Jason Lee - Head, Investor Relations Jack Dorsey - Chief Executive Officer Sarah Friar - Chief Financial Officer

Tien-tsin Huang - JPMorgan Darrin Peller - Barclays Jim Schneider - Goldman Sachs Dan Perlin - RBC Capital Markets Jason Kupferberg - Bank of America Josh Beck - Keybanc Capital Markets Jim Faucette - Morgan Stanley Ramsey El-Assal - Jefferies Andrew Jeffrey - SunTrust Robinson Humphrey Jacob Crafton - Wimpy's Burgers and Fries Jamie Friedman - Susquehanna Pete Christiansen - Citi Brett Huff - Stephens Inc

Hi, everyone. Thanks for joining our third quarter 2017 earnings call.

We have Jack and Sarah with us today. First, we want to remind everyone of the format of our earnings call.

We have published a shareholder letter on our Investor Relations Web site, which was available shortly after the market close. We will begin this call with some short prepared remarks before opening the call directly to your questions.

During Q&A, we will take questions asked from our sellers in addition to questions from conference call participants. We would also 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. Also, during this call, we will discuss certain non-GAAP financial measures.

Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our Investor Relations Web site. 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 Web site. An audio replay of this call will be available on our Web site shortly.

With that, I would like to turn over to Jack.

Thanks, Jason and thank you all for joining us. We’re really proud of our work this quarter.

Top line growth accelerated from second quarter of 2017. Total net revenue increased 33% year-over-year, up from 26% and adjusted revenue increased 45% year-over-year, up 41%.

This growth demonstrates that our core payments business remains strong and we continue to provide both small and large sellers with the tools they need to grow their business. We were excited to launch our new hardware product, Square Register.

We designed and built Square Register in-house, and for the first time, combined our hardware, software and payments into one product. Square Register doesn’t require a third party mobile, phone or tablet.

And the sleek and functional design is based on years of insight working with millions of sellers. The dedicated hard work consists of two screens, one for the seller and one for their customer, which have the reader that accepts contactless payments, chip cards and older magstripe cards.

Square Register fits our sellers’ needs as their businesses grow and become more complex. You can see this growth in our seller mix.

In the third quarter, gross payment volume from largest sellers, those that generate more than $125,000 in the annualized GPV, accounted for 48% of total GPV. As we continue to grow out market, we've learned that more complex sellers often have established systems that they’ve tailored to their businesses, such as e-commerce Web sites, custom points-of-sale or inventory software.

With our open platform, developers can connect these systems with Square and give sellers the ability to manage them in one place. Our open platform strategy is working, so as using business systems that are integrated to Square contributed nearly 20% of third quarter GPV.

These integrations are more important than ever as online and offline commerce emerge and sellers need to provide a seamless omnichannel experience for their customers; from a self-serve kiosk to a brick-and-mortar store to online sales. Omnichannel management is a particular need for marketplaces, which is why this quarter we partnered with Eventbrite to process payments for its online, mobile and in-person transactions.

Importantly, any marketplace will be able to build their own solutions on top of our platform and the functionality we build. Our platform also enables our internal teams to build upon existing functionality.

As we mentioned earlier this year, we used our e-commerce API to build and launch virtual terminal. It is now the fastest product to reach $1 billion in cumulative GPV.

We'll continue to leverage our platform to enable external developers and our internal teams to move quickly and build more services that our sellers need to grow. Now, I’ll turn it over to Sarah for some more detailed remarks on our financials.

Great, thank you, Jack. Q3 was a strong quarter for Square with top-line growth accelerating.

Total net revenue increased 33% year-over-year, up from 26% in the second quarter and adjusted revenue increased 45% year-over-year, up from 41% last quarter and 39% in Q1. Our third quarter benefited from growth in both our transaction based and subscription and services based revenue.

GPV was $17.4 billion, up 31% year-over-year. Mid-market sellers, who generate more than $500,000 in annualized GPV, grew 64% year-over-year, also accelerating from 61% in the second quarter.

