Good day, ladies and gentlemen. Thank you again for your cooperation. Welcome to the Square Second Quarter 2021 Earnings Conference Call. I would now like to turn the call over to your host today, Jason Lee, Head of Investor Relations. Jason?

Hi, everyone. Apologies for the delay. We were just experiencing technical difficulties with the conference line. Thanks for joining our second quarter 2021 earnings call during which we will discuss Square's planned acquisition of Afterpay. We have Jack and Amrita with us today. Also joining us on the call is Nick Molnar, Co-CEO and Co-Founder of Afterpay. We will begin this call with some remarks before opening the call directly to your questions. 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 in the investor deck and press release about our planned acquisition on our IR website 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 gross results for the month of July. These represent our current estimate for July performance as we have not yet closed our accounting financials for the month of July and our monthly results are not subject to interim review by our auditors. As a result, actual July results may differ from these estimates. We may also discuss financial metrics for Afterpay, which are available in Afterpay's public filings. 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, we are providing a slide presentation to accompany our commentary on the transaction. This conference call is also being webcast, and both the presentation and the call are available through the Investor Relations section on our website. An audio replay of this call will be available on our website shortly after the conclusion of the call. With that, I'd like to turn it over to Jack.

Thanks, Jason, and thank you, everyone, for joining us today. Before we discuss our plans to acquire Afterpay, which we announced yesterday, I'd like to first share two highlights from the quarter. Continuing our commitment to expand access to financial tools and services, in July, we launched Square Banking for our U.S. sellers. This new suite of products will help business owners better manage their cash flow and get more out of their money. Square Banking now includes three core products, two deposit accounts, Square savings and Square checking, joining Square's existing lending products now called Square Loans. By offering central banking tools that integrate seamlessly with seller solutions like payments and Square Payroll, sellers now have a unified view of their payments, balances, expenses and financing options. We also announced the launch of a new business at Square. Its name is CBD, which will focus on building an open developer platform with the goal of making it easy to create noncustodial, permissionless and decentralized financial services. Our primary focus is on Bitcoin, driven by our belief that Bitcoin has massive potential to level the playing field for all. We're going to make our development process completely transparent to the public. We plan to share updates publicly in real time as we have them. Now on to yesterday's acquisition announcement. Today is an important day for Square, for Afterpay and for what we can do together to better serve our customers. Through this transaction, we will be uniting two companies with a shared focus on economic empowerment and financial inclusion and taking the important opportunity to connect our two largest business units, Seller and Cash App. By integrating Afterpay into Seller and Cash App, we plan to combine complementary businesses while also accelerating even stronger connections and driving more commerce…

Thank you very much, Jack. Hi, everyone. It's an absolute pleasure to be here today back in the U.S. and just in time to come announce the next phase of our incredible journey. I'm here today because of my Co-Founder and Co-CEO, Anthony Eisen, who only a few years ago, sat down with me over some veggie mutton on toast around his kitchen table to discuss how we could improve the financial well-being of the next generation, to empower them to spend responsibly without having to revolve in debt, interest payments or service fees. I'm thankful every day that Ant and my past crossed in that way and our families have had the privilege to go on this journey together. It's been an incredible six-odd or so years since, ending our fiscal year 2021 nearly doubling our business year-on-year, building a loyal base of Afterpayers who love the product and a network of more than 100,000 merchants who see increased retail opportunity through our partnership and notwithstanding the recent challenges in the global economy. I couldn't be more proud of what we've achieved so far, and know that yesterday's announcement, there is so much more to come. We've been long admirers of the Square team and in many ways have lived parallel journeys as entrepreneurs focused on creating financial empowerment for consumers and businesses alike. As we've gotten to know each other better, the scale and shape of our businesses, the synergies in our products and our shared purpose, it's abundantly clear that we're at the start of an amazing partnership. And I know our team across the globe will share my excitement and enthusiasm of the opportunity to come. We started Afterpay having met by chance as neighbors in Sydney. Both Ant and I were passionate about developing an…

