Block, Inc. Q1 FY2025 earnings call

Square Performance - Strong quarter with 9% gross profit growth, driven by GPV growth and increasing banking attach rates. - Expanded market share in target verticals, with product innovation robust, including an upcoming product release event showcasing over 100 products/features. - Signed upmarket sellers and added partners across sales organizations. ### Cash App Performance - Gross profit up 10% year-over-year, but consumer behavior changes affected inflows. - Focus on expanding network, including growing with teens and families, optimizing product controls, and increasing marketing spend. ### Profitability - Adjusted EBITDA was $813 million (up 15% year-over-year), adjusted operating income was $466 million (up 28% year-over-year). Trailing 12-months ending March had adjusted free cash flow of $1.53 billion. ### Growth Drivers - Cash App Borrow: Unlocked by FDIC approval, doubling eligible actives and improving unit economics; world-class underwriting team with healthy loss rates. - Cash App Afterpay: Retroactive BNPL product launched in late February, showing strong early conversion and adoption. - Square GPV: Expected to improve throughout the year, with high-single-digit growth in Q2 and April global GPV growth expected at 9.6%. - Proto: Expect to deliver first bitcoin mining chips and systems in the second half of the year.

Total Block gross profit was $2.29 billion, up 9% year-over-year. Square had gross profit growth of 9% year-over-year, driven by GPV growth of 7.2% (constant currency GPV growth of 8.2%) and increasing banking attach rates. Cash App gross profit was up 10% year-over-year, but consumer spending behavior changes impacted inflows and Cash App Card spend, particularly with seasonal tax refunds and discretionary vs. non-discretionary spending.

Expect gross profit growth of 12% for 2025, with 9.5% in Q2, low-double-digits in Q3, and mid-teens in Q4. Expect adjusted operating income of $1.9 billion for the year, ~19% margin. Continue to invest in sales and marketing and risk loss for high ROI growth initiatives across Cash App and Square.

Changes in macroeconomic conditions could materially affect actual results. Changes in consumer spending behavior, especially discretionary vs. non-discretionary, can impact Cash App's performance. Actual results of product rollouts (e.g., Cash App Afterpay, Borrow expansion) may differ from estimates.

Q: Tien-Tsin Huang on company focus and drivers A: Jack Dorsey discussed focus on increasing network density, product controls, marketing spend, and AI tools like codename Goose for productivity.

Q: Darrin Peller on recent changes and macro assumptions A: Amrita Ahuja mentioned embedding macro softening into guidance due to changing consumer behavior and tax refund impacts.

Q: Tim Chiodo on Cash Card Afterpay functionality A: Jack Dorsey and Amrita Ahuja talked about early adoption, strategic value for younger customers, and long-term plans for payroll direct deposit.

Q: Dan Dolev on Proto A: Jack Dorsey discussed Proto's on-track delivery, focus on reliability and flexibility, and potential in the $3B-$6B bitcoin hardware market.

Q: Will Nance on Square field sales hiring A: Amrita Ahuja talked about accelerating field sales hiring due to strong early returns, partnerships, and recent sales wins.

Q: Adam Frisch on Borrow and direct deposit A: Amrita Ahuja explained Borrow expansion via Square Financial Services, connection to direct deposit, and ongoing banking feature campaigns.

Q: Harshita Rawat on Q2 guidance deceleration A: Amrita Ahuja noted Q2 guidance reflects cautious stance on macro softness, with acceleration drivers impacting later quarters.

Q: Trevor Williams on Square GPV and macro caution A: Amrita Ahuja discussed Square GPV growth expectations, investments, and confidence in the business trajectory despite macro caution