Transaction based profit, as a percentage of GPV, improved to 1.05%. This was driven by strong growth in products such as invoices, virtual terminal and online payments, which all have higher rates than our card present transactions.

We also benefited from improvements in our transaction cost profile. We continue to see strong momentum in subscription and services based revenue, which grew 84% year-over-year.

Instant deposit was a highlight with volume of $2 billion in the quarter, driven by increased usage by both Square sellers and Cash App individuals. GAAP net loss was $16 million in the third quarter compared to a loss of $32 million in the same quarter 2016.

This equates to a net loss per share of $0.04 compared to a net loss per share of $0.09 in the third quarter of 2016. Adjusted EBITDA was $34 million this quarter, an improvement of 195% year-over-year.

On an operating margin basis, this equates to 7 points annual improvement. This is a result of strong top-line growth and ongoing operating expense leverage.

I’ll now turn to full year guidance. And for details on our fourth quarter guide, please refer to our shareholders letter.

Once again, we’re increasing our full year guidance to reflect our current business momentum. We expect 2017 total net revenue to now be within a range of $2.18 billion to $2.19 billion and adjusted revenue to be in the range of $963 million to $966 million.

Adjusted EBITDA is expected to be in the range of $132 million to $135 million. At the midpoint, this represents a 14% adjusted EBITDA margin, which is an improvement of 7 points year-over-year.

This target improvement allows us to appropriately balance margin expansion, while investing for growth. We expect net loss per share to be within a range of $0.20 to $0.19, and we expect adjusted EBITDA to be in the range of positive $0.24 to positive $0.25.

And so with that, let me turn it back to the operator, and we’ll start the Q&A portion of the call.

Just on the net spread, that stood out to me I think 1.05. I was curious if the dynamic between the benefit of the higher yielding products you called out versus the pressure from custom pricing to largest sellers.

Is that changing at all, and I'm also curious if this -- the launch of Square Register changed the outlook for yields or take rates here in the short or mid-term?

So first of all on the net spread, or as we call it the transaction based profit that we're making, 1.05 was a really nice outcome and expended nicely from 10.01 a year ago. It is that balance that you talk to of products slate, virtual terminal, invoices, Square APIs, they all have higher revenue rates.

And so that is definitely offsetting custom pricing that we will do often for larger merchants. Recall, when we bring on a larger merchant, we want to optimize for total adjusted revenue and ultimately total margin.

And so in many cases, it will be both what they pay to process on Square for all of managed payments plus they may take a vertical point of sale where they pay a monthly fee plus they may pay us for hardware now with something like Square register. In terms of the register launch, we did chose different pricing there, so $0.025 and $0.10.

That really has the impact of, for merchants with smaller ticket sizes, more of an uplift in the price that they will pay. And we’re comfortable with that, because ultimately we feel like they’re getting more value.

It's much faster. It's going to move your line along, super fast at your quick service restaurants.

On the flip side for larger merchants, it's actually going to feel a little bit more like a price reduction. And again that’s good, because we want to really orient this product towards larger merchants, particularly those that have larger average ticket sizes as well.

Thank you.

Just want to touch on the guidance change on the revenue side. There was obviously a good amount, more than the need in the quarter itself.

So just looking ahead now, what really can we attribute that to, is it part of the subscription services side on it? So what are your expectations in terms of the outperformance for the rest of the year above and beyond of what you previously saw?

I think generally on the guidance, we feel great with the momentum in the Company, right now. I think at the midpoint, current 2017 would be 41% year-over-year growth.

So seeing that 40 handle on that growth rate for the year is something we're incredibly proud of. What's driving it, it's up outperformance across the board.

So first of all, the core itself, remember we’re still at that positive dollar based retention. So we just see this mighty engine underneath our business model that continues to perform.

On top of that, we are continuing to move up market. You saw that growth in the mid-market sellers all the way up at 64% year-over-year.

