Q2 2022 Block Inc Earnings Call
Thanks, Jack there are three topics I'd like to cover today first an update on our performance for the second quarter of 2022.
Trends across our business in July and third our planned investments for 2022, where we are being disciplined and preparation for multiple macro scenarios.
In the second quarter, we delivered strong growth across our ecosystem with gross profit of 1.4 dollars 7 billion up 29% year over year and 47% on a three year CAGR basis.
Gross profit includes an $18 million impact from the amortization of acquired technology assets.
And excluding these noncash expenses gross profit was $1 $49 billion adjust.
Adjusted EBITDA was $187 million.
For the second quarter, our be NPL platform, which we acquired through the acquisition of after pay contributed $150 million of gross profit split across square in ketchup and excluding this gross profit for the quarter was $1 $32 billion up 16% on a year over year basis, and 42% on a three year CAGR basis.
Square generated $755 million of gross profit in the second quarter, an increase of 29% year over year and 30% on a three year CAGR basis.
Excluding $75 million of gross profit from our B N P L platform.
Square gross profit was $681 million up 16% year over year and 25% on a three year CAGR basis.
Looking into the drivers of second quarter performance first we saw continued healthy retention across our existing seller base in the second quarter, we achieved positive GTD in gross profit retention for our square business.
Second we continue to deliver on our strategic priority of growing up market.
Gross profit for mid market sellers was up 24% year over year and 40% on a three year CAGR basis.
We've seen continued momentum in food and drink, which has delivered the fastest gross profit growth of any square vertical on a five year CAGR basis.
As Jack mentioned square for restaurants has been an important driver of our success here through the first half of the year G. P V from square for restaurants sellers more than doubled year over year.
With these sellers using an average of four monetize products during the second quarter.
Third we've experienced continued success expanding globally.
Including after pay our markets outside the U S represented 13% of course gross profit in the second quarter, we remain focused on improving product parity globally and launched 44 products in our international markets. During the first half of the year we.
We believe that bringing more of our ecosystem these markets well.
Increase our value to sellers.
Cash app generated $705 million of gross profit in the second quarter, an increase of 29% year over year and 88% on a three year CAGR basis.
Excluding our NPL platform cash up gross profit was $630 million up 15% year over year and 82% on a three year CAGR basis.
This quarter, we had our highest quarterly inflows ever into cash app with overall inflows, increasing both quarter over quarter and year over year, let's discuss some of the drivers here using our inflows framework looking at active and inflows proactive.
First we continued growth for monthly transacting actives, reaching 47 million as of June up 18% year over year with weekly and daily actives growing even faster.
We have been focused on enhancing the reality of peer to peer by expanding our presence in new demographics. When enacted has more of their friends and family using cash that we have more reasons to come back and their retention often improve.
In the first quarter retention was 31 percentage points higher for active with a network size of four or more other accounts compared to those with the network size of one.
The focus of our community pillar has been to deepen our presence in nor penetrated regions and demographics.
Broadening our go to market efforts and enabling more social discovery of our products.
Second inflows proactive averaged $1048 in the second quarter, which was relatively stable compared to the first quarter, even at the seasonal impact from tax refunds subsided and was down 11% year over year, primarily due to government disbursements in the prior year.
By having a full suite of financial products cash up and been able to drive more banking customers, who are highly engaged bringing in more inflows on average and typically use multiple products across our ecosystem.
And with the introduction of cash that borrow our first credit products, we have greater breadth to offer our banking customers in more ways to deliver value.
Cash or borrow has seen strong early momentum similar to our lending products across other lending products across block. We're focused on two areas first we are building fair and accessible products for our customers.
Cash up Aro offers short duration loans, where customers have taken out loans amounting to less than $200 on average in a month.
These loans can be paid back either in installments or as a percentage of inflows into cash app.
Many of these customers may have been left out by traditional financial institutions, and we believe unique insight from our broader ecosystem allows us to serve them in a responsible manner.
We have achieved profitable unit economics on borrow driven by disciplined around risk using.
Using automation and machine learning models, we proactively offer loans to some of our most engaged customers borrow actives brought four times more inflows into cash out compared to active who only use peer to peer.
This discipline around eligibility criteria combined with multiple frictionless ways to pay back.
Let us to generate meaningful improvements in risk loss as we iterate it on the product over time, achieving loss rates of less than 3% as of the second quarter.
Our approach to expanding access with discipline on risk is how we've operated square loans and it has allowed us to scale Cassia borrowed a 1 million monthly actives as of June <unk>.
