Q4 2024 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Block Fourth Quarter 2024 Earnings Conference Call. Today's call will be 45 minutes. I would now like to turn the call over to your host, Nikhil Dixit, Head of Investor Relations. Please go ahead.

Hi, everyone. Thanks for joining our fourth quarter 2024 earnings call. We have Jack and Amrita with us today. We will begin this call with some short remarks before opening the call directly to your questions.

During Q&A, we will take questions from conference call participants. We would also like to remind everyone that we will be making forward-looking statements on this call. All statements other than statements of historical fact could be deemed to be forward-looking. These forward-looking statements include discussions of our outlook, strategy and guidance as well as our long-term targets and goals.

These statements are subject to risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered an indication of future performance. Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ.

Also note that, the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements, except as required by law. Further, any discussion during this call of our lending and banking products refer to products that are offered through Square Financial Services or our bank partners. Within these remarks, we will also discuss metrics related to our investment framework, including Rule of 40. With Rule of 40, we are evaluating the sum of our gross profit growth and adjusted operating income margin.

Also, we will discuss certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter and our historical financial information spreadsheet on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our Investor Relations website.

An audio replay of this call and the transcript for Jack and Amrita's opening remarks will be available on our website shortly. With that, I would like to turn it over to Jack.

Thanks for joining. The letter this quarter walks through the progress we made in 2024. We expanded Square from a payments tool into a full commerce platform, enhanced Cash App's financial services offerings, and restructured our organization to move faster against our road map. Looking ahead, we're focused on connecting local communities, block by block through our neighborhood network strategy, investing in AI automation, open source innovation and Bitcoin infrastructure, all with the goal of expanding financial access globally. If you haven't yet, please read our letter for more details.

And with that, I'll turn it over to Amrita for some highlights from the quarter.

Thanks, Jack. In 2024, we drove gross profit growth at scale while dramatically improving efficiency across our business. We ended 2024 with $8.89 billion in gross profit, representing 18% year-over-year growth with Square up 15% and Cash App up 21%. Similar to prior years, we saw gross profit retention of more than 100% in 2024 for both Square and Cash App as we deepen engagement with our customers.

We saw an acceleration in two key metrics as we exited the year. Square GPV grew 10% year-over-year in the fourth quarter with improvements in same-store sales and customer retention as year-over-year growth in the U.S. increased 200 basis points sequentially to 6.9%. For Cash App, paycheck deposit actives reached 2.5 million in December, growing 25% year-over-year, and we saw an increase in momentum in the second half of the year. Our focus on disciplined execution led to a significant increase in profitability and operating leverage in 2024. Adjusted EBITDA was $3.03 billion, up 69% year-over-year, and adjusted operating income was $1.61 billion, a more than 4.5 times increase on a year-over-year basis, delivering 13 points of margin expansion.

And for the 12 months ending in December, adjusted free cash flow was $2.07 billion compared to $515 million a year ago. We achieved 36.5% on a Rule of 40 basis in 2024, up 7 points from the year prior. Let's look ahead to our guidance for 2025 and share why we're excited about the trajectory of our business across both growth and profitability. Consistent with what we called out last quarter and assuming a stable macro environment, we expect strong gross profit growth of at least 15% year-over-year or at least $10.22 billion in gross profit.

We're maintaining our gross profit guidance for 2025 despite absorbing an incremental 50 basis points of headwinds from FX rates compared to our preliminary guide in early November. Given the unique growth dynamics during the year, including lapping leap year last February and tougher FX comparisons in the early part of 2025, we expect our first quarter guide to be the low point for both gross profit growth and adjusted operating income throughout the year. Our full year guidance implies a meaningful inflection in growth during the year, and we have clear visibility into the key drivers of that acceleration as we scale recent product launches and execute on go-to-market.

We expect a more pronounced acceleration in Cash App as we broaden access to Cash App Borrow, launch and scale Afterpay on Cash App Card and invest in marketing. Cash Card has sustained strong gross profit growth for years by driving product velocity and successfully stacking new S-curves onto its existing product set to deliver more value to customers. We believe we're at the start of another exciting growth phase as we bank our base and with the ability to stack future building blocks of growth from both Borrow and Afterpay on Cash App Card. We ended 2024 with 5 million Cash App Borrow monthly actives.

