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Speaker 1: Earlier this month, Block, the company formerly known as Square,
Speaker 1: raised its full year profit guidance this after second quarter
Speaker 1: earnings came in well ahead of Wall Street expectations. It
Speaker 1: was fueled by strength and its cash app lending business
Speaker 1: and resilient payment volumes. The company now expects to generate
Speaker 1: ten point one seven billion dollars in gross profit this year.
Speaker 1: That's up from a prior forecast of nine point nine
Speaker 1: to six billion. We've got with us am Rita Ahujia,
Speaker 1: CFO and COO of Block. She joins us from Palo Alto, California,
Speaker 1: Actually from Hillsborough, California. Excuse me, I'm rida is going
Speaker 1: to be featured in an upcoming edition of the Bloomberg
Speaker 1: CFO Briefing newsletter. You can sign up for that at
Speaker 1: Bloomberg dot com slash CFO Briefing. Also with us is
Speaker 1: Nina Trentman, Bloomberg News senior editor. She writes the Bloomberg
Speaker 1: CFO Briefing newsletter. She joins us here in the Bloomberg
Speaker 1: in Active Brokers Studio. Welcome, Welcome everybody, and Rita, I
Speaker 1: want to start with you. I almost said Square at
Speaker 1: Block you've got a great view of what the consumer's
Speaker 1: doing because of transactions, because of what's happening with the
Speaker 1: cash app. How would you describe the US consumer right now?
Speaker 2: Yeah?
Speaker 3: Well, first of all, thank you so much for having me.
Speaker 3: It's great to be here. You know, look, we have
Speaker 3: real time data across our two at scale ecosystems, Square
Speaker 3: that serves sellers small businesses, and across that we see
Speaker 3: hundreds of millions of buyer cards Consumer cards, and then
Speaker 3: cash App, which serves individuals fifty seven million monthly active
Speaker 3: accounts on cash App across the United States. So between
Speaker 3: these two businesses we get to see a lot in
Speaker 3: terms of consumer spending and consumer health patterns. Overall, what
Speaker 3: we've seen is resilience. From a Square perspective, we see
Speaker 3: strong retention. This is the growth or seam store growth
Speaker 3: for a small business on our platform, remaining steady and strong.
Speaker 3: And we see strong new customer acquisition, which we think
Speaker 3: is a sign of strong small business as well as
Speaker 3: the growth of our platform. And then from a cash
Speaker 3: op perspective. We see continued growth in spending and in
Speaker 3: earned wages on our platform, which again is an indication
Speaker 3: of the engagement of our platform, our ability to command
Speaker 3: share of wallet, as well as the resilience of a consumer.
Speaker 2: Man Rita, thanks about joining us. Just following up there.
Speaker 2: In terms of your business, you also have a buy now,
Speaker 2: pay later component. I'm wondering how delinquency rates have evolved
Speaker 2: in that business and also how you're thinking about underwriting
Speaker 2: in this somewhat uncertain macro environment.
Speaker 3: Well, we think the product attributes of our three lending
Speaker 3: products enable us to be pretty nimble and be able
Speaker 3: to pivot quickly to the extent we do see a
Speaker 3: turn in repayment rates, which as you heard on our call,
Speaker 3: we haven't yet heard. We have three primary lending products,
Speaker 3: Square loans that serve small businesses. As you note by
Speaker 3: now pay later, which serves customers at a point of
Speaker 3: checkout when they're buying something and they can pay in
Speaker 3: for that transaction, and then cash that borrow which enables
Speaker 3: you to get a line of credit that often bridges people.
Speaker 3: We know so many Americans are living to effect a
Speaker 3: paycheck and this helps smooth their cash flows, and across
Speaker 3: each of these three lending products, we've seen strong and
Speaker 3: healthy repayment behavior. Now we're ready to the extent that
Speaker 3: that changes. We have the ability to update our underwriting
Speaker 3: machine learning based underwriting models in real time. But we
Speaker 3: also want to be there to support customers as their
Speaker 3: needs arise, and we think that our products can do
Speaker 3: that effectively.
Speaker 2: Just following up in terms of signals that you're looking
Speaker 2: for specifically on performance of the business and whether any
Speaker 2: of the micro uncertainty is feeding through. What are the
Speaker 2: metrics that you're specifically looking for.
Speaker 3: Sure, So from a cash that perspective, we look at
Speaker 3: things like inflows per active. That's the amount of mine
Speaker 3: that customers bring into cash App, and that held a
Speaker 3: growth rate on infloce proactive in the second quarter for
Speaker 3: us with cash up was at eight percent, showing again
Speaker 3: strong engagement with our platform and resilience of the consumer.
Speaker 3: We also look at things like commerce volumes. Our commerce
Speaker 3: volumes over the last twelve months within cash App grew
Speaker 3: sixteen percent year over that year over year. That's the
Speaker 3: amount of money that people are using our platform to
Speaker 3: conduct commerce, whether it's by now, pay later, cash up card,
Speaker 3: or cash up pay. We also look from a square
Speaker 3: perspective at things like growth on our discretionary verticals, so
Speaker 3: our food and beverage GPV, which you can think of
Speaker 3: as discretionary. We serve a lot of quick service restaurants.
