Block, Inc. · NYSE:XYZ
Block — Square — Investor Day (May 2017)
179 slides from Block's investor day presentation, May 16, 2017
Slide 1: Slide 1
Slide 2: Cautionary statement
Cautionary statement This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. All statements other t
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Slide 5: Union Square
Union Square
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Slide 8: Payments, point of sale, receipts, employees, analytics, finance, invoices, marketing
PAYMENTS PO INT OF SALE RECEIPTS EMPLOYEES ANALYTIC S FINANCE INVO ICES MARKETING 8
Slide 9: Payments, point of sale, receipts, employees/payroll, analytics, finance, invoices, marketing
PAYMEN TS POINT OF SALE RECEIPTS EM PLOYEES/PAYROL L ANALYTICS FI NANCE INVOIC ES MA RKETING 9
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Slide 11: Everything is connected—it’s the most convenient and straightforward system to use
“ Everything is connected— it’s the most convenient and straightforward system to use. Square has been with us every step of the way, and I can see myself adding even more services. SUZANNA CHUN FOUNDER OF TORI BLUSH BEAUTY COMPANY TORONTO, CANADA 11
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Slide 13: We accept
— : We accept 2 =P a ards throught
Slide 14: Integration
Integration Making our services work together more cohesively. PAYMEN TS POINT SQUARE BUILD WITH CAVIA R OF SALE FOR RETAIL SQUAR E CAPITAL PAYROLL CUSTOMERS E-COM ME RCE CASH AP POINTMENTS 14
Slide 15: Automation
Automation Making our services more self-serve with machine learning. CUS TOME R TARGETIN G PRE DICTIVE SUPPORT IN DASHBOA RD 201 495
Slide 16: Platform
Platform Making our services more modular. <?php $api = new \SquareConnect\Api\TransactionApi(); $transaction = $api->charge($accessToken, $locationId, [ 'amount_money' => ['amount' => 2837, 'currency' => 'USD'], 'idempotency_key' => uniqid(), 'card_nonce' => $cardNonce // Generated from Square e-co
Slide 17: Management team
Kevin Burke Jesse Dorogusker Jack Dorsey Sarah Friar Brian Grassadonia Alyssa Henry Marketing and Sales Hardware Lead CEO CFO Square Cash Lead Seller Lead Lead Sam Quigley Caitlin Rabil Gokul Rajaram Jacqueline Reses Hillary Smith Aaron Zamost Risk and Security Lead Executive Assistant Caviar Lead S
Slide 18: Board of directors
Roelof Botha Jack Dorsey Jim McKelvey Mary Meeker Partner, CEO, Chairman, Cofounder, Partner, Kleiner Perkins Sequoia Capital and Cofounder Square Caufield & Byers Paul Deighton Ruth Simmons Larry Summers David Viniar Former UK Former President, Former Secretary, Former CFO, Commercial Secretary Bro
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Slide 21: fair and square
fair and square /fer (ə)n skwer/ phrase of fair honestly; justly; straightforwardly
Slide 22: Q&A Jack Dorsey with David Viniar
Q&A JACK DORSEY WITH DAVID VINIAR
Slide 23: Investment Thesis
Investment Thesis SARAH FRIAR
Slide 24: Today’s takeaways
Today’s takeaways MA S S I V E M AR K E T We’re targeting a $60+ billion market that’s rapidly expanding as we build new vectors for growth. OP P ORT U N IT Y UN I QU E A N D The breadth and cohesion of our solutions make them difficult to copy and we’re reaching SCA L A B LE A S SE T S sellers effi
Slide 25: We have a massive and growing addressable market
We have a massive and growing addressable market MANAG ED PAY MENTS POINT OF SALE DEVELOPER PL ATFOR M GROWTH SERVIC ES Invoices Point of Sale Build with Square Capital Instant Deposit Employee Management App Marketplace Caviar Virtual Terminal Appointments Square Cash Customer Engagement Dashboard
Slide 26: Why Square wins: Unique assets, difficult to copy, and at scale
Why Square wins: Unique assets, difficult to copy, and at scale FO CU S ON TECH NOLOGY Integrated, end-to-end: hardware, software, payments, and data AN D D E S I G N B R EA DT H OF MA NAG ED Comprehensive, full-service offering that helps sellers manage the entire payment life cycle PAYM EN T S D I
Slide 27: … resulting in consistent, leading market share
… resulting in consistent, leading market share The Square app has consistently been in the top 10 for U.S. App Store ranking in iPhone Business Applications. iOS APP STORE—BUSINE SS A PPLICATIONS RANKINGS “Number of downloads” is primary component of ranking SQUARE (6) PAYPAL HERE (57) SHOPIFY POS
Slide 28: … across multiple devices
… across multiple devices iPHONE B USINESS APP RANK INGS iPAD B USINESS A PP RA NKING S SQUARE (6) SQUARE (5) PAYPAL HERE (57) QUICKBOOKS GOPAYMENT (118) SHOPIFY POS (188) SHOPIFY POS (141) PAYANYWHERE (216) CLOVER GO (154) QUICKBOOKS GOPAYMENT (271) SHOPKEEP (165) AMAZON REGISTER (N/A) REVEL (257)
Slide 29: We can drive valuable insights across our entire business
