Square, Inc. (SQ) CEO Jack Dorsey on Q1 2021 Results - Earnings Call Transcript

Square, Inc. (NYSE:SQ) Q1 2021 Earnings Conference Call May 6, 2021 5:00 PM ET

Company Participants

Jason Lee - Head-Investor Relations

Jack Dorsey - Chief Executive Officer, Chairman & Co-Founder

Amrita Ahuja - Chief Financial Officer

Conference Call Participants

Tien-Tsin Huang - JPMorgan.

Lisa Ellis - MoffettNathanson

Kamala Allison - Fybr Bamboo

Darrin Peller - Wolfe Research

Timothy Chiodo - Credit Suisse

Pete Christiansen - Citi

Harshita Rawat - Bernstein

Ramsey El-Assal - Barclays

Josh Beck - KBCM

Bryan Keane - Deutsche Bank

Rayna Kumar - Evercore ISI

Dan Dolev - Mizuho

Operator

Good day, ladies and gentlemen, and welcome to the Square First Quarter 2021 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

Hi, everyone. Thanks for joining our first quarter 2021 earnings call. We have Jack and Amrita with us today. 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 customers in addition to questions from conference call participants. We would 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. During this call, we will provide preliminary gross profit growth results for the month of April. These represent our current estimate for April performance as we have not yet closed our accounting financials for the month of April, and our monthly results are not subject to interim review by our auditors. As a result, actual April results may differ from these estimates. Also, we will discuss certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our Investor Relations website. An audio replay of this call will be available on our website shortly.

With that, I'd like to turn it over to Jack.

Jack Dorsey

Thanks, Jason. Thank you all for joining us. We continue to focus on helping our customers through COVID-19 as many states in the US and countries we serve reopen. With that focus in mind, this quarter, we again participated in the Paycheck Protection Program, enabling us to facilitate more than $1.4 billion in loans to date, $531 million in the first quarter to small businesses across the US, the vast majority of which were sellers with less than five employees.

Square Financial Services, our newly opened bank, will eventually allow us to expand access to banking services to many more small businesses. We also made government disbursements available to individuals through Cash App, enabling access to these funds up to two days early. We saw customer spending across the platform on critical needs such as rent, car payments, food and utility bills.

Now a few updates on our business before I turn to Amrita and your questions. We launched Square Messages this quarter, a new feature in our seller ecosystem that will efficiently connect sellers with their buyers through text or email. Square Messages is accessible from seller's online Square dashboard and consolidates communications with buyers from Square Feedback, Square Receipts and Square Appointments in one place. Now buyers can simply text or e-mail to sellers regarding their latest purchases or upcoming appointments, and sellers can respond while keeping their attention on the business.

Consumers and sellers have both expressed interest in being able to message each other directly and we believe this will help deepen the relationship and ultimately grow sales. Our omnichannel offers have enabled us to attract and retain larger sellers, too. Larger sellers come to Square for the breadth of our ecosystem, including our vertical point-of-sale products. Sellers who use Square for Restaurants or Square for Retail have adopted more than three of our products, on average, and generated greater than 5x to gross profit compared to the average seller in the first quarter.

Within Cash App this quarter, we launched Bitcoin peer-to-peer functionality. Customers can now send Bitcoin to friends and family for free within the app, which has attracted new customers to Bitcoin. This gives even more opportunities to build new network effects across the entire cash ecosystem. We've also found purposeful opportunities to connect seller and cash. This quarter, we incorporated Square Loyalty in the Cash App to drive customer discovery, engagement and retention, while also deepening the connection between buyers and sellers.

The integration allows for a richer customer experience with Square buyers to view and manage rewards using Cash App that enables cash up to reach and engage tens of millions of buyers using Square loyalty. These sorts of integrations are only possible because we have scaled ecosystems for both sellers and individuals, and we're excited about the opportunity for future connections.

Lastly, we closed the transaction to acquire a majority ownership stake in title and JZ has joined Square's Board of Directors. We believe there's a compelling intersection between music and the economy. Making the economy work for artists is similar to what Square has done for sellers. We're going to start small and focus on the most critical needs of artists in growing their fan bases. We're really enthusiastic to finally be able to start this work.

And with that, over to Amrita.

Amrita Ahuja

Thanks, Jack. There are three topics I'd like to cover today. First, a look at our performance in this first quarter of 2021; second, an update on our business through April and how we're thinking about growth comparisons going forward; third, I'll look at our investment approach for the rest of 2021, given our strong start to the year.

In the first quarter, our ecosystems delivered impressive growth, as gross profit was $964 million, an increase of 79% year-over-year. Net income was $39 million and adjusted EBITDA was $236 million. Each of our Seller and Cash App ecosystems exhibited strengths in the quarter.

