill in whatever they need to, whether it'd be legacy, hardware or inventory systems. So that strategy has continued to play out.

And as we think about our investments, as we talked a little bit about -- a little earlier, we have -- we have a bunch of levers to pull. So only awareness of more of the products is important. Sales, our sales team and account management is another important area for us. And hardware is an area that we can also see a lot of potential, and this is independent of whether you're a large seller, you're a restaurant, you're a retail organization, we can really customize a solution around each one. So we're not necessarily guiding that to a particular size of seller. It's more focused on the use cases and how utilizing more of our tools will make your business a lot more efficient and run better ultimately, hopefully, leading to more sales for you and your company.

Amrita Ahuja -- Chief Financial Officer

And I'll just add to that, Dan. On plan about larger sellers, we continue to have strong traction there with larger sellers growing 34% year-over-year in the third quarter. The products that address larger sellers, as you know, are vertical point of sale around retail and restaurants or developer platform where you can create more customized product offerings for larger sellers and some of our newer hardware products, terminal and register.

In terms of the go-to-market ways that we can address larger sellers, our marketing campaigns we believe address small and large sellers alike. And we do see that larger sellers have a tenancy to take on more products. And so the focus of the campaign being the broad suite of products that we offer beyond just payments, we feel can resonate with large sellers. Finally, the sales team growth, which we expect in 2020 should also address larger sellers needs and more complex seller needs.

I did want to address your international question. We see that our cohorts of customers internationally, similar to the US, have positive revenue retention, which is an important thing for us, obviously, to continue to measure. We most recently launched our terminal product in Australia, Canada and UK in this past quarter, and those launches were successful launches for us. We're seeing that we're unlocking new use cases as we bring our full suite of products to our international market. So we're excited to continue doing that in 2020.

Dan Perlin -- RBC Capital Markets -- Analyst

That's great. Thank you.

Operator

Your next question comes from the line of Andrew Jeffrey from SunTrust. Your line is open.

Andrew Jeffrey -- SunTrust -- Analyst

Hi. Appreciate you taking the question. I wonder if I could dig just a little bit deeper into the Cash App. You've talked about a number of ways you're looking to monetize and if there is any pushback we get -- it's really in Instant Deposit product first and foremost, and I think you fleshed out the means by which to advance would be beyond that.

But I wonder if you could elaborate a little bit on, the merchant flywheel, it strikes me that this is a pretty powerful tool for merchants who have receipts from Cash App or a Square Capital loan or case may be and that it can really act as a small business bank account substitute for traditional account. Could you just elaborate on that and how you think that sort of plays out long-term ability to monetize that ecosystem

Jack Dorsey -- Chairman & Chief Executive Officer

Andrew. I'm not sure I'm following your question. Are you talking about the Cash App versus Square Card?

Andrew Jeffrey -- SunTrust -- Analyst

Well, I mean, I think about Square Card is being sort of integral to that it's that whole value proposition.

Jack Dorsey -- Chairman & Chief Executive Officer

Yes. So with the -- so we have two main offerings here, but I think speak to the flywheel that you're, you're talking about. One is the Square Card, which allows sellers to store money with Square and we can also issue them MasterCard that allows them to spend instantly and get access to their funds or run their business instantly. And we think that one has been a pretty amazing product experience, but entirely new functionality that serves as another reason to join Square and to enter into our ecosystem.

In terms of the Cash App, there is a lot of opportunity between our receipts as a way to drive more Cash App downloads and usage. And there is potential intersection between what we're doing around loyalty on the Seller side and Boost on the cash upside. So these are things that are definitely questions for us and we'd love to experiment with, but it all goes back to the broader point that we believe that while these two ecosystems are extremely strong at scale, and quite powerful that each one of them has tools that reinforce one another. One ecosystems themselves reinforce one another that makes the company truly, truly incredible. So we will continue to look for smart ways to bring these two ecosystems together, driven by customer needs and that's customer needs on the seller side but also on the cash upside.

Andrew Jeffrey -- SunTrust -- Analyst

Thank you.

Operator

And your next question comes from the line of Peter Christiansen from Citi. Your line is open.

Peter Christiansen -- Citi -- Analyst

Good evening. Thanks for the question. Jack, I want to ask you more of a philosophical question. As you think about these two ecosystems, both have different competitive dynamics and different phases of maturity, how do you think --how do Square think about balancing the investment between Seller and Cash App. And perhaps, what are some of the key variables that you consider when you're in the decisioning process as you invest across the company broadly?