Thanks, Nick. We believe this is a transformative opportunity for our combined companies. And there are three topics I'd like to cover regarding the proposed Afterpay acquisition: First, the strength of the Afterpay business; second, the complementary aspects of our merchants and consumer ecosystems; and third, the propound growth opportunity we see together. Afterpay has distinguished itself as a category leader in Buy Now Pay Later with a product that is well positioned for secular shifts among merchants and consumers. First, greater consumer and merchant adoption has enabled Afterpay to deliver remarkable growth with revenue up approximately 4x over the last two years. We see a number of levers to help drive continued growth for Afterpay, first, in terms of ongoing secular growth of Buy Now Pay Later in e-commerce; and second, in terms of Afterpay's future growth adjacencies. Second, Afterpay's business has strong cohort economics, providing a durable foundation for growth across its merchants and consumer base. Afterpay has delivered positive GMV retention and increased purchase frequency over time with strong paybacks and returns on acquisition spend. These fundamentals mirror the dynamics in our Cash App and Seller ecosystem around growing engagement and strong returns. Next, we're excited by our compelling cross-sell opportunities. By integrating Afterpay directly into our Cash App and Seller ecosystem, we can expand each brand's customer base, strengthen each other’s products and build connections. On the consumer side, the addition of Afterpay embeds commerce more directly into Cash App. Afterpay's merchant base will have access to 4x more consumers and Cash App will have access to 16 million Afterpay consumers who represent a complementary demographic base. On the merchant side, we'll introduce Square Sellers to Afterpay's Buy Now Pay Later offering, which expands Afterpay more deeply in the new verticals and in-person commerce. Turning to…

Thank you. [Operator Instructions] Lisa, please open your line. Your line is open.

Terrific. Thank you. Can you hear me? Congratulations and thanks for taking my question. There's a number of successful BNPL players globally, and Square also has historically built a lot of capabilities in-house. Can you just talk about what factors led you to decide that Afterpay specifically is the best fit for Square versus alternative BNPL players or doing organic investment? Thank you.

Yes, absolutely. Thanks, Lisa. So as you mentioned, I mean, this space is getting more and more crowded. And obviously, there's a lot of different services and solutions out there. We started with what Nick and Ant have built and how ambitious and entrepreneurial and innovative they've been that they were extremely early in this space, help define a lot of it and really raise the bar on what everyone else is doing. So we are impressed by the vision, by their ambition, probably the entrepreneurship. I think the other big thing for us is making sure that – we've talked on this call a lot about how to connect it to our two biggest ecosystems, Seller and Cash App. And this was a clear fit in a way that they built their model out, a simple marketing tool and some incredible discovery for consumers. So for consumers, Afterpay offers truly interest-free products that don't require any credit history, something vastly different from what we've seen with other Buy Now Pay Later products. And this allows broader access to consumers while helping them spend a lot more responsibly. So that goes towards our purpose of economic impairment. And for merchants, Square has always asked the question, how can we help our merchants make more sales. And that was exactly the question that Afterpay has been asking, providing them a way to generate leads through the Afterpay app, which has helped them improve conversion rates, increase their transaction sizes and led to repeat purchases and repeat customers. So this allowed Afterpay to reach more than 60 million consumers and 100,000 merchants globally. So we're – looking at the deal, this was an obvious connection between the Seller and Cash App. Ant and Nick have built on top of an ecosystem model. There's a clear fit into our model that makes it even stronger for us. And the team they built is incredible, creative, innovative and ambitious. And we just saw this as a perfect move for both companies.

Thank you, and congrats again.

And Lisa, I'd add to that as well. We've been really impressed with the strong business fundamentals that Afterpay has demonstrated. Of course, we look at the combination of both growth and cohort economics. And what we see here in the cohort economics is growing engagement amongst consumers. After onboarding, customers transact more frequently each year that they're on the platform with some of the older cohorts from Australia and New Zealand transacting 30 times per year. We also look at the international expansion that this team has executed and demonstrated. Afterpay has shown an ability to grow quickly in new regions, including the U.S., which has been its fastest-growing market to date. And then the alignment to the strategic priorities of Cash App and Seller where Afterpay's Buy Now Pay Later product can help strengthen our existing ecosystems and help – we can help Afterpay expand with small- and medium-sized businesses in in-person and additional verticals. So, these volume metrics that we've – that Afterpay has demonstrated with merchants, whether it's 25% uplift in transaction size or 20% uplift in conversion rates and in purchase frequency and the lead generation they've demonstrated for merchants with 1 million leads per day, as Nick said, these are stats of a healthy foundation on which we can build together to accelerate growth across both the Afterpay ecosystem as well as cash and seller.

Thank you, and congrats again.

Thank you. Our next question comes from Tien-Tsin Huang from JPMorgan. Tien, please go ahead. Your line is open.

Thanks so much, and definitely congrats on the deal here. A lot of synergies to think about. So I was hoping to get – Nick, good to have you on the call. Nick, your perspective on what synergies you're most excited about. And then maybe same thing from you, Jack, what are you excited about from a synergy standpoint, if you could rank the top things. And I'm just curious how long will the Afterpay founders stay on the deals, we're thinking about integration here? Thanks.