Seller generated gross profit of $468 million, an increase of 32% year-over-year. We saw relatively stable gross profit growth in January and February before trends improved in March behind regional reopenings, government disbursements and lapping of the early pandemic last year.

A few factors driving sellers' strong performance. First, we continue to make meaningful progress with mid-market sellers, which now account for 30% of our seller GPV mix, up four points from a year ago. In the first quarter, mid-market Seller GPV grew 43% year-over-year, more than twice the growth of total Seller GPV. We experienced a notable recovery in GPV from existing seller cohorts and GPV growth also benefited from strong acquisition of larger sellers during the pandemic.

Second, our markets outside the US delivered strong growth, with gross profit up nearly 80% year-over-year in the first quarter and with our largest market, Australia, doubling year-over-year. We see an opportunity to drive greater scale as we launch more of our software and financial services offerings globally and expand to new markets. Third, volumes from our online channels remained strong with up more than 50% year-over-year even as card present volume returned to positive growth. Cash App generated gross profit of $495 million, up 171% year-over-year.

Looking at some of the drivers. First, we saw increased engagement across our ecosystem with customers transacting more on each Cash App product year-over-year. Monthly actives in the first quarter transacted an average of 18 times per month across the ecosystem, with March reaching an all-time high for transactions per customer.

Cash Card is a strong example of a product that has driven engagement, both for spend on the card itself, as well as in the broader ecosystem. We reached more than 10 million monthly actives in March of which 7 million transacted in a given week on average. Cash Card has also been an entry point into other products on our platform as Card Act has adopted nearly twice the number of products as non-card active in the first quarter.

Second, we wanted to touch on the importance of inflows or the amount of money pulled into Cash App. We facilitate inflows in a variety of ways and they have been a primary driver of Cash App gross profit. Ultimately, inflows are correlated to consumer spending power. When the spending power of our customers increases, they have pulled more funds into Cash App to use across our ecosystem. We saw this in March, when inflows in the Cash App increased 55% month-over-month. Cash App's top priority this year is strengthening its foundation, making it easier for customers to bring funds into the ecosystem.

Moving to first quarter profitability. Adjusted EBITDA of $236 million was primarily driven by strong topline growth late in the quarter for both Seller and Cash App as well as the $29 million release of existing transaction loss provisions related to our solar business in the fourth quarter of 2020, as we've seen loss rates come in more favorably than expected.

Next, we wanted to share with you trends for both ecosystems in April. We expect gross profit for our Seller ecosystem to grow by more than 135% year-over-year and Cash App by approximately 130% year-over-year in April. We expect year-over-year gross profit growth rate to moderate from April through the remainder of the second quarter, as growth comparisons get tougher in May and June.

Given the variability in monthly trends on a year-over-year basis, we suggest using two-year compound annual growth rates or CAGRs from 2019 to 2021 to better reflect underlying growth trends. For Seller, we've seen a more consistent growth rate on a two-year basis as Seller's gross profit CAGR was more than 25% in April, which was a slight improvement compared to the first quarter.

For Cash App, the two-year gross profit CAGR was down slightly from 142% in the first quarter to approximately 130% in April. We believe our customers had greater spending power from government funds, which drove an uplift in inflows in March and we have since seen a normalization with inflows down 16% in April compared to March. During these periods of elevated inflows, customers have found greater utility in our ecosystem and adopted more products, which we believe will ultimately drive more inflows into Cash App longer term.

Turning lastly to where we're focusing our investments in 2021. On the back of our strong momentum, profitability and encouraging early returns on investment, we intend on increasing our investments to grow our business during the remainder of 2021. We now expect to invest $1 billion to $1.1 billion in non-GAAP operating expenses, excluding risk loss in 2021, which is an increase of $200 million compared with the prior range and represents growth of 50% year-over-year at the midpoint. We intend on distributing this investment across our Seller and Cash App ecosystems as well as title, which is not included in our prior guidance.

In summary, with a strong start to 2021, we remain focused on disciplined investing to drive long-term growth. We see meaningful opportunities to continue expanding reach of our ecosystems and reaching new customers around the world.

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

Question-and-Answer Session

Operator

[Operator Instructions] And your first question is from Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang

Hi, thanks you so much for the impressive acceleration here. I wanted to ask if there's a way to maybe unpack that acceleration. I know reopenings probably played a role, stimulus probably played a role and maybe you're seeing some early returns on your stepped-up investments, Amrita, like you just mentioned there. So is it possible to maybe unpack it that way? And I think it might help us think about the go forward as well. Thanks.