Beyond that, adding in all of the products from our ecosystem where we just see more-and-more virtuous loops being created, I get it for capital loan, it helps my business grow. Therefore, I am doing more in payments.

We love those inter-linkages. That integration is really helping us.

And then finally, I think international had a good quarter. You saw the growth rate kick up there in Q3, and we continue to expect ongoing momentum from our international markets.

I own two restaurants here in the Memphis in North Mississippi area. Currently, I used Square to process my payroll at my location in the State of Tennessee.

But I'm wondering if there's a timeline available for when I’ll be able to process my payroll from our restaurant located in North Mississippi?

We're really excited about payroll as products. One of the things that gets us most excited is the fact that seller hasn't -- didn’t have to really do much to turn it on, because it's built right into the point of sale, which goes right into our ecosystem and that feels a lot more cohesive.

We are currently in 28 states, and they represent about 80% of the employer market. We brought Square Payroll for contractors to all 50 states.

But this is something we want to move much faster on to make sure that we cover every state in the United States. And we are working really hard to complete.

We don't have a timeline to share today. But thank you for the push we’ll continue to be [urgent].

I was wondering if you could maybe address the application for the bank charter or the ILC in Utah. What do you see longer term as the strategic purpose of that?

Is that more on the Square Capital side? Is it also potentially down the road on the deposit side?

Do you think it gives you more flexibility in terms of funding? Maybe just philosophically talk about your approach to banking for SMBs broadly speaking?

So from a high level, we want to make sure that we continue to build services for an underserved market that has been what has really tied the company together for the past close to nine years now. We saw underserved sellers who are not able to participate in the economy, because they can accept credit cards.

We see underserved buyers that we believe are serving through Square Cash and other products that we've talked about in the past. The ILC represents an efficiency for us it allows us to go faster, bring more efficiencies in the model, but also allow us to just take a different pack on our businesses and make sure that we're constantly doing the right thing.

We can bring the lending capabilities of a bank in-house, allowing us to be more verticalized and to make stronger and faster decisions. So we have stated that this is typically a year long process and don't have any updates to the timeline.

But we're pushing really hard to make sure that we get to clarity here. And this does help the capital business.

But looking down the line, we believe that we can offer more and more financial services to the underserved, both on the seller standpoint and also individuals as well.

And maybe if I could ask a quick follow-up on the Square Capital side, I think originations declined sequentially a little bit. So I’m wondering, Sarah, what might be going on in that business?

Is it just a little bit less seasonal demand? Do you see something about the credit quality, you didn’t like?

Or was there a hurricane impact or something else going on in the quarter?

So, Capital as you pointed out, $303 million in the quarter, up 45% year-over-year, but down a little sequentially. I think we saw couple of things to go on.

First, seasonality is a factor in Q3 where you have the two summer months in there. In addition, the hurricanes that happened in Texas and Florida, actually can have a negative impact on capital because we see our sellers business slow and payments that can be couple of days, a week or so, of impact.

But in Capital, the model itself resets, because it suits to your payments. So we offer less and we may offer to fewer.

So it takes a while to reset itself. When you look at capital in the future though and growth, I think there are two areas we're really focused on.

One is partnerships, and the team has done a great job in the last 12 months, building a capital partnerships platform. And we announced a second big partner.

They’re a big commerce, just in the last few weeks. And the second area is consumer installment.

So recall, we want to bring that super power to small businesses that often big businesses have, which is the ability for them to finance, a purchase for their customers, so it makes the customers’ purchase a little easier to decide upon. And we think that ultimately grows their business.

The net of it though is we see our broader ecosystem. So subscription services, where capital fits, still growing 84% year-over-year.

And in my mind, that speaks to just the broad ecosystem of many products. It's not just capital, capital is very important.

We’re going to keep growing it. But there are many, many more pieces that we're now adding into that portfolio, all of it, which is helping our sellers do what they do best, which is getting out there and selling their products.

So Sarah, I just wanted to ask a question, the net revenue growth is inflecting up. And I guess, in response to an earlier question, you talked about the cycle of the products.

