Block Resets to Focus on Slowing Expenses And Speeding Profit Growth

Block Inc. has been a fast-growing payments machine over the years since its founding in 2009, and now the company is looking to slow down somewhat and focus more intently on profit growth, according to top executives.

That move could start with personnel. “We plan on slowing our pace of hiring in 2023,” said chief financial officer Amrita Ahuja during a conference call late Thursday to discuss Block’s fourth-quarter and full-year 2022 results. “We plan on slowing the pace of expense growth.” The San Francisco-based payments company, whose products include the Square point-of-sale payments system as well as the multifunctional Cash App, will likely grow its head count by 10% this year, compared to 46% in 2022, Ahuja added.

The cost review will be comprehensive. “We’ll be looking at all of our overhead expense,” Ahuja said, while the company will be investing in its sales and marketing personnel. This will be especially important for Square. Here, she said, Block will be “refining our sales and marketing as it goes upmarket to larger sellers.”

Block has concentrated for years on expanding Square’s capabilities to appeal to larger sellers. In the fourth quarter, 39% of Square’s $48.6 billion in gross volume was concentrated in merchants accounting for $500,000 or more in volume. In the same quarter in 2021, that fraction was 37% of $42.6 billion. Both numbers are well ahead of the 30% share Square achieved in 2020.

Expectations are high for Cash App, the mobile wallet that largely makes up the rest of Block’s business. “We expect Cash App to expand its margins on a year-to-year basis,” Ahuja said. For just the first two months of 2023, she added, Block estimates gross profit growth of more than 50% for Cash App, based on what Ahuja called “early momentum” for the product, though she added this will tail off somewhat in March. Nonetheless, she added, “we expect Cash App to expand its margins on a year-to-year basis.” By contrast, gross profit growth for Square is expected to be about 15% for the first two months.

Overall, Block’s top brass made it clear Block is well past the scrappy startup phase of its development. For fast-growing Cash App, particularly, “we’re focused on whether the basics are rock-solid,” said Block founder and chief executive Jack Dorsey during the call. Newer Cash App products and services like savings accounts and free ATM withdrawals will draw much of the company’s attention, he added. He also announced that Ahuja will expand her responsibilities, taking on the role of chief operating officer while continuing to serve as CFO.

For the quarter, Block recorded total revenue of $4.65 billion, up 14% over the same quarter in 2021. For the year, revenue totaled $17.5 billion, down from $17.67 billion. Much of Block’s revenue stems from Bitcoin trading, which is a key, longstanding feature of Cash App. For the year, the company recorded a net loss of $540.7 million, compared to net income of $166.3 million in 2021.