This year, we plan to expand to additional customers and offer higher limits by improving underwriting, refining unit economics, expanding to more states and integrating borrow with direct deposit. Afterpay on Cash App Card launched this week, and we are rolling it out to new customers now after a year of strong testing. We see this product as another way for customers to manage their money and to drive increased spending through Cash App Card. Beyond these specific products, we're focused on driving more customers to Cash App Card, a gateway to our broader banking offerings and further growth in Paycheck Deposit actives.

For Square, we expect both TPV and gross profit to improve throughout the year, driven by a combination of both retention and acquisition. We meaningfully ramped marketing investments in the second half of 2024 and the strong returns we've sustained here give us conviction that these will compound as the year progresses. We also continue to invest behind our partnership and field sales strategies, and we expect growth contributions from these initiatives to increase compared to 2024. The platform investments we made last year across onboarding, orders and single app are still expected -- are all expected to drive strength in Square this year.

Many of the launches we highlighted this quarter were enabled by our recent platform enhancements. We have an extensive portfolio of growth initiatives across Square and Cash App, and we're excited for those to help drive accelerating growth in 2025. From a profitability perspective, we expect adjusted operating income of $2.1 billion or approximately 21% margin, expanding 240 basis points year-over-year. Even as we grow acquisition spend by more than 20% year-over-year across Square and Cash App. We remain committed to disciplined growth and driving cost efficiencies.

We were below our 12,000-person cap at the end of the year, and we intend to remain below for the foreseeable future. In 2024, we built the foundation for our next era of growth, and we're excited about our momentum heading into 2025. Our goal across both Square and Cash App in the year ahead is to make sure we're balancing continued growth investments on product and go-to-market with increased efficiency across our organization. With this, we expect to exit 2025 at a Rule of 40 run rate and remain on track to achieve our targeted Rule of 40 in 2026. As Jack said in his letter, we're excited to host you for an Investor Day in the second half of this year to show you more of our progress in these areas.

And with that, I'll turn it back to the operator to start the Q&A portion of the call.

[Operator Instructions] Your first question comes from the line of Tien-Tsin Huang with JPMorgan. Please go ahead.

Tien-Tsin Huang: Hi. Thanks a lot here. Jack, it feels like I've been thinking about Block a lot, and it feels like a big execution year for you guys in 2025. You talked about -- Amrita talked about building a foundation in 2024. So I'm curious from your standpoint, beyond the numbers and the guide and all that good stuff, what proof points are you focused on to gauge progress on execution in 2025? And how might this year be different than the last couple of years from an execution standpoint?

Yes. So I mean, we intend to double our growth rate across our business, and a lot of that has to do with how we configure ourselves. So as you said, we spent the majority of last year not only doing but talking about how we've reconfigured and reorganized the company and to set us up for rapid acceleration this year. And I guess the biggest proof point I would look toward is development velocity, how quickly we can now move and how quickly we can ship things, and how quickly we can see the impact or that they're not having impact, so we can make changes or end those things.

I would point you to one early proof point, which is this project we released called codename goose, which is an AI assistant for engineers to start, but it can expand to any discipline. We built this for ourselves internally. This team was less than 10 people. They did it in months and not years and we put it out.

And we now have a pretty sizable ecosystem of developers building extensions for it and it and expanding that we also get better for we can use. And it points to a pretty foundational move for us where we are now in the conversation with a lot of these AI companies. And I think, there's a few areas within that where we can take a leadership position as well. So we're excited to take that on.

But that's all a function of us reorganizing our company. This would not be possible at the beginning of last year, but it is now. So you should expect us to see those throughout the company and across all of our surface areas. We have much better go-to-market clarity and excellence in Nick and team, especially on Square, but certainly for Cash App as well.

So we intend to flex that muscle significantly this year and pair it with our better products. We have reconsidered how we release products at Square. We want to be a lot more open with our road map so that we can give sellers time to decide and more information to decide us versus other competitors, and they can get a lot more predictability around installing us or upgrading certain aspects of our system. And then for the first time as a company, since we founded the company, we have a prioritized road map across our entire company and all of our product services and surface areas.