Other cash that borrowers benefited our broader ecosystem in the second quarter over half of these loans were used to fund transaction on cash a card or peer to peer transfers.
While we're seeing strength so far we're also being mindful of the environment. This is a short duration product, where we determine eligibility based on unique data signals, which we believe enables us to pivot quickly as with the rest of our business. We're tracking trends in real time to monitor any changes and we intend on acting conservatively with each of our credit products as the.
The macro environment evolves.
Shifting to after tax.
In the second quarter GMB for after pay with $5 $3 billion.
Up 13% year over year or 65% on a three year CAGR basis.
For overall growth trends, we've seen impacts from spend shifts from online to in person competitive dynamics as well as foreign currency, which slowed year over year GMB growth by five points.
We've seen growth hold up better than our more mature regions like Australia, which is more diversified across discretionary and non discretionary verticals as well as in person and online channels.
Trends have slowed more in North America, a newer market for after pay where the primary verticals of fashion and beauty are both discretionary retail.
And where the after pay in person product is still ramping.
As we integrate after pay we see an opportunity to further diversify particularly in the U S with our base of millions of square sellers across a range of high ticket verticals and Omnichannel products.
On a GAAP basis revenue for our be NPL platform was up 6% year over year growing slower than GSV, given mix shift to newer markets.
Gross profit was down 2% year over year impacted by $11 million in amortization of intangibles within cost of sales without this impact gross profit growth would have been more in line with revenue growth.
Losses on consumer receivables were one point or 2% of GM V. During the second quarter, an improvement compared to $1 one 7% in the first quarter driven by mix shifts as well as enhancements to our risk models and processes. During the first half of the year, we continued to see healthy consumer repayment behavior with 90% 95 per.
Set of installments paid on time.
Next an update on recent trends through July .
We expect overall company gross profit growth of approximately 35% on a year over year basis, including our be NPL platform or 22%, excluding our be NPL platform.
The year over year growth rate improved compared to the second quarter, although the three year CAGR helps normalize for the unusual growth comparisons during the pandemic on a three year CAGR basis, we expect overall growth to be consistent with a 47% three year CAGR, we delivered in the second quarter or 42% three year CAGR, excluding RV NPL platform.
Let's look into trends by ecosystem for.
For cash App in July we expect gross profit, excluding our <unk> platform to grow by 32% year over year and be relatively consistent with the 82% three year CAGR in the second quarter.
On a year over year basis, we've seen growth in Atkins and overall inflows in July while inflows proactive declined slightly given government disbursements in the prior year.
On a three year CAGR basis.
Those proactive growth was in the mid teens in July and relatively consistent with the first and second quarters.
July spend per active on cash App card achieved positive growth on a year over year basis with a three year CAGR also in the mid teens in July spend on cash App card increased compared to the monthly average in the second quarter.
The mix of discretionary and non discretionary spend remained relatively consistent with the second quarter. We have seen a diverse range of use cases on cash App card was 33% of spend on gas utilities, and travel, 30% on food and grocery and 22% at big box and discount retailers.
While we expect cash up year over year growth rate to improve in the third quarter, we expect to see a slight moderation in the three year CAGR as we begin to lap the launch of tabs in 2019, and as cash App continues to grow off of a much larger base.
For square in July we expect gross profit, excluding our be NPL platform to grow by 14% year over year and to be consistent with the three year CAGR of 25% in the second quarter.
<unk> is expected to be up 18% year over year in July on a three year CAGR basis GDP growth is expected to be 23% in line with second quarter trends.
Diversity, among our seller base from our mix of channels and verticals has helped drive the stability, we're seeing faster growth from card present volume compared to card not present volumes as in person channels have offset some recent mixed shifts from online channels.
Across three of our largest discretionary verticals food and drink retail and beauty and personal care growth was relatively stable on a three year CAGR basis.
As we had expected square GPP continue to grow faster than gross profit on a year over year basis, driven by continued normalization and transaction base gross profit margins and as we lap nonrecurring PPP gross profit of $13 million in Q3 of 2021% and $59 million in Q4 of 2021, we expect the delta between <unk>.
Gross profit growth to continue through the remainder of 2022 on a year over year basis.
Turning to our <unk> platform in July we expect <unk> to be up 12% year over year or 61% on a three year CAGR basis.
You lie we expect GAAP gross profit to increase 1% year over year on a GAAP gross profit basis. After page results are impacted by expenses related to the amortization of intangible assets, which is expected to be $12 million on a quarterly basis going forward. We remain focused on unlocking the opportunities, we see with our integration and the <unk>.
