Q4 2021 Block Inc Earnings Call
Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ also note that the forward looking statements on this call are based on information as of available to US as of today's date, we disclaim any obligation to update any forward looking statements, except as required by law during.
This call we will provide preliminary gross profit growth results for the months of January and February . These represent our gross profit growth results for January and our current estimate for February performance as we have not yet closed our accounting financials for the month of February and our monthly results are not subject to interim review by our auditors.
As a result actual January and February results may differ from these estimates.
We will also provide preliminary unaudited financial results for after pay in the second half of 2021.
These results have not yet been audited or reviewed by our auditors.
Actual results for after pay may differ materially from these preliminary results.
Our remarks discuss losses on consumer receivables for after paid losses on consumer receivables represent an assessment of expected credit losses over the term of the receivables, which is 14% to 56 days, we believe losses on consumer receivables is comparable to <unk> or phase previously reported metric of gross losses.
Also we will discuss certain non-GAAP financial measures. During this call reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our Investor Relations website.
These non-GAAP measures are not intended to be a substitute for our GAAP results.
Finally, this call in its entirety is being audio webcast on our Investor Relations website, an audio replay of this call will be available shortly on our website with that I would like to turn it over to Jack.
Thank you for joining us today.
We wanted to start by acknowledging what's on everyone's minds the cleaning people.
So with them employees and customers with ties to the area and all of those affected by war.
Turning now to our quarter 2021 was a busy year for us we found new ways to connect our square and cash app ecosystems through the acquisition of after.
We added new ecosystems with title to serve artist and TBD to serve bitcoin developers.
We announced two new hardware projects to against the coin is the native currency for the Internet are.
Non custodial hardware wallet and bitcoin mining system.
We've been wanting to dedicate the square brand towards solar business unit for some time, so we've made that move to and renamed the overall company block.
Block now contains four business units square cash App title and TBD.
And now for some updates on our business.
And cash App, we saw strong engagement and adoption from both new and existing customers.
Fourth quarter, we added to the peer to peer functionality that was made public so popular with an update that lets customers from fractional shares on bitcoin from their cash balances to friends and family.
We're also launching new features to positioning <unk> as a platform that we can serve all of our customers financial needs.
In January we introduced catch up taxes.
<unk> can file for free from a phone or computer and can receive their tax refund up to two days early.
The improved cash up.
Historically, we have seen customers, bringing their tax refunds and the catch up and with catch up taxes, we hope to encourage customers to bring more inflows into our ecosystem and expand awareness of our direct deposit capabilities.
Turning now to square we.
We delivered on our priorities of expanding internationally growing up market and building out our omnichannel capabilities to create cohesive experiences between sellers and the customers.
For example, we know that photos are crucial to co selling successfully online for many sellers struggled with the time and cost required.
To address this in the fourth quarter, we introduced the square photo studio mobile App, which makes it easier for sellers to take high quality photos are directly thank them for their catalog or online store.
Between both ecosystems in January we closed our acquisition of <unk> and introduced our copay buy now pay later for square online sellers in the U S and Australia.
And offering has been long requested by sellers and customers.
Looking ahead, we intend to integrate buy now pay later more deeply in our ecosystem overtime and we believe after pay will accelerate the connections between our square in past ecosystems.
We have a strong foundation to build upon in 2022.
And we want to share more with all of you during Investor Day, we plan to host on May 18.
We'll go deeper into our mission.
<unk> strategy and long term goals.
We'll share more details as we get closer to that date.
And with that here's Amrita.
Thanks Jack.
Key topics I'm going to cover today.
The strong growth from our cash App and square ecosystems in 2021, and the compelling cohort economics driving those results.
Second after taste financial performance in the second half of 2021 hard.
<unk> looked at our growth trends and investments in the first quarter and into the rest of 2022.
Our business delivered strong growth in 2021 with gross profit of $4 $42 billion up 62% year over year.
With gross profit growth at 53% on a two year CAGR basis, we've more than doubled the scale of our business in 2019, and further diversified our product and.
In 2021 square had fixed revenue stream generated approximately $100 million or more in gross profit and cash up had four revenue streams with more than $200 million in gross profit.
We delivered over $1 billion in adjusted EBITDA and generated meaningful free cash flow during the year, demonstrating strong unit economics, and the incremental margins, which I'll come back to in a moment.
In the fourth quarter gross profit was $1.18 million and grew 47% year over year or 50% on a two year CAGR basis, adjusted EBITDA was $184 million, let's look at the drivers for cash App and square.
Catherine generated gross profit of $518 million in the fourth quarter up 37% year over year or 90% on a two year CAGR basis behind strong engagement and intraday.
