Twitter CEO Jack Dorsey addresses students at a town hall of the Indian Institute of Technology (IIT) in New Delhi, India on November 12, 2018.
Anushree Fadnavis | Reuters
Block executives no longer want the firm to be seen as a payment pure play.
The San Francisco-based company celebrated its first investor’s day in five years on Wednesday, with C-Suite suing Wall Street to argue that the money app, along with its crypto and music-streaming business, should be valued as an “ecosystem.” Instead.
“Blocking a payment company is like calling Amazon a bookseller,” CFO Amrita Ahuja told CNBC in a phone interview. “We have grown in different ways across multiple dimensions.”
CEO and co-founder Jack Dorsey, who previously ran Twitter, began Wednesday’s presentation with a keynote address on the evolution of the block and the role of Bitcoin in it. It is “difficult” to fit a company like Blockchain into a single division, he said.
“We’re no longer just a payment company,” Dorsey said during the live streamed event. “A lot has changed since the days of our last investor.”
Square was founded in 2009 and made its name by creating a credit card reader for mobile phones. The company has expanded the range of products like peer-to-peer payment and banking through the Cash app. The firm has also acquired AfterPay and J-Z’s Tidal Music Streaming Services. It also operates an FDIC-insured bank and offers stock and cryptocurrency trading.
The purpose of the block was to change the corporate name of the square to reflect the widening gap and larger plans around the crypto and blockchain.
Fintech was one of the best performers during the epidemic, blocking rising interest rates in 2022 and pushing its peers. ARK’s Fintech Innovation ETF, a basket called Fintech, has dropped about 55% so far. By 2022 the block itself has shrunk by about 45%.
Focus on profit
Still, CFO Ahuja of the block says the company is surpassing its peers in terms of profitability. The bloc revealed updated profit margins on Wednesday – an increasingly important metric because investors prefer the bottom line over growth.
According to the company, last year the adjusted profit margin for the business side of the business was 34%, and they were 12% for the cash app. In terms of net growth, the Cash app now has 46 million monthly active users and 80 million annual active users as of March.
“Wall Street analysts want to understand our growth profile, and our margin structure as a company – you can see based on our track record that we are outperforming the rest of the industry,” Ahuja said. “We operate in a large and growing market and are still participating.”
Earlier this year, Australian fintech company Block closed a $ 29 billion deal to buy OfferPay as it expanded into the installment loan market. CFO highlighted the cross-selling opportunity with about 6% of its Cash App users using AfterPay.
With the rise of online shopping, lending to consumers and merchants has become popular. This spreads the cost of a large purchase into four interest-free installments. Despite the pushback from consumer watchers, Ahuja argued that it was safer than a traditional card because customers would not be able to take out additional loans if they missed the payment.
“Millennials and General Z are quite openly skeptical about the traditional type of credit, which puts people in debt,” he said.
The block also acquired J-Z’s music streaming business tidal for about $ 300 million last year – a head scratcher for some paid analysts at the time. Dorsey said it was a bet on the creator’s economy, which he argued would continue to grow as artificial intelligence “removes the need for mechanical work”.
“It will be a huge economy in the future, and we see the opportunity to be a big part of it, using the tools and platforms we have already built,” Dorsey said. “We achieved TIDAL because we saw that artists take a path like small business and there is a significant gap in the market around artist tools.”
Dorsey sues for bitcoin
As of the quarter ended March, Bitcoin still made about 5% of the block’s total profits But executives are betting on crypto as a secular trend where the block could be in a better position. Dorsey described it as “an open standard for global money transmission” and said it would allow the blockchain’s “entire business to grow rapidly worldwide.”
Block first started offering bitcoin trading through the Cash app and included it on the company’s balance sheet as an alternative to firm cash. The world’s largest cryptocurrency has fallen more than 50% from its height and has struggled to recover its value so far this year.
Blockchain crypto businesses have expanded into a bitcoin hardware wallet, a bitcoin-mining business and an open source business called TBD for developers. On top of that, there is an independent, bitcoin-centric business within the block called Spiral.
Dorsey is less enthusiastic about other cryptocurrencies and says that “the Internet needs a currency of its own, and looking at the entire technology ecosystem to fulfill this role, it is clear that Bitcoin is currently the only candidate.”
“Its development may seem slow compared to other candidates, but it is the result of intent to save money and preserve the features needed for transition,” Dorsey plans to say, according to a transcript of Wednesday’s keynote address seen by CNBC. “The Internet needs a currency of its own, and looking at the entire ecosystem of technology to fulfill this role, it is clear that Bitcoin is currently the only candidate.”