Block, Inc. Q3 FY2024 earnings call

• Discussed the ecosystem of lending products, including Square Loans, Afterpay, Cash App Borrow, and their methodologies, risks, and competitive advantage.
• Focused on increasing access with these lending products through better technology, transparency, and simplicity.
• Noted strong results in the third quarter with gross profit growth, improved profitability with adjusted operating income and EBITDA at record highs, and adjusted free cash flow of $1.5 billion for the 12 months ending September compared to $945 million prior 12 months.
• Rolled out Square's order platform, tested enhanced Square for restaurants' point-of-sale experience, and planned to launch a single app experience more broadly in 2025.
• Mentioned ramping sales hiring, including field sales, and investments in Square brand and performance marketing.
• For Cash App, about to launch Afterpay on Cash App Card, leaning into go-to-market spend to drive paycheck deposit actives in 2025.

Gross profit was $2.25 billion, up 19% year-over-year. Square had 16% growth, contributing a portion of this gross profit, and Cash App had 21% growth. Revenue contribution: Square and Cash App each played significant roles in the overall gross profit, with Cash App showing stronger growth percentage-wise.

• Full year 2024: Raised guide on adjusted operating income and adjusted EBITDA, maintained gross profit guidance outlined in August.
• Fourth quarter 2024: Expected gross profit of $2.31 billion, 14% growth year-over-year.
• 2025 preliminary view: Expect strong gross profit growth of at least 15%, committed to expanding margins on adjusted operating income basis next year though pace of expansion less than 2024 as investing in growth opportunities, guide assumes stable macro-environment and momentum in business execution and product innovations.

• Evolving regulatory environment related to fintech banks and lending products, which could impact operations and compliance.
• Uncertainty around broader regulatory changes post-election and their potential impact on the business.

Q: On the Square side, asked about visibility and building blocks for GPV growth acceleration next year.

A: Amrita Ahuja discussed that Square GPV growth improved each month since July, U.S. growth improved by couple percentage points from Q3, international growth accelerated into October, driven by same-store growth in verticals and customer acquisition with product innovations and go-to-market initiatives ramping into 2025.

Q: Tim Chioto asked about initial local end-market sales team and expansion plans.

A: Amrita Ahuja said ramping field sales hiring is key, first group of dedicated field sales reps in market now, plan to continue hiring in Q4 and next year, existing sales team productivity improved 10%-20% YTD with more opportunity, and broader strategy involves marketing and partnerships with examples like T-Mobile and SalonCentric partnerships.

Q: Darrin Peller asked about impact of fintech bank regulation on compliance and Cash App growth.

A: Jack Dorsey said focused on controlling what can be controlled with better technology, applying engineering focus to stay ahead of regulation, Amrita Ahuja added well-positioned with scale, partnerships, and ability to innovate in compliance programs, and Cash App 2025 guidance is consistent with longer-term gross profit expectation.

Q: Ramsey El-Assal asked about timing-related impacts to Q4 gross profit.

A: Amrita Ahuja said partner benefits in Square and expansion of Cash App Borrow shifted to 2025, but Q4 has healthy underlying momentum with Square GPV growth signals, Cash App inflows per active growth, and new product launches supporting growth.

Q: Will Nance asked about balancing user growth and ARPU expansion in Cash App.

A: Amrita Ahuja said MAUs were 57 million, relatively consistent, focus on engagement with ARPU growth at 16% YOY, deliberate strategy to moderate new actives growth for focus on engagement, product adoption, share of wallet, and building trust and engagement with customers.

Q: Dan Dolev asked about strategic impact of lending products on ecosystem.

A: Jack Dorsey said lending products set Square and Cash App apart, lead with technology for transparency and simplicity in lending, benefit ecosystem by driving engagement and retention, and complement other features for revenue streams.

Q: Alex Markgraff asked about Cash App incentives marketing and activity levels.

A: Amrita Ahuja said bank-to-base strategy coming together, increasing go-to-market investment, rolling out benefits for paycheck direct deposit, testing Borrow to drive actives, and bringing visibility to benefits in app with early encouraging signs.

Q: Harshita Rawat asked about OpEx efficiency gains and balance with go-to-market investments.

A: Amrita Ahuja said significant opportunity in personnel expenses, structural costs, and corporate overhead, with people cap in place, opportunities in unit costs, and multi-year effort to examine corporate overhead for more investment in customers.

Q: Andrew Bausch asked about modest improvement in fourth quarter GPV growth.

A: Amrita Ahuja said still early in November, November and December impacted by holiday spending, but saw improvement in U.S. and international GPV since July and more opportunity in 2025 with execution.

Q: Trevor Williams asked about timing for broader rollout of Afterpay on Cash Card and early learnings.

A: Jack Dorsey said results encouraging, excited to roll out, Amrita Ahuja added methodical ramp, initial millions of Cash App Card monthly actives eligible, ramping eligibility and conversion over time with retroactive and pre-purchase offers.

Q: Andrew Jeffrey asked about Cash App monetization and direct deposit impact.

A: Amrita Ahuja said healthy trends across Cash App products, Cash App Card as largest gross profit revenue stream, Borrow with strong momentum, Buy Now Pay Later with growth, Cash App Pay with momentum and new partnerships, seeing multiple levers for continued growth and monetization.