We can drive valuable insights across our entire business $ 53B 254M 35 GROSS PAY MENT UNIQUE CARDS USED TRA NSACTIONS > 2B DATA POINTS COLLECTED VOLUME ON SQUARE PER SECOND AND UPDATED DAILY ON SQUAR E SELLER S All figures represented as trailing 12 months ended March 31, 2017. 28
Slide 30: Significant growth at scale
Significant growth at scale GR OSS PAYM E N T TOTA L NE T NE T LOSS VO LU M E (G PV ) NET R EVE NU E LOSS PER SH AR E $14B $462M ($54M) ($15M) ($0.35) ($0.04) $39M $0.31 INCREASE INCREASE $10B $332M 43% 39% GROWTH GROWTH At IPO Q1 2017 At IPO Q1 2017 At IPO Q1 2017 At IPO Q1 2017 “At IPO” represents
Slide 31: Significant growth at scale
Significant growth at scale A DJ US T E D ADJU S TE D ADJUSTED RE VE N UE EB I TDA EPS $204M $27M $0.05 $0.20 INCREASE ($0.15) $118M 27pt MARGIN INCREASE ($16M) 73% GROWTH At IPO Q1 2017 At IPO Q1 2017 At IPO Q1 2017 “At IPO” represents Q3 2015. 30 A reconciliation of non-GAAP metrics used in this d
Slide 32: Our business model provides a compelling investment opportunity
Our business model provides a compelling investment opportunity TR E ME N D O US S CA L E Millions of active sellers, $53 billion trailing four quarter GPV SI GN I FI CA N T G R OW T H 39% Adjusted Revenue year-over-year growth ATTR AC TI V E COHO RT 113% Adjusted Revenue retention rate and 3-to-4 q
Slide 33: Our Addressable Market
Our Addressable Market
Slide 34: Square’s U.S. payments opportunity today
Square’s U.S. payments opportunity today 21M APPLICAB LE SMALL TO $ 3T GPV OPP ORTUNITY $ 26B U. S . PAYM ENTS MED IUM -SI ZE BUSINESSES ADJUSTED RE VENUE OPPORTUNITY Sources: 2012 U.S. Census, Euromonitor. All figures are based on employer and non-employer firms with less than $100 million in annua
Slide 35: Square today
Square today $ 53B SQUARE GPV $ 0.6B SQUAR E PAY ME NTS ADJUSTED RE VENUE Figures are represented as trailing 12 months ended March 31, 2017. 34
Slide 36: Less than 3% penetrated
Less than 3% penetrated $ $ S S $ 3T GPV OPP ORTUNITY $ 26B U. S . PAYM ENTS ADJUSTED RE VENUE OPPORTUNITY Sources: 2012 U.S. Census, Euromonitor. Square figures are represented as trailing 12 months ended March 31, 2017. “Opportunity” figures are based on employer and non-employer firms with less t
Slide 37: We’re building a $60B+ commerce ecosystem
We’re building a $60B+ commerce ecosystem $ 26B U. S . PAY MENTS $ 5B E-COMMERCE $ 8B SOF TWAR E $ 14B 11B SQUAR E CAP ITA L $ CAVIA R Sources: Euromonitor. 2012 U.S. Census, FDIC, Oliver Wyman, Goldman Sachs—Future of Finance, Morgan Stanley—The Pizza Paradigm for Online Food Delivery. “U.S. Paymen
Slide 38: We’re building a $60B+ commerce ecosystem
We’re building a $60B+ commerce ecosystem $ 60B + U. S . ADJUSTED O P P O RT U N I T Y CO N T I N U ES TO GR OW A S WE B UI L D CA PA BI L I T I E S REVENUE OPPORTUNITY 37
Slide 39: The global opportunity is potentially 6–7x that in the U.S.
The global opportunity is potentially 6–7x that in the U.S. SMALL BUSINESSES CARD VOLUM E 12 5M $ 55 T 21M $10T U. S GLOBAL U. S GLOBAL Sources: 2012 U.S. Census, International Finance Corporation (IFC), The Nilson Report. 38 U.S. small business is based on employer and non-employer firms with less
Slide 40: Many disruptive trends in our favor
MACHI NE LE AR N IN G/ EL ECT R O N I C ARTI FICIAL INT ELLI G E NC E PAY ME NT S OPE N Many disruptive PL ATFORM S EM V/ NF C trends in our favor M OBI LE O MN I - C H AN N E L 39
Slide 41: Electronic payments: B2B represents a large opportunity
CH ECK AND W IRE 60% Electronic payments: ACH 33% B2B represents a large opportunity CARD 7% Outdated methods like check and wire represent 60% of business-to-business commerce. Source: BOK Financial Corporation (2013). 40
Slide 42: More sellers will need to make the shift to EMV
U. S . EM V M IX A S A PER CE NTAGE OF TOTA L CARDS AND SELLER LOCATIONS 6 4% 3 6% More sellers will need to make the shift to EMV EM V C REDIT EM V SE LLE R CARDS LOCATIONS Approximately 64% of credit cards are chip, but only 36% of seller locations are EMV ready. Source: Visa—Payment Security Land
Slide 43: More sellers will need to make the shift to EMV
YEA R- OVER -YE AR DECREA SE IN COUNTERFE IT FRAUD (JU NE 2 016) More sellers will need to make the shift to EMV 54% DECR EASE Sellers who upgraded to EMV saw counterfeit fraud dollars drop 54% on average. Source: Visa—Payment Security Landscape and Roadmap November 2016. 42
Slide 44: Sellers are increasingly looking for omni-channel solutions
14% CAGR > $5 00 B E-COM ME RCE $ 30 8B Sellers are increasingly looking for omni- channel solutions M- COMM ERC E 2016 2020 ESTIM ATE E-commerce sales are estimated to reach over $500 billion annually in four years. Source: Euromonitor. 43