Amrita Ahuja

Sure. Thanks for the question, Tien-Tsin. Taking a step back, both ecosystems are benefiting from strong tailwinds, coming out of the pandemic between reopenings, stimulus, secular shifts and from our own stepped-up investments. If you unpack it between sort of the three levers that you called out, reopening, government fund stimulus and our investments, you see all three playing out in the growth rates in Q1 and in April.

With reopenings, I think you can see that most clearly in the seller retention figures that we called out. We've been really encouraged here with the improvements that we've seen in recent months. When you look at GPV retention, existing cohorts of sellers have rebounded to around pre-pandemic levels. We're looking at that sort of two-year retention trend to normalize for the impact of COVID looking from '19 to '21. And in March and April of this year, GPV from our existing cohorts was nearly back to their 2019 levels.

Remember, this is a notable improvement from last year when the world was sort of discombobulated and our GPV retention was down about 40%. It improved to down 10% in the back half of last year, and we're now seeing back to very close to where they were in 2019, and on a gross profit basis, actually seeing positive retention for the first time since the fourth quarter of 2019.

So what we're seeing there, again, is very much due to both, strength in reopenings as well as strength in the new cohorts that we're bringing on. Our most recent cohorts from 2019 and 2018 are showing better retention compared to older cohorts, we think, partly attributable to the greater mix of larger and more omnichannel sellers.

And in fact, to your point about investments in Q1, our newly acquired 2020 cohorts continue to show strong gross profit contributions, pacing ahead of prior cohorts on a dollar basis, contributing the most gross profit of -- among any annual cohort in Q1. We think that's a strong early indicator for healthy retention in this cohort.

From a stimulus perspective, you can certainly see that play out with respect to the inflows dynamic that we talked about in Cash App, where we saw 55% inflows step up month-over-month from February to March. With a smaller step-down in April, 16% step-down, still at an elevated level, but beginning to normalize as we see those stimulus funds run through our customers' account.

And then from an investment perspective, again, some of the investments that we've made into our business, we see playing out now in Q1, where in our Seller business, our new cohort of customers in Q1 plus strong growth on a year-over-year basis, trending to the similar payback we've seen historically in last year around five quarters.

And with Cash App, the investments that we're making here are a combination of bringing customers in as well as engaging our current customers. And those engagement trends, as we called out earlier are very strong within the Cash App ecosystem, our strongest level of transactions per month at 18 times per customer in the quarter, up 40% on a per customer basis, is really an indication of the investments that we make to make our customers aware of the broader product ecosystem. And it's because of these early returns that we want to continue to lean in on the investments throughout the remainder of the year.

Tien-Tsin Huang

Got it. Good stuff. Thank you.

Operator

Our next question is from Lisa Ellis with MoffettNathanson.

Lisa Ellis

Good afternoon. So this quarter, you highlighted the integration of Square Loyalty into Cash App, which is one of the first explicit connections between the two ecosystems, I think, you've made. Can you just talk a bit about what other types of integration you're looking at making between the two ecosystems and sort of how you're thinking about the goals there, meaning focused on user growth, engagement growth, more monetization, improving underlying funding mix? Any additional color there would be helpful. Thank you.

Jack Dorsey

Yes. Thanks for the question. So, we think one of our superpowers is the fact that not only do we have an ecosystem on the Seller side that serves multiple verticals at once, but we also have the buyer side in Cash App. And our goal over time is to realize more of these connections. There's a lot of connections that you probably don't hear of, which are all internal. So everything that we build on the seller side, we can utilize internally on the Cash App side and vice versa. And that's allowed us to move much faster with both ecosystems because fundamentally, we have shared infrastructure.

So we have the external side, and we also have the external customer-facing connections, loyalty -- Square Loyalty and Cash App is a great example of that. We -- as you look at our ecosystem, as you look at how Cash Card is used, as you look at Boost, you can imagine many other connections around that. We think Square Loyalty and Cash App is a really big one because we have so many customers visiting Square Sellers, utilizing the loyalty programs and then integrating them into the Cash App and making sure that people understand that we have Cash App to offer. This allows us to build on those network effects that we develop in Cash App itself.

So ultimately, we're looking for the right connections that make sense from a customer perspective. And as we see more and more Cash Card uses at Square Sellers and we want to drive more, we have a lot of that control. And just have to make decisions around it as we learn what's best and what's most critical. So we're going to continue to look for opportunities here. There's a ton.

And as we add a new ecosystem in title, you can imagine even more, you can imagine even more connections between all three ecosystems because what makes that acquisition so compelling for us. So, this is a big part of our thesis around building these ecosystems in the first place. We'd be good with just one, but having multiple that can actually interconnect all under the same purpose is quite powerful and I think very, very unique.

Lisa Ellis

Terrific. Thank you.

Jack Dorsey

Thank you.

Operator

Our next question is from Kamala Allison, owner of Fybr Bamboo.