Yes, absolutely. Thanks, Tien-Tsin. Nice to hear from you. So from an Afterpay perspective, Square absolutely helps us accelerate our priorities of long-term growth and particularly in the U.S. If you think of both sides of the equation, Square Seller business can help us drive a more diverse set of retail verticals beyond just retail where we're primarily orientated. So to have millions of sellers on one side of the equation to help us expand further into in-person commerce and serving SMB merchant is a critical focus for us on the merchant side. And then when you think about the Cash App consumer side of the equation, Cash App brings up the highly engaged customer base annual transacting of 70 million. And that broad ecosystem of product allows us to really lean into how we drive value for both our consumers and our retailers. So, as Amrita mentioned before, Afterpay on average delivered 1 million leads per day as a result of 16 million annual active consumers over the last 12 months. So to be able to have a partner like Cash App that has a significantly larger consumer base, we firmly believe we can drive significantly increased value to our retailers beyond what we do today. And just the second question just on Ant and myself, and I hope Ant kindly speaking on his behalf. But we've been just increasingly excited as conversations progress. We're as excited today as the day we started the organization. I really think that's a testament to Jack, Amrita, Brian, Alyssa and the whole Square team, the alignment of mission, vision, culture and values was just imminently apparent the more we got to know each other and can't wait to take this partnership long into the future.

And from our side, I think, as I said in my last answer, we get the question all the time on this call, like what are some ways that you are all thinking about connecting the Seller and the Cash App ecosystem. And this one is massive and also obvious. We think from a seller perspective, the most obvious point is this is yet another tool to help drive more sales to a seller and also help us reach sellers that we have not been able to serve in the past. And that includes larger, more enterprise global retail sellers. And for us to be able to scale from the smallest of shops in your neighborhood up to the largest retailers in the world with one solution that brings people to the rest of our ecosystem is exactly in our ecosystem strategy, and this gives us a lot of fuel to continue to expand that. On the Cash App side, this is a new payment capability. So adding more capabilities to Cash App customers that they can have a choice on how they're interacting with the economy is pretty incredible. But also given that a lot of the consumer side is going to be focused on discovery, first and foremost, will give Cash App a way to provide more daily value, something that people want to open up every single day to check out what's new and to see our entire ecosystem with services within the Cash App as well. So you combine these two together, you get a strong connection between ecosystems. But even if they weren't connected, we have a lot of strength for each ecosystem. But again, I think the power and the true value of our company over the long term is how we connect all these systems – all of these ecosystems together, starting with Seller and Cash App, but obviously it goes bigger than that years ahead.

Yes. Grateful for the comments. Congrats again.

Thank you very much. Our next question comes from Darrin Peller from Wolfe Research. Darrin, please go ahead, your line is open.

All right. Thanks guys. Congrats on this. You clearly outperformed getting Cash App gross profit, and it was pretty clear at every engagement levels when you look at the comments you made of two-thirds of users transacting every week. When we consider that and now the combination with Afterpay, if you could just, a, touch on what's really driving that incremental engagement on the Cash App side; how much more room it has; and then probably more importantly, as you think of integration with Afterpay and what that can mean. Afterpay's revenue per user is even higher, I think. Can you just touch on, a, the work ahead to get done to actually integrate the two together, what we can envision and timing around it? And then what that means for engagement opportunities between the two.

Thanks, Darrin. I can kick us off on this one. I'll start with sharing a bit more about that growing engagement we've seen on Cash App and then share more about what that means in integration with Afterpay. From a Cash App perspective, we've seen that as we've added that weekly and daily utility with additional products and features and functionality in the Cash App that our customers have exhibited growing engagement with us. Weekly actives have steadily increased as a percent of monthly actives over time with nearly now two-thirds of our monthly – 40 million monthly actives using Cash App each week on average in June. This engagement has, in turn, driven monetization as inflows and product adoption has increased. Gross profit per transacting active was up 2.5 times from two years ago in the quarter and up 1.5 from just two quarters ago. Historically, what we've seen is that the average customer who adopts two or more products in Cash App generates 3 times to 4 times the gross profit compared to the average peer-to-peer customer. And we believe that integrating the Afterpay App into Cash App has the opportunity to drive that commerce discovery that Jack was speaking to, to drive further consumer engagement that also benefits merchants in the form of lead generation. This means that consumers will be able to browse merchants, purchase goods or services within Cash App and use Buy Now Pay Later at the checkout, allowing the consumer to pay for interest – pre- installments directly from Cash App, again, driving that recurring engagement. And we see this has a natural extension – this is really represents natural extension of Cash App's current ecosystem around spending and rewards. Obviously, from a spending perspective, we've seen strong adoption with Cash Card at 10 million monthly actives as of March and 7 million weekly actives with spend per customer increasing over time. And from a rewards perspective, Boost is currently an engagement and merchant marketing tool, and it could be used at scale as a compelling acquisition tool for Afterpay's enterprise merchants while also providing that increased utility for Cash App customers. So we see the potential in the integration of Afterpay into Cash App to drive greater utility for our customers and ultimately greater lifetime value and ARPU for us over time.