Slide 45: Software developers are recognizing value in payments
Software developers are recognizing value in payments MOST IM PORTANT ASPECTS TO ISVs WHE N SELECTING A PAYME NTS PA RTNE R SEC U RITY 36% Over 2/3 of independent software COST 14% vendors (ISVs) are considering a semi- integrated model for payments. EASE OF 11% I NTEGRATI ON REL IABIL ITY 9% ISVs n
Slide 46: Traditional borrowing for a small business is difficult
DEMA ND FOR FINANCING FOR SMA LL BUSINE SSES Sufficiently funded 29% Did not apply Traditional borrowing for a 44% small business is difficult Denied or received partial funding 27% One in four businesses did not apply due to discouragement, difficulty in the search process, or high credit costs. So
Slide 47: Traditional borrowing for a small business is difficult
TOP R EASONS F OR CREDIT DENIAL LOW/ INSU F F ICI ENT C REDIT 57% I NSU F FICI ENT COL L ATERAL 31% Traditional borrowing for a W EAK BU SIN ESS small business is difficult P ER FO RM ANC E 31% U NSU RE/ 41% OTH ER Outdated methods like credit score continue to make financing difficult for small bus
Slide 48: Many disruptive trends in our favor
MACHI NE LE AR N IN G/ EL ECT R O N I C ARTI FICIAL INT ELLI G E NC E PAY ME NT S OPE N Many disruptive PL ATFORM S EM V/ NF C trends in our favor M OBI LE O MN I - C H AN N E L 47
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Slide 50: Products
Products JESSE DOROGUSKER
Slide 51: Smart tools, managed payments, integrated services
1. SM A RT TOO LS TH AT H ELP S EL L E RS PA RT ICIPAT E A ND T HR IV E I N T HE ECO N O MY 2. M ANAG E D PAY M E NT S WIT H UN I QU E, U N DE R LYING S T R E NGT HS 3. INTEG RAT ED SERV IC E S TO HE L P SE LL ERS MA N AGE AND GR OW T HE I R B US I N E S S 49
Slide 52: Traditional payment terminal
Traditional payment terminal
Slide 53: Traditional point of sale
Traditional point of sale
Slide 54: La Colombe Coffee Roasters
LA COLOMBE COFFEE ROASTERS PHILADELPHIA, PENNSYLVANIA
Slide 55: Boston Home Inspectors
BOSTON HOME INSPECTORS BOSTON, MASSACHUSETTS 53
Slide 56: A seamless payment experience for a seller
A seamless payment experience for a seller Get Started Take Payment Get Paid MIN UTES I NS TAN T O N E BU S I N E SS DAY Square sellers receive next business day settlement for payments before close of business day at 5 PM Pacific. 54
Slide 57: A seamless payment experience through a managed payments product
A seamless payment experience for a seller through a full-service, managed payments product Get Started Take Payment Get Paid RISK MANAGEMENT MOBILE SOFTWARE FUNDS SETTLEMENT ONBOARDING HARDWARE ANALYTICS AND REPORTING CHARGEBACK AND DISPUTES SECURITY FRAUD DETECTION MANAGEMENT BUSINESS SYSTEM COMPL
Slide 58: Sign up, on your own, in minutes
Sign up, on your own, in minutes 56
Slide 59: Our risk management approach includes more sellers and scales efficiently
Our risk management approach includes more sellers and scales efficiently 0.1% TRANSACTION RISK LOSS > 90% 99.95% SELLER S SELF-ONBOA RD TRA NSACTIONS ASSESSE D AS A PE RC ENT OF GPV AND ARE APPROVED USING MACHINE LEAR NING Transaction risk losses represented as a trailing four-quarter average ended
Slide 60: Square Dashboard: A seller’s data
Square Dashboard: A seller’s data
Slide 61: Square Dashboard: A seller’s data, with insights
March 7, 2017 – April 7, 2017 FRI MAR 27, 2017 1,440 2,000 310 1,130 Square Dashboard: 1,500 A seller’s data, 1,000 with insights 500
Slide 62: Square Dashboard: Daily summary in your inbox
Square 11:54 Daily Sales Summary for Joe’s Pizza To: CEjoe@joespizza.net Square Dashboard: Daily summary in your inbox
Slide 63: Square Dashboard: Daily summary in your inbox
Square 11:54 Daily Sales Summary for Joe’s Pizza To: CEjoe@joespizza.net Square Dashboard: Daily summary in your inbox
Slide 64: Speed matters: Get paid fast
Speed matters: Get paid fast GET PAID GET PAI D GET PAID IN 2+ DAY INSTANTLY THE NE XT DAY ME RCHANT ACQUIRERS TAKE PAYMEN T Square sellers receive next business day settlement for payments before close of business day at 5 PM Pacific. Square sellers get paid instantly using Instant Deposit. 61
Slide 65: Cumulative Instant Deposit volume
Cumulative Instant Deposit volume $ 3B +74 DAYS $2B +1 06 DAYS $1B 41 3 DAYS L AUNC H AUGUS T 2 0 15 62
Slide 66: Differentiated hardware
Differentiated hardware 63
Slide 67: Differentiated hardware
Differentiated hardware 63
Slide 68: Square Reader for magstripe
SQUARE READER FOR MAGSTRIPE
Slide 69: Square Reader for contactless and chip
SQUARE READER FOR CONTACTLESS AND CHIP
Slide 70: Speed matters: EMV transaction speed
SQUAR E R EADER 8–13 sec Speed matters: EMV transaction speed 5.7 sec 4.2 sec 3.6 sec REPO RTED Q4 2 015 Q3 2 016 Q1 2017 IND USTRY (L AUNCH) AV ERAG E Reported industry average speeds: 66 New York Times, “Visa Speeds Up Chip Cards With Software Upgrade,” 2016; Wall Street Journal, “Chip Card Nightm
