Block executives don’t want the firm to be viewed as a pure payments play.
The company, based in San Francisco, held its first investor meeting in five years Wednesday. There, the C-suite argued to Wall Street that the money application, as well as its crypto- and music-streaming businesses should be valued instead.
CFO Amrita Ahuja said that calling Block a payments company was like calling Amazon a bookeller. “We have grown in many different ways across multiple dimensions.
Jack Dorsey (co-founder and CEO) opened Wednesday’s presentation by a keynote about the evolution of Block, and Bitcoin’s future role. He said that it was ‘difficult” to put a company such as Block in a single category.
Dorsey stated that “We are not just a payments business,” during the livestreamed event. “A lot has happened since our last investor day.”
Square was established in 2009, when it created a mobile credit card reader that could be used to pay for mobile phones. The company grew its reach to peer-to-peer transactions and bank-like products using Cash App. Afterpay and Jay-Z’s Tidal music streaming platform were also purchased. It also owns , an FDIC-insured Bank. The company offers stock and cryptocurrency trading.
Square’s corporate to Block renaming to Block was done in part because of the wider scope and wider plans for crypto and blockchain.
While fintechs performed well during the coronavirus outbreak, Block has been beaten by its peers in 2022 due to rising interest rates. Ark’s Fintech Innovation eTF is down over 60% since its inception. It includes a variety of fintech names. Block has seen a drop of more than 45% since 2022.
Ahuja, Block’s chief financial officer, said that the company outperforms its peers in profitability. Block updated its profit margins Wednesday, a measure that investors are increasingly valuing growth over the bottom line.
According to the company, the adjusted profit margins for Square were 34% last year, while they were 12% in Cash App. Cash App has now had 46 million active monthly users and 80 millions annual actives, according to the pure-growth segment.
Ahuja stated that Wall Street analysts will want to know about our growth profile and margin structure. They can see from our track record that we outgrow the rest of our industry. “We are still in the lead in a large, growing market.
Block has closed a $29B deal to purchase Afterpay , an Australian fintech company. This acquisition will allow Block to expand into the installment loan market. With AfterPay being used by approximately 6% of Cash App users, the CFO highlighted the cross-selling potential.
Consumers and merchants alike have become increasingly interested in the lending sector, as well as an increase in online shopping. The cost of a larger purchase is spread out into four interest-free payments. Ahuja claimed that the card is safer than traditional cards despite the opposition of consumer watchdogs. This is because customers can’t take out additional loans if they make late payments.
She stated that Millennials and Gen Z are very skeptical about traditional credit forms, which can lead to debt spirals.
Block also bought Jay-Z’s streaming music business Tidal for around $300 million last fiscal year. This was a major deal for some payment analysts. It was Dorsey’s bet on the creator economic, which he believes will grow as artificial intelligence eliminates the need for manual work.
Dorsey stated that ‘This will become a huge economy in the future and we see an opportunity for us to be part of it all using the tools, platform, and tools we’ve already created’. Tidal was acquired because artists follow a similar path to small businesses and there is a large gap in the market for artist tools.
Bitcoin still accounted for only about 5% of Block’s gross profits as of March quarter. However, executives believe that crypto will be a secular trend in which Block can be well-positioned. It is described by Dorsey as an ‘open standard global money transmission’, and will enable Block’s entire business to move more quickly globally.
Block was the first to offer bitcoin trading via the Cash App. The company keeps it on its balance sheet, as an alternative cash option. The world’s most valuable cryptocurrency has fallen more than 50% since its peak and has not been able to recover its value this year.
Block now has a Bitcoin hardware wallet, an bitcoin mining business and an open-source company called TBD for Developers. Spiral, a separate, bitcoin-focused company within Block, is also available.
Dorsey was not as enthusiastic about other cryptocurrencies. He stated that the internet needs a currency native for itself. However, when you look at all the technologies available to fulfill this role, it is clear that bitcoin is the only candidate.
Dorsey stated that although it may feel slower than other candidates, this is due to the deliberateness required for money storage and transmission.