What I'm, I guess, wondering is as you're increasingly moving upstream and we continue to see that quarter-after-quarter. Is the absolute dollar retention or the basket of products and revenues that those clients are taking, helping to also drive this inflection forward?

Thanks.

Thanks, Dan. So as we move into market, in terms of the positive dollar-based retention from existing sellers, that has stayed fairly consistent across all cohorts.

So we’ve talked to you about specific numbers back at our Analyst Day. So we're seeing double-digit type dollar based retention rates.

That has -- we’ve seen that be maintained. I don't think that large sellers act particularly different from our smaller sellers here, except perhaps more inclined to take certain products, like retail point-of-sale is clearly oriented towards a larger seller group.

A product like capital, we've actually seen it have applicability from the very smallest micro, the whole way up to large. So the answer is, I don't think larger sellers per se changes the trends.

But what I'm delighted with is that the trend is continuing, because that gives us a lot of momentum and predictability as we go into 2018, just from the base business.

Sarah may be a question for you. The EBITDA margin expansion, obviously, extremely impressively this year.

I think you’re on track to may be do upward to 750 basis points in 2017 to a lot better that you’d envisioned at the outset of the year. You’ve talked in the past about a longer term annual average trajectory of may be 500 basis points a year.

Is that still the right zip code? I mean, just given all the momentum you have.

Or is that potentially conservative?

So you’re right that this year we’ll see close to 7 points, so 700 basis points at mid-point of guide for EBITDA margin expansion. And that is 200 basis points ahead of coming into the year, we said look for mid single digits.

Part of that is really just driven by the great outperformance we’ve seen almost every single quarter. However, we do want to keep investing in our business.

I think we're proven to you that we are building a really large platform of sellers. And as we build out that platform, we're able to up sell and cross sell many, many more pieces of that platform.

And it's an each piece that we add, helps with things like turn. So sellers get stickers on our platform.

They grow faster and so, all of that integration really builds on itself. So we want to keep investing there.

The other product on the buyer side is Square Cash is now starting to get to very meaningful size for us, and we want to make sure we can invest in Square Cash too, as a way to get to those underserved on the buyer side. So as we look into next year, we’re still holding to mid single digits.

But if we could still continue to put up this growth rates, I'm inclined to keep investing and making sure that we can grow to something at scale. It doesn’t make sense to hold back an investment when you see the ROI that we see, the three to four quarter payback period and the positive dollar based retention, where we should be putting those dollars to work.

And now just quickly on Eventbrite, interesting deal there. When does the processing start and what’s the annual run rate there in terms of GPV?

So it will take some time to bring Eventbrite up and running on the platform. This is really about a play on marketplaces.

So we want to make sure that we can build functionality that any marketplace can use. Caviar is a marketplace that we run here internally and Caviar has taught a lot about what marketplaces need, some payments to catalogs to support, order management.

That is a lot in the [stood] vertical. Eventbrite gets us in the ticket sales.

And remember Eventbrite has that [knife] online and offline component, because clearly when you get to an event, there is a lot of offline commerce that occurs so great omnichannel possibility. So with Eventbrite our goal is to build really a general marketplace platform that any marketplace could come on to.

In terms of guidance for next year, we will, at that point, update you on where we will get to with Eventbrite. But I would expect it to take some time, but we’re getting gone and moving as fast as we can, right now.

I wanted to ask about Build with Square. I know that it's approaching 20% of your GPV.

So as we think about that meaningfully improving from here is it mainly about adding new software partners, is this software architecture more or less set? And then maybe one for you, Jack, just on the importance of AI initiatives when you look at everything that you have on the platform roadmap would be helpful.

Thank you.

I'll take both. So we continue to add new software partners.

We still believe we're in the early phases of Build with Square. We've been focusing a lot of the efforts on omnichannel, making sure that we can help sellers who want to sell online and offline.

And chase the developers that they hire or come to us and provide third party products to help them along the way. The software is certainly not set.

