‘No longer just a payments company’

Twitter CEO Jack Dorsey addresses students during a town hall at the Indian Institute of Technology (IIT) in New Delhi, India, November 12, 2018.

Anushree Fadnavis | Reuters

Block executives no longer want the firm to be seen as a payments pure play.

The San Francisco-based company held its first investor day in five years Wednesday, where the C-suite made its case to Wall Street that the money app, along with its crypto and music-streaming businesses, should be valued as an “ecosystem” instead.

“Calling Block a payments company is like calling Amazon a bookseller,” CFO Amrita Ahuja told CNBC in a phone interview. “We’ve grown in so many different ways across multiple dimensions.”

Co-founder and CEO Jack Dorsey, who formerly ran Twitter, kicked off Wednesday’s presentation with a keynote on the evolution of Block and bitcoin’s role in it going forward. It’s “difficult” to fit a company like Block into a single category, he said.

“We are no longer just a payments company,” Dorsey said during the livestreamed event. “A lot has changed since our last investor day.”

Square was founded in 2009 and made its name by creating a credit card reader for mobile phones. The company expanded its scope to peer-to-peer payments and bank-like products with Cash App. It also acquired Afterpay and Jay-Z’s Tidal music streaming service. The company also operates an FDIC-insured bank, and it offers stock and cryptocurrency trading.

Square’s corporate renaming to Block was meant in part to reflect that widening aperture and broader plans around crypto and blockchain. 

While fintechs were among the best performers during the coronavirus pandemic, Block and its peers have been pummeled in 2022 amid rising interest rates. Ark’s Fintech Innovation ETF, a basket of fintech names, is down more than 60% year to date. Block itself has fallen more than 45% in 2022.

Focus on profits

Still, Block’s CFO, Ahuja said the company is outperforming its peers on profitability. Block released updated profit margins Wednesday — an increasingly important metric as investors prioritize the bottom line over growth.

Adjusted profit margins for the Square side of the business last year were 34%, and they were 12% for Cash App, according to the company. On the pure-growth side, Cash App now has 46 million monthly active users and 80 million annual actives as of March.

“Wall Street analysts are going to want to understand our growth profile, and our margin structure as a company — you can see based on our track record we are outgrowing the rest of the industry,” Ahuja said. “We operate in a large and growing market and are still taking share.”

Block closed a $29 billion deal to buy Australian fintech company Afterpay earlier this year as it expands into the installment loan market. The CFO highlighted the cross-selling opportunity with roughly 6% of its Cash App users also using AfterPay. 

The lending sector has become popular for consumers and merchants, along with a surge in online shopping. It spreads out the cost of a larger purchase into four interest-free installments. Despite pushback from consumer watchdogs, Ahuja contended that it’s safer than a traditional card because consumers can’t take on additional loans if they miss a payment. 

“Millennials and Gen Z’s are quite frankly skeptical of traditional forms of credit, that leave people in debt spirals,” she said.

Block also acquired Jay-Z’s music streaming business Tidal for roughly $300 million last year — at the time a head scratcher for some payment analysts. Dorsey said it was a bet on the creator economy, which he argues will continue to grow as artificial intelligence removes “more and more of the need for mechanical work.”

“This will be a massive economy in the future, and we see an opportunity to be a big part of it, all using the tools and platform we’ve already built,” Dorsey said. “We acquired Tidal because we saw that artists take a path similar to small businesses, and that there’s a significant gap in the market around artist tools.”

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