We outlined at Investor Day, we believe our combined scale will be a key differentiator as we bring attributed cash out consumers and squares diverse seller base.
Shifting to our expectations for the remainder of the third quarter and full year as we shared on our last earnings call. We continue to believe cash up year over year gross profit growth rate. Excluding after pay will improve in the second half of the year compared to the first half as comparisons become more favorable as newer commerce and financial services products ramp.
With the benefit of certain pricing adjustments.
So consistent with what we mentioned last quarter for the remainder of 2022, we expect cash App and square to sequentially grow gross profit each quarter throughout the year, even excluding after pay assuming the macroeconomic environment remains stable.
Moving to our planned investments for the third quarter and remainder of the year, while gross profit trend within healthy through July we recognize the importance of exercising discipline with our investments as we enter a period of potential uncertainty as a result, we are reducing our planned investments for the full year 2022.
By $250 million, we pulled back on experimental and less efficient go to market spend.
Adjusted risk loss estimates based on where current trends.
And slowed the pace of hiring in total we have now reduced our non-GAAP operating expense plans by a total of $450 million since they started the year, which is 20% of what we initially guided for the step up in 2022.
As we outlined in Investor day, each of our cash I can square ecosystem has a large portion of the variable expenses and discretionary levers, which we can pull and we believe this gives us the ability to be nimble based on changes to the environment.
For 2022, we now expect to increase the overall non-GAAP operating expenses by $185 billion compared to 2021, roughly 10% less than what we shared last quarter.
Within this we now expect after Pes operating expense base to be approximately $750 million this year and excluding after pay we expect to grow overall non-GAAP operating expenses by 30% year over year of $1 $1 billion.
As we previously shared on a dollar basis, we expect to deliver greater adjusted EBITDA in the second half of 2022 compared to the first half of the year.
For the third quarter, we expect to Ingram, we increased non-GAAP operating expenses by $75 million compared to the second quarter or $65 million when excluding after pay.
In closing there are two aspects of our business that we believe can help us navigate potential uncertainty with agility.
We believe the diversity inherent in our ecosystem model adds resilience in a dynamic environment as our business is diversified across customer types product line business model and multiple ecosystems and second across our ecosystem. We have a number of signals into the health of consumers and businesses were tracking these trends in real time, and we will use them to act.
Quickly and prudently and to guide our business decisions.
Our long term priorities remains serving our customers delivering profitable growth and executing with financial discipline with that.
We will open it up to your questions.
At this time I would like to remind everyone in order to ask a question.
Please press star one to allow everyone to ask a question. Please limit yourself to one question well pause for just a moment to compile the Q&A roster.
Our first question comes from tenants being hung with J P. Morgan Your line is open.
Yes.
Great. Thank you so much.
The product updates in the development pillars.
In the letter.
Actually at least my question on the financials.
What you would do.
Just comment there in terms of curbing some of your spend because I think about spending on product and marketing right for block because it's sort of a hallmark for the company right to drive.
Differentiated growth. So my question is just trying to balance the needs of your employees that want to fight for budget I'm sure to keep.
Building out great products, but also it sounds like you are being mindful as well of the macro and for shareholders that care more about profitability. So I'm just trying to understand how you balance all of that and.
With benchmarks Youre really looking at to balance both growth and the investments that makes sense. Thanks.
Thanks for the question attention, we are very mindful of profitability and demonstrating disciplined here.
As you say, we have to balance this with the large market opportunity, we're addressing and our opportunity to take share gains at a time when.
Customers need us.
So we are continuing to invest given the vast market opportunities, we see but we also recognize that the environment has changed and we're prepared to adapt to uncertainty and maintain disciplined by pulling back on some of the discretionary operating expenses, particularly those that are less efficient. So our actions today show that we are also focused on <unk>.
Demonstrating greater near term profitability as we head into what could be a more volatile macro environment and in only the first six months here of this year, we pulled back on our full year, opex by 8% or $450 million.
$250 million of which came today across three primary areas.
Sales and marketing risk loss, which as you know is both an input and output for us and hiring.
This shows how we can dial our knobs in real time and be disciplined.
And we intend on bringing a similar level of rigor to how we think about the remainder of the year and 2023 as we enter into planning.
We have more discretionary opex levers across those three areas as well as corporate overhead that we could explore based on how we see the environment play out.
While the breadth of utility to our customers across our ecosystem has held our business up well to date.
We uniquely have is a real time read on our business and our millions of consumers and businesses, which enables us to pivot quickly and take the appropriate actions that we need to take for our business.