Jack Dorsey -- Chairman & Chief Executive Officer

Yeah. Thanks, Pete. Great question. So this is going to be something that we're constantly learning from. The most important thing is, we recognize this opportunity on the Seller side of, you know -- like, how are you thinking about investing within seller and all the payback periods we're seeing, the ROI we're seeing and the tools, it just bagged for more investment. It just felt like we are leaving opportunity on the table by not focusing on growing this in a much more substantial way.

Cash, on the other hand has -- had that mindset for some time and has really been focused on network first. And what gives me a lot of confidence is, we have a pretty deep understanding of how both businesses work and what levers to pull where we can be pretty agile about when to drive growth and when not to. And we've come a long way with the Cash App and how we think about building that network, but ultimately over time, we want to continue to build features that people love the people can't find anywhere else.

And as I said in my previous answer, I think there's a lot of potential between the two ecosystem. So we will be constantly looking for these opportunities to grow both ecosystems. But more importantly ways to connect the two together.

Amrita Ahuja -- Chief Financial Officer

And Pete just to tie that to our 2020 outlook, we see strong opportunities to deliberately invest in both of the ecosystem in 2020. For seller, today as you know, as we disclosed, we see strong profitability with adjusted EBITDA margins of nearly 30% in 2019 expected for the full year. That's up from negative 9% in 2015. In a very short period of time, we've been able to scale this ecosystem while driving strong profitability, and seeing very compelling returns as Jack was saying. So we want to intentionally invest for future growth in our go-to-market efforts that we outlined earlier in the call. And so for 2020, we expect margins in the Seller business as a result have slightly come down and we do expect to start seeing returns on these investments that we're making toward the end of 2020 and into 2021.

With Cash, given the strong cohort economics that we've seen, given the margin expansion that we've seen over time, over the past few years, and given the continued scaling of the ecosystem, we expect to see some margin improvement in 2020, even as we continue to invest in scaling the ecosystem. So those are some of the dynamics for how this investment model plays out for 2020.

Peter Christiansen -- Citi -- Analyst

That's very helpful. Thank you.

Jack Dorsey -- Chairman & Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of George Mihalos from Cowen. Your line is open.

Allison Jordan -- Cowen and Company -- Analyst

Hi. This is Allison on for George. Thank you very much for taking my question. I wanted to follow-up on the GPV commentary from earlier. It looks like the year-over-year growth and the sub 125,000 GPV seller category accelerated this quarter versus 2Q. I'm wondering if there is any color you can provide there? Thank you.

Amrita Ahuja -- Chief Financial Officer

Thanks for the question, Allison. GPV growth from larger sellers was 34% in the second quarter -- sorry, in the third quarter, and actually also in the second quarter. From a mix perspective, larger sellers were up slightly quarter-over-quarter, so 55% in terms of mix and 53% in terms of mix in the second quarter. So we continue to see real traction with larger sellers and continue to build out products as mentioned earlier in terms of vertical point of sale, in terms of hardware, and in terms of the developer platform to address this base of customers.

Allison Jordan -- Cowen and Company -- Analyst

Thank you.

Operator

And your next question comes from the line of Jason Kupferberg from Bank of America Merrill Lynch. Your line is open.

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

Hey guys. Just a quick clarification question. Just on the clarification. So I want to make sure I've got the numbers apples-to-apples right here. So your growth in 2019 ex-Caviar is forecasted now at 46%, and on that same basis, we're talking about low 30s in 2020. So I just wanted to get a clarification on that. And then, can you just give us a sense on the $75 million of incremental sales and marketing, how much of that will be US versus international?

Amrita Ahuja -- Chief Financial Officer

Sure. I'll take that, Jason. You've got that math right in terms of full year 2019. The guide at the midpoint, ex-Caviar, for the full year is $2.1 billion, which is a 46% growth rate year-over-year, which is actually the same growth rate that 2018 would have been on an ex-Caviar basis. But as you think ahead to 2020, keep in mind the exit rate that we've got coming out of 2019, which is a 37% rate in the first -- fourth quarter ex-Caviar unadjusted revenue, and 36% growth rate on gross profit at the midpoint.

In terms of the $75 million of marketing investments, US versus international, the international markets today are about 5% of our revenues. They will be a higher percentage of our marketing investments, but the vast majority of our marketing investments still go toward our US markets.

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

Thank you.

Operator

Your next question comes from the line of James Friedman from Susquehanna. Your line is open.