Kamala Allison

Hi. Thanks for having me. I'm Kamala Allison, owner of Fybr in Santa Cruz, California. We use a number of Square products to help run our brick-and-mortar and online shops. And my question is, as a small mom-and-pop retailer, my business has benefited greatly from a variety of Square solutions, including Square Register and Square Online. And as Square continues to position itself as a champion for small businesses, I'm wondering what the company's vision is for helping businesses like mine move up market and compete against larger retailers?

Jack Dorsey

Yes. Great question and thank you for trusting us and using us. This is exactly the reason we started. We found so many small sellers, micro-sellers, people who are considering opening a business in the first place. What they lacked were simple tools. We started with the simplest tool, is just enabling people to accept credit cards in the first place, which 12 years ago was not easy as a small business. And as [Indiscernible] more and more plastic, it became really critical not just to accept credit cards, but actually to not miss a sale.

So our goal here is to build a system that scales with the business. We don't want to be upper bounds on your business. And I think one of the proof points in this is we do have larger sellers. We do have larger retailers using Square. And a lot of those have actually grown with us. They didn't start large. They've grown as they've used us and as we've learned from them on how to make the tools better. So there's everything that we do in our tools is meant to scale to whatever your ambition is. And some, it's smaller, some might be much larger multi-location, multi-country, we can handle all of that.

Square Capital is a big part of this. We look deeply at what a small business needs, and we didn't give them too much and certainly didn't give them less than what they needed and doing a transparent and fair way was really important and making it easier, especially during last year when PPP came out. We have more than 80,000 sellers access $1.4 billion in PPP funding.

So every tool we make is designed in order to help a Seller make more sales and compete on a level playing field. And wherever you feel we're missing or we have a gap, please let us know and we'll move to very fast. But we're definitely here for businesses like yours and helping you grow if that's your ambition.

Kamala Allison

Awesome. Well, I appreciate everything you're doing. Thank you.

Jack Dorsey

Thank you.

Operator

And your next question is from Darrin Peller with Wolfe Research.

Darrin Peller

Thanks guy. Great job through all this. But if we just look into the Seller growth, especially as we bring [Indiscernible] Cash App has been a big driver of last year, it looks like Seller just on easier comps. But more importantly, the underlying growth trends we're seeing in some of your newer or more growthier areas picking up steam like international. And then, when we look even beyond international at e-com and omni and what that could be for you guys going forward beyond pandemic. Can you just touch on the trends you're seeing in both those areas? And then how those into the growth profile of this business, maybe even later this year and into next year and beyond?

Jack Dorsey

Amrita, you want to go ahead.

Amrita Ahuja

Yes. Hi Darrin thanks for the question. So I’ll lead off here with a couple of key points that can help orient you on how we're doing and what we're seeing so far and some of the key drivers of growth that you called out between international, omnichannel and e-commerce and growth with some of the mid-market sellers where we're seeing real traction.

With international, some of what we're seeing, particularly in the past few months and through the first quarter, is really encouraging. And that's coming on the back of closing the product parity gap that we've had between those international markets and the US And what that's leading to now is outsized growth with gross profit in the first quarter up nearly 80% year-over-year, now about 8% in seller gross profit in total.

Even with the pace of periodic lockdowns in certain markets in Q1, that growth was driven by continued mix of the acquisition of mid-market sellers as well as broader recovery and in-person activity towards the end of the quarter with reopenings, and we've seen that continue into April and again, some of the key markets that we see there between Australia and UK, in particular, where we've seen really strong growth as well as stepped-up investments. And we're now seeing the investments that we make in go-to-market in these international markets trending relatively in line with the payback, the very efficient payback that we see in the US now.

I think a lot of that again comes back to having a greater product set and greater product parity in the international markets now more than ever, and we'll continue to scale those across software, the financial services offerings and our sales and marketing spend. That's why we want to lean in.

From an omnichannel perspective as well, we've continued to see growth even with the return to positive growth on card-present volumes in the first quarter. We continue to see these omnichannel volumes, the online volumes and card-not-present with online volume growth at over 50% again in the first quarter, consistent with the average growth over the past couple of years. We see the increased importance here of our ability to address -- enable our Sellers to address their buyers through multiple channels.

And then from a mid-market perspective, we're also continuing to see this traction that we think will continue to be a source of growth for us. In this quarter, the growth from that 30% of our Seller GPV that comes from mid-market, those sellers were growing at more than 2x the rate of the overall Seller business. They grew 43% in the first quarter. And that's why we want to continue to lean in across the investments we're making in product, where that's where you see the vertical software and the developer platform really address the more complex needs that larger sellers have, as well as the investments we're making in marketing and sales. Intention is to double the sales team this year to increase our outbound outreach to reach even more larger sellers and to continue our investments in marketing across awareness, marketing and product-specific campaigns that we know are targeted to larger sellers.