Slide 71: Square mobile app and reader
9:41 Square mobile app and reader 67
Slide 72: Square Point of Sale app and Stand
Square Point of Sale app and Stand
Slide 73: Point of Sale
Point of Sale ORDERS ITE MS AND I NVENTORY EMPLOYEES AND LOCATION S STORE O PE RATIONS CUS TO MER D IRECTORY AND I NTEGR ATED WITH SQUARE’S MANAGED PAYMEN TS P RODUCT CORRIDOR SAN FRANCISCO, CALIFORNIA 69
Slide 74: Invoices, virtual terminal, e-commerce API, Cash for Business
INVOICES VIRTUA L TER MINA L E-COMM ERCE A PI CASH FOR BUSINESS 70
Slide 75: Cash, Capital, Appointments and other products
CASH CAPI TAL AP POINTMENTS SQUARE FOR AP P RETAI L MA RKETPL ACE MANAG ED POINT PAY MEN TS OF SA LE CUS TOMER BUILD WITH ENGAGEMENT SQUAR E CAV IAR PAY ROLL E-COM ME RCE 71
Slide 76: Point of Sale for key verticals
Point of Sale for key verticals SERVI CES RETAI L FOOD 72
Slide 77: Square Appointments: A point of sale for services sellers
Square Appointments: A point of sale for services sellers 73
Slide 78: Bang, Seattle, Washington
BANG SEATTLE, WASHINGTON
Slide 79: Square for Retail: A point of sale for high-inventory sellers
Square for Retail: A point of sale for high-inventory sellers 75
Slide 80: Jake, San Francisco, California
JAKE SAN FRANCISCO, CALIFORNIA 76
Slide 81: Caviar food ordering platform: A point of sale in the buyer’s hand
Caviar food ordering platform: A point of sale in the buyer’s hand
Slide 82: Caviar food ordering platform: Extending the restaurant’s reach
Caviar food ordering platform: Extending the 50% OF F OOD ORDER VOLUM E COM E > 2X ORDERS Y EA R OVER YEA R restaurant’s reach FR OM R ESTAURANTS THAT SEL L >$1 00K WI TH CAVIAR GROWTH IN Q1 2017 78
Slide 83: Souvla, San Francisco, California
SOUVLA SAN FRANCISCO, CALIFORNIA 79
Slide 84: Black Sands Brewery, San Francisco, California
BLACK SANDS BREWERY SAN FRANCISCO, CALIFORNIA 80
Slide 85: A platform for developers to meet sellers’ needs
A platform for developers to meet sellers’ needs E-COMM ERCE THIR D-PARTY A PPS IN- HOUSE Integrate Square on websites, Integrate Square with third-party Integrate Square into a seller’s enabling sellers to manage offline apps and back-office solutions specialized POS to accept payments and online b
Slide 86: Cash transactions are anonymous
Cash transactions are anonymous 82
Slide 87: Credit transactions are, too
Credit transactions are, too 83
Slide 88: Square builds a powerful connection
Square builds a powerful connection Photographer: Daniel Hennessy 84
Slide 89: Customer Engagement: Creating a customer-powered point of sale
Customer Engagement: Creating a customer-powered point of sale DI GI TAL RECEIPTS DIR ECTORY LOYALTY MA RKETING 85
Slide 90: Customer Engagement: Creating a customer-powered point of sale
Customer Engagement: Creating a customer-powered point of sale DI GI TAL RECEIPTS DIR ECTORY LOYALTY MA RKETING 350M 90M 70% 12 > DI GI TAL RECEIPTS IN UNIQUE C USTOM ER INCR EASE IN $ IN SALES FOR EVE RY THE L AST TWELVE PR OF ILES WITH FREQUENCY OF $1 SPENT ON SQUA RE MONTH S AS OF Q1 2017 EMAI L
Slide 91: Square Capital: Funds to grow your business
Square Capital: Funds to grow your business 89
Slide 92: Square Capital
Square Capital ~ 70% OF SQ UAR E CAPITAL SELLERS > 90% CUSTOMER ~ 80 NET PR OMOTER SCORE USED FUNDS FOR PURCHA SING SATISFACTION SCORE EQ UIPMENT, OPENING NEW LOCATIONS , OR MARKETIN G Square Capital use of funds is based on a Square survey of 7,300 Square Capital sellers as of Q1 2017. 88
Slide 93: Square Capital
Square Capital $ 1.5B CUMUL ATIVE LOA NS AN D MCAs + ~ 4% LOAN DEFAULT RATES SI NCE P UBLI C L AUNC H IN MAY 2014 All figures represented as of March 31, 2017. 89
Slide 94: Expanding Square’s product surface area
Expanding Square’s product surface area Select product launches and updates E MPLOYE E MAN AG E M E N T U K L AU N C H IN VO ICES IN S TAN T D E PO SI T S Q UA RE F OR R E TA I L SQUARE CAP ITAL APPO I N T ME N T S AP P I N VOI C E S F OR PO IN T OF SA L E DA SH B OA R D A PP S C H E DU L E D I N VO
Slide 95: Expanding Square’s product surface area
Expanding Square’s product surface area Products launched since 2014 as percentage of Adjusted Revenue 29% E MPLOYE E MAN AG E M E N T U K L AU N C H IN VO ICES IN S TAN T D E PO SI T S Q UA RE F OR R E TA I L SQUARE CAP ITAL APPO I N T ME N T S AP P I N VOI C E S F OR PO IN T OF SA L E DA SH B OA R
Slide 96: Jack’s Bar-B-Que, Nashville, Tennessee
PAYMENTS EMPLOYEE MANAGEMENT LOCATION MANAGEMENT SQUARE READER FOR CONTACTLESS AND CHIP SQUARE STAND ANALYTICS JACK’S BAR-B-QUE NASHVILLE, TENNESSEE 92
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Slide 99: Growth Strategy
