Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Block Inc (NYSE:SQ) reported a 19% year-over-year increase in gross profit, reaching $2.25 billion, with significant growth in both Square and Cash App segments.
• The company achieved its highest quarterly profitability ever, with improvements in adjusted operating income and adjusted EBITDA.
• Block Inc (NYSE:SQ) raised its full-year 2024 guidance for adjusted operating income and adjusted EBITDA, indicating strong financial performance.
• The company is seeing strong momentum in Cash App, with improved attach rates on paycheck deposits and other financial products.
• Block Inc (NYSE:SQ) is investing in growth opportunities, particularly in go-to-market strategies, to drive further expansion in 2025.

Negative Points

• There are discrete items impacting gross profit growth, such as delays in transaction cost benefits and expansion of Cash App Borrow, which are now expected to materialize in 2025.
• The company faces regulatory uncertainties in the fintech and banking sectors, which could impact its operations and growth strategies.
• Block Inc (NYSE:SQ) is experiencing moderated growth in monthly active users for Cash App, with expectations to end the year at around 57 million, indicating challenges in user acquisition.
• The company is making deliberate trade-offs in new active growth to focus on engagement and platform health, which may impact short-term user growth metrics.
• Block Inc (NYSE:SQ) is still in the early stages of rolling out new products like Afterpay on Cash App Card, indicating potential delays in realizing full benefits from these initiatives.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with SQ.

Q: Can you provide more details on the expected growth acceleration for Square's GPV in the U.S. next year? A: Amrita Ahuja, CFO, explained that they expect modestly improved growth in the fourth quarter relative to the second quarter and further acceleration into 2025. This confidence is based on recent improvements in year-over-year Square GPV growth each month since July through October, driven by same-store growth across verticals and encouraging trends in customer acquisitions.

Q: Could you elaborate on the field sales strategy for Square and its expected impact? A: Amrita Ahuja, CFO, mentioned that they have their first group of dedicated field sales reps in the market and plan to continue hiring. This strategy is expected to support brand perception and partnership marketing. They have seen a 10% to 20% improvement in per rep productivity year-to-date and believe there is more opportunity to increase this further.

Q: How is Block addressing regulatory challenges in the fintech banking sector? A: Jack Dorsey, CEO, emphasized the focus on building stronger systems and leveraging technology to stay ahead of regulatory changes. They are investing in compliance programs and building redundancy across their business to ensure resilience in an evolving regulatory environment.

Q: What are the key factors affecting Q4 gross profit guidance, and when might these impacts materialize? A: Amrita Ahuja, CFO, noted two key factors: a delay in partner benefits affecting transaction costs and the shift of Cash App Borrow expansion to new customer segments into 2025. These are expected to materialize during 2025, with borrow being used as an incentive to drive paycheck deposit adoption.

Q: How is Cash App balancing user growth with ARPU expansion, and what are the trends in monthly active users? A: Amrita Ahuja, CFO, stated that Cash App had 57 million monthly actives, consistent with the previous quarter, with a focus on engagement and ARPU growth. They expect moderated growth in actives, focusing on driving product adoption and share of wallet, with ARPU growing 16% year-over-year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.