Darrin, does that answer your question? Okay, we’ll move on to the next question. Thank you. Our next question comes from Timothy Chiodo from Credit Suisse. Timothy, please go ahead.

Great. Thanks a lot for taking the question. I want to dig in a little bit an area of synergy that you highlighted a few times in the prepared remarks and also in the letter last night, but the – or the slides around the larger seller opportunities, so the opportunity to introduce the Square ecosystem to those larger merchants that work with Afterpay. Maybe we could just bring that to life a little bit more, what type – what aspects of the ecosystem might be most appealing and what that road map might look like?

Yes. Thanks for the question, Tim. This is obviously an area that gets us really excited because the more we can expand the boundaries of what types of merchants and what sizes of merchants we can offer our products to, the better off our ecosystem is. So there's millions of seller seeds spread around the business. Today across large to small e-commerce sites, restaurants, things pickup and delivery, we have a larger in-person presence than Afterpay has today and $60 billion of interest in volumes with $80 billion in omnichannel volumes growing quickly. But Afterpay can provide access to a number of, as I said in my previous answer, enterprise and retail merchants with a global presence, where sellers can help move to omnichannel and expand to more in-person commerce. So a big part of our thesis and strategy around our ecosystem is making sure that we have a service and feature of our products that the seller can hire. And it may be specific to them, but that allows the door to open to the rest of our ecosystem. And we want to make sure that all of our products and services, all of our features scale from the smallest to the very largest. So it doesn't matter how they come in. We want to make sure that once they do come in, they see everything that – else we have to offer and they're hiring us for multiple jobs, not just the one that they came into the system for. So we have a similar play on the consumer side with Cash App, but this – on the seller side, gives us a greater tool to sell to enterprise, larger global retail merchants in a way that we just haven't had in the past. And again, why that matters is because we can introduce them to the larger ecosystem as well.

Excellent. Thank you, Jack.

Thank you.

Thank you. Our next question comes from Bryan Keane from Deutsche Bank. Bryan, please go ahead.

Hi guys, congrats on the deal from me as well. Thinking about this space, there's lots of large players entering this attractive BNPL sector, PayPal, Amex and even Apple. So how does Afterpay/Square differentiate solution versus the competition and make sure that overall in the industry, we just don't see further competition, pushing take rate down? Thanks.

I can start with this. I think, first and foremost, where we believe we're most differentiated is our combined ecosystem, ecosystem charging. So we see a lot of competitors with a seller ecosystem or a consumer ecosystem, but there are very, very few with both together. And as you look at the market, having the ability for a seller to come in for Buy Now and Pay Later but also have the entire suite of tools they need to run the rest of the business is pretty magical. And it's magical because it saves them a lot of time. They don't have to spend a lot of time connecting different vendors together. They can focus entirely on just building the business. And while it seems that's important for the smaller companies, it's even more critical for the larger companies, even the enterprise global retailers as well. So our model and our strategy is really focused on this fundamental principle of we have two ecosystems at scale serving both sides together. And the more we can connect them together to be seamless, the more value we can create both for the merchants, for the individuals, for the customers and also for our company as well. Maybe Nick can speak to this as well.

Yes, absolutely. Thanks, Jack. Look, from my perspective, we've differentiated ourselves over the years by providing – or looking at it through the lens of what value can we drive to the retailer. So naturally, our retailers see value in our core payment platform, and it delivers higher average order value, increased return rates, low – lower return rates, increased conversion rates. But the undercurrent here of how retailers really assess us in the business performance is, can we actually drive new business to their platform? Can we act as a customer acquisition channel for the retailer and drive business to them? And as I mentioned before, on average, sending 1 million leads per day over the course of the last 12 months to our retailers shows that we can perform not just not just through the core payment platform, but actually add value directly. And there aren't a lot of payment providers that have successfully built a platform that has the ability to drive new business to retailers. So when I think about what we've been able to achieve as a result of reaching 16 million annual active consumers, the ability to couple that with 17 million annual active Cash App customers and the ecosystem that unfolds as a result of that, the value we can drive to our retailers, I believe, is demonstrably greater than the existing strong results that we've been able to perform. So really excited about it from that perspective on our side.