Growth Strategy KEVIN BURKE
Slide 100: Four pillars of our growth strategy
D R IV E S CA L E AND EF FI CI ENCY I N ACQU ISI TI ON Four pillars of our ACC E L E R AT E M OVE UP- MARK E T growth strategy GR OW AN D R E TA IN E X IS TI NG BAS E CA PT U R E IN T E R N ATI ONAL OP P ORTUNI TY 96
Slide 101: Four pillars of our growth strategy
DRIVE SCALE AND EFFICIENCY IN ACQUISITION Four pillars of our ACCE L ER ATE M OVE UP - MA R KE T growth strategy GR OW A ND R ETA I N E XI S T IN G BA SE CA PT UR E IN T E R N AT I O N AL OP P ORT UN ITY 97
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Slide 104: Footnote
Footnote 100
Slide 105: Footnote
Footnote 101
Slide 106: Footnote
Footnote 102
Slide 107: Footnote
Please ring bell > for assisiance,
Slide 108: Footnote
We accept a ee | CRED Gards through 7 |
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Slide 110: Square is among the most trusted brands
CONSUM ERS WHO WOULD CONSIDER THESE COMPA NIES IF THEY OFFERE D BA NKING SE RV ICES 50% 41% 31% 29% Square is among the 29% most trusted brands 29% 26% 26% 26% 23% Source: Accenture—The Digital Disruption of Banking, 2014. 106
Slide 111: Our brand is well known and well loved
NET PR OMOTER SCORE (AVERAGE VS . LE ADER) SQUARE 67 PAYMENTS 38 Our brand is well known SMARTPHONE 67 and well loved CREDIT CARD 52 SOFTWARE 58 Square Net Promoter Score (NPS) average across the last four quarters as of Q1 2017. 107 Source: Satmetrix 2014 NPS Benchmarks
Slide 112: Creating a community of brand promoters
70% GRE ATER C USTOM ER LIFETIME VA LUE FOR A SQUARE PROM OTE R Creating a community of brand promoters 3X MOR E LIKELY FOR A PROM OTER TO REFE R SQUA RE 108
Slide 113: Enabling a virtuous cycle of scalable acquisition
ORGAN IC SEL F-SERVE B RAND AWAR ENE SS ONBOAR DING Enabling a virtuous cycle of scalable acquisition RE FERR AL S AN D BEST-IN -CL ASS WOR D-O F-MOUTH PR ODUCT ACTIV IT Y E XPE RIE NC E SQUAR E PR OMOTE RS 109
Slide 114: We accelerate this acquisition cycle with a broad set of channels
We accelerate this acquisition cycle with a broad set of channels PAID MARK ET ING DISTRIBUTION AND OUTRE AC H C HANNELS ONLINE SEARCH RETAIL ONLINE DISPLAY LOCAL MARKETING/EVENTS DIRECT MAIL PUBLIC RELATIONS DIRECT RESPONSE TELEVISION SEO MOBILE ADVERTISING CONTENT/SOCIAL MEDIA AFFILIATES REFERRALS
Slide 115: Retailers: this one’s for you. Meet Square
PRESORTED STANDARD U.S. POSTAGE Meet Square for Retail. PAID BURLINGAME, CA Retailers: PERMIT NO. 1 Visit square.com/retail to try it free. this one’s for you. Try the new We serve a lot of retailers like you. So we made Square for Square for Retail: a built-from-scratch solution loaded with our mos
Slide 116: Our portfolio of channels drives awareness and acquisition
DIRECT RESPONSE Our portfolio of channels drives awareness and TARGETE D REACH BR OAD REACH acquisition with different targeting strategies AWARE NESS B UILDING 112
Slide 117: We continuously optimize this portfolio by evaluating tradeoffs
HIGHER LIF ETIM E VALUE We continuously optimize HIG HER COST LOWER COST this portfolio by evaluating TO ACQUIRE TO ACQUIRE tradeoffs between lifetime value and cost to acquire LOWE R LIFETIM E VA LUE 113
Slide 118: We actively manage and scale individual channels using machine learning
3x INCRE ASE IN DIRECT M AIL VOLUM E WHILE MAINTA INING CONSISTE NT CONVE RSION RATE S We actively manage and scale individual channels using machine learning CO NVER SI ON RATE DI RECT MAI L QUANTITY 1H 2H 1H 2H 1H 2H 1H 2H 2013 2014 2015 2016 114
Slide 119: Get Paid Fast
Get Paid Fast Get started free at square.com/free.
Slide 120: This has enabled us to have a ubiquitous presence across the U.S.
This has enabled us to have a ubiquitous presence across the U.S. $ $ $ Scale indicates transaction size; color indicates seller industry. 116 Tuesday, April 4, 2017, 1:40 PM–2:10 PM Pacific
Slide 121: Four pillars of our growth strategy
DR I VE S CAL E A ND E FF IC I E NCY I N ACQ U I SI TI O N Four pillars of our ACCELERATE MOVE UP-MARKET growth strategy GR OW A ND R ETA I N E XI S T IN G BA SE CA PT UR E IN T E R N AT I O N AL OP P ORT UN ITY 117
Slide 122: Up-market sellers are a large opportunity
Up-market sellers are a large opportunity U. S . SELLER S U. S . GROSS SA LE S L ARGE $100M+ 22K $5.5T MID MAR KE T $1M–$100M 895K $3.8T A DD IT I ON AL A RE A OF FOC US SMB $250K–$1M 2.7M $1.0T MIC RO <$250K IN ANNUAL REVENUE 17.0M $451B Source: 2012 U.S. Census, Euromonitor. 118 All figures are ba
Slide 123: Philz Coffee
PHILZ COFFEE POPULAR COFFEE CHAIN WITH 36 LOCATIONS Footnote 119
Slide 124: Reynolds Towing Service
REYNOLDS TOWING SERVICE TOWING AND ROADSIDE ASSISTANCE SERVICES WITH 32 TRUCKS
Slide 125: 1-800-GOT-JUNK?