This is stack ranked. We have a directly responsible individual on task for each one. That gives us a lot more accountability. It gives us a lot more information around how we're investing internally, gives us a lot more clarity around what we're experimenting with and what we're trying to accelerate and what we're trying to refine and make better.

But most importantly, it also gives us clarity and the word clarity on what we need to stop and redeploy our resources, our people, our finances for things that we need to reconsider. So this went out to the whole company, and we're starting to run with it, but that will also help a lot with our execution, which will ultimately result in just much better product development velocity, much better learning so we can quickly adapt to the market and what our customers want and ideally be ahead of them with all these new tools that we're building such as the AI agent systems we're focused on.

Tien-Tsin, I'd just add a couple of thoughts on KPIs, metrics that we're going to be looking at and do look at on a daily and weekly basis. For our two most established businesses, I think it's very clearly acceleration in Square GPV and for Cash App, it's the ramp of our Paycheck Deposit actives and then more broadly, engagement across each of those platforms with a broader set of products. From an investment framework perspective, so when we think about the enterprise across Block, we want to see two things. We're laser-focused on being a Rule of 40 company in 2026 and now believe that we can get to that run rate by the end of this year and positive customer retention across each of our ecosystems.

That means our existing customers continue to grow, and we continue to add more and more value to them. And then finally, I'd say, I think we want to see some build on the signals for our next big building blocks, the next S curves that we're stacking. And I think what you hear from us today is that there's some near-term S-curve opportunities with Cash App Borrow and Afterpay on Cash App Card. And then the links between Square and Cash App, the neighborhood network will be laying important proof points behind in 2025, which should benefit us in the years to come.

Tien-Tsin Huang: Great. Thank you both for the thoughts.

Your next question comes from the line of Tim Chiodo with UBS. Please go ahead.

Great. Thank you. I want to talk about 2025 Square GPV growth. When we think about the major building blocks or components, they are same-store sales growth, churn or retention, the size of the new cohort coming on and then lastly, the annualization of last year's cohort that was brought on.

So you made some comments already around exiting the year with some good signs on improved same-store sales and some of the retention metrics getting a little bit better. And MKE may be a part of that if maybe that's getting better or maybe less bad. And then in terms of the size of the new cohort, clearly, there's the sales and marketing spend, there's the new partnerships and some of the good signs you're seeing there. Cognizant though that, that last part on the marketing, there's a little bit of a cumulative effect there, meaning it's a little bit more beneficial as it layers in into the second half of the year.

So putting that all together, I was hoping you could touch on some of those components and really what it means for the exit rate for GPV within the seller ecosystem as we look into the latter part of 2025.

Sure. Thanks for the question, Tim. So let's start with where we exited the year with Square GPV in the fourth quarter up 10% year-over-year and U.S. growth of 6.9%, both an improvement from the third quarter sequentially, with U.S. growth up 200 basis points relative to where we were in the third quarter, and international growth up 5 points to 25% relative to where we were in the third quarter. That acceleration in the fourth quarter was driven primarily by two key metrics, same-store growth across our verticals as well as improved seller retention.

The two verticals that I would call out in particular driving the acceleration are the two that we're most focused on, which is food and beverage and retail. When we look to 2025, assuming a stable macro environment, we expect GPV to accelerate from these current levels, driven by the product and go-to-market initiatives that we've been talking about for the past few quarters now. We expect to see a meaningful uplift in customer acquisition as we move throughout the year and as these investments compound. Now, when we look at it from Q1 to Q4, there's a bit of noise in Q1. We expect Q1 Square GPV growth, when you isolate for that constant currency and leap year, to be in the high single digits, building to low double digits as we exit the year.

As I said, there's some noise with that Q1 comparison because of FX and leap year, but we expect the core underlying growth of Square to be roughly in line with Q4 and to improve from here for the rest of the year on the back of a stable macro environment, driving better same-store growth, slightly better retention and stronger acquisition. Maybe just to quickly unpack what some of those customer acquisition and retention drivers are to accelerate growth. We've grown marketing spend significantly over the past two quarters with strong early ROIs, and we intend to invest behind that in 2025 as well.

