Block Inc

Sure, happy to take that, Ramzi. So first, on the specific items that shifted out of Q4, and we now expect to materialize in 2025, there's really kind of two key pieces to it. First, on the square side, there's some partner benefits that we had expected to land in Q4 that would benefit our transaction costs, and we now expect them to land during 2025. From a cash app perspective, secondly, we've shifted the expansion of cash app borrow to new customer segments into 2025. One example of this sort of expansion that we're talking about is that we're planning to use borrow as an incentive to drive paycheck deposit adoption, which we'll now expect to scale during the year next year. We're super excited about the potential here. We started some early testing on it. We've also delayed some expansion around underwriting criteria. As you saw in Jack's letter, lending has tremendous value to the broader ecosystem by driving engagement and retention and product adoption. So we're excited about the opportunities with borrow, some of which we had previously expected to materialize in Q4, but now we expect to see from a timing perspective in 2025. Just to level up briefly on the overall Q4 guide, we're raising the bottom line guidance, and that's even as we expect to continue ramping our -to-market spend to drive growth into 2025. And we see underlying sort of healthy trends and momentum across each of the ecosystems based on what we're seeing so far in October. You know, with square strong signals as noted earlier in GPV growth, with cash app healthy -over-year growth and inflows per active through October, which we expect to continue through Q4, and encouraging momentum around paycheck direct deposit actives as well. And then as you've heard, you know, execution across a number of different new product launches, whether it's square pre-authorization or enhanced restaurant point of sale, with more to come, things like after pay on the cash up card and our single app within square, all of which we expect to grow, support our growth into next year. So some healthy underlying momentum that we're seeing even in early Q4.

Thanks, Anirita. And your next question comes from the line of Will Nance with Goldman Sachs. Your line is open.

Hey, I appreciate you taking the question today. I wanted to ask just on some of the trends and cash app and just how you guys are thinking about balancing the user growth algorithm versus the ARPU expansion. And, you know, maybe you can kind of talk through some of the trends you saw this quarter. I think MAUs were relatively stable. What sort of the expectations and expectations over the next year or so?

Hey, Will, I can get us started on this. So what we saw from an MAU standpoint was 57 million monthly actives relatively consistent with the end of the second quarter up 3% year over year. Maybe let's just talk about some of the drivers for that and where we are seeing real growth from an engagement perspective. So first, you know, we think longer term, there is a significant opportunity to continue to drive growth with actives. You know, we've got room to grow around our digital native audiences, millennials and Gen Z customers and real resonance there. In the near term, from a year over year growth perspective, we do expect to see more moderated growth and likely will end the year as well in that sort of 57 million monthly active range. There's two reasons for this that are, you know, part of our deliberate strategy and in our bank to base strategy. First is our focus is around engagement. As you've noted with our ARPU trend lines at $75 in the third quarter versus 65 last year, growth of 16% year over year, we're seeing strong engagement on the platform. And we've put emphasis on driving product adoption, driving share of wallet. You see that come through in products like Cash App Card or Cash App Borrow or Buy Now Pay Later, where we've seen transactions increase, where we've seen Cash App Card spend increase on a year over year basis and strong engagement in flows per active up 9%. The second key piece of our strategy is driving enhancements to the platform where our focus is on promoting a healthy ecosystem. As we're working, you know, to build a primary banking relationship with customers, building a healthy and safe platform are critical to that work for both existing customers as well as new. And so we've made some adjustments around onboarding flow, limits and other controls, which, you know, enable us to create greater access and opportunities for cross-selling, but do have some trade-offs in terms of new actives growth. And we think those trade-offs are worthwhile as we're building the, you know, deepening trust and engagement with our customers.

Great, appreciate you taking the question tonight.

And our next question comes from the line of Dan Dolaz with Mizuho. Your line is open.

Hey, guys, good evening. Thanks for taking my question. I want to ask like a bigger strategic question, Jack. Like I saw the shareholder letter, it looks like a lot of nice returns on the lending products. Can we touch on it a little bit long-term as you think about how these different lending products are enhancing the entire ecosystem as you continue to scale? Thank you.