Darrin Peller

That's really helpful. Just good to see the runway you guys have. Thanks again.

Amrita Ahuja

Thanks, Darrin.

Operator

Our next question is from Timothy Chiodo with Credit Suisse.

Timothy Chiodo

Thanks a lot. I'd like to dig into the Cash App inflows topic. You were talking about that a little bit during the prepared remarks. Specifically payroll direct deposit, clearly one of the more important drivers there. Maybe you could talk about some of the tactics you've been taking to increase that penetration, but of course it going beyond that. There are many other ways to drive inflows, whether it be debit cards, bank transfer, peer-to-peer trading, maybe you could talk a little bit about those as well and how they're helping to drive those inflows.

Jack Dorsey

Yes. I'll kick us off. So direct deposit remains a top priority for the Cash App team this year, and we've seen pretty meaningful traction from deposits to impact tax refund season. So a lot of our work recently has been making direct deposit much more visible and the experience more frictionless as we on it so we can help with those inflows.

One of our top priorities in 2021 is making sure our foundation can serve all the use cases in the ecosystem. So we're investing a lot in the infrastructure, automation support, compliance to allow greater funds into our ecosystem. This is a really big one and allowing customers money into Cash App in new ways. Several funding methods with Cash App does an offer to customers today, and we're going to continue to evaluate. Credit Karma was also a big mix in this as we get to focus on those inflows from a tax perspective as well.

Amrita Ahuja

And let me just add a couple of…

Timothy Chiodo

[indiscernible] on the Credit Karma point. A quick follow-up which is very related to this. Given the strengthening…

Operator

Our next question is from Pete Christiansen from Citi.

Pete Christiansen

Thank you. Good evening. Nice acceleration. Jack, I'm hoping we could dig a little bit more into Square's investment rationale for acquiring title. How should investors think about, I guess, synergy realization with the brand? And how do you envision what the early integration efforts might look like with Square's existing ecosystems? Thank you.

Jack Dorsey

Yes, great question. And I know a bunch of you out there had questions around this. We're super excited about this work because we get to broaden how we build our tools for an entirely new set of audience, and that said, is artists and musicians. If you look at the space, obviously, there's a ton of competition in streaming but there's not a really great effort around artist tools. And what -- the thesis we had going into this deal was that we want to make sure that like everything that we learn from helping a seller with very simple tools in order to participate in the economy, we can bring to an artist because we saw a ton of parallels between what a new emerging artist has to go through, the long tail of artists and what a small business has to go through. They're very similar.

And we're going to start with the most critical needs, and we have a good 100-day road map and you all should be seeing some updates within those 100 days. We're going to focus on those simple critical artist tools in a way that we know and really provide a platform for artists to turn to first when they want to release their work. And we are focused on a more emergent. We are focused on a more long tail because that is the pattern and the flow that has worked for us with the seller base.

But as you see in our business, we have handled some of the largest sellers in the world, and we expect to be able to provide the same sort of tools and experiences for the largest artists in the world as well. And fortunately, we have some of the largest artists in the world within this deal and also on our Board, who have been through the entire industry, understands what an artist needs, understand what the new emergent artists needs and how to really build a service that they love and really is giving back to them and to their career. So that was the thesis behind the deal. We're going to move super fast and we're really excited about doing the work. And I imagine with some of the releases that we will be putting out over the next year, that you will see the same parallels that we see.

Pete Christiansen

Thank you.

Operator

And we have a question from Timothy Chiodo with Credit Suisse.

Timothy Chiodo

Thank you. I appreciate that. Yes, I was just -- it was a quick follow-up there. So Jack, you were mentioning about the progress in payroll direct deposit and all the many other ways to have inflows come into the Cash App ecosystem. The brief follow-up was just that, is it fair to assume that, given all of the strength in those inflows that the Cash App marketing spend for this year could be a little bit more heavily skewed towards discretionary or what we call offensive customer acquisition spend relative to the nondiscretionary funding and some of the other portions of the cost?

Amrita Ahuja

Hey, Tim, just to pick up on your question since I know it kind of got cut off before. I wanted to also lean in on your prior question, which was around direct deposit and putting that in context of inflows. With direct deposit, we've seen encouraging recent progress, as Jack was speaking through, with March being our highest number of overall drug deposit actives and our first-time actives was growth driven by government fund inflows, paycheck deposits and tax refunds.

Although we do believe that they're still very early in this ramp, and we've clearly benefited from government disbursements in the month of March. As you noted, it does give us an opportunity as we see these higher inflows, whether they're from direct deposit customers or from other inflow sources, which by the way, were much higher, six times higher than direct deposit sources in the month of March.