We expect continued investment across the combination of sales, marketing, and partnerships to drive new seller acquisition. We're seeing better coordinated strategy across these three levers than we've seen before. Our retention is strong today, but we expect account management and investments into our product to increase that further. And then we believe we have the opportunity to gain wallet share and drive same-store growth higher.

An example of that being Kiosk, which is a product that we expect to increase wallet share. And we'll have more that we expect to launch throughout 2025 to continue to drive that important retention metric for us.

Thank you.

Your next question comes from the line of Darrin Peller with Wolfe Research. Please go ahead.

Hi, guys. Thank you. Maybe I could just jump in quickly on Q4 first, the spread between GPV growth and the gross profit growth now. Just if you could help us understand a little bit of the dynamics there.

But then more importantly, just the building blocks of the gross profit growth ramp expected through the year. I understand a lot of the initiatives will kick in. But if you're starting off, I think you said 11% for Q1, 15% for the year. Maybe just help us a little bit more -- a little more granularity of the building blocks to get from that starting point to the 15% for the full year.

Thanks guys.

Sure, Darren. Maybe just to quickly hit off on the first part of your question for Q4. Keep in mind that when you're thinking about GPV versus gross profit, the banking ecosystem had a tougher compare in the fourth quarter. So we saw --

Right.

Right. So we had 12% growth overall from a gross profit perspective in the fourth quarter. From a banking perspective, we had 13% growth in the fourth quarter. And as a reminder, our banking products grew by 28% in the fourth quarter of 2023, driven by some elevated loan volume growth.

So it's a tougher compare from a banking perspective. As we look to this year, 2025, let me start with sort of the dynamics that we see in the first quarter and then the line of sight, the clear visibility that we have to the drivers of gross profit accelerating throughout the year. So first, we recognize the growth rate dynamics as we start the year are unique for a couple of different reasons, some idiosyncratic headwinds like FX and leap year and then some tougher compares like the banking one I mentioned. So in the first quarter, leap year is expected to create a roughly 1 point headwind to gross profit growth for both Square and Cash App with an additional approximate 1 point headwind to Square's gross profit growth from FX.

And then in addition to that, we have Square Banking with an incredibly strong Q1 in 2024, where it grew by 36% as we grew originations at an accelerated rate as a tougher comp for us this Q1. And then from a Cash App perspective, again, the tougher compare related to some pricing changes for Bitcoin, where we had the full quarter benefit of that last Q1 as well as some benefits from the price appreciation of Bitcoin. Now with those Q1 dynamics in mind, let's turn to where we have confidence that we can build upon these compounding benefits that we see of our product and go-to-market initiatives into the remainder of the year.

So for Square, we expect gross profit growth trends to align closely with GPV trends in 2025. We'd see GPV growth acceleration drivers that we've talked about, go-to-market investments, new products to gain traction and compound during the year and as a result, expect to see gross profit accelerating off the Q1 levels. We're also growing our marketing spend here, again, behind strong ROIs and are continuing to add sales and partnership resources, all of which we expect to result in accelerating new customer acquisition. We have much higher expectations for our sales and partnership investments this year than we did last year.

And we met and exceeded our targets last year, and we intend to do the same this year. From a Cash App perspective, we expect the acceleration throughout the year to be more pronounced, exiting 2025 well above the Q1 gross profit growth rate. We think we have a unique opportunity here on this next phase of growth for Cash App between Borrow and Afterpay on Cash App Card. Afterpay on Cash App Card, we are after a year of sort of methodically testing this, now launching this week, allowing customers more ways to manage their money and giving them more optionality at checkout.

Cash App Card at 25 million monthly actives in December is an amazing distribution surface for us to launch these sorts of product features into. And it's one that we saw really resonate with customers as we were in testing over this past year with nearly $150 million in originations just in the beta alone. And then for Borrow, this product that has scaled meaningfully in 2024, we believe that there is a tremendous amount of opportunity left for growth in a variety of different areas. This year, as I mentioned earlier, making Borrow available to more customers with higher limits by improved underwriting, better unit economics and expanding into additional states.

