ICYMI: Block Improving Profitability, Keeping Eye on Crypto

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2:05You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, earlier this month, Block, the company formerly known as Square, raised its full year profit guidance. This after second quarter earnings came in well ahead of Wall Street expectations. It was fueled by strength in its cash app lending business and resilient payment volumes. The company now expects to generate$10.17 billion in gross profit this year. That's up from a prior forecast of$9.96 billion. We've got with us Amrita Ahuja, CFO and COO of Block. She joins us from Palo Alto, California, actually from Hillsborough, California.

2:41Excuse me. Amrita is going to be featured in an upcoming edition of the Bloomberg CFO Briefing newsletter. You can sign up for that at Bloomberg.com slash CFO Briefing. Also with us is Nina Trentman, Bloomberg News senior editor. She writes the Bloomberg CFO briefing newsletter. She joins us here in the Bloomberg Interactive Brokers studio. Welcome, welcome, everybody. And Rita, I want to start with you. I almost said square at Block. You've got a great view of what the consumer is doing because of transactions, because of what's happening with the cash app. How would you describe the U.S. consumer right now?

3:15Yeah, well, first of all, thank you so much for having me. It's great to be here. You know, look, we have real-time data across our two at-scale ecosystems, Square that serves sellers, small businesses. And across that, we see hundreds of millions of buyer cards, consumer cards. And then Cash App, which serves individuals, 57 million monthly active accounts on Cash App across the United States. So between these two businesses, we get to see a lot in terms of consumer spending and consumer health patterns. Overall, what we've seen is resilience. From a square perspective, we see strong retention.

3:52This is the growth or seam store growth for a small business on our platform, remaining steady and strong. And we see strong new customer acquisition, which we think is a sign of strong small business as well as the growth of our platform. And then from a cash app perspective, we see continued growth in spending and in earned wages on our platform, which again is an indication of the engagement of our platform. our ability to command share of wallet, as well as the resilience of a consumer. And Rita, thanks for joining us. Just following up there, in terms of your business, you also have a buy now, pay later component.

4:28I'm wondering how delinquency rates have evolved in that business and also how you're thinking about underwriting in this somewhat uncertain macro environment. Well, we think the product attributes of our three lending products enable us to be pretty nimble. and be able to pivot quickly to the extent we do see a turn in repayment rates, which, as you heard on our call, we haven't yet heard. We have three primary lending products. Square loans that serve small businesses. As you note, buy now, pay later, which serves customers at a point of checkout when they're buying something and they can pay in for that transaction.

5:06And then cash at borrow, which enables you to get a line of credit that often bridges people. We know so many Americans are living to expect a paycheck, and this helps smooth their cash flows. And across each of these three lending products, we've seen strong and healthy repayment behavior. Now we're ready to the extent that that changes. We have the ability to update our underwriting, machine learning-based underwriting models in real time. But we also want to be there to support customers as their needs arise. And we think that our products can do that effectively. Just following up in terms of signals that you're looking for specifically on performance of the business and whether any of the macro uncertainty is feeding through, what are the metrics that you're specifically looking for?

5:51Sure. So from a Cash App perspective, we look at things like inflows per active. That's the amount of money that customers bring into Cash App. And that held a growth rate on inflows per active in the second quarter for us with Cash App was at 8%, showing, again, strong engagement with our platform and resilience of the consumer. We also look at things like commerce volumes. Our commerce volumes over the last 12 months within Cash App grew 16 % year over year. That's the amount of money that people are using our platform to conduct commerce, whether it's buy now, pay later, Cash App card or Cash App pay.

6:30We also look from a square perspective at things like growth on our discretionary verticals. So our food and beverage GPV, which you can think of as discretionary, we serve a lot of quick service restaurants, full service restaurants, grew 15 % year over year in the second quarter. retail GPV, also oftentimes discretionary vertical for us grew 10 % year over year. Again, these are healthy rates of growth, but we're very watchful. We look at this data on a daily basis and we want to be there both to protect our business, but also more importantly, serve our customers to the extent that, you know, in this dynamic environment, anything were to change.