Yeah, absolutely. I mean, I think this is one of the things that will ultimately set both Square and Cash App apart. It certainly did for Square in the early days when we launched what we called Backdent Square Capital. Just having an easy option for sellers to potentially increase their sales by getting a appropriately sized loan right to their email inbox and an invite to opt into it. And then paying back through just making sales to their customers really took off. And it kind of guides how we think about all of our lending products. We want to lead with technology. And that means that we have a deep understanding of our sellers, our Cash App customers, our after pay customers and merchants. And we want to make it very transparent and upfront so they know exactly what they're gonna pay. There's no hidden fees. Everything is visible. So they know what they're taking part of. And then finally is simplicity and specifically around the payback experience. That's where it really matters. Because with a simple payback experience, it doesn't really feel like a loan. It feels like something that you can use right in time to do whatever you need to do, whether it be buy a new salon chair to double your sales or just hold you over for the week before your paycheck in the Cash App case. So this will be a reason that people stay. And that's traditionally one of the big reasons why people do is because they have access to something like this built right into the point of sale, built right into their app that they started with peer to peer and have moved on to banking and using the Cash App card. I think the most exciting thing for us is putting after pay on the Cash App card. And then just how that extends the potential. And obviously the scale of the Cash App card is meaningful enough that it really changes the game for our customers and obviously our business as well. And we think these are great options for investors in these products, but we have a lot of flexibility in the future, including SFS as we think about these products and as we move forward. But in terms of the ecosystem, today it's really focused on retaining through providing entirely new utility which is extremely useful for these customer bases. And then little by little, as people understand the benefits, I think it becomes an acquisition channel for us, a reason why people want to download Cash App and use it, a reason why people want to download Square as their point of sale and use it for their business, whether that be one location or multiple. So it's banking as a category is a huge differentiator for us and something that we'll continue to invest in. But it also is a compliment to everything else. We need to lead with all the other features that provide other utility and other revenue streams for us. We think there's a lot there, both on the Cash App side and also on the Square side, especially since we completed our orders migration, we can get back to building new things and new innovations for our sellers, whether that be software, hardware or services. And we've looked very deeply across our entire ecosystem for those connection points, which had even more utility and entirely new network effects like Cash App to Square merchants.

Thank

you so much.

And your next question comes from the line of Alex Markrath with KBCM, your line is open.

Hey everyone, thanks for taking my question. Earlier in the year, you all had indicated marketing around Cash App incentives and starting at the back half. Just sort of curious to what extent this has started and some of the early learning so far considering that the bank, the base efforts and then Amrita, maybe just bring it all together for us with your earlier comments around activity levels that you're seeing among the active space more recently, thanks.

I'm happy to get us started here. I think what we're seeing from our bank to base strategy is really sort of coming together. First, from a product perspective, we believe the suite of tools, financial tools that we've built is compelling relative to what's out there with traditional banks. And we're intending to increase our investment behind -to-market to bring awareness around that. Maybe just unpack kind of what's going on in here. We've got benefits that help drive paycheck direct deposit acquisition and improve retention. A number of which are enumerated in the shareholder letter and which we've been building upon throughout the year and continue to build upon. We recently rolled out free paper money deposits as a new benefit. And as I mentioned earlier, we're testing access to borrow as a way to drive paycheck direct deposit actives encouraging signs still early. We're also bringing greater visibility to these benefits in the app. We started rolling out a new in-app experience, a new version of our money tab within Cash App in October that makes our direct deposit offering and all these sort of related benefits way more visible. We're only obviously a few weeks into this, but we're seeing high engagement and uplift in customers setting up direct deposit through that. And Cash App Card is I think another key piece of bringing visibility to our broader set of banking offerings and ultimately direct deposit. Obviously, as you've heard, we have a lot of excitement about bringing after pay to the Cash App Card. And we see that as an opportunity to drive engagement and ultimately attach to our banking products and direct deposit. Specifically within GoToMarket, our focus is on scaling several channels, including performance marketing, incentives, referrals, and brand marketing. And you'll see us do that in the fourth quarter included in our guide is a step up in marketing related to that and into 2025 with the intent of ultimately building trust and awareness around all of these financial services products. So we're pretty excited about what we're seeing. As you noted earlier, strong engagement, even so far without driving a step up in marketing, but with now bringing it all together from an awareness standpoint, we're excited

to see what lays ahead.

Thanks.

And your next question comes from the line of Jeff Cantwell with Seaport Research. Your line is open.

Hey, thank you very much. Questions for Jack. Your company has been focused on Bitcoin for many years. I want to pivot a little bit away from Square and Cash App and ask about that because at the moment, it increasingly sounding like there's potential opportunities for greater regulatory clarity on crypto in the US. Well, first of all, do you agree with that statement and can you maybe talk a little bit about Block's Bitcoin strategy and how you might capitalize on that development? Also, can you remind us how much BDC you have on the balance sheet and talk about what you might be adding to that in the future? And then lastly, I'll ask all of mine up front, you just give us your thoughts on what greater regulatory clarity might mean for crypto in general. Does that kind of open up the possibility for more acceptance and usage here in the US and globally? Thanks.

