Twitter CEO Jack Dorsey addresses students during the town hall at the Indian Institute of Technology (IIT) in New Delhi, India, on November 12, 2018.
Anushri Fadnavis | Reuters
Block managers no longer want the firm to be seen as a pure payout game.
The San Francisco-based company spent its first investor day in five years on Wednesday when C-suite announced to Wall Street that the money app, as well as its crypto and music business, should be rated as an “ecosystem”. instead.
“Calling Block a payment company is like calling Amazon a bookseller,” Amrita Ahuja CFO told CNBC in a phone interview. “We’ve grown so many different ways in different dimensions.”
CEO and co-founder Jack Dorsey, who previously ran Twitter, kicked off a presentation Wednesday with key reports on Block’s evolution and the role of bitcoin in it. He said a company like Block is “hard” to put in one category.
“We are no longer just a payment company,” Dorsey said during a live broadcast. “A lot has changed since our last investor day.”
Square was founded in 2009 and made a name for itself by creating a credit card reader for mobile phones. The company has expanded its scope to include peer-to-peer payments and banking products through the Cash App. The firm also acquired Afterpay and Jay-Z Tidal’s music streaming service. He also manages an FDIC-insured bank and offers exchange and cryptocurrency trading.
The corporate renaming of Square to Block was supposed to partly reflect this aperture extension and wider plans around the crypto and blockchain.
While fin technology was some of the best during the pandemic, Block and his colleagues were beaten down in 2022 amid rising interest rates. ETF Fintech Innovation ETF ARK, a basket of fintech names, has fallen about 55% since the beginning of the year. The bloc itself fell by about 45% in 2022.
Focus on profits
However, Block Ahuja’s chief financial officer said the company outperforms its counterparts in profitability. On Wednesday, Block released an updated rate of return – an indicator that is becoming increasingly important as investors prefer the bottom line over growth.
According to the company, the adjusted profitability for the square side of the business last year was 34%, and for the Cash App – 12%. In terms of net growth, the Cash app now as of March has 46 million active users monthly and 80 million active users per year.
“Wall Street analysts will want to understand our growth profile and the structure of our margins as a company – you can see from our track record, we are outgrowing the rest of the industry,” Ahuja said. “We are working in a large and growing market and still hold a share.”
Earlier this year, Block struck a $ 29 billion deal to buy Australian tech company Afterpay when it enters the credit market in installments. The CFO noted the possibility of cross-selling when approximately 6% of Cash App users also use AfterPay.
The lending sector has become popular with consumers and retailers along with the growth of online shopping. He divides the cost of the larger purchase into four interest-free installments. Despite the response from consumers, Ahuja argued that it is safer than a traditional card because consumers cannot take out additional credits if they miss a payment.
“Millennials and Generation Z are quite openly skeptical of traditional forms of lending that leave people in a debt spiral,” she said.
Last year, Block also acquired the music streaming business Jay-Z Tidal for about $ 300 million – at the time it was a major one for some payment analysts. Dorsey said it was a bet on the creators ’economy, which he claims will continue to grow as artificial intelligence eliminates“ more and more need for mechanical work ”.
“It will be a huge economy in the future and we see an opportunity to become a significant part of it using the tools and platform we have already built,” Dorsey said. “We bought TIDAL because we saw that artists are following a path similar to a small business, and that there is a significant gap in the market for tools for artists.”
Dorsey’s case for bitcoins
As of the quarter ended March, bitcoin still generated only about 5% of Block’s gross profit. But executives are betting on the crypt as a secular trend in which Block can be well positioned. Dorsey described it as “an open standard for the global transfer of money” and said it would allow “the Bloc’s entire business to move faster around the world”.
Block first began offering bitcoin trading through the Cash app, and the firm keeps it on the company’s balance sheet as an alternative to cash. The world’s largest cryptocurrency has fallen more than 50% from its maximum and is struggling to regain its value this year.
The Crypto Business Block has expanded to include a bitcoin hardware wallet, a bitcoin mining business and an open source business called TBD for Developers. In addition, Block has an independent bitcoin-focused business called Spiral.
Dorsey is not so keen on other cryptocurrencies and said that “the Internet requires its own currency, and looking at the whole technology ecosystem to fulfill this role, it becomes clear that bitcoin is currently the only candidate.”
“Its development may be slow compared to other candidates, but it is the result of the intent needed to preserve the attributes needed to store and transfer money,” Dorsey plans to say, according to a transcript of Wednesday’s program speech reviewed by CNBC. “The Internet requires its own currency, and looking at the entire technology ecosystem to fulfill this role, it becomes clear that bitcoin is currently the only candidate.”