Q4 2024 Block Inc Earnings Call
Hi, everyone. Thanks for joining our fourth quarter 2024 earnings call, we have Jack and Amrita with us today.
I'll begin this call with some short remarks before opening the call directly to your questions. During Q&A, we will take questions from conference call participants.
We would also like to remind everyone that we will be making forward looking statements on this call all statements other than statements of historical fact could be deemed to be forward. Looking. These forward looking statements include discussions of our outlook and strategy and guidance as well as our long term targets and goals. These statements are subject to risks and uncertainties actual results.
Else could differ materially from those contemplated by our forward looking statements reported results should not be considered an indication of future performance.
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 available to US as of today's date, we disclaim any obligation to update any forward looking statements, except as required by law.
Further any discussion during this call of our lending and banking products refer to products that are offered through square financial services or our bank partners.
Within these remarks, we will also discuss metrics related to our investment framework, including the rule of 40 with rule of 40, we are evaluating the sum of our gross profit growth and adjusted operating income margin.
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 and our historical financial information spreadsheet 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.
Speaker Change: Audio webcast on our Investor Relations website, an audio replay of this call and the transcript for Jack and Amrita is opening remarks will be available on our website shortly.
Jack: That I would like to turn it over to Jack.
Speaker Change: Thanks for joining.
Jack: This quarter walks through the progress we made in 2024.
Jack: We expanded square from a payments tool into a full commerce platform enhanced.
Jack: Enhanced cash app's financial services offerings, and restructured our organization to move faster against our roadmap.
Jack: Looking ahead, we're focused on connecting local communities block by block through our neighborhood network strategy investing in AI automation open source innovation and bitcoin infrastructure, all with the goal of expanding financial access globally.
Jack: If you haven't yet please read our letter for more details and with that I'll turn it over to Amrita for some highlights from the quarter.
Amrita: Thanks, Jack and 2024, we drove gross profit growth at scale, while dramatically improving efficiency across our business we.
Amrita: We ended 2024 with $8 eight $9 billion in gross profit, representing 18% year over year growth with square up 15% and cash App up 21%.
Amrita: Similar to prior years, we saw gross profit retention of more than 100% in 2024 for both square in cash App as we deepen engagement with our customers.
Amrita: We saw an acceleration in two key metrics as we exited the year.
Amrita: Square D. TV grew 10% year over year in the fourth quarter with improvements in same store sales and customer retention.
Cause year over year growth in the U S increased 200 basis points sequentially to six 9%.
Amrita: For cash at T check deposit actives reached $2 5 million in December growing 25% year over year, and we saw an increase in momentum in the second half of the year.
Amrita: Our focus on disciplined execution led to a significant increase in profitability and the operating leverage in 2024.
Amrita: Adjusted EBITDA was $3.0 billion to $3 billion of 69% year over year and adjusted operating income was $1 six $1 billion or more than four five times increase on a year over year basis, delivering 13 points of margin expansion.
Amrita: And for the 12 months ending in December and just did free cash flow was $2 $7 billion compared to $515 million a year ago.
Amrita: We achieved 36 five on a rule of 40 basis in 2024 up seven points from the year prior.
Let's look ahead to our guidance for 2025 and share why we're excited about the trajectory of our business across both growth and profitability.
Amrita: Consistent with what we called out last quarter, and assuming a stable macro environment. We expect strong gross profit growth of at least 15% year over year or at least $10.22 billion in gross profit.
Amrita: We're maintaining our gross profit guidance for 2025, despite absorbing an incremental 50 basis points of headwinds from FX rates compared to our preliminary guidance early November.
Amrita: Given the unique growth dynamics during the year, including lapping leap year last February and tougher FX comparisons in the early part of 2025, we expect our first quarter guide to be the low point for both gross profit growth and adjusted operating income throughout the year.
Amrita: Our full year guidance implies a meaningful inflection in growth during the year and we have clear visibility into the key drivers of that acceleration as we scale recent product launches and execute on go to market.
Amrita: We expect a more pronounced acceleration in cash app and we broadened access to cash that borrow launch and scale after pay on cash App card and invest in marketing cost.
Amrita: Catch up of sustained strong gross profit growth for years by driving product velocity and successfully stacking new S curves under its existing product set to deliver more value to customers.
Amrita: We believe we're at the start of another exciting growth phase as we think are base and with the ability to stack future building blocks of growth from both borrow and after pay on cash App card.
Amrita: We ended 2024 with $5 million cash up Aro monthly active this year, we plan to expand to additional customers and offer higher limits by improving underwriting refining unit economics, expanding to more states and integrating borrow a direct deposit.
Amrita: After paying on cash App card launched this week and we are rolling it out to new customers now after a year of strong testing, we see this product as another way for customers to manage their money and to drive increased spending through cash back card.
Amrita: Beyond these specific products, we're focused on driving more customers to cash up card a gateway to our broader banking offerings and further growth in pay check deposit actives.