Yeah, I think greater clarity will definitely be extremely helpful because it allows us to move much faster because we know what the rules are and what the common understanding is, especially in the US. So I think this is generally a net positive for the industry. We're only focused on Bitcoin and we're only focused on Bitcoin because we want the internet to have a native currency. And the reason we want that is because we want to accelerate our business. If we have a native currency for the internet, it means we can move money much faster and we can offer cash out products and square products in every single market instead of the market by market push that we have to do today. So what we're focused on in terms of our strategy overall on Bitcoin is making it more accessible, making sure that more people can access Bitcoin, buy, sell it obviously, but also send it peer to peer. We want to make it more secure. Our manifestation of this is around Vicky and making sure that we help in every way possible to better secure the network. Mining and our mining initiative is a big part of this. And ultimately we want to make it usable every day. This is a longer term strategy. This is where we get into actual payments on the internet and having an open protocol for payments on the internet, which it needs and it's going to happen at some point. It's just a matter of time. And Bitcoin has the strongest adoption, it has the strongest belief system and it has all the attributes necessary to trust it as a currency, including having no security issues, never being down and having a significant developer community behind it that makes it stronger and more secure and faster every day. If there are two areas I point you to in terms of manifestation of Bitcoin, it'd probably be the cash app exchange, number one, because it's the starting point for people participating in this future currency. And then second is mining. Mining is we think going to be pretty large for us because we've been developing ASICs for quite some time. There's a specialized version of an ASIC, our competitors. There's only one main competitor here. And a lot of mining folks just want another option, believe it or not, but they want another option that is reliable, that is configurable, that they can customize to their needs. And whether that be buying the chip or the hash board or even the entire system, having other options out there is significant. And you probably saw our announcement of one of those deals and there are more to come because there's a huge gap in the market in terms of quality of these machines and also focus on it. And we have a team that can do both, fortunately. So we will continue to look at the space and continue to work on products and features that help across those three things, accessibility, making it more secure and making it more usable every day.

And Jeff, just on your question about Bitcoin on the balance sheet, we have just over 8,300 Bitcoin on the balance sheet, which as of the end of the quarter was worth $530 million. And obviously current trading values is worth about

100 million more than that. Great, thanks for all that, appreciate it.

And as a reminder, we ask that you please limit yourself to one question. And your next question comes from the line of Harshita Rawat with Bernstein. Your line is open.

Hi, good afternoon. I want to ask about Alpex. This year you exceeded your objectives. Here and also given the low constraints you placed on yourself. Amrita, how do you think about further efficiency gains here from kind of streamlining resources which you'd be doing? And how does that balance against some of your -to-market investments in Square and Ultra-Marketing Spend on Gasha? Thank you.

Sure, Harshita. What I would say is that we still see significant opportunity across building leverage. In multiple areas of our operating expense base, maybe three key areas to call out so that we can make room for our -to-market initiatives where we are seeing high returns in which we do expect to accrete in terms of long-term profitable growth. But those three key areas being personnel expenses, structural costs and corporate overhead. From a personnel perspective, we've got a people cap in place. We believe that that sort of a constraint affords us creativity around and prioritization around how we focus our efforts against our strategies against delivering value to customers. And with 19% growth this quarter, 15% growth, at least 15% growth next year, you see a tremendous amount of leverage on that fixed expense base as we remain under our people cap. Secondly, from a structural cost perspective, we see further opportunities around unit costs when we look at how we operate our products, whether in partnership with others or as we run our machine learning models from an underwriting and risk loss perspective. And then third, corporate overhead. It's a multi-year effort to examine each of our sort of key pieces around corporate overhead from T&E to professional services to cloud to software to travel and entertainment. And we think that there is more opportunity for us to ensure that we can put as many of our investment dollars towards our customers as possible. And we also, as noted in the shareholder letter, make decisions against our own progress and hold ourselves accountable to a high bar. And as a relate of that have made some recent decisions with respect to some of our emerging initiatives where we're reducing our team size on title and winding down our TBD efforts, but in an effort to be able to put more investment against the areas that are working, that have found product market fit, like our Bitcoin mining initiative, as you heard from Jack, where we have a healthy pipeline of demand or things like our self custody wallet for Bitcoin Bitkey, which was recently named to one of the best inventions of 2024 by time. So, we're continuously evaluating ourselves, our performance and holding ourselves to a high bar. And I think that's how we expect to drive further margin improvement next year.

And your next question comes from the line of Andrew Bausch with Wells Fargo. Your line is open.

Thank you for taking the question. I know it's been asked before, but just wanted to hone in on GPV again. You said that growth was double digit in October, but we're only expecting kind of a modest improvement in fourth quarter versus third quarter. So maybe you can kind of just help us understand why only a modest instead of something more robust.

