Jack Dorsey is once again CEO of the company he founded more than a dozen years ago — and he plans to stay there until Block "hits some milestones" toward reinvigorating growth, Dorsey said during a Thursday call with analysts to discuss third-quarter earnings.
Following the
"We had unclear decision making throughout the company, which led to a lot of slowness, especially on the Square side," Dorsey said, adding that there were "a lot of silos, a lot of redundancy and a lot of kind of a lack of desire for teams to work together."
A top priority for growth will be creating incentives to expand Block customers' use of its
"Cash App is interesting and it sits at the intersection of three very distinct use cases, which [include] P2P payments and commerce. And our approach is to ultimately bring these three [things] together in a very seamless way to find an entirely new product category, which reinvents banking for our customers," Dorsey said.
These moves — combined with the fact that Block boosted its full-year outlook for gross profit margin to $7.46 billion, from $7.44 billion, and forecast a significant improvement in next year's adjusted operating income — caused Block's stock to jump, rising nearly 14% in Friday morning trading activity to about $50 a share.
In a letter to shareholders also published Thursday, Dorsey said he's optimistic that Block can see immediate results from the changes he's recently set in motion.
"I believe there have been a number of things holding Square back — some structural, some cultural, all of which can be addressed through stronger and more opinionated prioritization and week-on-week fast iteration," Dorsey wrote in the letter.
The new marching orders include capping the total number of Block employees at 12,000 and bringing teams together to collaborate on ways to improve overall efficiency and to streamline customer-onboarding processes with AI, Dorsey wrote.
"We have exceptional AI talent at the company and we haven't been using it effectively," Dorsey wrote, adding that Block has teams building generative AI features to facilitate tasks for Square sellers.
Dorsey has also vowed to zero in on the unique needs of Square sellers in different markets like restaurants and service providers, enhancing local sellers so they stand out from the "monotone" of general e-commerce, and using AI to speed up market activity. For example, last month Square introduced an AI tool for restaurants to automatically generate a new menu in minutes.
In August, Block also launched Square Go. the firm's marketplace for local beauty industry service providers, integrating marketing with booking appointments and accepting payments. In its first few weeks, Square Go drove 500,000 appointments for sellers, Dorsey said.
During the third quarter, Square for Franchises also launched, enabling business operators to manage multiple locations through a single view of overall store performance, with gift card and loyalty options.
Square Loans closed the quarter that ended Sept. 30, 2023, with approximately 120,000 loans totaling $1.17 billion, up 4% from a year earlier.
Square sold $42 million in payment-acceptance hardware, down 2% from a year earlier; hardware resulted in a $36 million gross loss, as the company uses hardware as a selling tool.
Cash App has seen strong growth recently, Dorsey wrote in the shareholder letter. Cash App had more than two million monthly active users at the close of the quarter, double the number of users three months earlier, helped by new partnerships with key partners including DoorCash, Adyen and Stripe.
Block's total net revenue was $5.62 billion, up 24% over $4.5 billion in the third quarter of 2022. Operating expenses were $1.91 billion, up 18% from a year earlier. General and administrative expenses rose 22%, to $379 million, driven primarily by higher personnel, customer service and compliance costs. The company's operating loss was $10 million, compared with a $49 million loss during the third quarter a year earlier.
Block also instituted an initial authorization to repurchase $1 billion in shares, giving the company room to maneuver if Block's value dips, Dorsey announced in the shareholder letter.
In a Friday note to investors, analysts at JPMorgan Chase dubbed Block's third-quarter results "a welcome reset" putting the company on a positive track. "To us, this felt like a turning point in messaging and strategy, with management drawing hard lines around growth, headcount and profitability, checking many boxes on our wish list to unlock value," the analysts wrote.