Amrita: For square, we expect both TPG and gross profit to improve throughout the year driven.
Amrita: Driven by a combination of both retention and acquisition.
Amrita: We meaningfully ramped marketing investments in the second half of 2024 and the strong returns we have sustained here give us conviction that these will compound as the year progresses.
Amrita: We also continue to invest behind our partnership and field sales strategies.
Amrita: And we expect growth contributions from these initiatives to increase compared to 2024.
Amrita: The platform investments, we made last year across Onboarding orders and single App are still expected are all expected to drive strength in square this year.
Amrita: Any of the launches we highlighted this quarter were enabled by our recent platform enhancements.
Amrita: We have an extensive portfolio of growth initiatives across squaring cash up and we're excited for those to help drive accelerating growth in 2025.
Amrita: From a profitability perspective, we expect adjusted operating income of $2 1 billion or approximately 21% margin expanding 240 basis points year over year.
Amrita: Even if we grow acquisition spend by more than 20% year over year across square and cash App.
Amrita: We remain committed to disciplined growth and driving cost efficiencies, we were below our 12000 person cap at the end of the year and we intend to remain below for the foreseeable future.
Amrita: In 2024, we built the foundation for our next era of growth and we're excited about our momentum heading into 2025.
Amrita: Our goal across both square and catch up in the year ahead is to make sure. We're balancing continued growth investments on product and go to market with increased efficiency across our organization with this we expect to exit 2025 of the rule of 40 run rate and remain on track to achieve our target of a rule of 40 in 2026 and.
Amrita: As Jack said in his letter we're excited to host you for an Investor day in the second half of this year to show you more of our progress in these areas and with that I'll turn it back to the operator to start the Q&A portion of the call.
Speaker Change: You would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again, we ask that you limit yourself to one question, we will pause for just a <unk>.
Amrita: To compile the Q&A roster.
Speaker Change: Your first question comes from the line of Tien Tsin Huang with Jpmorgan. Please go ahead.
Speaker Change: Alright, Thanks, a lot here Jack it feels like they're thinking about.
Speaker Change: Like a lot and it feels like a big execute execution year for you guys.
Speaker Change: 25, you talked about I'm going to talk about building a foundation in 'twenty for us Im curious from your standpoint beyond the.
The numbers and the guide and all that good stuff what proof points are you focused on to gauge progress on execution in 2005.
Speaker Change: This year be different than the last couple of years from a from an execution standpoint.
Speaker Change: Yes, so I mean, we intend to develop our growth rate across across our business.
Speaker Change: Hello, there has to do with.
Speaker Change: We configure our R R.
Speaker Change: So as you said.
Speaker Change: We spent the majority of bus you are not only doing if were talking about how we have reconfigured and reorganized the company.
Speaker Change: And.
To set us up for.
Speaker Change: Rapid acceleration this year.
Speaker Change: I guess the biggest proof point I would look towards his development velocity how quickly we can now move and how quickly we can ship things.
Speaker Change: And how quickly we can see the impact or that theyre not having impact so we can make changes or.
Speaker Change: And those things.
Speaker Change: I would I would.
Speaker Change: Point, you to one early proof point, which is this.
Speaker Change: This project, we released called Golden Goose, which is.
Speaker Change: AI assistant poor.
Speaker Change: Engineers to start but it can expand any discipline. We built this for ourselves internally. This team was less than 10 people. They did it in months not years and we put out.
Speaker Change: We now have a pretty sizable ecosystem of developers building extensions for it and expanding it.
Speaker Change: Also get better for them and we can use and it points to a pretty foundational move for us where we.
Now in the conversation with a lot of these AI companies.
Speaker Change: And I think there's a few areas within that where we can take a leadership position as well. So we're excited to take that one but that's all a function of us.
Speaker Change: Reorganizing our company this would not be possible.
Speaker Change: Beginning of last year, but it is now so you should expect us to see those throughout the.
Speaker Change: The company and the crossover surface areas.
Speaker Change: We have much better go to market clarity and excellence.
Speaker Change: And Nick and team, especially on square, but certainly for cash app as well. So we intend to flex that muscle significantly this year and pair it with our better products.
Speaker Change: We have recent reconsidered, how we release products at square.
Speaker Change: We wanted to be a lot more open with our roadmap. So that we can get sellers time could decide and more information to decide versus us versus other competitors and they can get a lot more predictability around installing us or upgrading.
Speaker Change: Certain aspects of our system.
Speaker Change: And then for the first time as a company since we founded the company, we have a prioritized roadmap across our entire company and all of our products services and surface areas.
Speaker Change: This is stack ranks we have directly responsible individual.
Speaker Change: Alright.
Speaker Change: On task for each one.
Speaker Change: That gives us a lot more accountability gives us a lot more information around how we're investing internally.
Speaker Change: Is this a lot more clarity around what we're experimenting with and what we're trying to accelerate and what we're trying to refine that.
Speaker Change: Make better but most importantly, it also gives us clarity in your clarity on what we need to stop.