We grew cash up networks to 44 million monthly transacting Atkins as of December for a growth of 22% year over year.
Our active base is highly engaged and we have seen growing adoption of cash card.
Reached more than 13 million monthly actives as of December 31% attach rate to our monthly active base up from 22% attach rate two years ago.
As we've grown our overall base of customers. We've also seen growing usage per cash card customer.
In the fourth quarter spend per cash card Act has increased year over year as active use cash card for a diverse range of everyday purchases from fast food restaurants to big box retailers to gas stations and more.
This broad reach of allowed cash card to gain meaningful scale generating nearly half a billion dollars in gross profit in 2021 up nearly two times compared to the prior year.
As we look at the overall cash app ecosystem inflows are the amount of money customers pulled into their cash app accounts totaled $45 billion in the fourth quarter, which grew year over year and quarter over quarter, even as most government disbursement programs ended by September .
This represented more than $1000 per monthly transacting active which was relatively stable on a quarter over quarter basis and increased year over year.
As active adopt more products, they typically inflow more money into cash App, which we think leads to greater monetization.
Can see the power of this dynamic with cash card customers in the fourth quarter cash card active generated approximately five times more gross profit per active as compared to active that only used peer to peer.
Turning now to our square ecosystem square generated gross profit of $657 million in the fourth quarter of.
54% year over year or 32% on a two year CAGR basis, an improvement from the third quarter Alan.
Our strategic priorities of building omnichannel products growing up market and expanding globally continue to drive growth.
Our upmarket sellers have achieved strong growth and have adopted more products over time to garner gross profit from mid market sellers grew significantly faster than the overall square business up 73% year over year in the fourth quarter, a 47% on a two year CAGR basis.
We continue to believe our square ecosystem is differentiated due to our integrated and cohesive set of products across hardware software and payments and financial services, serving seller needs in a more comprehensive way we.
We are making progress and surfacing incremental product adoption to serve our sellers across multiple vectors with a goal of creating a more retentive and valuable relationship.
As our mix has shifted to larger and more complex sellers, we have seen an increase in product adoption in 2021, 80% of square gross profit came from sellers using two or more products and 38% came from sellers using four or more products with these sellers generating more than 10 times the gross profit compared to those.
Only using one product.
Our square ecosystem has also resonated across our global markets gross profit from squares markets outside the U S grew faster than the overall pace of 60% year over year and 63% on a two year CAGR basis in the fourth quarter. Despite various periodic lockdown as we continue to achieve strong acquisition of new sellers.
And increased product parity with the U S market.
Now shifting to the strong cohort economics that have enabled efficient growth for our cash and square ecosystems star.
Starting with cash ex acquisition retention and returns on investment.
In 2021, even as we scaled our marketing investments cash I've spent approximately $10 to acquire a new transacting actives.
We've seen early monthly cohorts, maintaining a payback period of less than one year as gross profit per monthly active was $47 in the fourth quarter.
For existing customers increased product adoption and engagement has enabled annual gross profit retention of more than 125% each of the last of the past four years, which has driven strong returns on investment of six times or greater over three years for historical cohorts.
Whereas also driven attractive cohort economics in 2021 square again onboard at its largest annual cohort of new sellers on a gross profit basis with a greater mix of investments towards long term strategic areas like international and brand campaigns of course, 2021 sales and marketing spend is pacing towards an estimated six quarter.
Payback.
Beyond growth of new solar acquisition, we saw encouraging recovery within our existing base. This year each of our existing annual cohorts achieved positive gross profit retention in 2021 compared to 2019 and in aggregate grew 10% over this period.
<unk> 2020, and 2021 cohorts are pacing towards compelling returns on investment of three X over four years.
With these cohort economics, we delivered an incremental adjusted EBITDA margins of 32% in 2021, which was driven by ramping profitability in both square and cash App and illustrates the potential structural profitability in our business that we're investing behind.
Next an update on after pay we completed the acquisition of after pay on January 31, 2022, since we announced the transaction in early August our teams have been focused on closing the transaction and planning for the sizeable integration of our two companies.
Despite the significant work and management focus required here on day, one we executed on a meaningful integration of our square into our square ecosystem. We're excited about the early progress and also recognize we're embarking on a multi year effort to deliver the shared vision, we have for our customers. Although after pay did not contribute to our fourth quarter results, we wanted to share.
<unk>, an appetite business since their last reported financial results.
Looking first at after pace growth drivers in the second half of 2021 gross merchandise volume or <unk> was up 54% year over year and up 84% on a two year CAGR basis revenue and gross profit each grew by approximately 53% year over year and by approximately 73% on a two.
Year CAGR basis.