1-800-GOT-JUNK? LARGEST JUNK REMOVAL SERVICE WITH OVER 100 LOCATIONS
Slide 126: Coachella
COACHELLA ICONIC MUSIC FESTIVAL WITH 99,000 DAILY ATTENDEES
Slide 127: Laser Away
LASER AWAY LASER HAIR AND TATTOO REMOVAL WITH 32 LOCATIONS
Slide 128: Market dynamics and Square differentiators
MERCH AN T INTEGRATED BUSINE SS ACQUIRERS POINT-OF-SA LE SAA S • Commoditized payments • Manual onboarding • Best-of-breed approach with specialized • Low orientation for tools • Complex setup and MARKET solutions to grow business maintenance DYN AMI CS • Lack of integration with • Salesforce-driven
Slide 129: Cash, Capital, Appointments and other products
CASH CAPI TAL AP POINTMENTS SQUARE FOR AP P RETAI L MA RKETPL ACE MANAG ED POINT PAY MEN TS OF SA LE CUS TOMER BUILD WITH ENGAGEMENT SQUAR E CAV IAR PAY ROLL E-COM ME RCE 125
Slide 130: What people think of “up-market” vs. Square’s approach
WHAT P EOP LE THI NK WHEN SQUAR E’S APPROACH THE Y HEAR “UP-M AR KET” TO UP- MA RKET Relies on sales for onboarding >80% of larger sellers self-onboard Majority of sales leads are inbound and handled Majority of sales are manual and headcount driven through machine learning Verticalized sales expert
Slide 131: We’re investing in scalability to increase efficiency of sales and support
L A RGE R SELLE RS GPV We’re investing in scalability to increase efficiency of our SUPPORT HE ADCOUNT sales and support SA LE S HE ADCOUN T Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Larger sellers defined as sellers that process more than $125K in annualized GPV. 127
Slide 132: Growing up-market sellers while maintaining our payback period
Growing up-market sellers while maintaining our payback period GPV MIX BY SELLER SIZE PAYBACK PE RIOD 15% 12% 9% 6% 4% 27% 28% 22% 25% 17% 2013 2014 2015 2016 2017 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 2 013 2 014 2 015 2 016 M I D M A RKET SELLER S SMB SEL LERS >$500K Annualized GPV $125K–$500K Annualized GPV
Slide 133: Four pillars of our growth strategy
DR I VE S CAL E A ND E FF IC I E NCY I N ACQ U I SI TI O N Four pillars of our ACCE L ER ATE M OVE UP - MA R KE T growth strategy GROW AND RETAIN EXISTING BASE CA PT UR E IN T E R N AT I O N AL OP P ORT UN ITY 129
Slide 134: Systematic approach to effective growth and retention marketing
Systematic approach to effective growth and retention marketing WH O WH AT W HE N H OW MILLI ONS 40+ PRODUCTS HUNDREDS OF 15+ OF SELLERS AND INTEGR ATI ONS TRIGGE R SIGNA LS CHANNELS PER CA M PA IGN 130
Slide 135: Sugar Shack Donuts & Coffee
SUGAR SHACK DONUTS & COFFEE RICHMOND, VIRGINIA 131
Slide 136: Sugar Shack Donuts is growing with Square
Sugar Shack Donuts is growing with Square F IRST LOCATI ON Q2 2 013 +1 LOCAT I O N SQ UARE S TA N D +2 LOCAT I O N S +1 LOCAT I O N E MPLOYE E MAN AGE M EN T G IF T CARD S +1 LOCAT I O N +2 LOCAT IO N S +1 LOCAT I O N CU S TOM E R M AR K E T I N G ON L I N E S TO RE +1 LO CATI O N Q1 Q1 Q1 Q1 Q1 201
Slide 137: Sugar Shack Donuts is growing with Square
Sugar Shack Donuts is growing with Square Sugar Shack’s Gross Processing Volume F IRST LOCATI ON Q2 2 013 +1 LOCAT I O N SQ UARE S TA N D +2 LOCAT I O N S +1 LOCAT I O N E MPLOYE E MAN AGE M EN T G IF T CARD S +1 LOCAT I O N +2 LOCAT IO N S +1 LOCAT I O N CU S TOM E R M AR K E T I N G ON L I N E S T
Slide 138: Creating more value for our sellers at scale
Creating more value for our sellers at scale > 2B DATA P OINTS COLLECTED AND UPDATED 100M ME SSAGES SENT TO SELLER S IN 20 16 DAILY ON OUR SQUARE SELLERS FOR CROSS-SE LL A ND RETENTION 134
Slide 139: Four pillars of our growth strategy
DR I VE S CAL E A ND E FF IC I E NCY I N ACQ U I SI TI O N Four pillars of our ACCE L ER ATE M OVE UP - MA R KE T growth strategy GR OW A ND R ETA I N E XI S T IN G BA SE CAPTURE INTERNATIONAL OPPORTUNITY 135
Slide 140: There is a huge untapped opportunity internationally
HOUSE HOLD FINA L CONSUM PTION E XPE NDITUR E ($ USD) $24T There is a huge untapped $43T opportunity internationally $3T $3T $18T $16T $12T $12T U.S. Canada Australia Rest of Global and Japan and UK World Source: World Bank national accounts data 2015. 136
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Slide 142: The first step to executing was proving the concept in Australia
AUSTRALIA GPV > 80% AVERAG E QUART ER- OVER- QUA RTER GR OWTH The first step to executing was proving the concept in Australia Q1 Q2 Q3 Q4 Q1 2016 2017 138
Slide 143: Next step was launching UK: an attractive market and doorway to expansion
Next step was launching UK: An attractive market and a doorway to broader expansion opportunities 5.5M SMALL BUSINE SSES 47% OF PRIVATE SECTOR REV ENU E THE UK E NA BLES BROADER IN THE UK FR OM SMALL BU SINESS E XPA NSION OP PORTUNITIE S 1. Pan-European Agreements 2. Dublin center of operations to s