Yeah, well, look, we're still in the early days of November, so we'll know more obviously as we get through November and December. November and December typically are months that are more impacted by holiday and seasonal spending, which we don't yet have a view on and maybe more discretionary verticals is related to that. So obviously update you as we know more, but what we did see in October is, as I noted, a couple of percentage points of improvement in the US off that .9% year over year growth in Q3, and also improvement even on the international growth, which was obviously already strong at 20% year over year in the third quarter. We think that there's even more opportunity as we look to 2025 in our own execution in terms of customer acquisition, in terms of all these product initiatives coming to bear.

Great, thank you, Anurita.

And your next question comes from the line of Trevor Williams with Jefferies. Your line is open.

Great, thanks a lot. I wanted to go back to Afterpay on cash card. If you're able to share anything more specific in terms of timing for a broader rollout, and then any early learnings just from the more limited launch that you've done to date around how it's complementing the existing debit spent on cash card, anything just in terms of what kind of uplift you're seeing. Thanks very much.

Yep, nothing specific on the date. We wanna make sure that we get the whole experience correct, but the results have been very, very encouraging from our customers. And we see that this is a meaningful opportunity for us that we're gonna roll out and scale over the next short time. But the scale of the cash app card and the functionality of buy now pay later, and making sure that people can easily access and not have to think too much about it, just using their cash app card. And going back to what I said about our lending ecosystem, the focus here is on technology to make sure that we are able to offer this to as many people as possible, the transparency that they'll be able to see and trust it more because of that. And then also the simplicity, and specifically where the simplicity matters is around the payback. So we're really excited about it and can't wait to continue to roll it out.

And Trevor, I'd just add, similar to what you've seen us do with our other lending products, and more recently with cash app borrow, is that we're gonna be pretty careful and methodical in terms of how we ramp the product. As you heard from Jack, we're super excited here, but we wanna make sure that we're ramping, iterating, learning as we test. What we'd expect to see is initially, millions of monthly actives of our cash app card, monthly actives should be eligible next year. Obviously a subset of them will actually convert to using the product. And that over time, we expect to grow both eligibility and do things to try to drive conversion, hire a conversion over time as well. We're gonna start first with the retroactive offer, which is you can effectively, after you've make a purchase, retroactively pay in for, and then we'll expand to allow customers to turn on after pay before they make a purchase. So we're being deliberate both in terms of the use cases that we roll out, the number of customers that we make eligible, and then looking to see how that conversion plays out over time with an eye towards ramping eligibility and conversion as we go throughout time.

And we will now take our final question from the line of Andrew Jeffrey with William Blair. Your line is open.

Hi, appreciate you sneaking me in here at the end. Amrita, I wanted to ask about cash app monetization and kind of how we think about progressing. I think, first of all, just kind of what the composition of that looks like today between the different drivers, interchange in particular, and whether interchange becomes a greater contributor with direct deposit. I imagine it will, but I'm just trying to dimensionalize that and think about trends in monetization.

Sure, what I would say is that we see healthy trends across a number of different products for cash app. When we look at what's driving the strong performance, gross profit up 21% year over year in the third quarter, inflows up 13% year over year, monetization rate, and the growth of active is all growing as well. What we see is cash app card, borrow, our buy now pay later platform, cash app pay, each of these products driving meaningful growth. Cash app card is our largest gross profit revenue stream or primary driver of growth with both actives and spend per active growing on a year over year basis. It's now become a daily utility for our monthly actives. We're seeing an average of six times transactions in terms of transactions per week. And we're doing, there's more that we can do here, putting more marketing dollars behind driving cash app card actives. As this is really an entry point, as I was noting earlier for our customers and how they look at our broader suite of financial services products. Borrow also with strong momentum, gross profit growth up more than two times year over year in the third quarter. And buy now pay later, inclusive of our ads, burgeoning ads revenue stream on that platform with 29% gross profit growth in the third quarter, 23% GMV growth, both those rates stronger than where we were in the prior quarter. So an improvement in growth. And then with cash app pay, we've seen tremendous momentum here. Cash app pay monthly actives have actually now surpassed after pay's North American actives. We're adding more and more partnerships, new enterprise merchants. We recently launched, announced our partnership with Lyft, which has more than 23 million active writers in North America. And seeing rapid, again, adoption with minimal marketing spend behind it. And we will be leaning in to marketing. We just started some in the third quarter to activate some marketing campaigns and drive awareness of cash app pay. So, again, I think we see multiple levers for continued growth and ramping of our existing products. And then with new products to come, like after pay and cash app card, we see further opportunity around driving engagement, monetization rate in the future.

Thank you. And ladies and gentlemen, this concludes today's call. And we thank you for your participation. You may now disconnect.

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