So we're focused on driving long term profitability growth.
Behind the strong structural profitability of both square in cash up 2022 has been a significant investment year for us with after pay and with investments into cash and square and as we look towards the remainder of the year and planning.
Planning ahead for 2023, we intend on being purposeful with our investments and we'll be dynamics to adopt them to any further changes we see in the macro environment.
Okay.
It's clear and encouraging thank you appreciate it.
Yeah.
Our next question comes from Timothy Chiodo with Credit Suisse. Your line is open.
Great. Thanks, Good afternoon, everybody I want to hit a little bit on cash App commerce initiatives, Jack you talked a little bit about this in the prepared remarks in terms of the new discover tab.
<unk> capabilities, there, maybe you could talk a little bit about the roadmap a little further whether somebody commerce can be done in the app.
But it's going to be clicked off to other sites and how that might look over time and then the second aspect is cash out pay not with EMEA up but maybe you could give an update on the merchant acceptance of cash I paid with non square or not after pay merchants.
Yes. Thank you for the question so.
So this this really gets at the heart of exactly why we made the acquisition of battery, but in the first place.
It's because we believe that cash up ultimately can drive a ton of discovery.
Or merchants, all around the world, but especially around local merchants and.
And that just.
Businesses with products and services.
People would otherwise not have hub.
Signal room.
We believe that cash ultimately becomes a place that you want to check.
No not on the weekly basis, but every single day.
Cause it consistently gives you a good sense of it.
Your friends and families.
The.
Business was around new products and services, they're interested in offers such as boost all in one place. So a number of you have.
Probably seen.
Discovery tab.
And in your ketchup.
We're rolling it out to more and more people right now alright.
Alright.
Really excited about this because we believe the biggest part of it.
Our speakers is around connecting people with.
Commerce and transactions and sugar with local merchants, but also of merchants.
Around the world after pay us.
Our solution around that.
And we think there's huge opportunity.
To make these connections not just with the after pay merchants, but the entire square ecosystem as well, which really speaks to.
Our strengths and connecting these two ecosystems together in.
In terms of cash okay.
In the second quarter, we made a lot of strides scaling cash or pay to more after pay sellers.
Allowing more merchants to offer both buy now pay later in ketchup checkout.
And since launching square so September of last year, there have been more than $2 million.
Transactions through cash pay.
And this has been mainly organic adoption.
And we've signed partnerships with several enterprise Oxiclean merchants, who are being who will begin offering.
And then method.
We hope to bring us even further to our sales team brought.
<unk> cash I pay acceptance.
More and more of our merchants within the extra paid merchant base, but also the square British business rule.
Great. Thank you for that update on the merchant acceptance I appreciate you taking the question.
Thank you.
Our next question comes from Darrin Peller with Wolfe Research Your line is open.
Yes.
Hey, guys.
Just touch on the behavior that you're seeing with customers and consumers across the business given the backdrop of the macro uncertainty, especially in the cash card side.
Also your EBITDA came in well above expectations, and obviously happy to hear about the incremental steps being taken on the opex side, but if you could just revisit the investments into cash app because it does sound like at.
At least into July it was stable on a CAGR three year CAGR basis, I think you said, 82%.
Maybe just some tough comps coming up aside from that.
Thanks for the question there Darren happy to start out.
So from a cash out perspective, we are seeing sort of stability in the trend lines on a three year CAGR basis.
Across sort of the customer cohorts that we look at it on a blended basis across cash app.
Pack, a little bit of what we've seen here across our product set which we believe provide.
Diversity and breadth of utility for our cash app customers across engagement, which we would measure as transactions and inflows per active.
And then a cross monetization or sort of our revenue streams.
And then I'll come back to your point about EBITDA.
From a product perspective look we've as you've seen with our development pillars across financial services Commerce community Crypto. There are a number of things that we're doing where we're building relationships and seeing product adoption from our customers and that enables us to be dynamic in environments like this.
There, we see a product providing differential utility in that environment and being able to double down quickly and example of that obviously being in the early days of Covid, our ability to move quickly to enable direct deposit access to our customers to receive government disbursement in an environment like this cash that card is becoming an increase.
And part of broad based use cases for our customers. What we saw as I mentioned early on cash that part is positive growth on spend per active in July even relative to Q2 with a consistent mix across discretionary and non discretionary.
Verticals alike.
So product.
<unk> is a key pillar for us and continued growth with cash happened and how we can serve our customers through dynamic time engagement is another key lever for us.
And what we see here is that obviously as I mentioned earlier certain products perform better at certain times, but unimplemented basis.