Speaker Change: And redeploy our resources our people our finances.
Speaker Change: Things that we need to reconsider so.
Speaker Change: Just want to add to the whole company.
Speaker Change: And we're starting to run with it but that will also help a lot with our execution, which will ultimately result in just much better product development velocity much better learning. So we can we.
Speaker Change: We can quickly adapt to the market and what our customers want.
Speaker Change: Ideally be ahead of them with all these new tools that we're building such as AI agent systems, we're focused on.
Speaker Change: Tien Tsin I'd, just add a couple of thoughts on Kpis metrics that we're going to be looking at and do look at on a daily and weekly basis for our two most established businesses I think its very clearly acceleration in square GTA V and for cash App, it's the ramp of our pay check deposit.
Speaker Change: Actives, and then more broadly engagement across each of those platforms with a broader set of products.
Speaker Change: From an investment framework perspective, so when we think about the enterprise across block.
Speaker Change: Want to see two things.
Speaker Change: We're focused on being a rule of 40 company in 2026, and now believe that we can get to that run rate by the end of this year.
Speaker Change: Positive customer retention across each of our ecosystems that means our existing customers continue to grow and we continue to add more and more value to them.
Speaker Change: And then finally I'd say I think we want to see some build on the signals for our next big building blocks of next S curves that were stacking and I think what you hear from US today is that there are some near term S curve opportunities with cash at borrow and after pay on cash App card.
Speaker Change: And then but the links between square and cash up to the neighborhood network will be laying important proof points behind in 2020, fives, which should benefit us in the years to come.
Speaker Change: Great. Thank you both for the thought.
Tim Chiodo: Your next question comes from the line of Tim Chiodo with UBS. Please go ahead.
Tim Chiodo: Great. Thank you I wanted to talk about 2025 square GPP grow when we think about the major building blocks of our components. They are same store sales growth.
Tim Chiodo: Churn or retention.
The size of the new cohort coming on and then lastly, the annualized <unk> of last year's cohort that was brought on so you made some comments already around exiting the year with some good signs on improved same store sales and some of the retention metrics getting a little bit better.
Tim Chiodo: And <unk> may be a part of that if maybe thats getting better or maybe less bad and then in terms of the size of the new cohort clearly there is the sales and marketing spend there's the new partnerships and some of the good signs youre seeing there cognizant, though that that last part on the marketing, there's a little bit of a cumulative effect there meeting, it's a little bit more beneficial as it layers in into.
Tim Chiodo: The second half of the year, so putting that all together I was hoping you could touch on some of those components and really what it means for the exit rate for <unk> within the salary ecosystem as we look into the latter part of 2025.
Speaker Change: Sure. Thanks for the question Tim.
Speaker Change: So, let's start with where we exited the year with square D. P V. In the fourth quarter up 10% year over year in U S growth of six 9%, both an improvement from the third quarter sequentially.
Speaker Change: With U S growth up 200 basis points relative to where we were in the third quarter and international growth up five points to 25% relative to where we were in the third quarter that acceleration in the fourth quarter was driven primarily by two key metrics same store growth across our verticals as well as improved.
Speaker Change: Dollar retention the two verticals that I would call out in particular, driving the acceleration or the two that we're most focused on which is food and beverage and retail.
Speaker Change: When we look through 2025.
Speaker Change: Assuming a stable macro environment, we expect GTA V to accelerate from these current levels.
Speaker Change: Driven by the product and go to market initiatives that we've been talking about for the past few quarters now.
Speaker Change: We expect to see a meaningful uplift in customer acquisition as you move throughout the year and as these investments compound now.
Speaker Change: Now when we look at it from Q1 to Q4 Theres a bit of noise. In Q1, we expect Q1 square GTD growth when you isolate for that constant currency and leap here to be in the high single digits building to low double digits as we exit the year.
Speaker Change: As I said there is some noise without Q1 comparison because of FX and leap year, but we expect our core underlying growth of square to be roughly in line with Q4 and to improve from here for the rest of the year on the back of a stable macro environment driving better same store growth slightly better attention and stronger acquisition.
Speaker Change: Maybe just to quickly unpack, what some of those customer acquisition and retention drivers are to accelerate growth, we've grown marketing spend significantly over the past two quarters.
Speaker Change: With strong early Rois, and we intend to invest behind that in 2025 as well.
Speaker Change: We expect continued investment across the combination of sales marketing and partnerships to drive new seller acquisition, we're seeing better coordinated strategy across these three levers than we've seen before.
Speaker Change: Our retention is strong today, but we expect account management and investments into our products to increase that further and then we believe we have the opportunity to gain wallet share and drive same store growth higher. An example of that being kiosk, which is a product that we expect to increase wallet share and we will have more that we expect to launch throughout 2025 to continue.
Speaker Change: To drive that important retention metric for us.
Speaker Change: Thank you.
Speaker Change: Yeah.