After pay continue to grow acquisition across its merchant and consumer base in the second half of 2021 at the end of December atrophy had more than 122000 annual active merchants of 64% year over year and more than 19 million annual active consumers up 47% year over year.
As we look towards integration, we see a powerful opportunity to expand and reinforce both our seller and consumer relationships by connecting after pay with our square and cash App ecosystems.
Turning to after pay as consumer losses in the second half of 2021, an area that after pay has been deliberate in managing.
Losses on consumer receivables were $1, one 7% of <unk>, an increase of eight basis points compared to the first half of 2021, driven by seasonality around the holidays and a greater mix of volumes from newer products and regions. We have historically seen loss rates improve with more time after we launch in the market.
As customers transact more frequently in our data model will become more robust we.
We have seen this trend in our older markets of Australia, and New Zealand and North America, and the United Kingdom are following a similar path for our core buy now pay later product.
We saw healthy consumer repayment behavior as 98% of installments were paid on time in the second half of 2021 consistent with the first half of 2021.
On a full year 2021 basis after pay delivered $19 $7 billion in GMB up 74% year over year revenue growth was approximately 71% year over year and gross profit growth was approximately 75% year over year.
Finally, turning to trends in the first quarter and our expected investments similar to prior years, we wanted to provide prior quarters. We wanted to provide an update on trends so far in the quarter.
Excluding ascertain across cash App and square, we expect gross profit growth of 33% year over year or 43% on a two year CAGR through January and February .
<unk> ecosystem for cash App for the months of January and February we expect gross profit growth of 21% year over year or 71% on a two year kagan basis.
For square for the months of January and February we expect gross profit growth of 45% year over year or 28% on a two year CAGR basis.
We experienced a moderation in gross profit growth for both our cash App and square ecosystem in January before growth improved in February we believe the moderation in January growth was driven in part by the impact of the Omicron variant as both businesses were more impacted in regions with pronounced increases in Covid cases.
While cash upfront impacts in January network volumes across peer to peer and cash for business cash card continued to deliver strong growth year over year and on a two year CAGR basis.
<unk> growth was more impacted in verticals like food and drink retail and beauty, which saw a trough in mid January before improving in the subsequent weeks.
In February we have seen trends in each ecosystem improve compared to January through the first three weeks of February <unk> growth on a two year CAGR basis.
Approximately at fourth quarter levels for.
For cash App, we expect gross profit to increase month over month in February compared to January as inflows through the first three weeks of February are trending ahead of January level, then back near December levels.
We completed the acquisition of after pay at the end of January So after pay will only contribute to February and March results in the first quarter.
For the month of February we expect Afterpain DNV growth to be between 25% and 30% year over year with revenue growth in the similar range now.
Now looking ahead to the remainder of the first quarter.
In the first quarter, we expect the gross profit two year CAGR for both cash App and square to modestly improve compared to trends through January and February driven by an expected improvement in the two year CAGR in March.
On a year over year basis, we expect slower growth in March compared to January and February as the prior year comps get tougher recall that we benefited from a strong growth in March 2021 behind government disbursements during that month.
As we look ahead to 2022 beyond the first quarter, we believe cash up year over year gross profit growth rate will improve in the second half of the year compared to the first half as the comps become more favorable and as we introduce new product innovations across our commerce and financial services priorities.
And make pricing adjustments in certain areas.
As we look at 2022, we expect to sequentially grow gross profit each quarter across cash App and square throughout the year, assuming the macroeconomic environment remains stable.
Moving to our planned investments for the first quarter and full year 2021.
For the first quarter, we expect to increase overall non-GAAP operating expenses by $180 million compared to the fourth quarter or $40 million when excluding after pay.
For the full year 2022, we expect to increase overall non-GAAP operating expenses by $2 $3 billion, including after pays expected operating expense base of approximately $1 million this year.
Excluding after pay we expect to increase overall non-GAAP operating expenses by $1 3 billion or approximately 38% growth year over year, which is consistent with what we shared in November .
Given the pacing of our investments during the year, we expect to deliver greater adjusted EBITDA in the second half of 2022 compared to the first half of the year, we expect that our four emerging initiatives titled EBITDA TBD, the hardware wallet and bitcoin mining.
Will represent approximately $140 million non-GAAP operating expenses were 2% to 3% of the overall company's investments.
Always we will actively manage our investments adjusting based on the top line growth and returns D C.
At our upcoming Investor day on May 18, we are excited to share more with you about where we are and where we're headed.
We see a compelling long term vision of large and growing total addressable market testing customer needs that will continue to focus on and strong unit economics in our business. We hope to tell you more about the potential with after pay and how we will work to connect our growing square and cash app ecosystems in the meantime, we will be disciplined.
