Block CEO Dorsey touts stronger Q1, previews crypto plans

Block CEO Jack Dorsey said the firm plans to launch its first remittance product using decentralized finance later this year and reiterated his commitment to investing in Bitcoin, which he believes will form the basis of future Web commerce. Credit: Eva Marie Uzcategui/Bloomberg

Block reported stronger-than-expected first-quarter results on Thursday; CEO Jack Dorsey achieved key goals in a turnaround plan launched when he returned to helm the San Francisco-based fintech after several years away from the job.

The San Francisco-based fintech’s revenue for the quarter ending March 31, 2024, rose 20% to $5.96 billion from $4.9 billion in the first quarter of 2023, helped by healthy spending through Square merchant network Cash App and buy/pay now. reached. then pay After service. Net income for the quarter was $472 million, up more than $98.3 million from the same period a year ago, up more than 400%, helped by cost leverage and non-recurring items.

During a conference call with analysts Thursday to discuss the results, Dorsey defended Block’s security practices while responding to NBC’s report this week. The article detailed US prosecutors’ review of a former employee’s allegations that Block violated Know Your Customer (KYC) and money laundering rules. NBC made similar claims about security vulnerabilities from different former employees of Block earlier this year.

Dorsey told analysts that Block works diligently to detect fraud, adding that the company files suspicious activity reports when warranted. In 2022, Block conducted a comprehensive internal audit and responded to signals of potential fraud it identified and reported its findings to the Treasury’s Office of Foreign Assets Control, which subsequently issued a No Action to Prevent Letter.

In his quarterly letter to shareholders, Dorsey also doubled down on Block’s commitment to Bitcoin; Dorsey says Bitcoin is the most likely candidate to become an open protocol for transferring funds that is not owned or controlled by a single entity. Block said the bitcoin exchange is currently the fourth-largest gross profit stream for Cash App, even though the company devotes less than 3% of its resources to bitcoin-related projects.

Block also plans to launch its first cross-border remittance product this year, building on its own TBD product that launched in 2021. TBD supports a funds flow tool that enables conversion from fiat currencies to digital currencies, including transaction support for unbanked consumers using mobile phones, Dorsey wrote in his letter.

“Global remittances, an $860 billion industry, are a use case in more urgent need of better solutions than everyday payments today,” Dorsey wrote.

Block will now invest 10% of gross profits from its bitcoin products into purchasing more bitcoin, and said the firm initially invested $220 million in bitcoin, which grew 160% to $573 million by the end of the quarter.

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Block saw healthy results from merchants using Square to accept payments in its core operations, increased transaction volume through its Cash App, and its Afterpay buy now/pay later service saw a 25% increase in gross merchandise volume. Block has also made further progress in bringing the three entities together for their common interests.

Cash App users are increasingly seeing Square merchants within the app when searching for products and services. The company is in the process of adding Afterpay access for Cash App users. Dorsey told analysts that Afterpay would be rolled out further after assessing consumer reaction to the latest changes.

The firm is testing a new merchant approach at Square that shortens the steps for new merchants who sign up to accept payments through Square. Previously, about 15 steps took 20 minutes; The new system reduces that to two steps in less than five minutes, Dorsey said.

Block is also consolidating most of its Web-based banking operations, including bill payments, into Square. “When you download Square, you get everything you need in one app, including all of our banking products,” Dorsey said.

Block plans to launch Cash App Card and Afterpay for Square this summer as it continues to cross-market its various services. Block’s chief financial officer, Amrita Ahuja, told analysts that Cash App now has 57 million monthly active users, a 6% increase from the same period a year ago.

Square raised its full-year gross profit expectation to $8.78 billion, or 17% year-over-year.

Analysts were generally optimistic about Block’s progress in the first quarter.

“While it is still early post-restructuring, product velocity appears to be improving,” analysts at JP Morgan, the equity firm of JPMorgan Chase, said in a note to investors on Friday.

“We liked this quarter’s elaboration on Bitcoin and Square’s goal to support decentralized cross-border remittances, a market in line with Block’s history of disruption,” analysts wrote.