Your next question comes from the line of Darrin Peller with Wolfe Research. Please go ahead.
Speaker Change: Hey, guys. Thank you maybe I could just jump in quickly on Q4 first the spread between <unk> and the gross profit growth narrow just if you could help us understand a little bit of the dynamics there, but then more importantly, just the building blocks of the gross profit growth ramp expected through the year I understand a lot of.
Speaker Change: Initiatives will kick in but if youre starting off I think you said, 11% for Q1 15 for the year, maybe just help us a little bit more and a little more granularity of the building blocks to get from that starting point to the 15 for the full year.
Speaker Change: Thanks, guys.
Speaker Change: Sure Darrin, maybe just quickly hit off on the first part of your question for Q4 keep in mind, when you're thinking about <unk> versus gross profit the banking ecosystem had a tougher compare in the fourth quarter. We saw right. So we had 12% growth overall from a gross profit perspective in the fourth quarter.
Speaker Change: <unk> from a banking perspective, we had 13% growth in the fourth quarter.
Speaker Change: And as a reminder, our baking products grew by 28% in the fourth quarter of 2023, driven by some elevated loan volume growth. So it's a tougher compare from a banking perspective.
Speaker Change: As we look to this year 2025.
Speaker Change: Let me start with sort of the dynamics that we see in the first quarter and then the line of sight the clear visibility that we have to the drivers of gross profit accelerating throughout the year. So first we recognized the growth rate dynamics as we start the year are unique.
Speaker Change: For a couple of different reasons, some idiosyncratic headwinds like FX and leap year and then some tougher compares like the banking one I mentioned so in the first quarter leap year is expected to create a roughly one point headwind to gross profit growth for both square cash app.
Speaker Change: With an additional approximate one point headwind to squares gross profit growth from FX.
Speaker Change: And then in addition to that we have square banking with an incredibly strong Q1, and 24, where it grew by 36% as we grew originations at an accelerated rate as a tougher comp for us. This Q. This Q1.
Speaker Change: And then from a cash out perspective, again, a tougher compare related to some pricing changes for bitcoin, where we had the full quarter benefit of that last Q1 as well as some benefits from the price appreciation of bitcoin now when those Q1 dynamics in mind, let's turn to where we have confidence that we can build.
Speaker Change: Upon these compounding benefits, we see of our product and go to market initiatives into the remainder of the year. So for square, we expect gross profit growth trends to align closely with G. P V trends in 2025.
Speaker Change: We'd see GPP gross acceleration drivers that we've talked about go to market investments new products to gain traction and compound during the year and as a result.
Speaker Change: To see gross profit accelerating off the Q1 levels.
Speaker Change: We're also growing our marketing spend here again behind strong rois.
Speaker Change: And are continuing to add sales and partnership resources all of which we expect to result in accelerating new customer acquisition, we have much higher expectations for ourselves and partnership investments. This year than we did last year, and we met and exceeded our targets last year and we intend to do the same this year.
Speaker Change: From a cash out perspective, we expect the acceleration throughout the year to be more pronounced exiting 2025, well above the Q1 gross profit growth rate.
Speaker Change: We think we have a unique opportunity here on this next phase of growth for cash app between borrow and after pay on cash card.
Speaker Change: After paying our cash a card we are after a year of sort of methodically testing is now launching this week, allowing customers more ways to manage their money and giving them more optionality at checkout cash Upcard at 25 million monthly actives in December is in amazing distribution surface from <unk>.
Speaker Change: Launch these sorts of product features into and it's one that we saw really resonate with customers as we were in testing over this past year with nearly $150 million in originations just in the beta alone.
Speaker Change: And then for borrow this product that is scaled meaningfully in 2024, we believe that there is a tremendous oh.
Speaker Change: Amount of opportunity left for growth.
Speaker Change: A variety of different areas this year as I mentioned earlier.
Speaker Change: Making borrow available to more customers with higher limits by improved underwriting better unit economics, and expanding into additional states also enabling borrow to be a driver for paycheck deposits by creating greater integrations there.
Speaker Change: And then finally, I'd say as I point to looking at our exit out of 2025 is that we'd expect to see prudhoe, our bitcoin mining initiatives to start benefiting gross in the second half of the year as well.
Henry: Thanks Henry.
Speaker Change: Your next question comes from the line of Dan <unk> with Mizuho. Please go ahead.
Dan: Hey, guys great quarter. Thanks for taking my question I have a long term strategic question maybe for Jack.
Dan: On your on Protos open a bitcoin mining system and it looks really interesting.
Dan: Could it mean could it be the next cash app like how big is the upside from that and what's the long term vision and strategy for that product I appreciate it.
Dan: Yes.
Dan: This is one where we're really excited about we do think the market is large and we do think we are poised to take a significant percentage of it because.
Dan: There is one.
Dan: One player.
Dan: Really in this space and.
Dan: Customers want other options.
Dan: We did a bunch of research we've talked with a bunch of these finding customers and we found it.