And adapt in this dynamic environment as ever I will now turn it back to the operator to start the Q&A portion of the call.
Thank you to ask a question you will need to press star one on your telephone keypad again that is star one to ask a question.
I would like to remind everyone to slow to please limit your question to one.
We'll pause for just a moment to compile the Q&A roster.
Our first question comes from the line of Tien Tsin Huang.
J P. Morgan please ask your question.
Thank you so much and I appreciate the incremental margin comments truly encouraging.
I thought I'd ask if you don't mind just on the operating expense investments.
And then maybe you talked about it.
Over 50% last year. Another 1 billion three like you said back in November of this year. So I'm curious if your investment priorities or visibility and spending changed in any way with respect to getting adequate returns that <unk> been talking about I saw that the CAC on catch.
It is now $10. So just curious of your priorities or.
General thinking here has changed.
Would it be growing users or <unk> or just spending priorities. Thank you.
Sure attention. Thanks for the question. So first one is say what we delivered in 2021 in terms of our adjusted EBITDA margins of 32% year over year versus 2020 really showed the ramping profitability and underlying structural profitability.
<unk> across our businesses across both square and cash App and that's what we're investing behind here now that coupled with the unit economics is what we look at on a dynamic basis throughout the year to assess the investments that we're making and I think it's important for.
To unpack that a little bit to look at the quality of these cohort economics to understand the investments that we're making.
With cash up specifically I think there are four factors that we look at in each of those four factors that I'll go through has attractive fundamentals and they've traced overtime. So first customer acquisition cash app's strong network effects has driven efficient acquisition historically and even.
As we scaled our investment in the past year with paid marketing target new audiences that help us drive both brand awareness and engagement with higher product adoption and ultimately <unk>, even with that incremental marketing investment we increased our cash to only $10 to acquire a net new active customer in 2021.
Versus the historic $5, which frankly, you could argue was too efficient.
We believe this is lower that $10 is still lower than other neo banks in a fraction of what a traditional bank with spend to acquire new customer and that's really supported by the efficiency of the model with peer to peer embedded within the App. Then you look at the returns on the investment here with cash outs are FERC focus and these investments is met.
<unk> returns on investment because we've seen growing <unk> over time.
And what we've achieved historically has an ROI of over six times over three years for historical cohorts and even again in 2021, as we increased marketing spend by <unk> and CAC by over <unk>, we have seen in our early 2021 cohorts trend towards a payback of less than a year and we on boarded our largest annual <unk>.
Heart on both variable profit and gross profit basis here in 2021 and.
And then you look at engagement and to your point <unk> gross profit per monthly active was $47 based on fourth quarter gross profit, which increased 13% from the prior year showing increasing engagement of our customers over time and we believe we are still early in this cross sell journey, especially when you think about the power of.
Products like cash card, which is still at only just over a 30% attach rate to our total active base and cash card really driving more inflows and more spend and more engagement on the platform. So we see a meaningful opportunity here to grow our pool, both with products like cash card and with other products like investing direct.
Does it et cetera, and that's a meaningful focus for us as part of our go to market strategy to drive ARPA and then finally retention.
We increased engagement and monetization for our customers.
Over time, and Thats led to strong gross profit retention of over 125% year over year. Each of the last four years that means once a cohort onboard on average they generated at least 25% more gross profit in the second year in at least 25% more than the third and fourth years net of any churn. So these are the dynamics that we're investing behind in our key.
Focus areas, which really havent changed given the health of these fundamental metrics that we're looking at as we make these investments.
Good stuff. Thank you.
Our next question comes from the line of Darrin Peller from Wolfe Research. Please ask your question.
Alright, Thanks, guys and nice job on the results, maybe just a bit of a follow up it's obviously great to hear the strong trends in January and February , especially around <unk>.
Cash App gross profit when you look at the conviction in your cash up organic growth potential from here sounded constructive.
Acceleration youre talking about in the second half.
For us if you could just give us more color on expectations for active user growth relative to the $4 million to $5 million revenue annually as you've had before.
Is that are approved and then just Jack maybe you can give us some more understanding of what you anticipate building out in terms of new products that can drive that engagement that either.
Either we've seen so far expanding more yet to come in where you are at the moment.
Hey, guys.
Thanks Darren.
I can start and then you can take the second part of the question.
So just it just <unk>.
Ground you in what we're seeing so far for cash App Darren.
Gross profit growth ultimately driven by as you called out network reach engagement and inflows, which we shared at $45 billion in Q4 was up quarter over quarter and year over year.
When we unpack a little bit of what we've seen so far this year in January we did see some moderation in the gross profit growth rate for cash App, which we believe was related in part to omicron.