We're seeing our strongest engagement in terms of transactions per active in recent months with July at 21 times.
Per active influence proactive overall has grown overtime as well and that's something that we'd like to see continue to grow in July we had mid teens growth on an influence proactive basis on a three year CAGR basis.
That's led to an overall diversification of our revenue streams and our monetization across various business models.
Ultimately has enabled us to continue to invest in the business across a variety of you know at scale revenue streams and with some newer ramping revenue streams like cash or pay which obviously Jack was talking about as well as cash that borrow in other banking and commerce products.
From an EBITDA perspective look we're continuing to invest in our business across the seven pillars that we outlined at Investor day from a product development standpoint, as well as from a sales and marketing standpoint.
Going to be disciplined to make sure that the areas of investment are the areas that have the strongest likelihood of return.
And I think that's part of what Youre seeing in terms of our operating expense guide, which is obviously an operating expense guidance for the whole company.
Cash App is a key part, but but given the signs of stability that we've seen so far obviously, we continue to read these trends in real time.
We want to continue to invest to ensure that we remain high.
Highly valuable to our customer base and can even take share through dynamic times like this.
That's really helpful. Thank you guys.
Yeah.
Yeah.
Our next question comes from Lisa Ellis with Moffat Nathanson Your line is open.
Good afternoon, guys. Thanks for taking my question.
And the follow up a bit on the macro points. There are you starting to see any signs of.
Changes in spending or borrowing behavior across either the square base or cash out with the NPL base as a result of the macro environment, just thinking about your exposure to Smbs and middle income consumers and I guess kind of maybe take a step back overall, how are you feeling about how.
A week or potentially weaker macro environment might affect you I can imagine there are some positive and some negative. Thank you.
Sure I'm happy to start here. Thanks for the question Lisa.
And since I shared a couple of stats on the cash out perspective, and the last question, maybe I'll share some incremental stopped on the square perspective.
I think similar story from a three year CAGR basis with respect to gross profit being relatively stable from Q2 into July of course, there are pockets of shifts underneath the surface with respect to performance for instance, as I mentioned earlier mix shift from online to in person, but the breadth of our square eco.
System is what enables us to capture that stronger performance in person, even as we see a normalizing mix shifts from online and the other thing I'd say here with respect to our strategy before maybe double clicking on some of the specifics is that our strategy has been to grow in these areas.
Add diversity.
And add broader footprint for us so the three top strategic investments during the square business for some years now and into 2022 are growing up market with larger sellers, who we've seen has haven't generally larger greater resilience through macro volatility.
Growing our omnichannel capabilities, which obviously again helps us navigate mixing spending patterns or shifts in spending patterns across channels.
And growing globally, which enables us to see a broader range of sellers, including outside of the United States.
And ultimately it's that breadth of this of our ecosystems, including with the square ecosystem, which has enabled us to be resilient through macro changes as we've seen even during the pandemic, which obviously impacted the square business, particularly and has enabled us to grow at a pace faster than the broader industry maybe.
Maybe just to give you a couple of stats in terms of vertical and seller mix that we see in real time.
Obviously, a diverse base of sellers millions of sellers from a vertical perspective, we span a range of verticals, so 40% of square GTD comments from a range of services verticals.
In 2021, and the remaining 60% is across some of those discretionary areas like food and beverage retail and other smaller but growing vertical.
Where we've continued to see stability from a three year CAGR perspective.
From a seller size perspective, as I said continue to grow up market in the second quarter two thirds of our volume in this core business is from larger sellers of 125000 in annual <unk> or more and historically those larger sellers have been more resilient in a downturn.
And as we've said larger seller broader retention within the square business, even including our smaller sellers has been positive across CPG and gross profit in the second quarter and into July .
And the final point I'd make here is that again the diversity of the products that we offer our customers which go beyond.
Commerce and payments and include customers to ask banking and other products that drive retention and multiple points of value that we can offer our sellers and we're seeing as we increasingly stretch to mid market sellers that they are adopting more products you know mid market sellers on average adopt for Prada.
<unk> and our ecosystem, which enables us to get hired for multiple tools and value that we can provide to our customers, which again adds resilience. So those are kind of the key areas that I would focus you on what we're seeing in real time, but of course, we're mindful of the environment and are reading all of the staff.
In real time to be able to make proactive in front footed adjustments as needed.
Thank you thanks very helpful.
Our next question comes from.
With Olympic Equities your line is open.
Alright, thank you.
So I guess youre seeing good growth across our lending products at the moment.
Great.