Dan: Don't have the reliability they needed they didn't have the customization they needed.
Dan: Did I have.
Dan: The ability to upgrade and build their own custom systems around.
Dan: Their rigs and some of them wanted to just like a full system that just worked off the shelf.
Dan: There was a bill.
Dan: In the U S.
Dan: The fact that it's open source.
Dan: We're on.
Dan: For three nanometer.
Dan: This allows us to have much better performance in.
Dan: A much stronger roadmap looking forward.
Dan: So we do think we're poised well.
Dan: <unk> manufacturing chips, now theyre going to be rolling out this year.
Dan: Along with our with our full systems.
Dan: This year is going to be a one off.
Dan: I think like.
Dan: Unexpected upside in this business and one that we significantly changed the market dynamics because of just how well our system works and how configurable that is so within this space, Yes, I do think it's a massive opportunity and one that's well well well overdue.
Speaker Change: Definitely things like that thanks again Jack.
Robbie Bamberger: Your next question comes from the line of Robbie Bamberger with Baird.
Robbie Bamberger: Yes, thanks for taking my question.
Cash up I may use have been flattish at around $57 million. The last several quarters I guess what would it take for these to start growing again is it incremental marketing spend new products or something else.
Hey, I'm happy to start us off here. Thanks for the question Robbie.
Speaker Change: So let's start I think the short answer is we think that there is significant opportunity for growth longer term, but there is some deliberate decisions that we've made as part of our banker base strategy in the near term that have resulted in a consistent sort of 57 million monthly actives, which grew 2% year over year in December.
Speaker Change: This is a part of our continuous enhancements to drive healthy customer engagement as we bake our base.
Speaker Change: We've made investments in critical areas like compliance support and risk and as we've done that we've progressed more of our actives through our identity verification process, which in turn unlocks greater access to those actives to our full suite of financial tools.
Speaker Change: So as we've made those investments we've seen benefits come through in a couple of different places first from a product growth perspective, we've seen that accrete to engagement and attach on products like cash card direct deposit and borrow all of which you've heard about today obviously.
Speaker Change: But also a great benefits to our unit economics risk loss for US has been an area of operating expense leverage on both peer to peer and cash up card risk loss over the past year and I think that's critically tied to the enhancements we've made to the platform here in the near term. This year, we expect the biggest drivers of cash App gross.
Speaker Change: Profit growth should be metrics like inflows proactive and monetization rate or our pool.
Speaker Change: Whereas we would expect after active growth to be relatively flat on a year over year basis. This year now longer term to your question, we see a significant opportunity to grow active, particularly among the digital native audience like millennial and Gen Z.
Speaker Change: We also see powerful network effect connections across our audiences you know amongst the teams and families.
Speaker Change: And across our other brands after pay customers, many of whom will be introduced to cash up through the integrations like the one that we're launching this week with bringing after pay functionality into cash up cards as well as square buyers. The more we can execute on our neighborhood network strategy to connect these two ecosystems.
Thank you.
Speaker Change: Your next question comes from the line of Andrew Bock with Wells Fargo. Please go ahead.
Andrew Bock: Hey, Thanks for taking my question I wanted to hit on the cash that flywheel and how you've called out.
Andrew Bock: The rolling monetization opportunities by stacking these multiple S curves.
Andrew Bock: Although we have after pay functionality live and the cash card I guess, how would you characterize the potential of this S curve compared to innovation in products you've introduced in the past and then if there are any high level thoughts you can provide around goals for attach monetization contributions all it'd be super helpful. Thanks.
Andrew Bock: Yes, I can surface.
Andrew Bock: I think it's a huge.
Andrew Bock: That's correct because his entire companies focus on just one thing.
Andrew Bock: And what matters most for for cash App and the ketchup card.
Andrew Bock: Is that all back together.
Andrew Bock: But they actually positively reinforce one another as well so we have as Amrita said earlier, we have a huge base of customers.
Andrew Bock: Customers that we can deploy those too.
Andrew Bock: Can do that extremely quickly.
Andrew Bock: It's easy to rollout for us an alert people proactively of entirely new utility, but they can use that.
Andrew Bock: And silly.
Andrew Bock: And ultimately that provides a flywheel into more spend and more usage of other.
Andrew Bock: Jason aspects of cash flow, which we continue to.
Andrew Bock: But to deepen and broaden the ecosystem and ultimately connect.
Andrew Bock: Connected with the square ecosystem.
Andrew Bock: Which speaks to what I believe is our two superpowers, we have both of these ecosystems at scale.
Andrew Bock: Both sides of the counter.
Andrew Bock: And now we can bring more financial tools and more financial utility that people can't find.
Andrew Bock: Elsewhere as connected.
Andrew Bock: To every single person, that's where we're using cash up on the cost curve, but also it will be a significant reason to use cash up and not have to go to the app store for Tenda.
Andrew Bock: 10 different apps everything is in one off.
Andrew Bock: It'll be the ketchup.