Slide 144: We have a holistic offering in every market
We have a holistic offering in every market ! " # $ % UN I T E D STAT E S CA N ADA JAPA N AUS T R A L I A U N IT E D K I N G DO M PAY ME N TS HAR DWARE P OIN T OF SA LE DASH BOA RD I N VOIC ES E MP LOY E E AND LOCATIO N M ANAG E ME N T D IRECTORY AND CARD O N FILE I N VE N TORY MANAGEM ENT REGISTE R
Slide 145: Flower Girl London
FLOWER GIRL LONDON NORBURY LONDON, UK
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Slide 147: Financials
Financials SARAH FRIAR
Slide 148: Powerful business model
T RE MEND OUS S CAL E S IGN IF ICAN T GROW TH Powerful business model AT TRACTI VE COHO RT ECON OMI CS S T RONG M ARGI N TRA JECTO RY 144
Slide 149: Significant growth at scale
G ROS S PAYM ENT VOLUME (GPV ) ADJUSTED R EV ENUE $14B $204M $10B Significant $118M growth at scale 43% GROWTH 73% GROWTH At IPO Q1 2017 At IPO Q1 2017 A reconciliation of non-GAAP metrics used in this document to their nearest GAAP equivalents is provided in the appendix to this document. 145 “At I
Slide 150: Key drivers of growth
NEW SELLER S Key drivers of growth STRONG RE VENUE RETE NTION NEW PR ODUCTS 146
Slide 151: Initial sales and marketing investment of $36M
Initial sales and marketing investment of $36M Q1 2015 Cohort SA LES AN D M AR KE TING E X PEN SE ($36M) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2015 2016 2017 147
Slide 152: Profit exceeds initial sales and marketing in 4–5 quarters
Profit exceeds initial sales and marketing in 4–5 quarters Q1 2015 Cohort $ 40M IN C UMUL ATIVE TRA NSACTION-BASE D PROFIT AFTER FI VE QUARTERS $40M CU MUL ATIVE COHORT TRA NSAC TION-BAS ED PR OFIT SA LES AN D M AR KE TING E X PEN SE ($36M) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2015 2016 2017 Cumulative cohort
Slide 153: … and continues to grow thereafter
… and continues to grow thereafter Q1 2015 Cohort $ 62M IN C UMUL ATIVE TRA NSACTION-BASE D PROFIT AFTER EI GH T QUARTERS $62M CU MUL ATIVE COHORT TRA NSAC TION-BAS ED PR OFIT SA LES AN D M AR KE TING E X PEN SE ($36M) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2015 2016 2017 Cumulative cohort transaction-based pro
Slide 154: Our cohort economics highlight go-to-market efficiency
1.7X 1.1X ROI AFTER ROI AFTER EIGHT QUARTERS $62M FIVE QUARTERS $40M Our cohort economics highlight go-to-market efficiency Q1 2015 Cohort ($36M) Q1 Q2 Q1 2015 2016 2017 ROI is calculated by dividing cumulative cohort transaction-based profit of the Q1 2015 cohort of sellers by sales and marketing e
Slide 155: Consistent cohort growth leads to strong revenue visibility
Consistent cohort growth leads to strong revenue visibility GPV by Annual Cohort 107% TRANSACTION-BA SED PROFIT RETEN TION 2016 COHORT 2015 COHORT 2014 COHORT 2013 COHORT PRE-2012 COHORT 2012 2013 2014 2015 2016 Transaction-based profit retention calculated as year-over-year retention of transaction
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Slide 157: Cross-selling enhances cohort economics
Cross-selling enhances cohort economics Illustrative Seller Example—Adjusted Revenue opportunity for an individual seller Retail seller, $1M in annual sales, $500K in GPV, three locations 3x INCRE ASE LOW CUSTOMER ACQUIS ITION COSTS IN ADJUSTE D RE VENUE $900 $9,300 $900 $2,500 $2,000 $3,000 Transac
Slide 158: Cross-selling enhances cohort economics
Cross-selling enhances cohort economics Q1 2015 Cohort $79M $ 62M 79M $ IN C UMUL ATIVE A DJUSTED REV ENUE AFTER EIGHT QUARTER S CU MU L ATI VE SUBSC RIPTION AND S ERVIC ES-BA SE D REVEN UE CU MU L ATI VE COHORT TRA NSAC TION-BAS ED PR OFIT SA LES AN D MAR KE TING E X PEN SE TO ACQU IRE ($36M) Q1 Q2
Slide 159: Cross-selling enhances cohort economics
PAYBACK RE VENUE R ETENTION 113% 4–5 QUARTERS 3–4 QUARTERS Cross-selling enhances 107% cohort economics Transaction- Adjusted Transaction- Adjusted Based Profit Revenue Based Profit Revenue Payback for transaction-based profit and Adjusted Revenue represents the average number of quarters it takes f
Slide 160: Industry-leading revenue retention
RE VENUE R ETENTION METR ICS 13% Industry-leading revenue retention 5% 2% Private SaaS Public SaaS Square*** Median* Average** Sources: Pacific Crest Public SaaS Company Disclosure Metrics for Retention and Renewal Rates, 2016 Pacific Crest Private SaaS Company Survey, company’s most recent SEC fili
Slide 161: Investing in growth while benefiting from operating leverage
Investing in growth while benefiting from operating leverage 16% 13% A DJ US T E D E BI T DA M A R GI N 7% 7% A DJ US T E D RE VE N U E 1% (5%) (6%) (13%) (13%) (17%) (24%) (23%) (53%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2014 2015 2016 2017 Adjusted EBITDA margins calculated on Adjusted Revenue b
Slide 162: Investing in growth while benefiting from operating leverage