We saw resilient so in certain parts of the ecosystem for instance, cash card, which is more resilient and continue to drive strong growth in February we expect gross profit to increase month over month as inflows in those first three weeks of February are trending ahead of January levels nearly back to December levels. We also expect year over year gross profit growth to <unk>.
Prove in February and when you look throughout the rest of the quarter, we expect that two year CAGR to modestly improve for cash app from the 71%. We had in January February based on an expected improvement in March.
And again, we would anchor you to the two year CAGR here for Q1, just given the comps around the year over year from March of 2021 last year, where the government disbursements.
Looking to the remainder of 2022 as we think about growth levers, we see room to scale with recent product launches, it's cash out pay families taxes, which are still early and scaling in the second quarter and obviously, we've got the pipeline around cash app borrow and integration products with.
After pay and with the commerce opportunity there. So as a result as you noted we expect cash up year over year gross profit growth rate to improve in the second half versus the first half behind these new products behind some pricing changes and as we begin lapping more normalized macro environment in the second half of the year.
And then I think your question was around with new products potential.
The strongest the great thing about catch up what we found is how it publicly network effects.
Was that early on so if you look at how we launched the App.
The peer to peer aspect.
Although he has been.
Strongest driver of usage so.
Being able to get paid and then also request money from micron to some money for microphones, creating another.
Another customer.
But if we look forward.
Some of the features and Rina mentioned also.
The benefit of enhancing those network effects.
Any product.
Either quake network effects or strengthen the one we already have.
Two for you.
We have a lot of <unk>.
We will update that.
Think positively reinforce one.
One another.
And a lot of it creates even more opportunity for people to get their money with us and as we see people keeping their money with us we see them.
Activities.
The workflow such as decline in stocks or.
Further.
We think there are causing pluses.
Part of that.
The whole suite of appointments accruals.
I spoke to.
We're really excited about when we will do it in a way that we've always done to make sure that we get down to the simplest.
So people can use immediately and I think thats, what sets us apart from our competitors and especially.
The neo banks.
Hum.
Some of the others that you all have brought up.
Is that we're not just focused on one.
One output.
While the Macquarie ecosystem positively reinforces one another.
For our customers.
And through that for us as well.
And then you bring in the business.
Growth on the solar side.
The most exciting thing for us going forward is how it's not decrease because seems even more and Apple pay is one such example of amounts of collection. So we're really excited about.
We're excited to be finally passed the integration. So we can focus on building, especially on the cash upside you've only seen.
The square seller side, but.
We did this sort of the connection between the two of them.
Super excited about what it brings to casual customers.
Great. Thanks.
Thanks, Sean.
For our third question, we have carriers.
Terry uncomfortable the cash up customer please ask your question.
Yes, hi, Thank you again.
I definitely enjoy using cash app and the question that I have normally received my paycheck direct deposited into cash app and while I do enjoy receiving my checks two days earlier.
I just wanted to know down the line on your guys' roadmap do you see.
My paycheck cashed up into converted into breakpoint by any chance down the line.
No.
Thank you. Thank you first and foremost being customer.
Obviously, we're really sorry about the coin we own limited more accessible to everyone.
Love your analysts about automatically converted.
To your paycheck and the bitcoin as well.
Seeing a lot of and we're partnering with.
A lot of athletes to work with US obviously, we want to bring it to everyone. You can do it today effectively by drug pausing in the peso.
I'm doing an auto body.
The point Bob.
Effectively.
From a cash up to buy bitcoin for you every week or two weeks or whatever timeframe you want.
From your drug is positive for truckload, we think there's some opportunities to play.
So it even more seamless so.
We're definitely looking like they're somewhat.
Thank you again for the opportunity.
Yeah.
Our next question comes from the line of Timothy Chiodo from Credit Suisse. Please ask your question.
Great. Thanks, everyone. Thank you for taking the question I wanted to touch on cash out taxes, given the inflows are right around the corner here over the next few weeks really I think about this there's two types of benefits. There is near term and long term on the near term you have obviously the tax refund inflows and monetization and then longer term, it's sort of a shot on goal to bring on more.
Users to reduce churn more cash card more direct deposit et cetera, maybe you could just help talk about both of those both the near term and the long term and how it might play out.
Okay.
Right.
I think that's a great way to think about it sort of movie.
We definitely see a lot of opportunities in the near term too.
Look at the customers.
Using cash up already today core.
Core classes through direct deposit.
Ideally, we want to be known as the simplest way to handle all of your personal finances.
What you have to do.
No matter, how accretive they become we want to make sure.
Bowl and straightforward.
That was the idea behind.
Creating an.
Launching plasma practices.