James Friedman -- Susquehanna -- Analyst

Hi, thanks. It's Jamie at Susquehanna. I just wanted to ask Amrita, in your prepared remarks, you had mentioned that some of the EBITDA upside in the Q3 which was a surprise to us, you said that -- some of it came from core and some of that came from timing of expenses. I was just hoping you could elaborate a little bit about that. And I just have to ask about Eventbrite, those comments were helpful too, but if I was interpreting what you're saying relative to the GPV versus what sounded like a less important revenue factor, was that about price or am I just oversimplifying? Thank you.

Amrita Ahuja -- Chief Financial Officer

Sure. On the first part of your question, James, on the EBITDA beat, that's right. It was driven by both over performance in our Seller and Cash ecosystems, offset by underperformance in Caviar, along with over performance related to expense timing as well as some efficiencies. We do expect most of those expenses to materialize in future quarters. And as we have in the past, we plan to reinvest any outperformance that we've had back into these ecosystem through both product and sales and marketing efforts to grow for the long-term.

With respect to Eventbrite, I didn't quite catch your question, but I think you're asking why there is less of a revenue impact relative to GPV. And yes, the take rate on a deal like Eventbrite is much lower. So that's why from a GPV perspective, there would have been an impact, but from a revenue perspective, the contribution from Eventbrite would have been de minimis.

James Friedman -- Susquehanna -- Analyst

Got it. Thank you.

Operator

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

Ramsey El-Assal -- Barclays -- Analyst

Hi. Thanks for taking my question. Given all the puts and takes in your evolving business mix and not to steal thunder from Analyst Day, but how would you frame up your kind of normalized margin profile at this point. I know that you have a completely different business than you did -- you know, at your first Analyst Day meeting. So I was just wondering if you could comment on that. And then just a quick bolt-on as what's the revenue model for the stock trading feature. How do you -- how do you make money on that? Thanks.

Amrita Ahuja -- Chief Financial Officer

Sure. I can take that. On our last Investor Day -- at our last Investor Day, Cash App with sort of a twinkle in our eye. I mean, obviously it has grown rapidly since then, it's now a quarter of our revenues. And so, clearly, I think at this next Investor Day, we'll be sharing much more with you about Cash App in terms of product roadmap and business model. And so, I think it's premature for us today to give you a long-term view in terms of margin profile. So what I can say is, as we've shared with you this quarter compared to our last Investor Day, the dynamics in our Seller ecosystem, which was the majority of our business in 2017 have largely stayed the same or gotten better. At last Investor Day, we talked about a 20% to 25% long-term top line growth and 35% long-term margins. And just a year and a half later now in 2019, we stand here having achieved nearly a 30% margin by year-end and having exceeded the top line growth targets, all with three to four quarter payback and positive revenue retention.

And then with Cash App, we have scaled it rapidly since the last Investor Day. And as mentioned, had continue to see margin expansion from Cash App for each of the last three years with very similar dynamics in terms of cohort economics and compelling returns on our investments. Very similar dynamics in Cash App to what we see in the Seller ecosystem. So we're excited to share with you more when we meet at Investor Day.

With respect to monetization of Investing, as we noted, there is no commission fees related to our investing product today within Cash App. The majority of the costs associated with Investing will be brokerage costs and will be included in our sales and marketing line related to Cash App. We really view this product set to be an engagement driver for us as we mentioned earlier, to help build out the network, and to help bring discoverability and daily utility to the app that enable growth for other revenue streams within the app

Ramsey El-Assal -- Barclays -- Analyst

Thanks so much.

Operator

And that is all the time we have for questions. At this time, I would like to turn the call back over to the Company for some closing remarks.

Jack Dorsey -- Chairman & Chief Executive Officer

Thank you everyone for joining our call. I would like to remind everyone that we will be make -- we will be hosting our fourth quarter 2019 earnings call on February 26th. Thanks again for participating today.

Operator

[Operator Closing Remarks].

Duration: 57 minutes

Call participants:

Jason Lee -- Head of Investor Relations

Jack Dorsey -- Chairman & Chief Executive Officer

Amrita Ahuja -- Chief Financial Officer

Tien-Tsin Huang -- JP Morgan -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Beatrice Kalra -- Square -- Analyst

Josh Beck -- KeyBanc Capital Markets -- Analyst

Bryan Keane -- Deutsche Bank -- Analyst

Lisa Ellis -- MoffettNathanson -- Analyst

Harshita Rawat -- Bernstein -- Analyst

Dan Perlin -- RBC Capital Markets -- Analyst

Andrew Jeffrey -- SunTrust -- Analyst

Peter Christiansen -- Citi -- Analyst

Allison Jordan -- Cowen and Company -- Analyst

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

James Friedman -- Susquehanna -- Analyst

Ramsey El-Assal -- Barclays -- Analyst

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