We have a bunch of evolution we want to make. We're really focused on the developer experience, right now.

We just have a small conference right after Money 2020 with our developer partners to get their feedback on how we're doing and what we need to improve. So there's a lot more to come there.

And we do believe this is a really critical aspect of our work. And we are showing that's working.

But we believe there's a ton more potential that we're excited about. In terms of AI and machine learning and deep learning, this is a huge investment for us as a company, has great impacts across our business and across the industry, obviously.

We've been looking, over the past two year at internal efficiencies first. We have been using data science more broadly since the start of the company to manage risks, which is at the core of our business.

But we're now looking at more broad based to how to approach every single problem with machine learning and deep learning in the solution set. And that's both internal efficiencies, such as how we handle support, and also sales to providing newer experiences for sellers.

Where we get the greatest benefit from applying machine learning and deep learning is giving more access to more people. So in being able to include more sellers, being able to include more buyers on things like Square Cash, for instance, is where we're focusing the majority of our efforts.

In terms of the platform, specifically, we're certainly looking for opportunities to utilize this technology there. But it is one solution out of many and just one consideration.

But we’re building up our discipline within the company and have also gone through a training with the company to make sure that we have best of class scale available in house that we can utilize.

I wanted to ask about, as your efforts around large merchants. Obviously, you’ve just introduced the new Square Register.

In the past, you've talked about being able to pursue large merchant opportunities, largely through inbound interest. I'm wondering if there's coming or there will come a time that it makes sense to pursue those opportunities more proactively, especially as you add capabilities.

And then just a housekeeping question, you mentioned impact of hurricanes et cetera, on Square capital. But how much of an impact on your overall results was there during the course of the quarter?

Thanks.

So on larger sellers, we are definitely seeing tremendous momentum as we move up-market. Getting to larger sellers is really a function, in my mind, of three things.

It's making sure that we have the product that satisfies what they need. It's making sure that we can sell it to them in the right way and then ultimately that we can support them.

So we put a lot of investment on the product side, because ultimately we want to have an intuitive product that even a larger seller could self-onboard to. And one of the stats I am most proud of and excited about for Square is that 80% of larger merchants still self-onboard to Square; they hit our Web site; they self-onboard; they don't have to talk to someone.

And that really speaks to just how well the product has been brought to bear in the market. From a hardware perspective, the new Square Register, I think, is going to have a step change here.

It brings together the best of Square in terms of hardware, software and managed payments that are all combined. We’ve talked about Best Beverage Catering in our shareholder letter, an example of a merchant that will roll out Square Register to up to 100 venues.

So that just starts to speak to the scale that we can build for. In terms of then servicing those sellers once they come onboard, we have definitely done a lot to make sure we have the right support and the right account management.

It's a great place to also put things like ML and automation to work on. We want to help a seller get to the answer as fast as possible and often that doesn't need to involve an actual person.

Often that can be self-serve on our Web site, it could be self-serve through our help center, it can be going to our community and it can be even proactively respond that. And I think this is going to be an exciting place for bots and so on in the future.

And in terms of sales, your question on do we need to build an outbound sales channel? Today, we’ve been very successful with inbound.

And as we've talked to you about before, we allow sellers to self-identify when they do get to that page. And we absolutely will reach out to them.

Again, we use ML there to make sure we're reaching out to the more misleads most likely to convert. However, over time we're willing to do both and we’ll continue to evolve the sales go-to-market as long as we can keep the strong ROI that we see, which is a three to four quarter payback period.

Quickly on the hurricanes. Frankly, not a lot of effect on payments, overall.

I think, one of the things you see is it tends to happen quickly. We will do what we can to help our sellers to prepare, making sure they know about things like offline mode, are really important.

Seems like a small feature. But if your lights are out and you have no power, you may need to just run that Square Register without being able to do the call back through the Internet.

And in that case, we're still there for our sellers, making sure they never miss the sale. And we often see, given just the spread we have by MCC, by merchant size.

