Thread by @investing_city

Ok, first up is Square (SQ)!

[THREAD]

https://twitter.com/investing_city/status/1279807855281999872

1/ Started out only as a payments company with Square Card Reader.

Since then, Square has expanded its seller ecosystem with 30 products.

Now there are two sides of the business:
- seller ecosystem
- Cash App

2/ 43% of gross payment volume (GPV), or $46 billion, is from food/drink and retail.

Over the past 6 years, GPV mix by sellers with more than $125k has gone from 28% of the total to 54%.

Square is gradually moving upmarket.

3/ Square's seller ecosystem

Software
- POS, virtual terminal
- Appointments, Retail, Restaurants, Invoices
- Online store, gift cards, marketing, dashboard

Hardware
- Reader, Stand, Register, Terminal

Financial services
- Instant transfer, Capital, Card, Payroll

4/ Cash App Ecosystem

Sending/Receiving
- Simple peer-to-peer transfers

Spending
- Cash Card (debit), Cash Boost (rewards)

Investing
- Buy stocks and Bitcoin

- 24 million MAUs
- Strong growth in low-income populations
- "cash-tag" giveaways lower customer acquisition cost

5/ Square has 4 revenue segments

Transaction based
- 2.75% fee

Subscription and services-based
- Cash App, Capital, Instant Transfers make up the majority
- Other seller ecosystem products make up rest

Hardware

Bitcoin
- Recognized separately from other Cash App revenues

6/ But we need to factor in the cost of revenues.

If we do, gross margins by segment look like this:

Transaction: 37%
Subscriptions + Services: 77%
Hardware: -61%
Bitcoin: 2%

7/ So then we can calculate the % of sales vs. the % of gross profits

For 2019 (barely off b/c rounding):

Transaction: 65% vs. 60%
Subscriptions + Services: 22% vs. 42%
Hardware: 2% vs. -3%
Bitcoin: 11% vs. 0%

8/ Square's net income of $375 million for the year was affected by its $410 million sale of Caviar (it's food delivery business) to DoorDash.

But, even excluding that, 2019 was the first year of EBIT profitability.

9/ Square is considered a "payment facilitator" rather than a payment processor.

The onboarding process for Square is so simple because it has already taken care of the merchant bank agreements. Square aggregates all of its merchants so each one doesn't have to do that.

10/ In conclusion, Square is no longer just a payment facilitator. The growth of its seller ecosystem and the Cash App have created much more optionality but also complicate the picture.

For example, it's tough to know how much of the 42% of gross profit is from the Cash App.

Other notes:
- Widely known but Jack Dorsey is also CEO of Twitter
- Square bought Weebly for $272 million in 2018
- 3 payment processors account for 86% of settlements
- $500 million in net cash
- Mary Meeker and Roelof Botha are on the board

What else did I miss? 🧐