Also enabling Borrow to be a driver for paycheck deposits by creating greater integrations there. And then finally, I'd say, as I point to looking at our exit out of 2025 is that we'd expect to see Proto, our Bitcoin mining initiative, to start benefiting growth in the second half of the year as well.

Thanks, everybody.

Your next question comes from the line of Dan Dolev with Mizuho. Please go ahead.

Hi, guys. Great quarter. Thanks for taking my question. I have a long-term strategic question maybe for Jack on your -- on Proto, the open bitcoin mining system, it looks really interesting. Could it -- maybe could it be the next Cash App? Like how big is the upside from that and what's the long-term vision and strategy for that product? Appreciate it.

Yes. This is one, we're really excited about. We do think the market is large, and we do think we're poised to take a significant percentage of it because there is one player really in this space, and customers want other options. We did a bunch of research.

We talked with a bunch of these finding customers, and we found that they didn't have the reliability they needed. They didn't have the customization they needed. Didn't have the ability to upgrade and build their own custom systems around their rigs. And some of them wanted just like a full system that just worked off the shelf, that was built in U.S.

And the fact that it's open source and were on a 3-nanometer process allows us to have much better performance and a much stronger road map looking forward. So we do think we're poised well. We're manufacturing our chips now. They're going to be rolling out this year along with our full systems.

And this year is going to be one of, I think, like unexpected upside in this business and one that we significantly changed the market dynamics because of just how well our system works and how configurable it is. So within this space, yes, I do think it's a massive opportunity and one that's well, well, well overdue.

It definitely seems like that. Thanks, again, Jack.

Your next question comes from the line of Robbie Bamberger with Baird.

Yes. Thanks for taking my question. Cash App MAUs have been flattish at around 57 million the last several quarters. I guess, what would it take for these to start growing again? Is it incremental marketing spend, new products or something else?

I'm happy to start us off here. Thanks for the question, Robbie. So let's start -- I think the short answer is we think that there is significant opportunity for growth longer term. But there's some deliberate decisions that we've made as part of our banker-based strategy in the near term that have resulted in a consistent sort of 57 million monthly actives, which grew 2% year-over-year in December.

This is a part of our continuous enhancements to drive healthy customer engagement as we bank our base. We've made investments in critical areas like compliance, support and risk. And as we've done that, we've progressed more of our actives through our identity verification process, which in turn, unlocks greater access to those actives to our full suite of financial tools. So as we've made those investments, we've seen benefits come through in a couple of different places.

First, from a product growth perspective, we've seen that accrete to engagement and attach on products like Cash App Card, direct deposit and Borrow, all of which you've heard about today, obviously. But also accrete to benefits to our unit economics. Risk loss for us has been an area of operating expense leverage on both peer-to-peer and Cash App Card risk loss over the past year. And I think that's critically tied to the enhancements we've made to the platform here.

In the near term, this year, we expect the biggest drivers of Cash App gross profit growth should be metrics like inflows per active and monetization rate or ARPU, whereas we'd expect actives growth to be relatively flat on a year-over-year basis this year. Now longer term, to your question, we see a significant opportunity to grow actives, particularly among that digital native audience like Millennial and Gen Zs. We also see powerful network effect connections across our audiences amongst teams and families and across our other brands, Afterpay customers, many of whom will be introduced to Cash App through the integrations like the one that we're launching this week with bringing Afterpay functionality into Cash App Card as well as Square buyers, the more we can execute on our neighborhood network strategy to connect these two ecosystems.

Thank you.

Your next question comes from the line of Andrew Bauch with Wells Fargo. Please go ahead.

Hi. Thanks for taking the question. I wanted to hit on the Cash App flywheel and how you've called out the rolling monetization opportunities by stacking these multiple S curves. And now that we have Afterpay functionality live in the Cash Card, I guess, how would you characterize the potential of this S-curve compared to innovation and products you've introduced in the past?

And then if there are any high-level thoughts you can provide around goals for attach, monetization contributions, all would be super helpful? Thank you.

Yes, I can start this. I mean I think it's a huge S-curve because there's entire company focused on just this one thing. And what matters most for Cash App and the Cash App Card is that these all stack together, but they actually positively reinforce one another as well. So we have -- as Amrita said earlier, we have a huge base of Cash Card customers that we can deploy this to.