Some merchants actually will see more sales in that period, right. If you're selling, I don't know, camping gear or things that people might fall back to, your sales might actually balloon.

So net-net on payments very little impact. Capital, we just see it because of how our models work in terms of the number of payments that are taken in a given period.

Can you guys comment on your product roadmap at this point? Are you now primarily focused on leveraging and improving and extracting yields from the product set that you have today?

Or should we expect continued innovation in terms of new product categories coming online? And then just as a quick follow up to that.

I want to ask about Square Cash and just -- can you just give us a read on how the service is evolving in terms of it -- is it feel that look and smell a lot like Venmo in terms of the use cases or is it a different animal? Is there more to B2B stage or a different customer demographic with Square Cash or is it something that's stacked at pretty squarely against Venmo just those two?

Thanks.

So the approach we've taken on our roadmap is to quickly identify the most critical need for a customer, whether that’s a seller or an individual. And to make it best of class, our solution best of class and we start obviously with credit card acceptance and then identify the next must, and next must, next must.

And that got us to places like Square Capital, which we believe are hugely innovative. And got us to a place like instant deposit, which we believe is also extremely innovative as well.

So we're going to continue to look at critical needs and solve them in vey credit ways. And we do believe that these will create, potentially create, entirely new product services and product lines and potentially business lines.

So we are focused on creating more, but they have to make -- they have to serve a critical need for a seller or for an individual. And we have been focused, the majority of our efforts in the early days and throughout today, on the underserved.

But we have build with a utility mindset. So anyone, whether you’re a seller that’s just getting started or you have 200 locations across multiple markets.

Square should be extremely valuable to you. And we want to build the utility of those scales to both ends.

And I believe that we have proven that we can do that. On Square cash, we're really excited about the performance of the service and the uptick and how people are using it.

We're thrilled that we’ve seen Square Cash break into the top 20 of the U.S. iOS apps store and Google Play on a regular basis now, puts it up there with some very notable apps.

And ahead of bunch of peers in the category, it's been the number one finance app consistently for months now. So we do believe we transcend what our competitors are focused on, which seems to more peer to peer.

We see Square Cash as a spending device and we see the first critical need was sending money to another individual then we added sending money to a business, requesting money from a business for an individual as well. And then we issued a card with a store value behind it.

And we are seeing a huge uptick in this usage and people are using it as a primary spending device, which really excite us. And we’re going to continue to look for adjacencies, solve critical needs for individuals around Square Cash.

The other thing that gets me excited is we do have something that the purely digital. And that is a nice parallel to our core business in hardware.

So we have [indiscernible] in both places that work together and can be used across our entire ecosystem as well. So Square Cash represents a really exciting app for us, and we're seeing that in the numbers, both in downloads and in usage, but also represents fundamental technology that all of our services throughout the company can use.

And since deposits for instance was base of this technology. So we think there is a lot more room around the service and the application.

And we're really excited about our roadmap ahead, and what people do with it, but also continue to build more fundamental technology and more fundamental services and potentially business lines on top of it. We’ve proven to ourselves that we can do it and we see a lot more in our future.

Jack, in your prepared remarks, you talked a bit about omnichannel. In the shareholder letter, you talk about some of the unique requirements of omnichannel like multi-party settlement.

More generally, I was hoping to get your comments about how you feel about your competitive position in omnichannel? What are the opportunities but what are the strengths and challenges that you might face as you travel that journey?

Thank you.

This is a big focus for us right now and it's going to be a big focus for us into 2018. We believe we're extremely well positioned to win here.

And we've been listening to our sellers for quite some time. We've had a lot of sellers who have come to us, starting offline and wanting to sell online, and that's who we address first.

And we've also seen sellers who are online, who want to experiment with pop-ups or physical locations. And again want dashboard and want set of tools to represent the entire business.

So this is something that we're deeply focused on. And I think we're in a really good position, because one of our strengths, in addition to what Sarah mentioned earlier in self serve and our speed and access to funds and also our elegance in all of our solutions, is our cohesiveness.