As we see those elevated levels of inflows and as we see more engaged customers, we generally see higher product adoption, engagement and lifetime value. And that then unlocks the opportunity for us to invest in the business in more deliberate ways, to the second part of your question. And so we do see an opportunity here to continue to, to lean into the growth and step up that we see in the Cash App business overall.

But I do want to just make sure that we clarify in inflows, is there multiple ways to inflow money into Cash App, right? You have peer-to-peer transfer. You have cash from your bank account added automatically or one-time at a time or through direct deposit. And it's through the broader growth of inflows that we see an opportunity to continue to invest and see higher ARPUs over time.

Timothy Chiodo

Great. Well, thank you so much for taking that and the follow-up. And thank you for looking me back in.

Operator

And our next question is from Harshita Rawat with Bernstein.

Harshita Rawat

Hi. Good afternoon. Thank you for taking my question. I want to ask about crypto. You've been involved in Bitcoin from very early on. We are now seeing -- they are suggesting a majority of millennials and now interested crypto, significantly more versus a year ago. Are you looking to expand into crypto beyond, it's going buy and sell? And on a somewhat related note, what do you also think about CBBCs and squares potential goal to play there? Thank you.

Jack Dorsey

Yes. So, just a reminder on some context on why decline and why we believe this is the right path for us. We see Bitcoin as the Internet's potential to have a native currency. And we want to further that as much as we can. And a lot of our work really lines up to that. We started with buying and selling of Bitcoin in Cash App, but what we've done since, including open source development via Square Crypto, COPA, which is open source foundation for crypto patents to protect the community.

And a lot of our related work around government lobbying as well or CTI, is all around making sure that can realize a native currency, because it is so fundamental to businesses on the Internet and so fundamental to our business generally. So our focus, first and foremost, is on enabling, and this is going to be a long-term focus, on enabling Bitcoin to be the net currency. It removes a bunch of friction for our business, and we believe fully that it creates more opportunities for economic empowerment around the world. And you should see more of activity from us over the year towards this goal. So we do think that Bitcoin is the important one to focus on, and it's what we are focused on.

Amrita Ahuja

And I would add, Harshita, when you look at some of the product innovations that we have for our Cash App customers with respect to Bitcoin, there are things that we can uniquely do that we think really differentiates for us. It's the intersection of multiple products with each other, whether it was the Bitcoin Boost that you saw last quarter or it's now peer-to-peer Bitcoin, where you have the ability to – friends can send each other Bitcoin all through Cash App very seamlessly. These are things that Cash App can uniquely do to serve our customers. And we think that's part of the reason that we've been able to drive awareness more broadly with Bitcoin with our strongest acquisition of new Bitcoin actives in the first quarter and growth in volumes per customer, which we also saw in the first quarter, those are the compounding benefits that get us to the growth that we've seen here now with $75 million in gross profit in the first quarter, up 11x year-over-year.

Harshita Rawat

Okay. Thank you.

Operator

Your next question is from Ramsey El-Assal with Barclays.

Ramsey El-Assal

Hi. Thanks for taking my question. I wanted to follow up on Tidal. So understanding and appreciating that the tools for artists that you're working on, can you comment on plans or thinking around using Tidal to drive engagement for consumer users of the Cash App in like exclusive content or integration into Cash App. And I guess just kind of a bolt-on is what's your view on acquiring or developing other non-financial services assets to kind of deepen the consumer relationship? Is this just the first step in a new direction or is this kind of a one-off?

Amrita Ahuja

Yes. So I forgot to mention in my answer just the – another big reason we looked at Tidal in the first place is because we see such an intersection between when our customer base in Cash App and general culture and music and what we find in Tidal, obviously. So we think there's a ton of connection points between Cash App and Tidal.

We're super excited to explore those. Hopefully, you'll see some of those manifest this year. We think – we do believe that we have an opportunity here to drive engagement around a lot of tools that you might find in our seller base and a lot of experience you would find in Cash App.

And you can imagine some of the more obvious ones that you see artists currently struggling with, but we can make it very, very easy. It's not just about streaming revenue. There's a lot to the broader ecosystem where artists get paid, inclusive of merchandise and ticketing and all these other things.

So there's a lot of potential. We just want to make sure that we're doing the most critical things first, and we want to make sure that we're known as the place for artists to create first and foremost, and then really pair that with an incredible listening experience and fan experience to bring the fans closer, and Cash App is in an incredible way for us to do that because of the surface area, and just the people that we're serving with the Cash App. So it made sense on so many dimensions to us internally. And we're excited to show off these connections as we go forward this year.

Ramsey El-Assal

Good. Thank you.

Operator

And our next question is from Josh Beck with KBCM.