We can do that extremely quickly. It's easy to roll out for us and alert people proactively of entirely new utility that they can use that day instantly. And ultimately, that provides a flywheel into more spend and more usage of other adjacent aspects of Cash App, which we continue to look to deepen and broaden that ecosystem and ultimately connect it with the Square ecosystem, which speaks to what I believe is our true superpower that we have both these ecosystems at scale with both sides of the counter. And now we can bring more financial tools and more financial utility that people can't find elsewhere as connected to every single person that's already using Cash App and the Cash App Card, but also there will be a significant reason to use Cash App.

And now I have to go to the App Store for 10 different apps. Everything is in one app and it will be the Cash App.

And I'll just add a couple of points to help contextualize as well, Andrew, both on Afterpay and Cash App Card and then I want to speak a bit to Borrow. But similar to how we've ramped Cash App Borrow, with Afterpay and Cash App Card, as Jack said, we see a tremendous opportunity. As we always do, we'll start small, expecting millions of monthly actives to be eligible this year and then ramp those offerings where we determine eligibility, obviously, based on adoption and improvements to our underwriting models as we gather more data. So we'd expect Afterpay and Cash App Card to benefit gross profit and compound in that benefit throughout the year, benefiting our growth more in the second half of the year as we've called out related to the acceleration in Cash App gross profit throughout the year.

I think it's also, if we're speaking about S curves for Cash App, important for us to talk about Cash App Borrow as well. And when you look at the growth and attraction that this product has achieved, what we're seeing is that our customers really value the optionality to manage their cash flows that Cash App Borrow provides. And I think that's similar to what Afterpay will provide as well in Cash App Card. But we shared last quarter a recent survey, 43% of our Borrow actives, which we now ended the year with 5 million Cash App Borrow monthly actives, 43% reported that that the loans helped them pay their bills, 38% said these loans helped them smooth cash flows between paychecks.

It's a part of how they're managing their money. And products like Borrow help deepen that customer relationship. We've seen Borrow actives bring in 13% more inflows and conduct 6% more transactions than non-Borrow actives and drive 10% higher variable profit to us on a proactive basis, even excluding the profit generated from Borrow. So we saw strong growth in Borrow this past year, but we think have an opportunity to expand it further, as I've mentioned already, into 2025 and continue to compound the benefits beyond the 5 million Borrow monthly actives that we had at the end of year.

Maybe the final point I'll make here is in 2024, about 25% of actives chose to take out a Borrow loan after getting an offer. And that number is significantly higher for paycheck deposit actives, which gives us confidence that access to credit ultimately is an important part of our much broader banker-based strategy going forward.

Really interesting. Thank you, Amrita.

Your next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead.

Yes. Hi, guys. I was hoping you could just put a finer point on the gross profit guide by segment for Q1 and for the full year. And then if you can just talk about maybe the top two or three Square initiatives that you really think will move the needle on GPV in 2025? Thank you.

Sure. Happy to start off on the gross profit question. As we said, we expect to see ramping gross profit growth through the year, with Cash App's acceleration throughout the year being more pronounced relative to Square's, albeit we expect to see growth trends improve throughout the year. And we expect Q1 to be the lower point throughout the year in terms of gross profit growth and profitability.

Again, some of the key initiatives that we've talked about in terms of sales and marketing, product launches, and the ramp of products like Borrow or Afterpay on Cash App Card are the key elements that compound that drive the more meaningful growth rate as we exit the year relative to where we start in Q1. Go for it, Jack.

On the Square side in terms of drivers, as we talked about for quite some time, we want to really simplify our go-to-market and also add a lot of strength there. We've got a lot of strength by changing the team, making a lot more efficient, being more open to partnerships and new ways to market. And then we have a bunch of products in that that initiatives we think will help us. But if I had a message including bringing the Square app into -- the five Square apps into one Square app so it's just much easier to onboard people and that it is customizable as you tell us more information, as you use it more, it flexes to your needs.

Second, like we are -- we've completed our transition from a technology sector perspective. That means far greater reliability, that means far greater development velocity. That means we're not just a payments platform, we're actually an orders and commerce platform, which gives us more flexibility in terms of what we can build. And just some examples of this, we have bar tabs, which we don't have forever.