So the fact that you can come into Square through one channel, such as Register or online or Caviar and you get a whole suite of tools that serve critical needs for your business, it's really powerful. And we haven't seen that matched in many others.

And when it is matched, it's not matched in a seamless way that we have an offering around. So we are excited to build on that strength.

And we do think it is extremely differentiated and we haven't seen a lot to challenge that, but we don't want to rest on our laurels, we want to continue make sure that we're building more of those services that work together. In terms of our challenges, I think, there's a lot we could do.

We just need to make sure that we're prioritizing the things that really matter. And we stay focused on those and that's always a challenge, because there're a lot of seller needs and there're a lot of buyer needs, and we get excited about all of them.

But we want to continue to go after our discipline that we show at the company, which is solving the most critical needs first and then doing an excellence critical. So I feel confident in ability to sequence and our ability to prioritize, and our ability to apply the right technology to the problem, but we have to maintain the focus throughout.

You had a lot of success with Capital, and broadly I think with AIs, as evidenced by your continued low loss rates. You had a competitor enter the market this week with an extensively AI based capital competitor.

I just wonder if you could compare and contrast and think about how you compete, is that market perhaps that’s a little more crowded?

So, I think we always see competitors going after one part of our equation. And we certainly need to watch that.

But again, I think our real strength is to comprehensiveness and cohesion of our offering and our ecosystem. We're going to continue to apply the right technologies, such as AI to everything that we do, not just risk, not just capital but everything.

But I think our strength is the fact that we do have a more comprehensive solution than most sellers. And we're certainly watching what others do.

But I'm really confident in our roadmap, because we continue to prove that we're solving critical needs of our sellers and of our broader customer base that are resonating. So we need to maintain that focus and we need to continue to look at trends and technology, both in terms of what artificial intelligence and machine learning and data science more broadly can do and apply it to every aspect to our business.

And we remain focused there. All this goes back to something we believe is a core advantage for us which is payments.

And in fact, the seller doesn't have to think about, does this work with X, it just works right out of the box. And no matter how you going to view the ecosystem payment comes right out of the box.

And there is nothing simpler and nothing easier and nothing faster in terms of getting access to your funds. So that remains our focus and we’ll continue to see competitors enter at the edges.

But we want to make sure that we're focused on that cohesion which has been a strength of us.

Can we dig a little bit more into this big commerce partnership that you have, particularly as you look to extend Square Capital into the siloed Caviar user? Do you have the same data insights, I guess, from a risk analysis point of view?

And how should we think about -- how that relationship scales over time? And then my follow-up would be piggybacking off Jim's earlier question on the sequential downtick on originations, also looks like $8 million was added on to the balance sheet quarter-over-quarter.

Is that related to the same issue that was earlier discussed, or should we think of that as more normal run-of-the-mill business?

Just normal run-of-the-mill business, right, the Square Capital portion that sits on our own balance sheet is still small relatively. So we're sitting at about $58 million on our balance sheet.

Cumulatively, we've now done over $2 billion in Square Capital originations that we’ve facilitated, so just normal course of business. Recall, we typically use our balance sheet for areas where we are still early and curing the data, so products like consumer installments, even products like some of our partnerships.

So segueing into that. The important thing with a partnership platform is getting access to similar data that we see with Square Payments, which then helps educate our models so that they can make the right risk trade-offs on where to go offer that capital to.

So clearly with partners like Upserve [41.02] [indiscernible] [originali], which does a point-of-sale more geared towards the restaurants world, a partner like Caviar, frankly, who also clearly is bringing us restaurant-type customers, BigCommerce seeing a lot of sellers business online. And these are all great partners, because they're bringing that same type of data that can flow through the models that we have built where our competitive advantage are.

It also allows us to serve that loan back in a really seamless way. And I think as Jack talked about in the last question, as competitors come and go what is beautiful about the product is it's getting served to you in your dashboard where you see your business.

And we're actually mastering the repayment against how your business is performing. And you can really only do that when you're in the payment flow.