But could you kind of expand on your comments about risk costs, and how youre thinking about credit risk across these products, particularly given the macro risks.
Okay.
Of course things can al.
So look I think there's two attributes that we ensure all of our lending product teams are laser focused on one is a data driven approach and the second is the unique structure optimizing for the unique structure of our products.
Relative to many others out there from a data driven approach our risk and underwriting machine learning models get updated in real time and based on a broad set of customer data whether you are looking at borrow cash up Aro square alone and after pay receivables and specifically with borrower alone we determine.
Then the eligibility criteria.
Which ultimately is responsible in terms of helping them protect the customer and block and what that does is it enables us to read that data and move quickly in times of change as we did at the start of the pandemic as you know with the square loans business. The unique structure of our products is really designing our products to simplify access to capital for customers and to make it.
Easy to pay them back. These products are generally short duration and they have simplified repayment process, including for some products thing first is not payback priority.
<unk> generally.
Short duration square loans is less than a year in terms of duration. After pay turns 15 times per year four to six weeks at average cash that borrow.
Similarly terms with a with less than a month in terms of repayments on average.
What that means is that we're laser focused on managing risk loss as an input.
To how we run these businesses and the underwriting decision, making that we employ across products, enabling us to be more front footed in a dynamic environment.
And as a result, we are seeing loss rates on cash that borrow which is earlier in its life and consistent with where square loans has been at less than 3%.
And positive unit economics, there on cash up borrowing of courseware alone and then her after pay we're seeing.
A 1% loss rate, which actually improved slightly from Q1 into Q2 on the back of mix shifts as well as enhancements that we're making here to the risk loss models. So key area of focus for us and one that we're deliberately looking to manage.
Great. Thank you.
Our next question comes from Josh Beck with Keybanc. Your line is open.
<unk>.
Thank you for taking the question I wanted to.
Talk a little bit about the Astra pay integration, obviously, it seems like youre, making some very good.
Headway with respect to coverage discovery as well as the API for sellers.
What we started to get into some of these longer term.
Creation priorities I'm, just kind of curious now that you've owned the company for a complete quarter, how you feel like you're tracking against those and really any guidance on what metrics. We should look for terms of synergies. Obviously, it's one of these opportunities that can really.
Show up across the business, so curious to hear a little bit about the integration path.
We should be wash it further.
Okay.
Thank you for the question I'll start.
And we can follow up with.
With more numbers, but.
Hi.
Thank goodness.
The biggest reason for this acquisition was to bring two ecosystem together to really prove.
Ecosystem model between square in most of the catch up on the cash upside as I as I talked about before we're really focused on discovery discovery of merchants around you.
<unk> services offers like boost.
A number of you have probably seen the.
<unk>.
You can find it within cash app.
But looking for the mainframe graphs at the bottom of your obligation. We intend this to be a place where you can find.
Everything related to what you might once.
Within cash App.
Sending money to people like your friends.
We're buying.
Frank products or services for merchants around your question so.
That is a big part of our focus.
A big aspect of what we believe is important about this acquisition.
The second is on the square ecosystem side offering a tool for square sellers to ensure.
Sure that they can make more sales.
And day one.
The start.
After we closed we offered the service on.
Mine.
And are now offering it as a person as well so.
We are very early with this integration.
And it does take time to.
Having the integration of this size.
But we believe as we continue to push forward.
We will see a ton of <unk>.
Synergies between everything that we're doing on the catch up and also the square so to bring these two ecosystems together and that really is the.
The aspect that we think is most powerful in this in this partnership but a lot of our peers in the industry do not have they often are focused on one aspect such as buy now pay later and not focused on the connection between all these things, especially the consumer and also the merchant side.
We.
We will continue to increase.
Our customers both to discover new products and services within cash App, but also make it easier for sellers to turn on these features so that they can make more sales.
And the more we do that.
The ecosystems benefit.
Our customers value us.
Yeah, and I'd, just add Josh that I think.
Youre right that from a synergy perspective, we should expect to see opportunities that span beyond just the buy now pay later platform into each of the square cash App revenue streams in lines of opportunity as we think about increasingly creating that marketplace that connects.
Sellers and consumers alike.
We are.
More fully integrating the people who run these businesses from a product perspective, and marketing perspective, a customer surface perspective.
I would expect us to see opportunities over time, both from top line and.
Cost optimization to be able to really drive stronger unit economics, as well as to drive those opportunities that Jack is referencing across a broader commerce opportunity, but also point you back to them as well.
He said on the in my initial remarks, the diversity and the sort of complimentary aspects.