And we think there's a long roadmap ahead.
As Bruce with Boeing for customers and also for us.
Definitely over the long term, we still see a lot of.
Competition.
<unk>.
The following factors a lot of.
The new costs that are unnecessary.
Takeaway.
And we're going to follow our history and.
Remove any security of information that we've seen in the financial industry closer to customers, which.
Hmm.
So we see them using our services a lot more because it's much more transparent.
Okay, so well.
We're really excited about the platform, but more importantly, where sort of the remove a bunch of those complexities where people can get on with the laws.
And Tim I'll, just add that.
What we see with our tax product.
We want customers to view cash up as really a preferred banking platform and expand awareness around cash app's direct deposit capabilities as Jack mentioned, historically, we see more inflows around tax season customers, bringing in their tax refunds to cash out, but now with this integrated tax product, we can make those deposits.
Even easier and faster customers using cash taxes can receive their refund up to two days early if it's the positive free cash App, which we believe can drive more inflows into cash app and ultimately our focus as a level up is on driving more inflows, obviously through adding that utility to our customers.
And we believe catch up taxes can act as both the acquisition and an engaged in a product for cash app by being that simplified free tactile I would note that there is a number of levers that we have right for driving inflows and one of them around recurring pay cheque deposits. We are also seeing traction on we've seen growth.
Recurring pay check deposits with volumes up two times year over year in the fourth quarter as we've made improvements to that direct deposit experience by allowing customers to directly log into their employer or their payroll provider from the App and also as we invest in marketing and boost incentives to drive awareness of those products.
In futures, so part of a broader strategy that we have around ultimately the utility to our customers and inflows into cash app.
Yes, we noted the partnership with Pinwheel there. So thank you for both of those updates check in Emeryville.
Yeah.
Yes.
Our next question comes from the line of Lisa Ellis.
And Nathan please ask your question.
That's terrific thanks, guys.
The App to pay acquisition was closed and you've had a few months working with that team can you just provided updated perspective on the primary sources of synergies from the deal and how you expect the synergies to maybe even start to affect the block in 2022. Thank you.
Yes.
So first.
We're thrilled to be over the hump.
Finally closed.
We're all kind of imagine the integrations are quite challenging and distracting for both up with square and catch up with.
We knew going into this but.
We believe in.
<unk> completely in the foodservice.
This is a huge connection between our two largest ecosystem square in peso.
On the square side. This is something that our customers have been asking for for quite some time.
On the book for themselves.
But also for their customers their customers are.
Driving some of this adoption.
The thing about Africa.
Much closer.
Two.
Much much larger repos.
Continuing to go down our Omnichannel strategy, making sure that we are.
Leading our customers wherever they are.
With those merchants that they wanted to stop them.
For cash App.
There's a long roadmap of hub.
Haven't seen much of this will talk more about this during our Investor day.
This is to me.
A lot of the real excitement lies is we have an opportunity for a whole lot more discoveries.
On the cost side, and given tougher customers entirely new capabilities.
But it could have been.
Certainly the closer before but I don't think in any.
Financial instruments so.
Well.
So you know.
Happy to be through this integration. It was it was tough and challenging but I'm really proud of the fact that we're able to launch something day one close.
And then customers can use it right away so.
I expect us to continue that momentum.
Between the portion the specs a lot more on the cost of goods.
And I would just add Lisa obviously I've only just completed the acquisition a few weeks ago. So we will have more to share about how we expect to unlock deeper integration points and synergies between the businesses as Jack said in Investor day, but we really see a meaningful cross sell opportunity between our square sellers after.
<unk> customers, both merchants and consumers and cash App and plan to leverage that overlap in consumption behavior as we develop these integration points further.
Just to dig in a little bit more on the cash app side.
After pay as retailers have shown a lot of excitement about potential integration opportunities being developed right now with cash app, including the combination of buy now pay later with cash App pay which as you know we just launched a few months ago. We've also built in cash App and initial search page for customers, where they can discover.
Buy now pay later offers within cash App similar to how you might discover a boost.
Offer within your cash App customers can click through the search icon to discover after pay merchants along with other peer to peer network and boost functionality. That's the first time, we've enabled commerce for customers to buy through cash App and its early days, we continue to iterate here on this product, but we've already seen over $100000.
<unk> going out from cash out to after paying merchants since late December 1 million enabled us. So this is something that we think will continue to evolve and become more and more prominent as we further integrate after pay offers into cash app as well as further integration obviously in the square broadening out the rollout of <unk>.
Later in the in person sellers and we look forward to updating anymore as we make progress.
Exciting thank you.
Our next question comes from the line of harsh <unk> from Bernstein. Please ask your question.