And so that's why we look for those partners. It’s why we believe we can be very additive to those partners, and it's why we've built it in a very scalable platform, like way, so that as we work with someone like BigCommerce, they don't need engineers on their sites make this work.

We've made it now so plug-and-play that new partners can come on in a really seamless easy fast way.

And then we’ve seen the Square commercial adds on TV a lot more often. Should we think of advertising spend increasing as an overall percentage of OpEx, going forward?

Yes, the sales and marketing spend, as you can see, I mean, it’s our variable spend and it does move up and down quarter-to-quarter period-to-period. And that really depends on, partially time of year and partially what we’re talking about.

So we've had a lot of launches through this year, starting in Q1 with our first vertical point of sale push around retail point of sales, appointments in another vertical point of sale. But we’ve really pushed on the retail side.

From there, we invested behind the new country in the UK and now with Square Register launch time, we want to make sure we continue to position Square, not just as a start accepting payment but really more as we are -- the point of sales we’re a commerce platform, we can help you start run and grow your entire business with many different pieces. And I think Jack and I’ve talked about this on numerous calls about where we have most work to is we’re aware enough and just making sure that larger sellers, in particular, know that Square is the partner for them.

We're not just about micro businesses. So you will see sales and marketing rise and fall.

But how we’re monitoring internally is always coming back to this discipline of a three to four quarter payback period, and that has remained really consistent even in quarters like the last where we leaned heavily into overall aggregate dollars of sales and marketing expenditure.

Two quick one, one could you talk a little bit more about your marketing products that is something we’re pretty exciting about. It seems like a really high ROE product for the merchant and something you guys are uniquely positioned on.

And then second of all, the way you talked about the industrial bank license wanting to in-house some of the lending function, you mentioned just the speed of decision making. Does that also include keeping more on your balance sheet?

We’ve gotten some more questions on that. Thanks for the responses.

So on Square Marketing our CRM product, we're very excited about it too, so thank you for talking about it. If you look at -- we talked a little bit more about this in Q2 actually.

What we see with Square Marketing programs is they generate about $10 in sales for everyone $1 in spend by their seller, that’s an incredible outcome for small businesses. And I think what’s really unique in the way Square does this is we can actually close the loop for them because we can tell them, you put this marketing camping out, you sent it to Jack, Jack walks in your store and use the card that we’ve already tagged to Jack.

So Jack doesn’t have to do anything. In fact, we can even take the $5 off right at the POS, it's a beautiful experience for him.

And the customer and the seller knows that the marketing campaign work. In terms of loyalty programs, we see about 70% increase in buyer visit frequency.

We have about 90 million unique customer profiles. We sent 350 million digital receipts.

I mean, it is a platform that has scale to it. In terms of seeing it in our numbers, it would fall within the subscription services line.

But I think more broadly, we view it as we have the most CRM forward point of sale system out there. And so that helps us compete against the old school POSs that are really just some terminals and even the folks that are trying to build next gen POSs as they just don’t have that platform that link back to the customer.

So expect to hear more, but we're excited by the momentum that’s building and we think that’s part of why you saw the acceleration in growth, it's just one of many levers as to why adjusted revenue is accelerating quarter-over-quarter and year-over-year. In terms of the capital -- the question on does -- do we need more on balance sheets as we move to things like the ILT.

Right now, our expectation is to keep our strategy as it is. Hopefully, I heard your question correctly and continue to work with third party investors.

We still see tremendous interest in this product overall. We talked about adding in the Canadian pension plan last quarter.

Great example of the type of investor that's now coming to Square Capital as the data has cured and they can see the quality of the product that we're talking about. CBD clearly has nine long duration over $300 billion of assets under management I am looking for more long term returns.

So I think that also helps with our cost of capital. So our expectation for now is certainly not to keep building up our balance sheet.

We usually talk about it being somewhere in the 10% to 15% max of overall cash, cash equivalents and marketable securities. And we're still well under that with over $1.1 billion sitting on our balance sheet right now.