It went to GA. We Rolled Out's Scan The Pay functionality, introduced house accounts, launched other features to bolster our food and beverage offerings, which is a big focus for us. And we rolled out Instant Payouts for marketplace delivery orders, which is helping customers with the task of managing their cash flow. But the net of it is we have a much stronger go-to-market.

We have a lot more focus and simpler call to action on that. We've completely changed our platform to allow us a lot more flexibility to build the features that we have been gaps. And it will also allow us to create entirely new features that we're super excited about. Another big driver that we talk a little bit about in the letter is going to be the neighborhood network.

This is utilizing Cash App to drive more people than Cash App customers in particular to Square merchants, give them new tools to offer cash back instantly to their customers, build loyalty to do remote ordering, and that continues to be in beta and we will continue expand it this year.

Thank you.

Your next question comes from the line of Ramsey El-Assal with Barclays. Please go ahead.

Ramsey El-Assal: Hi, Chuck and Amrita. Thank you for taking my question. I wanted to actually follow up, Jack, on the last thing that you mentioned, which is the neighborhood network strategy. I'm trying to think through, maybe you could help us think through sizing the opportunity, how much investment or build is required here? And also any thoughts on timing? So size, investment, and timing of the neighborhood network. Thanks.

Yes. Well, first and foremost, we're the only company still that have both sides of the counter like this, so we have the seller side and we have the individual side. And we've tried to do this in the past and really capitalize on the opportunity, but we just didn't have the scale on the consumer side to the degree that we needed. A lot of you who have been following us for quite some time might remember Square Wallet or what we called Card Case way back in the day.

Now we do have scale on Cash App and now we can actually act on it. And we see a number of problems that sellers are facing with the current offerings for pickup, for reservations, for ordering that we can help with. We can also give them entirely new tools to give things like boosts or instant cashbacks immediately to their customers, which builds loyalty and give them more discovery through the lens of the Cash App itself. This represents a very easy selling point for our sales team because it means that we're turning on this massive faucet of Cash App customers to potentially discover the business but also give them these great tools to retain their customers.

And to your question of in terms of building entirely new things, most of this is more of a connection and just prioritizing the right connections to get the experience correct. A lot of the work is going to be more around converting our existing Square customers to online and that benefits us and it benefits them and benefits their customers, and it certainly makes this neighborhood network a lot more possible. So we're going to be thinking deeply about how to migrate folks easily and allow them to have a storefront that they're proud of, that can work with the system, and which allows more commerce and more sales on their side.

In terms of time line, we are in beta right now in a few cities. We're making sure that we get the experience right before expanding it. And of course, we want it to be a lot more self-serve so that goes to that migration point that I was talking about. And if you one button push so that sellers can just turn this on, and they're in business and they get new traffic.

That's the goal. So look for more of these proof points early this year and all the way to the end of the year.

And Ramsey, I would just add on your question about investment, we've already got significant investment deployed across each of these ecosystems. It's really about bringing the strategy together in support of the two ecosystems working together. So an example of that is in Square, we're already building a field sales team. We're hiring that out.

We've seeded our first territories. We're doing that in areas where we have strong partnership strategy, but we're also prioritizing cities with high Cash App density to drive the ecosystem connections. An example city would be Atlanta, where we see strong Square Seller presence as well as Cash App presence. And the two can feed off of each other.

So it's not even necessarily about incremental investments. It's about a coordinated approach and strategy as we deploy those investments.

Ramsey El-Assal: Got it. Thank you. That's perfect.

Your next question comes from the line of Rayna Kumar with Oppenheimer. Please go ahead.

Hi, Jack and Amrita. Thanks for taking my question. Could you elaborate on any feedback that you're getting from vendors on your initial testing your enhanced Square for Restaurant point-of-sale experience? Thank you.

Yes. I mean, we're getting pretty good feedback from the focus. I mean, things like the bar tabs and everything that we've built to ship from just being a payments platform to a commerce platform are working because we're building the features that sellers before, especially food and beverage sellers could only find in our competitors. And the most important part of us being able to close those gaps is that we can introduce people to the broader Square ecosystem, including all of our banking.