Thank you for taking my question, so I wanted to ask about affluent.
User expansion for cash App.
Driving monetization for affluent users is an area where some of your peers like venmo have struggled.
Partly because these individuals as our utilities are served by traditional financial institutions.
As you increase your marketing spend on cash out, which I recognize is still very low on a cash basis. What are you seeing in terms of engagement and user behavior for afternoon. Thank you.
Well.
I will say that I think our biggest constraint right now.
Or just how we think about building.
Catch ups.
Risks.
Compliance upwards everything that we see around Cogs.
We want to make sure that we are.
Our building a system that is scalable.
That allows for limits or.
Customers who might have.
More.
Resources at their disposal and one east coast for more and more things such as the no.
There were two thirds of normal bank. So we.
We have we have limits in place include mango. These things on the go for us with so much so that we're looking.
Looking for opportunities to increase those.
And two at the same time maintained all of our risk controls and fraud and the consumer will do what we've done so well over the years.
So some of that elsewhere, but it almost square so the system our business.
Forever.
So.
As we look to inflows in deposits, especially this is a huge opportunity for us.
Especially for higher net worth individuals who want to use the cash.
The marketing I think.
Generally it appeals to a very broad base mainstream.
It is always going to be our intention we want to make sure. We're building the brand the number one people.
Thanks Ross.
It is simple.
It is solid.
Its worthy and unnecessary experience when they download the app.
Everything works immediately so they can access all.
All the features that is very very simple ways.
To provide more information to that higher limits in place.
So.
I think I think the marketing as we continue to look for opportunities to go even more mainstream the reserve book.
A stronger audience.
Marketing will certainly reflect the uniqueness of the brand.
Which has served us really really well, especially when you consider.
The competition that we have.
Other banking services.
<unk> brought in some more boring.
Harrison. So we're we're very excited to bring a lot more light to that some.
Certainly a lot more.
So more fairness FERC customers as well, which is a big part of why we're doing what we're doing.
Great.
Just to add.
To underscore <unk> point.
Cash App at 44 million monthly active growing 22% year over year was the number one downloaded finance app in the U S. In 2021, and the number four downloaded app overall in the U S. In 2021 on iOS.
So where we are reaching mainstream scale and want to continue to enable broad based utility as Jack was saying around deposit limits.
But as you see through the strength of our cohort economics with growing <unk> $47 in the fourth quarter up 13% year over year.
With strong gross profit retention of over 125% year over year for each of the last four years.
And with strong rois that success over the last three years.
And now with four monetization streams at $200 million more in gross profit, there's a diversity of customers that we're reaching and a diversity of use cases that we're helping to address for our customer base and.
And that work continues and without work, we believe we'll be able to reach.
Greater diversity of demographics and use cases over time.
Very helpful. Thank you.
Our next question comes from the line of Josh Beck from Keybanc capital markets. Please ask your question.
Thank you so much for taking the question.
Wanted to go back a little bit to this topic of Commerce discovery certainly the 100000 leads right out of the gate is impressive.
Yeah.
They have really really good momentum on building up its affiliate model. So I'm just curious as you play this forward.
Do you see this evolving as it may be a case, where you start to build out.
Tech capabilities that have much deeper.
Deeper conversations with the advertising community curve to really kind of monetize some of the commerce discovery aspects of the platform just curious strategically how you're approaching that.
Sure I can jump in here.
We see where the combination of after paying both of cash and square is a true differentiator frankly, when you look at the landscape.
Commerce and financial services, and specifically differentiator related to buy now pay later as we connect and integrate these platforms.
Specifically with cash and after pay.
We see strong potential to deepen engagement across millions of younger consumers frankly, who are immersed in online and omni channel commerce.
Longer term, we also see an opportunity to bring cash up financial tools, including money transfer stock bitcoin boost et cetera to after paying customers as well so we see that crossover across financial services.
Specifically with with Commerce.
As we noted after pay has a history of being able to drive lead generation to merchants.
This is prior to the acquisition they were driving over 1 million <unk> per day in the back half of 2021 with 38% of those referrals from consumers searching within after pay for specific brands and 46% of referrals from browsing on after pays app homepage and now when you combine that with the SKU.
Rail of cash App at 44 months million monthly actives, that's an even greater opportunity for us to really add value both to the merchants who are looking for more.
Quality consumers and to the consumer who are looking for more opportunities and more offers.
So we see a significant opportunity there the other thing that I'd say is that when you think about the integration with square.
Obviously, we've launched the square online integration day, one with encouraging early results, but we've got a much more.
More fulsome further rollout to come across the broader ecosystem of in person and online in coming months and what we've seen with after pay is the growing importance of honestly, our omnichannel presence and they are more mature markets like Australia, and New Zealand in December they drove over 30% of their <unk> in.