Andrew Bock: And I'll just add a couple of points to help contextualize as well and you both on after paying cash a cart and then I want to speak a bit tomorrow.
Similar.
Andrew Bock: Similar to how we ramped cash-out borrow with after pay on cash up cart as Jack said, we see a tremendous opportunity as we always do we'll start small.
Andrew Bock: Millions of monthly actives to be eligible this year, and then ramp those offerings, where we determine eligibility obviously based on adoption and improvements to our underwriting models as we gather more data. So we would expect after paying cash upcard to benefit gross profit.
Andrew Bock: Compounding that benefit throughout the year benefiting our growth more in the second half of the year as we've called out.
Andrew Bock: Related to the acceleration in cash up gross profit throughout the year.
Andrew Bock: I think it's also for thinking about.
Andrew Bock: S curves for cash up important for us to talk about cash that borrow as well and when you look at the growth and attraction that this product has achieved what we're seeing is that our customers really value. The optionality to manage their cash flows that cash up borrow provides.
Andrew Bock: And I think that's similar to what after pay will provide us well in cash up card, but we shared last quarter.
Andrew Bock: In a recent survey, 43% of our borrow actives, which we now ended the year with $5 million cash or borrow monthly active 43% reported that the loans help them pay their bills, 38% said that these loans helped them smooth cash flows between paychex, it's a part of how theyre managing their money.
Andrew Bock: And products like borrow helped deepen customer relationships, we've seen borrow atkins bring in 13% more inflows and conduct 6% more transactions than non borrow actives and drive 10% higher variable profit to us on a proactive basis, even excluding the profit generated from borrow so.
Andrew Bock: We saw strong growth in borrow this past year, but we think we have an opportunity to expand it further as I've mentioned already into 2025.
Andrew Bock: And continue to compound the benefits beyond the $5 million borrow monthly actives that we had at the end of the year maybe.
Andrew Bock: Maybe the final point I'll make here is in 2024 about 25% of active chose to take out a bar alone after getting an offer.
Andrew Bock: And that number is significantly higher for paycheck deposit actives, which gives us confidence that access to credit ultimately is an important part of our much broader banker base strategy going forward.
Andrew Bock: I'm really interested.
Andrew Bock: Thank you Andrew.
Speaker Change: Our next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead.
Andrew Bock: Yeah.
Andrew Bock: Yeah, Hi, guys I was hoping you could just put a finer point on the gross profit guide by segment for Q1 and for the full year and then if you can just talk about maybe the top two or three square initiatives that you really think will move the needle.
Andrew Bock: LNG PV in 2025 thank.
Andrew Bock: Thank you.
Speaker Change: Sure happy to start off on the gross profit question.
As we said we expect to.
Speaker Change: See ramping gross profit growth through the year with cash app acceleration throughout the year being more pronounced.
Speaker Change: Relative to squares, albeit we expect to see growth trends improve throughout the year.
Speaker Change: And we expect Q1 to be the lower point throughout the year in terms of gross profit growth and profitability.
Speaker Change: Again, some of the key initiatives that we've talked about in terms of sales marketing product launches.
Speaker Change: And the ramp of products like borrow or after paying on cash App card.
Speaker Change: Are the key elements that compound and drive the more meaningful growth rate as we exit the year relative to where we start in Q1.
Speaker Change: Yeah.
Shlomo: Hi, Shlomo.
Speaker Change: Pardon.
Speaker Change: Go for it.
Speaker Change: On the on the square side in terms of drivers.
Speaker Change: Yes.
Speaker Change: As we've talked about for quite some time we.
Speaker Change: I wanted to really simplify our go to market and also at a lot of strength. There we've got a lot of strength by changing the team.
Speaker Change: More efficient.
Speaker Change: Being more open to partnerships.
Speaker Change: The waste market and.
Speaker Change: And then we have a bunch of products in that initial.
Speaker Change: Initiatives.
Speaker Change: We think will help us.
Speaker Change: Clarify that message, including bringing the square up into the five square apps into one square. So it's just much easier to onboard people and customizable.
Speaker Change: Customizable as you close more information as you use it more.
Speaker Change: Flexes to your to your needs.
Speaker Change: <unk>.
Speaker Change: Second like we we're we've completed our transition from a technology stack.
Speaker Change: Dave.
Speaker Change: That means greater reliability.
Speaker Change: For greater development velocity that means we're not just the payments platform Russian orders and commerce platform, which gives us more flexibility in terms of what we can build.
Speaker Change: And.
Speaker Change: And just some examples of this with BARDA hubs, which we didn't have for wherever you want to.
Speaker Change: Jay you rollout scan to pay functionality introduced house accounts.
Speaker Change: Onshore the features to bolster our food and beverage offerings, which is a big focus for us.
Speaker Change: And we rollout and some payoffs.
Speaker Change: For marketplace delivery orders, which is helping customers with the task of managing their cash flow.