Square, I think, continues to excel in our product offering because of our quality, because of it is more self-serve and owners of these businesses and their employees can do more of the things that they need to do without having to reach out support or having a sales or executive account agent who's handholding them along the way. And that's where our technology-led approach leads and really matters. And we're going to continue to push that and give people better and better tools to help automate some of the more mechanical aspects of the business so they can really focus on their customers and building the business.

But thus far, it's been good. We have much stronger feedback loops now that we've functionalized the company between customer support and sales and our product teams and our development teams so that we can act on feedback much faster. And as I talked about in the first part of the call, what matters to us most is development and velocities that we can quickly make changes, we can learn from experiments much faster, and we can deploy technology in a way that addresses customer needs and hopefully predicts them ahead of their ask and also ahead of our competitors, which we intend to do.

Yes, Rayna, I'll just add that I think what you see from us is a greater rate of product velocity as we shifted from a payments platform to an orders platform. And you see that firsthand in the restaurant point-of-sale enhancements that we've rolled out and are continuing to roll out to all of our sellers this year. Between Kiosks, Bar Tabs, Scan-to-Pay, House Accounts, item splitting, instant payouts, these are all launches over the past six months. And we've got more to come for this really critical vertical.

And I think what you see is that when we're able to get that into people's hands and demonstrate, as we are with our field sales efforts, what a larger seller and in the food and beverage space can do. And even a QSR like Bluestone Lane that we mentioned in our letter, it's a pretty powerful demonstration and one that, frankly, flies in the face of the of the perception Square being little reader company. And so that's what we're doing with investing into our partnerships, field sales and marketing approach to be able to expand and bring awareness to the much more expansive set of offerings that we have for QSR and FSR.

And I think that's starting to bear fruit now with some of these larger seller wins, but there's a lot more for us to do behind that. And I expect you'll also see greater product velocity, again, behind that platform shift that we completed last year.

We will now take our last question from Bryan Keane with Deutsche Bank. Please go ahead.

Hi, guys. Thanks for taking the question. I wanted to ask about the strength in Afterpay in the quarter what you saw there. And as we think about the rollout of Afterpay on the Cash Card, I guess it's almost in lieu of a credit card.

The growth there can be pretty material, I assume, going forward. How do we think about the profitability of that card as we seriously ramp it this year and into next? Thanks.

Sure. Maybe I'll start on the last part of your question first, which is, first of all, we get to determine eligibility for Afterpay on the Cash App Card. So we get to put -- create as an input based on what we see from risk loss rates, adoption rates, et cetera, how to pace the growth of Afterpay on Cash App Card. Based on what we saw during the beta with the strong attach rates and risk loss rates, we're excited for what we could be compounding here throughout the year.

But again, that's one that we can read the metrics on a daily basis and sort of tune the knobs based on the performance. And it is -- risk loss is an important investment area for us in some of these ramping lending products, be it Afterpay, Afterpay on Cash App Card, or Cash App [indiscernible] in the quarter, in the Q4 quarter, which obviously is a seasonally important quarter for us, GMV was up 19% year-over-year. Gross profit was up 23% year-over-year. Growth was primarily driven by our core Pay and Borrow offering, which grew similarly to the prior quarters gifts cards growth accelerated in the second half and, in particular, in Q4 as we expanded eligibility for gift cards globally to the U.K.

And as you noted, we've got a lot of opportunity ahead of us as we think about Buy Now, Pay Later. Afterpay to Cash App Card, obviously, which we're launching this week. Core Buy Now, Pay Later, we saw global revenue retention improve year-over-year with strong trends, especially in our enterprise segment. And in 2025, we have a number of enterprise merchants in our deal pipeline that we're continuing to sign as we go expand the value proposition.

And then gift cards, we've been expanding eligibility to more merchants in the U.K. late last year and in the U.S. in early 2025, all of this while we're maintaining strong loss rates in line with historical ranges for these products. Losses on consumer receivables were 0.97% of GMV in the fourth quarter, below our 1% target. So continuing to ramp but do that responsibly.

Okay. Thank you.

Ladies and gentlemen, thank you for participating in today's program. This does conclude the program. You may all disconnect.