Our customer.
Customer bases is also an opportunity for us to continue to explore as we go deeper with these product integrations, we provide a diversity in terms of.
Seller size in terms of vertical and in terms of channels to the after pay be NPL platform through our square integration and after pay provide to us Similarly, a deeper.
Exploration of both commerce and financial services with consumers and merchants. So there are a number of things to unpack here from a product integration standpoint, and I expect them to see that play out in.
A broader way across the P&L over the long term as we as we make those integrations.
Very helpful. Thanks, Jack and Amrita.
Yes.
Our next question comes from John Davis with Raymond James Your line is open.
Hey, good afternoon, and thank you for taking the question. So I wanted to touch a little bit on cash up active growth still remains very healthy but has slowed a little bit I think as expected as we lap stimulus and obviously crypto weakness, but I wanted to drill down and see and read it maybe it's a little bit of detail on kind of top.
Top of funnel like new customers versus churn I think it's only natural you probably have a little bit elevated churn like what are you doing to try and keep.
Customers active on cash App, they may have been driven to the app by stimulus.
Chance, we could see a reacceleration in kind of net new active growth. If we kind of digest. This churn just any color there would be helpful. Thanks.
Yes.
Sure. Thanks for the question, maybe I can start and in Jack obviously shouldn't should add in.
So one thing I'd say is that you know at 47 million monthly transacting as is what we're seeing is sort of broad based appeal, particularly for.
Digital native Gen Z and millennials, but even more broadly than that and we think that there is so much more opportunity to go deeper here as we outlined in some of the Tam numbers at our Investor day.
Look at the more detailed specifics on sort of a quarter to quarter basis. The pace for growth in monthly active base can be influenced by seasonal impacts for instance in Q1.
With tax refunds, we historically see that seen Q1 be a stronger quarter from in actives and inflows proactive perspective, as they have greater spending power and look to deploy that.
Art, we grew our monthly active base by the same amount in Q1 and Q2, yeah, although with the seasonal strengths in March.
From related to that that sort of tax seasonality.
What we look at from a go to market perspective.
It's been fairly consistent so far through the first half of 2022, we've continued to see strong long term returns on our investments and the cost of acquisition for net new actives has been in line with what we saw in 2021.
With continued engagement as I said earlier product adoption across a range of financial services and commerce offerings.
That ultimately drives up higher lifetime value for our customers, which enables us again of course to reinvest.
And the other thing I'd point out is that as I mentioned in the intro remarks.
One of the key things that we think about as we think about retention for our customers.
Is driving stronger connections amongst customers within cash App, we see a 31 percentage points stronger retention practice with a network or for a more in cash up compared to those with only a network of one and so that's a key piece of leaning into our community pillar <unk>.
Making these products and your contacts within cash App more discoverable in order to drive awareness and to drive retention.
The only the only thing I would add here is.
I think one of the important things that we want to continue to focus on and you all have brought up in the past.
As we want to make sure that we have diversity of utility.
So we believe it's really important.
People may come in for particular reasons, such as what we saw during the stimulus or.
Cause the peer to peer functionality that we've always provided.
Right.
In terms of retention and also.
New customer acquisition.
It really has to do with like how much utility we're offering.
And not just.
Focused on one thing, which is Peter peer transactions.
Or investing or bitcoin or lending.
But it is a place one place you can do all those things.
And we see.
Peers.
Other industries in other spaces in other countries.
Done that very well.
Which is sometimes reference those super apps or neo banks.
And we believe that.
Over the long term that is the right strategy.
Does this both for the cash App ecosystem and also the square ecosystem and.
And more importantly, the fact that we have both of those and one company. We believe is our superpower so over the long term.
We will continue to see a bunch of ebbs and flows within the markets.
The macro environment, but our strength realized and the fact.
But we're not just dependent upon one particular use case.
<unk> utility, but that we offer all of them.
Well one day.
The other will flow and we will continue to build this ecosystem, where someone is coming back to the cash up every single day for something that is of extreme.
Extreme importance.
Life, which obviously we believe.
The relationship with money and.
People's financial.
Permitting for the economy is critical and we hope to serve them.
<unk> multiple ways and we think that is a relationship that is the strength and resilience ultimately over time that creates both.
New customer acquisition, but also retention over time.
Great. Thanks, I appreciate the color.
Our next question comes from Ramsey.
<unk> with Barclays. Your line is open.
Thanks, So much for taking my question I wanted to follow up on your on your comments, just now Jack and Amrita.
