So we’ll be rolling it out to our other verticals in July. And then contracts, as we think about our go-to-market motion, our sales team and the tools that we give them are critical to be able to reach the sellers with more complex needs. And we rolled out contracts in the first – second half of 2023 and what we saw from December to March was that the number of U.S. sales wins that had contracts attached more than doubled. It’s early, but we’re also seeing cohort retention improvement when contracts are deployed. So we believe that there’s more that we can do here as these products and features come together to lean in to go to market, especially in the back half of the year and into the future to improve the trend lines that we see across GPV.
Operator: We will take our next question from Andrew Bauch with Wells Fargo. Your line is open.
Andrew Bauch: Hi, thanks for taking the question. I just wanted to expand on what you just said there around the go-to-market strategies and the improved product velocity. And maybe if you could help us understand what the value proposition of contracts really unlocks for you guys? And maybe if we can just layer that into some of the expanded franchise capabilities that you discussed. I mean, [indiscernible] chain, like that’s a win for Square that we haven’t seen that magnitude in the past.
Jack Dorsey: Yes. Well, just to start on contracts since you pointed out, this is something we were against for many years in our funding because we saw what a lot of people were doing to small merchants. They are locking them into these pretty predatory contracts. And we still see some of our peers do that today. We took a slightly different tact on it and also have a different goal. We recognize that there are merchants who appreciate contracts because it helps them with predictability of their cost and it allows us to get them free hardware. So if you were to look at just one point, it would be that. And from December to March, we saw the number of U.S. sales wins with contracts attached more than double. So this is really still early for us, but we’re looking, we’re observing what our peers are doing.
We’re observing customer needs, and we want to do something that is far more attractive and much better for the seller and therefore, for us. And it’s working. A big portion of what we’re doing on the go-to-market side is we’re just experimenting a lot more. I think in the past, we relied a little bit too much on 1 thing working. And when that thing didn’t work, we switched the thing. Now we are focused on a big thing in our go-to-market, which is like really looking deeply at the product and the onboarding experience, of course, and just really focusing a lot on that but also looking at doing experiments like field sales, like contracts, everything we’ve done around verticalization of our sales force, all these things compound. And some of them will work, some of them won’t work.
And we’ll invest heavily in the ones that do. But I think that experimentation mindset and being much faster to recognize when something is working or not working, will help us really improve it mirrored with everything that we’re doing on the product side as well.
Andrew Bauch: Franchise capabilities?
Jack Dorsey: Yes. And sorry, on the franchise capabilities, yes, this is an opportunity for us. We are focused a lot on food and beverage. We know there’s a number of gaps that our competitors take advantage of. We’re driving those home and fixing all of them. And our first goal is to get to parity on all the features that make us lose in food and beverage. And then as we get to that this year, then it’s a question of really showing people the depth of our – and the breadth I should say, of our ecosystem. And this is where banking continues to be a stronghold for us and something that will really set us apart in addition to our renewed focus on a better design product and a better engineered product that doesn’t fail.
Operator: And we will take our next question from Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg: Thanks, guys. I wanted to stay here on the Square side for a minute. You had expected the gross profit growth to decelerate in Q1. It’s obviously accelerated modestly. And I think you said at a high level, software and banking, obviously, were drivers there, but we’re hoping you could go a little bit deeper into which specific parts of the software and the banking businesses and maybe touch on international a little bit also. Just trying to unpack where the sources of upside surprise were because we certainly good numbers to see there. Thanks.
Amrita Ahuja: Sure. Maybe just to unpack the drivers on the banking side first. What we saw was first quarter banking gross profit for Square grew 36% year-over-year. And was the key driver of delta between gross profit and GPV growth unpacking that a bit more. What we saw was healthy repayment trends and strong organic volume growth drive results this quarter for banking. Square loans facilitated $1.32 billion in originations, up 17% year-over-year in the first quarter. Instant Transfer also contributed as we lap now in the second quarter, some of the pricing impacts pricing increases that we made in Q2 of last year. And then gross profit from banking products in our international markets also continue to grow as we add more and more capabilities to more geographies.