Speaker Change: But the net of it is we have a much stronger go to market, we have a lot more focus and simpler call to action.
Speaker Change: We completely changed our platform to allow us a lot more flexibility to build the features that we have been gaps.
Speaker Change: And it also allows us to create entirely new features that we're super excited about.
Speaker Change: Another big driver that we talk a little bit about <unk>.
Speaker Change: Letter.
Speaker Change: And to be the neighborhood network.
Speaker Change: Utilizing cash up to drive.
Speaker Change: More people and casual customers in particular.
Speaker Change: For merchants given your tools to offer cashback insulated to their customers build loyalty to do remote ordering.
Speaker Change: And that's continues to be in beta on where we were.
Speaker Change: We'll continue to expand it this year.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of from Cielo saw with Barclays. Please go ahead.
Speaker Change: Hi, Jack and Amrita. Thank you for taking my question I wanted to actually follow up Jack on the last thing that you mentioned, which is the neighborhood network.
Speaker Change: Strategy I'm trying to think through and maybe you could help us think through.
Speaker Change: Sizing the opportunity how much investment or build is required here and also any thoughts on timing so size investment and timing of the neighborhood network. Thanks.
Speaker Change: Yes.
Speaker Change: Well first and foremost we're the only company at scale to help both sides of the kind of like this so we have the seller side and we have.
Speaker Change: The individual side.
Speaker Change: We've tried to do this in the past and really capitalize on the opportunity, but we just didn't have the scale on the consumer side to the degree that we need it.
Speaker Change: Well a lot of you who've been following us for quite some time, Ryan might remember square wallet or what we called card case way back in the day now.
Speaker Change: Now, we do have the scale and cash up and now we can actually act on it.
Speaker Change: We see a number of them.
Speaker Change: Of problems that are facing with the current offerings for pickup for reservations for low ordering.
Speaker Change: We can help rich.
Speaker Change: We can also give them entirely new tools to give things like booster ensign cashbox immediately to their customers, which goes loyalty.
Speaker Change: And to give them more discovery through the lens of the cash up up itself.
Speaker Change: This represents a very easy selling point for our sales team because it means that we're turning on this massive classes of customers potentially discover the business, but also give them.
Speaker Change: Great tools.
Speaker Change: To retain their customers.
Speaker Change: To your question of in terms of building entirely new things. Most of this is more of a connection and just prioritizing the right connections.
Speaker Change: To get the experience correct.
Speaker Change: A lot of the work is going to be more around converting our existing square customers.
Speaker Change: Two online entities and that benefits us and it benefits them and benefits to our customers and it certainly makes this neighborhood network a lot more possible. So we're going to be thinking deeply about how to migrate folks easily and allow them to have.
Speaker Change: Sure.
Speaker Change: Storefront that their product that can work with this system.
Speaker Change: And which which allows more more commerce and more more sales on their side.
Speaker Change: In terms of timeline, we are in beta right now in a few cities.
Speaker Change: We're making sure that we get the experience right before expanding it and of course, we wanted to be a lot more self serve so that goes to migration point that I was talking about in <unk>.
Speaker Change: One button push so that sellers can just turn this on and then business and they get new traffic.
Speaker Change: That's the goal.
Speaker Change: So look for more of these proof points earlier this year and all the way to the to the end of the year.
Ramsey I would just add on your question about investment, yes, we've already got significant investment deployed across each of these ecosystems. If it's really about bringing the strategy together in support of the two ecosystems working together. So an example of that is in square, we're already building a field sales team were high.
Speaker Change: Wring that out we've seeded our first territories.
Speaker Change: We're doing that in areas, where we have strong partnership strategy, but we're also prioritizing cities.
Speaker Change: With high cash up density to drive the ecosystem connections you know an example city would be Atlanta, where we see strong square seller.
Speaker Change: Presence as well as cash App presence and the two can feed off of each other so it's not even necessarily about incremental investments. It's about a coordinated approach and strategy as we deploy deploy those investments.
Speaker Change: Got it thank you that's perfect.
Speaker Change: Your next question comes from the line of Rana Kumar with Oppenheimer. Please go ahead.
Rana Kumar: Hi, Jack and Amrita, Thanks for taking my question.
Rana Kumar: Could you elaborate on any feedback that you're getting from vendors on your initial testing on your enhanced square for restaurant point of sale experience.
Rana Kumar: Yeah.
Rana Kumar: Yes.
Rana Kumar: We're getting we're getting pretty good feedback.
Rana Kumar: From some of the focus.
Rana Kumar: Things like the bar tabs on everything that we've got to shift from just being a payments.
Rana Kumar: Farm to a commerce platform are working because we're building the features.
Rana Kumar: So as before especially food and beverage sellers could only find in our competitors.
And the most important part of us being able to close those gaps we can introduce people to the broader square ecosystem, including over all of our banking.
Rana Kumar:
Rana Kumar: Square I think continues to excel in our product offering because of our quality.
Rana Kumar: Because it is more self serve and <unk>.