Josh Beck

Thank you so much for taking the question. I wanted to ask about the Seller business. It seems Square for Restaurants and Square for Retail maybe is inflecting. I know that about half of the new Sellers are adopting those products or half of them are new to Square. So are you seeing maybe like an accelerated displacement of legacy systems? Do you feel like you're perhaps getting better awareness for new business formation? Maybe just help us unpack a little bit the momentum that you seem to be having there.

Amrita Ahuja

I think it's a bit of all those things that you mentioned. We're certainly displacing our agency systems because people want to upgrade. And we saw a lot of that in 2020 due to COVID, where the legacy systems would not allow for online sales.

And while you have a business who does the majority of their transactions off-line, last year, they were forced to go online. And we just made it super easy for them to do that. And as things reopen, go back and have a good mix now, now that they open their eyes towards what's possible with online.

We found in the past that a lot of sellers tend to be a little bit slow to adopt newer technologies because what they have is working. And we just want to take that fear away and make sure that they -- with a few button presses can get right into it and go, and we certainly benefited from that.

We've definitely seen businesses cross vertical as well. We've mentioned on this call before, but we see restaurants become retailers and retailers serve food, and we'll see more of that as more reopen services, service businesses become retailers as well and vice versa. So we -- because we cover all verticals, we can allow for that blending where the seller does not have to think about it at all. They can just focus on what they're trying to build and the customer base.

And then I would say like the fact that we do have a much broader ecosystem than most, we're not just a point-of-sale. We lend people money as well. We have CRM and loyalty built in. We have integrations to Cash App, and the more of those that we make easy, the less the seller has to do it themselves.

If you visit a large seller or a small seller, the amount of systems they have to hook together in order to just do their business is insane. So we take all that work. We put it into one website, one app, and people can just immediately focus on their customers internal attention to growing the business. And that's real. So taking all that friction away from folks so that they can focus on meaningful continues to be a competitive advantage for us.

Jack Dorsey

And Josh, what we are seeing here is rapid growth with the restaurant retail product. In Q1, annualized gross profit from the sellers who used those products was $140 million, which doubled on a year-over-year basis. Remember, in Q1, where we still had a portion of the quarter were many sellers were only partially able to be in business. But half of that came from these restaurant retail products and half, to Jack's point, came from other products across the ecosystem.

We know that these products attract sellers with more complex needs and we can serve them in other ways over time. But we still think it's early here, and that's why we want to scale these products further, and that's part of the reason we want to continue to invest in marketing and sales to increase the awareness about our capabilities here.

Josh Beck

That makes sense. Really nice momentum. Thank you, both.

Operator

Our next question is from Bryan Keane with Deutsche Bank.

Bryan Keane

Hi guys, thanks for taking my question. Wanted to ask about the impressive growth of Cash App in April. Cash App gross profit, I think, was up 130% despite, if I remember correctly, it was a tough comp from last year that it picked up on. So, just trying to think about the growth rate of that business as we go forward and potentially Cash App gross profit per user as we go through 2021. Thanks much.

Amrita Ahuja

Sure. Happy to help out. So you're right, with April, we saw strong growth both on a year-over-year basis and on a two-year CAGR basis, Cash App grew approximately 130% due to strong underlying trends, frankly, that we're seeing in our business, many of which we've talked about between engagement up approximately 40% year-over-year, with March reaching all-time highs in terms of transactions per customer as well as in terms of spending power. This comes back to close. This comes back to our customers' ability to bring money into Cash App and use it in the ways to benefit them, with growing utility on our platform.

We did see, obviously, an impact from government disbursements in March here, where we saw a significant increase in both our customer spending power and the inflows in the Cash App, where inflows were up 55% month-over-month in March and then moderated a bit in April with inflows down on a month-over-month basis, about 16%, but still at that elevated level in April as well as March.

When we look forward, we do know that our customers' spending power is going to continue to be influenced by things like the macro landscape as well as obviously, government fund programs. The current stimulus bill and most recent programs have different elements than the prior ones last year, so it may look different on a month-over-month basis than what we saw last year as an example.

The recent program has roughly half the amount of unemployment insurance benefits as last year. But we do have new elements to this program around the child tax credit and unemployment tax credit. So, we don't fully know what the impact of those elements will be to our customers' spending power and therefore, to our inflows, but we would expect to see some moderation, given the tougher comps, as you pointed out on a year-over-year basis.

Again, the pace and the magnitude of that normalization is going to depend on how our customers use their funds ultimately. And again, it's part of the reason that we're suggesting that you look at the two-year CAGRs going forward to normalize for some of that year-over-year changes as we go throughout the year.

And then, of course, longer term, what we're focused on with Cash App is being able to reach more customers and drive engagement, which ultimately, over time, we think drives inflows into the ecosystem.