The recent launches of loans in Japan in January, for instance, has exceeded – – well exceeded our initial expectations. Clearly, quick access to funds and a seamless product experience are true differentiators relative to existing financing options for SMBs in Japan. From an international perspective, in the first quarter, gross profit in markets outside the U.S. grew 38% year-over-year and represented 13% and Square’s gross profit, international GPV was up 23%. We believe there is a significant long runway ahead for growth here as we’re less than 1% penetrated in markets outside the U.S. And we’ve continued to see growth in our deeper vertical points of sale as well across the Square ecosystem. So each of the key strategic and focus areas for us continues to show outsized growth and will be areas that we lean into.
Specifically on vertical points of sale, gross profit from products across retail restaurants and appointments grew 24% year-over-year in the first quarter.
Jason Kupferberg: Thanks, Amrita.
Amrita Ahuja: Sure
Operator: And we will take our next question from Alex Markgraff with KBCM. Your line is open.
Alex Markgraff: Hi, thanks for taking my question. Just a couple on tax and direct deposit. Of the 40% tax actives, the positive refunds into cash. Just curious what sort of overlap there might be with existing payroll direct deposit actives? And then what exactly is entailed in sort of converting those folks that are not maybe overlapping today? And then just as a quick follow-up, any sort of indication of inflows growth excluding the impact of any sort of tax refund growth.
Amrita Ahuja: So as I noted, the Paycheck direct deposit inflows grew faster than overall inflows, so that is neutralized for the tax impact in Q1, the sort of seasonal impact in Q1. More broadly, what I’d say about our tax initiative is that it represents a discovery initiative for us in bringing our direct-to-deposit capabilities, the ability to get your funds faster through Cash App and put it front and center for our customers as they’re getting in engaging in a deep financial services offering that we have a free one with taxes. And so as you look at the broader base of direct deposits in Q1, that’s clearly larger than the Paycheck direct deposits alone. And we saw growth in that as well. But really, the tax piece is about driving discovery and awareness around our broader financial services offering, including Paycheck direct deposits.
And it is a potential for us to convert more of those tax direct deposit customers in the Paycheck Direct deposit customers. A much broader opportunity for us, of course, is, as I mentioned earlier, around the key initiatives that we got from a product perspective around financial services and around bringing all of those initiatives together in bundling and in pricing that’s compelling to our customers.
Alex Markgraff: Great. Thank you.
Operator: And we will take our next question from John Davis with Raymond James. Your line is open.
John Davis: Hi, good afternoon. Jack, I just wanted to touch on the recent merchant settlement with the networks, both on the surcharging side as well as the interchange cuts and just thoughts on how that impacts the merchants and Square more specifically.
Jack Dorsey: Sorry, which – what do you talking about here?
John Davis: So sorry, the merchant settlement with Visa, Mastercard, on the ability to surcharge as well as the cut in interchange to want into effect next year?
Jack Dorsey: I’m not sure I’m sure how to answer the question. We – I haven’t spent much time on this particular issue. I do know that it is an active conversation for a lot of sellers and their customers and different countries have different policies on this. We don’t have a surcharge ability on Square right now. We are rolling that out in Australia, where it is something that most merchants do. But no other comment on this.
John Davis: Okay. Then maybe just Amrita, just a quick question on the sustainability of the 1,000 basis point difference in kind of GPV growth in Square of 9% versus 19%. I know you noted Square banking growth was like mid-30s for the quarter, but how should we think about the relation between GPV growth and seller and GP growth throughout the balance of the year?
Amrita Ahuja: Yes. As I noted in the interim remarks, what we expect to see is a narrowing of the gap or the delta between gross profit growth and GPV growth. That’s as we see GPV growth in the back half of the year, we expect to be stable to improving behind more favorable same-store comparisons. So that’s sort of the expectation that we see for the remainder of the year. And we expect gross profit growth to moderate a bit from the first quarter is 19% as we lap some of that stronger banking performance and pricing changes from the prior year. Obviously, all of our key initiatives the Jackson referencing related to Square from a product and go-to-market perspective, we’re hard at work on and believe that those – as they hit throughout the remainder of the year, can turn the tide from the 2025 perspective.
John Davis: Okay. Thanks.
Operator: And we will now take our final question from Brian Keane with Deutsche Bank. Your line is open.
Brian Keane: Hi, guys congrats on the solid results here. I just want to ask about Afterpay. It’s really seemed to have turned a corner with volume, now having consistently growing 25% the last couple of quarters. Can you just maybe talk high level what’s changed for Afterpay to get better growth? And then obviously, the gross profit growth jumped this quarter to be higher than the volume? Maybe what are those drivers and the outlook there. Thank you.