Got it. Very helpful. Thanks so much.

Thank you very much. Our next question comes from Ramsey El-Assal from Barclays. Please go ahead, Ramsey, your line is open.

Hi, thanks for taking my question. I wanted to ask about how Afterpay kind of advances the Square international market strategy. Can we expect you to build out a broader presence for Square, for example, Square products and global markets where Afterpay may already be operating where maybe – maybe where Square isn't? Any color around international strategy would be appreciated.

Sure. Thanks for the question, Ramsey. Maybe I can kick off and Nick you can add in. Global expansion has been a top priority, as you know, for Cash App and Seller, and we see our geographic presence as complementary with Afterpay. Afterpay has driven strong growth across Australia, New Zealand and, more recently, U.S. and Canada and the UK with recent launches as well across Europe, in Spain, France and Italy. And Afterpay has grown both its consumer and merchant presence in these markets. We see that, that growing global presence allows for easier entry into new markets and help us potentially expand in markets where we already exist but have a smaller presence as well as potentially those new markets. The vast majority of Cash App and seller GPV are from the U.S. today, but we're already on that pathway of growing in existing markets. Sellers for markets outside the U.S. are achieving close to U.S. payback levels on investment. We're closing the product parity gap. We're seeing growth rates in those markets at 2x the U.S. And we're now launching in new markets, most recently in Ireland and with the France beta as well. So Afterpay's footprint and expertise can further enable our expansion whether in geographies where we're both present as well as new geographies together. And that opportunity to strengthen our combined product offering and acquire new customers together is profound when you think globally.

And then, Amrita, if I can add, from an Afterpay perspective, we've been focused on global expansion as well. As Jack mentioned earlier, that strength from an enterprise retail perspective and the ability to go global with your global retailers has been a core focus for us. Since launching in North America just three years ago, we're seeing very strong growth in the region and particularly in the U.S. The U.S. now for us represents our largest consumer base from any country in FY 2021. And it's been our fastest-growing geo on a volume basis. So we want to focus more investment in the U.S., which is why we see such a strategic opportunity to join Square and the combination with Cash App and seller as I've spoken about a few times, I think, provides the two sides of the equation. And similarly, we recently announced the launch of Money by Afterpay, been experiencing – sorry, we have this existing product in geos where Cash App doesn't exist today, which we can help leverage to help Cash App reach more geographies. So together, I believe there's a long-term opportunity here to explore and learn about new geographies.

Great. Thanks so much.

Thank you. Our next question comes from Jason Kupferberg from Bank of America. Jason, please go ahead.

Great. Good morning, guys. Thanks for all the color here. I wanted to follow up on the earlier question just about buy versus build, and maybe if you can talk more specifically about the pros and cons that you may have considered of entering the BNPL space by buying as opposed to building. I'm wondering if you actively considered the latter options, and Square obviously has a strong legacy of organic innovation.

Yes. I mean we're always considering the options we have before us. But in this particular case, it really came back to Nick and Ant and the team and how innovative they've been and how early they were in the space and how strong their ambition is and how much it complements our strategy. It allows us to move much faster, achieves a bunch of our goals in terms of expanding the types and sizes of merchants that we can reach. And there was just an obvious connection into our current ecosystem that made us all even stronger. So I think we get a lot of wisdom, a lot of knowledge, a lot of customer understanding by going this route. And that will set us up for a much stronger future where we can move much, much faster if we were to just start from scratch. And we get two incredible leaders into the company to continue to build out not just Afterpay, but have opinion on the rest of our business as well and continue to raise the bar on what we're able to do.

And Jack, maybe I can add from an Afterpay perspective. We're certainly at the early days for Buy Now Pay Later being a 2% penetration of e-comm and even less of the overall credit card spend. So from Ant and my perspective, the combination of our companies aligns with our long-term objectives of financial inclusion. And as Jack just mentioned during our conversation, we've discovered an incredibly strong alignment between the leadership teams. It’s one thing to have on paper what your values, mission and vision look like. But the way that each of our teams live and breathe our mission of economic empowerment and financial inclusion was incredibly clear and apparent. So yes, look, we see huge opportunity in our combined combination accelerating, our shared mission and long-term vision and growth. And we're excited about this announcement today. I think, this is really exciting for shareholders of both companies.

Thanks, Jack. Thanks, Nick.

Thank you. That's the time for the questions we'll be taking today, so I'll hand back over to the management team for any closing remarks. Many thanks.

Thank you, everyone, for joining our second quarter earnings call. And that concludes this call. Thank you.

Thank you all for joining the call today. Have a lovely rest of your day. You may now disconnect your lines.