Bryan Keane

Great. Congrats on results.

Amrita Ahuja

Thanks.

Operator

The next question is from Rayna Kumar with Evercore ISI.

Rayna Kumar

Good evening. Thanks for taking my question. Over the last few months, you've added a number of new Boost rewards, particularly Bitcoin Boost. I'm curious to better understand how some of these new Boots rewards have had an impact on your engagement and gross profit per user.

Jack Dorsey

They're pretty incredible. So Boost just helped us reach new Cash Card customers and increase the utility of it. First, it's very rare for a card like that to have something not instantaneous, but more importantly, controllable. Anyone can go to the app and just choose whatever fits, whatever they're about to do.

So if you're about to go in a restaurant, you might see a Bitcoin Boost or 20% off. If you're in a bus getting a lift, you might see that Boost for the pet store to buy some dog food, you might see that. So it's -- we want to make it super, super flexible, and that's where I think the magic lies in it.

And various Boosts have different expirations and different aspects to them. So there's a discovery aspect to it as well, to see what is new and what new Boost comes up. And this all goes back to what we continue to build within the Cash App.

This is an increase to the Boost, Cash Card, investing, Bitcoin. All these things provide more network effects for us. So people may come in because they received a payment from their family member or their friends, they download the app.

They can see that we sell Bitcoin. They can buy Bitcoin. They can buy some of the Bitcoin for their friends who doesn't have the app yet, get it and then they see the - we have investing and so on and so forth.

So we want to build a suite of services that are relevant to the audience we're trying to serve and are also critical to them and do it in one place where they don't have to really go anywhere else, just like our Seller ecosystem. They don't have to look anything else up. They don't have to download any other apps.

They can do all the things that people want to do in this day, in this present moment from one app, and we'll continue to add more and more of those features. But Boost is -- we still consider it to be fairly early in terms of the capabilities that we're going to enable. And it has a pretty exciting runway ahead of it.

Rayna Kumar

Very helpful. Thank you.

Operator

And your next question is from Dan Dolev with Mizuho.

Dan Dolev

Hey, great quarter. Thanks for taking my question. So can you guys talk a little bit about the new products that are coming out? I know that there's been a lending product that was in beta. Can we get a sense of sort of the timing for those and whether or not we should expect them? Thank you very much.

Jack Dorsey

I'm sorry. What was the first part of your...

Dan Dolev

The lending product. Sorry, Jack [Indiscernible]

Jack Dorsey

The one with the -- with Cash App?

Dan Dolev

Yeah, exactly. The payday lending, low APR product.

Jack Dorsey

Yes, yes, yes. So we have a lot of experience, obviously, in lending, and this is one of the benefits like everything that we do within Seller, we learn a lot from and we -- if it makes sense, we can translate it to Cash App. We do see a pretty incredible opportunity around lending to individuals. We are currently experimenting with that with a small group of customers and small amounts.

Again, like one of the things that worked for Square capital is, if sellers went to a bank, they would we offered a minimum of $25,000 or $20,000 and it's just not -- that's way too much. They needed $5,000 to buy a new salon chair. So we really focused on like the actual needs. And through that, we saw massive growth within Square Capital. And we're doing that – we have the same approach with lending in Cash App, like what are the actual needs and how is it best served within the Cash App. So through this beta, that's the question we're trying to answer. We started with a small nominal amount, and as we get feedback and as we understand payback rates and how it's working, we'll make further decisions and roll it out to more people. But right now, we're still running mode and as we get more of those, we'll make it more concrete and deliver to 100%.

Dan Dolev

Got it.

Amrita Ahuja

And Dan could maybe just answer the sort of higher-level question of road map for Cash App. I would also encourage you to think about what's unique about Cash App and what we feel really differentiates both of our ecosystems is the intersections of multiple products at once from a consumer standpoint. And it's those connections between various products that can sometimes drive differentiation, unique value and, in Cash App's case network effects. So the intersections of peer-to-peer with decline drive network effects for both. The intersection of boost with direct deposit drives awareness, and I think that those sorts of intersections are key areas for exploration for Cash App going forward, even independently of new product launches. And similarly, as Jack was speaking about earlier in the call, some of the foundational improvements that we're making the Cash App will enable us to reach broader demographics of customers going forward. So there are multiple growth vectors that can play out here that involve product improvements that may not be necessarily related to specific product launches. So those are, of course, in the works as well.

Dan Dolev

Excellent. Thank you. Amazing stuff.

Operator

And that's all the time we have today for questions. I'll now turn the call back over to the company for closing remarks.

Jason Lee

Thank you for joining our first quarter earnings call in 2021, and we will see you on the next earning call.

Operator

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.