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Block CEO Dorsey Touts Stronger First Quarter, Predicts Crypto Plans | PaymentsSource
Block CEO Jack Dorsey said the company plans to launch its first remittance product later this year using decentralized finance and reiterated his commitment to investing in bitcoin, which he said will underpin of future commerce on the Web.
Eva Marie Uzcategui/Bloomberg
Block announced stronger-than-expected first-quarter results on Thursday, as CEO Jack Dorsey hit key milestones in a turnaround plan launched when he returned to the helm the San Francisco-based fintech next several years away from the role.
The San Francisco-based fintech’s revenue for the quarter ended March 31, 2024 was $5.96 billion, up 20% from $4.9 billion in the first quarter of 2023, helped by healthy spending through its Square shopping network, Cash App and buy now/pay later service Postpaid. Net income for the quarter was $472 million, up more than 400% from $98.3 million from the same period a year earlier, aided by cost leverage and non-recurring items .
During a conference call on Thursday to discuss the findings with analysts, Dorsey defended Block’s security practices in responding NBC report this week. The article detailed US prosecutors’ exploration of a former employee’s allegations that Block had violated Know Your Customer (KYC) and money laundering rules. Made by NBC similar statements earlier this year regarding Block security breaches by several former employees.
Block works rigorously to detect fraud, Dorsey told analysts, adding that the company files suspicious activity reports when warranted. In 2022, Block responded to potential signs of fraud detected by conducting a comprehensive internal audit and reported the findings to Treasury’s Office of Foreign Assets Control, which subsequently issued a no-action letter to Block, he said.
In his quarterly letter to shareholders, Dorsey also doubled down on Block’s commitment to bitcoin, which Dorsey said is the most likely candidate to become an open protocol for transferring funds that is not owned or controlled by any single entity. Although Block devotes less than 3% of company resources to bitcoin-related projects, his bitcoin trading is currently the fourth-largest gross profit stream for Cash App, he said.
Block also plans to launch its first cross-border remittance product this year, building on its TBD product, introduced in 2021. TBD supports a funds flow tool that enables conversions from fiat to digital currencies, including transaction support for unbanked consumers with cell phones, Dorsey wrote in the letter.
“Global remittances, an $860 billion industry, is a use case that is more urgently in need of better solutions today than everyday payments,” Dorsey wrote.
Block will henceforth invest 10% of its gross profit from bitcoin products in purchasing more bitcoin, noting that the company initially invested $220 million in bitcoin, which grew by 160% to $573 million dollars at the end of the quarter, he wrote.
Across its core operations, Block has seen positive results from merchants using Square to accept payments, an increase in transaction volume through Cash App, and its Afterpay buy now/pay later service has seen a 25% increase in gross volume of goods. Block has also made further progress in linking the three entities together for their mutual benefit.
Cash App users can increasingly see Square merchants within the app when searching for products and services. The company is adding Afterpay access for Cash App users. It will further roll out postpaid after assessing consumer response to recent changes, Dorsey told analysts.
Inside Square, the company is testing a new merchant onboarding approach that reduces steps for new merchants signing up to accept payments through Square. Previously it took about 15 steps and 20 minutes; the new system reduces this process to two steps in less than five minutes, Dorsey said.
Block is also consolidating more of its web-based banking operations, including bill payments, into Square. “Download Square and you’ll have everything you need, including all of our banking products in one app,” Dorsey said.
Block plans to roll out Afterpay to Cash App Card and Square this summer, as the company continues to market its various services. Cash App now has 57 million monthly active users, up 6% from the same period a year earlier, Block’s chief financial officer, Amrita Ahuja, told analysts.
Square raised full-year gross profit expectations to $8.78 billion, or 17% year-over-year growth.
Analysts were largely optimistic about Block’s progress in the first quarter.
“While we are still early in the shakeup, product velocity appears to be improving,” analysts at JPMorgan Chase equity firm JP Morgan said in a Friday note to investors.
“We liked this quarter’s insights into Bitcoin and Square’s focus on supporting decentralized cross-border remittances, a market suited to Block’s track record,” the analysts wrote.