Rana Kumar: Owners of these businesses and their employees can do more of the things that they need to do without having to reach out to support.
Or having a sales or executive account.
Rana Kumar: Whose handholding them along the way.
Rana Kumar: Where our technology led approach leads.
Rana Kumar: And really matters, and we're going to continue to push that and give people better and better tools.
Rana Kumar: To help automate some of the more mechanical aspects of the business.
Rana Kumar: So they can really focus on their customers and building their business, but thus.
Thus far it's been good.
Rana Kumar: We have a much stronger feedback loops now that we punch lines the company between customer support and sales of our product teams.
Rana Kumar: And our development teams, we can act on feedback much faster than they.
Rana Kumar: As I talked about in the first part of the call what matters. Most is development velocity. So that we can quickly make changes we can learn from experiments much faster.
Rana Kumar: We can deploy technology.
Rana Kumar: Hey.
Rana Kumar: Dresses customer needs.
Rana Kumar: Hopefully predict them ahead of the ASP and also ahead of our competitors, which which we intend to do.
Speaker Change: Yeah right now all of this.
Rana Kumar: Just add that I think.
Rana Kumar: What you see from US is a greater rate of product velocity as we shifted from our payments platform to an orders platform and you'll see that firsthand in the restaurant point of sale.
Rana Kumar: Hansman that we've rolled out and are continuing to roll out.
Rana Kumar: To all of our sellers this year between kiosk bar tab scan to pay house accounts items splitting instantaneous. These are all.
Rana Kumar: Launches over the past six months.
Rana Kumar: We've got more to come for this really critical vertical and I think what you see is that when we're able to get that into people's hands and demonstrate as we are with our field sales efforts.
Rana Kumar: What a larger seller and including beverage space can do and even in Q I'm, sorry, like Bluestone Lane that we mentioned in our letter.
Rana Kumar: It's a pretty powerful demonstration and one that frankly flies in the face of the perception of square being the little the little reader company and so.
Rana Kumar: That's what we're doing with you.
Rana Kumar: Investing into our partnerships field sales and marketing approach to be able to expand and.
Rana Kumar: And bring awareness to the much more expansive set of offerings that we have for <unk>.
Rana Kumar: And I think that's starting to bear fruit now with some of these larger seller wins, but theres a lot more for us to do behind that and I expect you'll also see greater product velocity again behind that platform shift that we completed last year.
Speaker Change: We will now take our last question from Bryan Keane with Deutsche Bank. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking the question wanted to ask about the strength in after pay in the quarter, what you saw there.
Speaker Change: And as we think about the rollout of after pay on the cash card I guess, it's almost in lieu of a credit card.
Speaker Change: The growth there can be pretty material I assume going forward, how do we think about the profitability of that card as we seriously ramp at this year and into next.
Speaker Change: Sure maybe I'll start on the last part of your question first which is first of all we get to determine eligibility for after pay on the cash card.
Speaker Change: So we get to put create as an input based on what we see from risk loss rates adoption rates et cetera.
Speaker Change: How to pace the growth of after pay on cash a card based on what we saw during the beta with the strong attach rates and risk loss rates, we're excited for what.
Speaker Change: What we could be compounding here throughout the year, but again, that's one that we can read the metrics on a daily basis and sort of <unk> based on the performance.
Speaker Change: And it is in a risk loss is an important investment area for us in some of these ramping lending products be it after pay after pay on cash apart or.
Speaker Change: Okay.
Speaker Change: Quarter end, the Q4 quarter, which obviously is a seasonally important quarter for us <unk>.
Speaker Change: Up 19% year over year gross profit was up 23% year over year growth was primarily driven by our core paying for offering which grew similarly to the prior quarter's gift cards growth accelerated in the second half and in particular in Q4, as we expanded eligibility for gift cards globally to the U K.
Speaker Change: <unk>.
Speaker Change: And as you noted we've got a lot of opportunity ahead of us as we think about buy now pay later.
Speaker Change: After paying a cash a cart, obviously, which we're launching this week our core buy now pay later, we saw global revenue retention improve year over year with strong trends, especially in our enterprise segment and in 2025, we have a number of enterprise merchants in our deal pipeline that we're continuing to sign as we go in to expand the value prop.
Speaker Change: <unk> and then gift cards, we've been expanding eligibility to more merchants in the U K late last year and in the U S and in early 2025 all of this while we're maintaining strong loss rates in line with historical ranges for these products losses on consumer receivables were zero point, 97% of G&A in the fourth quarter below our.
Speaker Change: Our 1% target.
Speaker Change: So continuing to ramp but do that responsibly.
Speaker Change: Okay. Thank you.
Speaker Change: Ladies and gentlemen, thank you for participating in today's program. This does conclude the program you may all disconnect.
Speaker Change: Thank you.
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Speaker Change: Yes.
Speaker Change: You may now be right.
Speaker Change: Julien.
Speaker Change: Yes.
Speaker Change: Okay.