NON- GAA P OPE RATING E XPENSES 132% 117% 98% Investing in growth 78% while benefiting from operating leverage P RO D U C T D E V ELO P M E NT SA L E S A N D MA R K E T I N G GE N E R AL A N D A D M IN IS TRATI VE OT HE R E X P EN S E S 2013 2014 2015 2016 Operating Expenses excludes share-based com
Slide 163: Growing GPV while driving down transaction losses over time
Growing GPV while driving down transaction losses over time GROS S PAY MENT VOLUME TRA NSACTION LOSS TRA NSACTION LOSS A S A PER CENTAGE OF GPV $50B $45M 0.17% 7% 0.09% $11M $7B 8x GROWTH 4x GROWTH 2012 2016 2012 2016 2012 2016 159
Slide 164: Our business benefits from high incremental margin
Our business benefits from high incremental margin FIXED COSTS VA RIABLE COSTS PR O D U CT C USTOM ER SA LE S AN D E N GI N E E R I N G ACQUISITION M AR KETING GROW TH H AR DWA R E COST OF INV ESTM E N TS D E V E LO P M E N T GOOD S SOLD DATA S CI E N CE R ISK LOSS ONGOING VAR IABLE DATA CEN TER AN
Slide 165: Our business benefits from high incremental margin
Our business benefits from high incremental margin Variable cost as a percentage of Adjusted Revenue TRANSACTION-BA SED SUBSCRIPTION A ND SERVICES-BAS ED C USTOM ER ACQUISTION CUSTOMER ACQUISTION ONGOING ONG OIN G VA RIABLE VARIABLE Variable costs include expenses related to sales and marketing, cos
Slide 166: An overview of our investments today
An overview of our investments today PRO DUCT DEVELOPMENT SALES AND MARKETING GENER AL A ND ADM INISTRATIVE Engineering, data Paid marketing, direct sales, account Finance, legal, communications, science and design, management, mag stripe reader, customer support, product hardware development Square
Slide 167: We are investing in sustainable growth
We are investing in sustainable growth BUI LDI NG A WORLD- GO TO MARKET GENER AL A ND CL AS S TEAM ADM INISTRATIVE EFFICIE NCY Continue to invest in talent Maintaining go-to-market … while leveraging machine learning acquisition to build and efficiency and expanding into to drive greater operational
Slide 168: Our investment road map
Our investment road map 3 SQUARE CASH 2 BUILD WITH SQUARE CUSTOMER ENGAGEMENT SQUARE CAPITAL SQUARE PAYROLL 1 CAVIAR HORIZON 3 INTERNATIONAL PAYMENTS Bold bets: Long-term growth drivers HORIZON 2 POINT OF SALE Newer offerings that are beginning to scale HORI ZON 1 Proven investments with strong pred
Slide 169: Long-term targets
2017 Guidance 2015 2016 Long Term (Midpoint) ADJU S TE D RE VEN UE 64% 52% 31% 20%–25% G ROW TH Long-term targets ADJU S TE D EB I TDA MA RGI N (9%) 7% 13% 35%–40% See appendix for GAAP reconciliation to Adjusted Revenue and Adjusted EBITDA. 165 Adjusted EBITDA margin is calculated as Adjusted EBITD
Slide 170: Our business model provides a compelling investment opportunity
Our business model provides a compelling investment opportunity TR E ME N D O US S CA L E Millions of active sellers, $53 billion trailing four quarter GPV SI GN I FI CA N T G R OW T H 39% Adjusted Revenue year-over-year growth ATTR AC TI V E COHO RT 113% Adjusted Revenue retention rate and 3-to-4 q
Slide 171: Q&A
Q&A
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Slide 173: square.com/investors
square.com/investors
Slide 174: Appendix: GAAP Reconciliation
Appendix GAAP RECONCILIATION
Slide 175: Adjusted Revenue—Reconciliation to GAAP Total Net Revenue
Adjusted Revenue—Reconciliation to GAAP Total Net Revenue Adjusted Revenue is a non-GAAP financial measure that reflects our total net revenue less transaction-based costs, and excludes Starbucks transaction-based revenue. We believe it is useful to exclude transaction costs from Adjusted Revenue as
Slide 176: Adjusted EBITDA—Reconciliation to GAAP Net Loss
Adjusted EBITDA—Reconciliation to GAAP Net Loss Adjusted EBITDA is a non-GAAP financial measure that represents our net loss, adjusted to eliminate the effect of Starbucks transaction-based revenue and Starbucks transaction-based costs, before interest income and expense, provision or benefit for in
Slide 177: Adjusted Net Income (Loss) Reconciliation
Adjusted Net Income (Loss) Reconciliation Adjusted Net Income (Loss), and Adjusted EPS are non-GAAP financial measures that represent our net loss and net loss per share, adjusted to eliminate the effect of Starbucks, share-based compensation expenses, amortization of intangible assets, amortization
Slide 178: Reconciliation to GAAP Operating Expenses
Reconciliation to GAAP Operating Expenses Year Ended December 31, 2013 2014 2015 2016 (in thousands) (unaudited) OPERATING EXPENSES ($233,727) ($376,565) ($544,488) ($746,491) SHARE-BASED COMPENSATION 14,658 36,100 82,292 138,786 DEPRECIATION AND AMORTIZATION 8,272 17,584 20,804 27,536 LITIGATION SE
Slide 179: square.com/investors
square.com/investors