In terms of the multiple touch points that you can develop here that would drive benefits such as engagement and retention I guess can you give us more detail on the approach or strategy to sort of drive that cross sell I mean, obviously this does discovery tab is a key piece of the puzzle, but I'm just curious what are the levers Youre plans do you have I don't know its marketing investments partnerships sponsorships.
This is more of a sort of you will build it and they will come type situation or are you going to need to push the message out a little bit more.
It's kind of forced those connections to happen.
I think we have a.
We have a very unique benefit and the like we have.
Critical.
Regular use network effect, which is.
Uh huh.
And you can see for yourself and how.
How the behaviors in the upstream.
On a biweekly basis payday in the United States.
We continue to see an increase.
In downloads and the apps are quite good.
Yeah.
When people get money.
They tend to send it are requested to their friends and family. So.
We have a we have a built in network effects that is inherently natural.
Two the use case.
We wanted to continue to see grow.
And we've built an ecosystem.
Around them.
<unk> <unk>.
Just by virtue of people needing to send and receive money to their friends family work.
Direct deposit and.
Payroll and getting their paychecks.
We can build something that is.
At least.
Weekly if not.
Every every two weeks use case.
And then get to more and more.
Daily use case, which.
It's always our goal.
We saw a step towards that with bitcoin.
We see a step towards that with the cash card.
We see it with lending.
In terms of Boro.
But ultimately.
Discovery in the discover tab as you said.
We will bring us to that.
They will use case, where.
People want to open the up every single day, because they find something meaningful that they find something meaningful in that neighborhood.
Turning to meaningful product a meaningful service.
They continue to find easy ways to go back to that the utility that they have with peer to peer.
So that that is always going to be our strongest.
Acquisition and retention channel.
It's entirely organic based on just what people want to do of course, there are many other opportunities in terms of partnerships.
Marketing.
All of these other things that we've been very creative around especially within cash app.
I think you've seen with our partnerships with.
Various celebrities and artists around the world.
However, it.
It all comes back to like is this a use case of people news every single day.
Is it providing the value.
And are they finding and discovering something but ultimately they want to do more of that is adjacent to it that is the model again.
It's a model for cash App is close to the model for for square and the rest of our ecosystem inclusive of title and TBD.
And.
It doesn't happen overnight, but over the long term we believe these relationships we're building with people.
Especially in the retention.
We'll just continue to grow.
And continue to be more and more valuable to people, especially given that we have the broadest and ultimately the deepest relationship with.
Tumors them, what they wanted to do.
And.
And participating with the economy.
And I would add Ramsey you know just to sort of provide some more examples on the product forms of connecting points within the cash app ecosystem because of course as Jack mentioned there are a number of things we can do from partners partnerships sponsorship sales perspective.
To broaden the platform from a product perspective, I think there are theirs.
Three things that I would outline one as Jack said that the network effects inherent in peer to peer you've seen us leverage peer to peer not only for sort of a standard Fiat.
Transfers, but also for bitcoin and stock transfer to bring visibility to investing product you could imagine being able to peer to peer send a gift card to a friend.
We build out our commerce vertical so being able to to bring your connections your friends and family along with you as you experienced these other products.
Is an opportunity for us in driving greater adoption.
Second piece from a product perspective is around our booth network and now.
Supercharge that even further with after pay but with our boost network, what we've obviously seen as the opportunity for our customers engaged with cash App card.
To get a differential incentives and opportunities if they try investing or if they tried direct deposit as an example, where you can provide them with even more incentives and now with after pay and the sort of AD and affiliate networks. They've got we with our combined efforts here have an opportunity to grow that even for.
Further the third piece I'd say is the product initiatives that we have that enable us to cross sell and go even deeper with already engaged customers. You can think of those as being direct deposit where we see that as an attached to cash app card.
You can see that with our taxes product, which is really seamless to use with our broader if you use our financials broader financial services suite of products, you can see that with cash at borrow which as we mentioned we determine eligibility and we've been offering that to our customers who have.
Multiple higher inflows, so that gives us a chance to go even deeper and offer more value and obviously monetize some of those products.
With our customers who are already deeply engaged and really just create a frictionless experience about both broadening the product adoption as well as going deeper in each of these verticals.
That was very comprehensive I appreciate it thanks, so much.
I would now like to turn the call back to the company for closing remarks.
Thank you for joining our call and we will see you next quarter.
Ladies and gentlemen, thank you for participating in today's program. This does conclude the program you may all disconnect.
Hmm.
Yeah.
Hum.
Hum.
Hum.
Tim.
Yeah.
Jesse went up the Brooklyn homeless cuts.