Store and those Omnichannel consumers transact four times more compared to online only consumers.
And we saw that in both the U S and Australian New Zealand last year. So.
So really the integration across both sides of the ecosystems for consumers in both merchants, we see as a tremendous future opportunity.
Very exciting thank you Humberto.
Our next question comes from the line of Keith Christiansen from Citi. Please ask your question.
Thank you good evening, Jack I want to touch upon your networking comment you made earlier.
I can tell you that certainly at my son's school cash upper teens is definitely buzzworthy, particularly among if you think about it everyone's favorite bank bank of mom and dad, who also need to download the app.
Just wondering if you've seen that early signs of that that networking effect as it relates to catch up for teens and then.
Quick follow up and just wondering if you could just give some color on the success of our user migration from Karma to cash up I know that the Karma App has been directing users to download cash up just wondering.
How are you viewing that progress how do you figure that into Kirk. Thank you.
Yes, so to answer your question.
Yes, we have seen encouraging adoption, but since joining our platform and really strong demand for.
The broader ecosystem, especially ketchup.
Thanks.
I think the marketing applies.
Marketing.
Really speaks to.
This group of people.
It speaks to you, but the simplicity in the controls.
The parents as well so I think we've found a really good mix.
All right.
We feel very long road map ahead.
For that initiative.
For teens and for families and parents so.
<unk>.
We're definitely thought about that and bring more of our.
The ecosystem.
Similar.
Yeah, just to finish up on the first point with cash.
Cash that per families 20 million teams in the U S. Today represent a large portion of spend in coming years, and we know they're early on in your financial journey, we can grow with them and they are typically at team theyre typically underserved by traditional financial services, obviously, relying mostly on cash. So this is an opera.
<unk> to your point to drive network effects as well as to grow with Nextgen consumers.
The second part of your question I think you're referring to credit Karma attack and our ability to now that we have an integrated cap that taxes product to bring on new customers is that was that your question Pete yes, yes.
Yeah, certainly we do see an opportunity both from an engagement standpoint, with our current customers who are looking for a free.
And relatively simple tax filing service, we're seeing an opportunity to go deeper with them to provide that utility around our integrated tax product and making those deposits easier. So it's an integration sorry.
Engagement opportunity for us as we've integrated it is also an acquisition opportunity for US. It is also an opportunity to bring new people in the cash app.
We haven't tried some of the other offerings within cash app, but but as they learn more about cash app through catch up taxes, we have the opportunity to.
To make them aware of our other products and services across the ecosystem.
Early for US we're still relatively early in the tax season.
Phil in year, one in terms of this integrated product, but we are encouraged by the early results that we're seeing here.
That's good to hear thank you Bob.
Again as a reminder, we would like to remind everyone to please limit your question to one.
Our last question comes from the line of Ramsey El <unk> from Barclays. Please. Please ask your question.
Hi, Thanks for squeezing me in here.
I was wondering if Jack and Amrita you could give us your updated thoughts on the roadmap to rollout cash up in more international markets I'm trying to think of what the value proposition might look like internationally relative to the U S and sort of the timing around when we might see an expansion of cash app and other geographies.
Yes.
So this remains a major focus for the claim.
Yeah.
We intended to square business to be global in between Suncor, the casual business the global as well.
We have made some.
Some moves here.
The biggest strategies that we're exploring today for Chris Sampson is number one of our products.
We launched some funds between Europe , and U K, and we've seen steady growth with retail customers and transaction frequency over the past year.
And the second is through M&A.
We recently acquired birth, which is a European financial mobile App.
Thanks.
Where we've been learning more about peer to peer behavior.
In Europe .
It will definitely be an opportunity for us to learn about how we move.
Around the world So.
We will go.
Continue to expand our products globally and pick the right.
<unk>.
Quick one first amongst them most of them also look for opportunities to make acquisitions within market.
On the similar behaviors.
But we have found to be variable in nature.
And Ramsey I would just add that this is another one where after pay certainly comes into play when you think about that $19 million.
Consumer base as of the end of last year about 65% is in the U S. But obviously a significant portion that sits outside of the United States, where we can grow together.
Consumer standpoint.
And certainly as you think about Australia, where there is a significant opportunity to.
To leverage the flag that after pay has already planted so well for cash app. So so we see an opportunity for the future here as we.
Build upon the skill sets and the footprint and the consumer base that after pay brings into block.
Got it okay. Thanks, so much.
Ladies and gentlemen, thank you again for participating.
This does conclude today's program you may now disconnect.
The centers. Please stay on the line for your post conference.
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