It’s highly recommended to listen to earnings calls (for UK-listed share - just go to Investor(s)/Investor Relations (IR) and check for any announcements and/or subscribe to official PR/IR news).
For US-listed well-known stocks, some sites like AlphaStreet, Motley Fool and SeekingAlpha offer transcripts of those earnings calls.
Square’s earnings call was in late February after volatility has begun all over the markets. Nevertheless, Square offered earnings guidance for 2020 showing they expect large growth in 2020. They said they already launched the payments terminal (card reader) business in the UK. Australia and Canada during 2019.
Guidance for 2020
Turning to our financial guidance for 2020. We expect to achieve total net revenue of $5.90 billion to $5.96 billion and gross profit of $2.44 billion to $2.475 billion or 34% year-over-year gross profit growth at the high end of the range, excluding Caviar. These figures are ahead of the preliminary expectations we shared on our third quarter call as the business has continued to execute at high-growth rates even as we’ve scaled.
We expect our 2020 transaction profit margins as a percentage of GPV to be relatively stable compared to 1.08% in 2019 as we expect any benefit from the pricing change to be largely offset by mix shift to larger sellers. We expect to generate adjusted EBITDA between $500 million and $520 million, consistent with the preliminary guidance we provided on our last call. Similar to 2019, if we deliver top line outperformance during the year, we do not intend on increasing our adjusted EBITDA guidance and instead plan on reinvesting that upside back into the business where we see opportunities to benefit long-term profitable growth. Our EBITDA guidance includes strategic investments across both ecosystems, including the previously outlined sales and marketing spend for our Seller ecosystem, which we expect to achieve a 4-quarter payback on our overall 2020 spend and to return multiples over time based on the strong returns we see.
Additionally, as previously mentioned, 2020 guidance includes a larger-than-normal facilities expansion related to our Oakland office as well as additional regional offices, which will add an incremental onetime step-up of $50 million to our operating expense base. Over the medium to long term, we expect to continue to drive leverage from our G&A expenses as we have historically. Finally, we’re hosting our Investor Day on March 18 in San Francisco, where we will provide a deeper update on our long-term vision, market opportunity, strategy and business model for the Seller and Cash ecosystem and long-term financial outlook.
Cash App’s contribution to the top line
In the fourth quarter, Cash App delivered $183 million in revenue, excluding Bitcoin, up 96% year-over-year and $141 million in gross profit, up 101% year-over-year. Cash App’s strong and sustained growth has led to a mix shift in our overall company gross profit with cash accounting for 27% of total gross profit in the fourth quarter compared to just 19% a year ago.
Cash App’s DAU, MAU and user monetisation
As Jack mentioned, Cash App was at 24 million monthly actives in December, up 60% year-over-year and has added more new monthly actives each year since launch with December 2019 being its strongest month for new adds. Cash App daily active customers increased at an even faster clip of 80% year-over-year as we’ve enhanced discoverability and navigation to our products as well as added new products like equity investing. Cash App has not only been growing its engaged customer base to an impressive scale, but it has also driven consistent growth in revenue per customer over the past few years. In December, Cash App generated more than $30 in annualized revenue per monthly active customer, excluding Bitcoin, which more than doubled from less than $15 in December of 2017.
Vertical integration - Seller and Buyer
And we have an incredible advantage over our peers in this industry because of the two ecosystems that we’re building: one, seller focused and also focusing on their customers but Cash App up as well. Pairing both of them together is quite powerful.
Guidance updated after the $1 billion convertible bond was issued to fund operations - affecting interest expenses and thus net income:
The revisions to Square’s first quarter and full year 2020 guidance, which was previously announced on February 26, 2020, are only a result of the Notes issued by Square on March 5, 2020. As a result of the issuance of the Notes, Square is revising its guidance for net income (loss) per share and Adjusted Net Income Per Share (Adjusted EPS) to reflect the estimated increase in interest expense. Square is also revising its guidance for net income (loss) per share to reflect the estimated amortization of debt discount and issuance costs associated with the issuance.
As a reminder, Square will release financial results for the first quarter of 2020 on May 6, 2020, after market close.