7:09I want to pivot a little bit to crypto because Block holds roughly 8 ,600 bitcoins worth almost a billion dollars and crypto treasury companies have been getting a lot of attention. You guys own Bitcoin. Are there any plans to add Ether to the company? What's the journey been like on that crypto plan and Ether plans at all? No plans to add anything beyond Bitcoin from a cryptocurrency perspective to our balance sheet. We believe that if the internet is to have a currency, Bitcoin is the most likely contender. It's the longest lived. It's resilient. It's an open developer ecosystem. All the rules are understood and it is effectively an open source platform, an open protocol for money.

7:55We think ultimately if the internet does have a currency and that is Bitcoin, that enables us as a company to move at the speed of the internet as we think about our business more globally. So a world in which Bitcoin succeeds is a world in which companies like ours can move more efficiently and more quickly to serve our customers. That's the sort of purpose, the strategic alignment that we have with Bitcoin. We have all sorts of different ways that we as a company are learning about how to operate in a Bitcoin world. One of those is by holding it on our own balance sheet as a corporate to have Bitcoin in our treasuries.

8:34And we've been doing this for five plus years now. And it's something where we get to learn the insurance aspects, the buy-sell aspects, the custody aspects, the protection around that, and how we think about the accounting and the tax elements for Bitcoin. So we're learning a lot as a company as we do that, just as an individual would or another institution might. And I think it's something that a lot of other corporates will begin to consider more and more. We're speaking with Amrita Ahuja, CFO and COO of Block. And Rita, on the Bitcoin question, the buying and selling, do you have plans to buy more Bitcoin to add to the treasury?

9:14We have a program in place where we dollar cost average our Bitcoin purchases. We have gross profit that we generate from Bitcoin and our customer oriented products. So we sell Bitcoin through Cash App. We've sold over$58 billion worth of Bitcoin to our Cash App customers. We also have a product that we're launching in the back half of this year for Bitcoin miners around the infrastructure, the hardware and this integrated software for that. And we have a self-custody product, BitQ. We have said that 10 percent of all of the gross profit that we generate across our Bitcoin products, we will invest back into Bitcoin.

9:52And so we're in the market every single day buying that 10 percent worth of our gross profit back into Bitcoin. Rita, we are running out of time just very quickly. Just wondering from a CFO perspective, you said if you've held Bitcoin on your balance sheet for five years, you've seen the fluctuations. That's basically what I'm hearing from CFOs as to why they don't want to hold Bitcoin. How is the company navigating the ups and downs in the price, even though most recently we've seen more increase than decrease? You know, there's been fluctuations in a number of different assets, different asset classes.

10:25You have to be transparent with your investors as to what's driving various elements. The updated accounting standards for Bitcoin treat it like any other asset that you may own, where you write it up at the end of the quarter if the value goes up and you write it down at the end of the quarter if the value goes down. The prior standards, which to get into some of the accounting wonkiness, were as an intangible asset were very, very strict and you can only ever write down the value of Bitcoin. So now with these updated accounting standards that look like any other asset that you may hold on your balance sheet, we think that that has the opportunity to create clarity for investors and for companies and to bring more people into the Bitcoin ecosystem.

11:08I'm Rita Ahuja, CFO and COO of Block. Please do come back and join us soon on Bloomberg Businessweek Daily. Really appreciate your time. Once again, I'm Rita Ahuja, CFO and COO of Block, joining us from Hillsborough, California. Also with us, Nina Tretman, Bloomberg News Senior Editor. She writes the Bloomberg CFO Briefing newsletter. Sign up for it at Bloomberg.com slash CFO dash briefing. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges.

11:45At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. it. Whatever your goal, trade show giveaways, client gifts, or team gear, 4imprint has the promo products to match.

12:19With thousands of options, from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget, with standout choices at every price point. And with their 360-degree guarantee, you can be 4imprint certain your order will show up just right, right on time. Explore more at 4imprint.com. 4imprint. 4certain. As industries evolve faster than ever, companies need an environment that accelerates strategic growth, and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance.

13:00With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan. Pure opportunity. Seize your opportunity at michiganbusiness.org. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person how you need it.

13:33Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com.