Block CEO Dorsey touts stronger Q1, previews crypto plans

Block announced stronger-than-expected first-quarter results on Thursday, as CEO Jack Dorsey hit key targets in a turnaround plan launched when he returned to helm the San Francisco-based fintech after 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 during the first quarter of 2023, helped by healthy spending through its Square merchant network, Cash App and buy now/pay later service Afterpay. Net income for the quarter was $472 million, up more than 400% over $98.3 million from the same period a year earlier, aided by cost leverage and non-recurring items. 

During a Thursday conference call to discuss results with analysts, Dorsey defended Block's security practices when responding to NBC's report this week. The article detailed U.S. prosecutors' exploration of allegations from a former employee that Block violated Know Your Customer (KYC) and money-laundering rules. NBC made similar claims earlier this year about Block's security lapses that came from different former employees.

Block rigorously works to detect fraud, Dorsey told analysts, adding that the company files suspicious activity reports when warranted. In 2022 Block responded to potential fraud signals it detected by conducting a comprehensive internal audit, and reported its findings to Treasury's Office of Foreign Assets Control, which subsequently issued a No Action Letter to Block, he said.

In his quarterly shareholder letter, Dorsey also doubled down on Block's commitment to bitcoin, which Dorsey says is the most likely candidate to be an open protocol for funds transfer that's not owned or controlled by any single entity. Although Block devotes less than 3% of company resources to bitcoin-related projects, its bitcoin exchange currently is 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 own TBD product, introduced in 2021. TBD supports a funds-flow tool enabling conversions from fiat to digital currencies, including transaction support for unbanked consumers with mobile phones, Dorsey wrote in the letter.

"Global remittance, an $860 billion industry, is a use case that's more urgently in need of better solutions today than everyday payments," Dorsey wrote.

Block henceforth will invest 10% of its gross profit from bitcoin products into buying more bitcoin, noting that the firm initially invested $220 million in bitcoin, which grew 160% to $573 million at the end of the quarter, he wrote.

In its core operations, Block saw healthy results from merchants that use Square to accept payments, increased transaction volume through Cash App, and its Afterpay buy now/pay later service notched a 25% increase in gross merchandise volume. Block also made further progress in knitting the three entities together for their mutual benefit.

Cash App users increasingly can see Square merchants within the app when searching for products and services. The firm is in the midst of adding Afterpay access for Cash App users. It will further roll out Afterpay after weighing consumer response to recent changes, Dorsey told analysts.

Within Square, the firm is testing a new merchant-onboarding approach that cuts steps for new merchants signing up to accept payments via Square. Previously, it took about 15 steps and 20 minutes; the new system cuts this down to two steps in under five minutes, Dorsey said. 

Block is also consolidating more of its Web-based banking operations, including bill pay, into Square. "Download Square and you have everything you need, including all of our banking products within one app," Dorsey said. 

Block plans to roll out Afterpay on Cash App Card and for Square this summer, as the firm continues to cross-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 its full-year gross profit expectations to $8.78 billion, or 17% growth year over year.

Analysts were broadly optimistic about Block's first-quarter progress.

"While still early post-reorganization, product velocity seems to be improving," said analysts with JPMorgan Chase's equity firm J.P. Morgan in a Friday note to investors. 

"We liked this quarter's detail on bitcoin and Square's goal of supporting decentralized cross-border remittance, a market well-fit for Block's track record of disruption," the analysts wrote.