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| And we see a strong correlation with inflows into Cash App driving gross profit and customers being more engaged with the broader set of products across Cash App |
| And what we've seen in terms of the behaviors and the engagement on Cash App Card has been healthy, not only with a growth in actives but also growth and spend per active, which means that we saw meaningful growth in overall spend on Cash App Card in 2023 |
| First, where we've been, in particular our performance for the full year and fourth quarter of 2023, where we saw strong growth and meaningful improvements in profitability, driving progress against our investment framework |
| And as we said in the letter in a lot of detail, I think we'll see very positive outcomes from that focus and it allows us to go to parts two and three of that strategy, which is on families and also becoming a Social Bank |
| We're really excited about the progress that we've seen over the past year and how quickly we've been able to drive growth, as we've expanded to more and more merchants |
| And I believe we'll be able to push really hard and see really good outcomes |
| Adjusted EBITDA was $1.79 billion, up 81% year-over-year and 24% margin on gross profit, our highest-ever |
| And finally, point you to that strong engagement where our customers using our banking products are ultimately more engaged with Cash App Card monthly actives bringing in over two times more inflows, 2.3 times more inflows, and those direct deposit monthly actives bringing in seven times more inflows than a peer-to-peer active |
| Cash flow generation also improved this year as adjusted free cash flow for 2023 was $515 million, up from negative $346 million a year ago |
| And I think in the very near future, our designers as well, that allows us to learn much faster, it allows us to ship faster, allows us to correct mistakes much faster, and really be ahead of the market where we think our strength is, which is creativity, and bringing all these very complex systems together |
| During 2023, Square and Cash App each achieved positive gross profit retention in aggregate across our annual cohorts, Square cohort saw strength in software and banking, offset softness in processing volumes during the year |
| And with a savings launch where we're offering a yield for customers who direct deposit with us, a strong yield for customers who direct deposit with us at 4.5%, and a more modest yield for customers who use Cash App Card at about 1.5% |
| The respective midpoints represent margin at 12% and 29% and year-over-year growth of 361% and 57%, demonstrating our continued focus on driving profitable growth |
| Adjusted EBITDA was $562 million and adjusted operating income was $185 million, both higher than our guidance, driven by continued discipline in discretionary spend |
| And that constraint, again, is what leads to stronger prioritization and focus in the areas that will impact our customers the most and ultimately lead to profitable growth |
| Our primary objective in 2024 is to deliver an improvement from the Rule of 29 we achieved in 2023, on a combined company basis |
| Within our card-not-present volumes, we saw solid growth in online volumes up 11% year-over-year |
| This represents a year-over-year margin expansion of approximately 9 points on adjusted operating income and 7 points on adjusted EBITDA |
| While Square GPV growth has moderated, driven by GPV per seller and MKE declines, our banking products and vertical point-of-sale solutions delivered strong growth, with gross profit from these products up 18% -- 28% and 27% year-over-year, respectively |
| GMV from our BNPL platform with $8.6 billion in the fourth quarter, up 25% year-over-year, driven by strength across our Pay-in-Four offering as well as Single Use Payments, which allows customers in the U.S., UK, and Australia to shop by the Afterpay app at merchants we don't have a direct relationship with and pay using BNPL |
| Improvement from the third quarter was driven by a number of factors, including an increase in Bitcoin gross profit from pricing changes implemented during the quarter |
| Our heightened focus on efficiency, helped us improve profitability during the year |
| with a long runway for growth |
| As we look longer term, we see opportunities around monetization rate as we go deeper in the financial services ecosystem and we attach more of these products to our customer base, as our customers take on more and more products themselves, we see an opportunity to grow monetization rate |
| We have a strong pipeline as well of large merchants |
| Cash App generated $1.18 billion in gross profit in the fourth quarter, an increase of 25% year-over-year |
| We surpassed $1 billion in gross profit in 2023 for Cash App Card and that growth was three times higher than instant deposit where customers are sending their funds outside of Cash App |
| And as we are able to attach more products to our customers as they are able to grow on our platform that extends the lifetime value of these customers and ultimately what we're able to invest into go-to-market initiatives to bring customers into the Square ecosystem |
| And this opens the door for our customers to treat every single merchant that they go to as a Buy Now, Pay Later entity, which is pretty awesome and pretty cool, and we're excited about it |
| And we're very excited about the expanded potential use cases that we can utilize for -- in addition to the ones today, which are around loans |
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| And we believe that the gaps that we had in the recent past really hurt our aspirations and our execution |
| And consistent with what we shared last quarter, we've also seen a lower gross profit contribution from ramping cohorts of sellers |
| And the second thing is about three years ago, we were more in a mode of letting as many flowers bloom as possible, and it created a bunch of inefficiencies between all of our ecosystems |
| and particularly in January where we saw it driving 3 to 4 point moderation in growth |
| We expect the gross profit growth rate to moderate compared to the fourth quarter's 25% and will be lapping tougher comparisons |
| So far this year weather has periodically impacted Square GPV in the U.S |
| We realized last year that was incorrect |
| We have nine products within the market, they're only going to get stronger |
| And certain regions experienced impacts to in-person volumes particularly within food and drink, and retail |
| I think the -- that particular strategy just did not work because the expectation of the customer coming in, especially for business banking for whatever reason was off |
| For Square, we expect gross profit and GPV to moderate slightly compared to the fourth quarter of 18% and 10%, respectively |
| While we experienced positive acquisition and stable churn of existing sellers compared to prior periods, GPV per seller continued to be affected by slower discretionary spend in the U.S |
| On a GAAP basis, operating loss of $131 million was impacted by a goodwill impairment of $132 million, severance expenses of $70 million, primarily related to our recent organizational restructuring, and lease impairment restructuring expenses of $34 million |
| And these tools and these costs just weren't really great at all |
| There are some gaps that we're missing that traditional banks offer that we do not |
| And that those constraints are clarifying for us, actually in supporting further scoping, prioritization, and operational excellence in how our teams operate |
| We expect the headwind from MKE transactions to remain for some time although its impact should moderate as we expect software-enabled payments to become an increasing driver of our business |
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