Speaker 3: Full service restaurants grew fifteen percent year year in the
Speaker 3: second quarter. Retail GPV also oftentimes discretionary vertical for US
Speaker 3: grew ten percent year every year. Again, these are healthy
Speaker 3: rates of growth, but we're very watchful. We look at
Speaker 3: this data on a daily basis, and we want to
Speaker 3: be there both to protect our business but also more
Speaker 3: importantly serve our customers to the extent that you know,
Speaker 3: in this dynamic environment, anything were to change.
Speaker 4: I want to pivot a little bit to crypto because
Speaker 4: block holds roughly eighty six hundred bitcoins worth almost a
Speaker 4: billion dollars, and crypto treasury companies have been getting a
Speaker 4: lot of attention. You guys own bitcoin. Are there any
Speaker 4: plans to add Ether to the company. What's the journey
Speaker 4: been like on that crypto planet? Yeah, Ether plans at all.
Speaker 3: No plans to add anything beyond Bitcoin from a crypto
Speaker 3: currency perspective to our balance sheet. We believe that if
Speaker 3: the Internet is to have a currency. Bitcoin is the
Speaker 3: most likely contender. It's the longest lived, it's resilient, it's
Speaker 3: an open developer ecosystem. All the rules are understood, and
Speaker 3: it is effectively an open source platform, an open protocol
Speaker 3: for money. We think ultimately, if the Internet does have
Speaker 3: a currency, and that is bitcoin, that enables us as
Speaker 3: a company to move at the speed of the Internet
Speaker 3: as we think about our business more globally. So a
Speaker 3: world in which bitcoin succeeds as a world in which
Speaker 3: companies like ours can move more efficiently and more quickly
Speaker 3: to serve our customers. That's the sort of purpose the
Speaker 3: strategic alignment that we have with bitcoin. We have all
Speaker 3: sorts of different ways that we as a company are
Speaker 3: learning about how to operate in a bitcoin world. One
Speaker 3: of those is by holding it on our own balance
Speaker 3: sheet as a corporate to have book bitcoin in our treasuries,
Speaker 3: and we've been doing this for five plus years now
Speaker 3: and it's something where we get to learn the insurance aspects,
Speaker 3: the buy sell aspects, the custody aspects, the protection around that,
Speaker 3: and how we think about the accounting and the tax
Speaker 3: elements for bitcoin. So we're learning a lot as a
Speaker 3: company as we do that just as an individual would
Speaker 3: or another institution might, and I think it's something that
Speaker 3: a lot of other corporates will begin to consider more
Speaker 3: and more.
Speaker 1: We're speaking with Amrita, who'sia CFO and COO of Block
Speaker 1: and Rita on the bitcoin question, the buying and selling.
Speaker 1: Do you have plans to buy more bitcoin to add
Speaker 1: to the treasury.
Speaker 3: We have a program in place where we dollar cost
Speaker 3: to average our bitcoin purchases. We have a gross profit
Speaker 3: that we generate from bitcoin in our customer oriented products,
Speaker 3: so we sell bitcoin through cash App. We've sold over
Speaker 3: fifty eight billion dollars worth of bitcoin to our cash
Speaker 3: app customers. We also have a product that we're launching
Speaker 3: in the back half of this year for bitcoin minors
Speaker 3: around the infrastructure, the hardware and this integrated software for that.
Speaker 3: And we have a self custody product, bitkey. We have
Speaker 3: said that ten percent of all of the gross profit
Speaker 3: that we generate across our bitcoin products we will invest
Speaker 3: back in the bitcoin, and so we're in the market
Speaker 3: every single day buying that ten percent worth of our
Speaker 3: gross profit back into bitcoin.
Speaker 2: Im Rita, we are running out of time just very quickly.
Speaker 2: Just wandering from a CFO perspective. You said, if you've
Speaker 2: held a bitcoin on your balance sheet for five years,
Speaker 2: you've seen the fluctuations. That's basically what I'm hearing from
Speaker 2: CFOs as to why they don't want to hold bitcoin.
Speaker 2: How is the company navigating the ups and downs in
Speaker 2: the price, even though most recently we've seen more increase
Speaker 2: than decrease.
Speaker 3: You know, there's been fluctuations in a number of different assets,
Speaker 3: different asset classes. You have to be transparent with your
Speaker 3: investors as to what's driving various elements. The updated accounting
Speaker 3: standards for bitcoin treat it like any other asset that
Speaker 3: you may own, where you write it up at the
Speaker 3: end of the quarter if the value goes up, and
Speaker 3: you write it down at the end of a quarter
Speaker 3: if the value goes down. The prior standards, which to
Speaker 3: get into some of the accounting wonkiness, were as an
Speaker 3: intangible asset. We're very very strict and you can only
Speaker 3: ever write down the value of bitcoin. So now with
Speaker 3: these updated accounting standards that look like any other asset
Speaker 3: you may hold on your balance sheet, we think that
Speaker 3: that has the opportunity to create clarity for investors and
Speaker 3: for companies and to bring more people into the bitcoin ecosystem.
Speaker 1: I'm Rita, who's a CFO and COO of Block. Please
Speaker 1: do come back and join us soon on a Bloomberg
Speaker 1: Business Week Daily. Really appreciate your time. Once again, I'mrita,
Speaker 1: who's just CFO and COO of Block, joining us from Hillsboro, California.
Speaker 1: Also with us, Nina Trettonman, Bloomberg News Senior editor. She
Speaker 1: writes the Bloomberg CFO Briefing newsletter. Sign up for at
Speaker 1: Bloomberg dot com Slash CFO Dash Briefing