XYZ - NYSE

Good day, ladies and gentlemen, and welcome to the Block Third 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 third 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 discussion during this call of our lending and banking products, including those offered through 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.

Thank you all for joining us. My shareholder letter this quarter explains our ecosystem of lending products, our methodology, how we address risks, and our competitive advantage. We are focused on increasing access with Square Loans, Afterpay, Buy Now Pay Later, and Cash App Borrow through better technology, transparency, and simplicity. If you haven't yet, please read the letter for more details. And with that, I'll turn it over to Amrita for some highlights from the quarter.

Thanks, Jack. We delivered strong results across the company during the third quarter. Gross profit was $2.25 billion, up 19% year-over-year with 16% growth for Square and 21% growth for Cash App. We delivered a significant increase in profitability on a year-over-year basis with meaningful margin improvement, and our highest quarterly profitability ever for both adjusted operating income and adjusted EBITDA on a dollar and margin basis. For the 12 months ending in September, adjusted free cash flow was $1.5 billion compared to $945 million in the prior 12 months. For full year 2024, we have raised our guide on adjusted operating income and adjusted EBITDA, and we have maintained the gross profit guidance we outlined in August. For the fourth quarter of 2024, we expect gross profit of $2.31 billion or 14% growth year-over-year. Let's unpack a few real-time dynamics. For Square, we've seen an improvement in underlying GPV trends in recent months. In October, we saw higher year-over-year growth for both U.S. and Global GPV compared to the third quarter, with Global GPV showing double-digit growth. For Cash App, we've seen strong momentum on gross profit and improved attach rates on paycheck deposits. Looking at our fourth quarter guidance, while underlying trends in the business are stable to improving and we expect Square GPV growth to improve modestly compared to the third quarter, there are a few discrete items that impact gross profit growth by about 3 points. In Cash App, we shifted out the expansion of Cash App Borrow into new customer segments, and in Square, we had a delay in a one-time transaction cost-benefit from a partner. We now expect both of these benefits to land in 2025. Our adjusted operating income guide in the fourth quarter reflects plans for a step-up in sales and marketing for both Square and Cash App, as we invest behind attractive unit economics in each business to drive growth into 2025. Our updated full year 2024 guidance implies Rule of 36, a significant improvement of 6 points compared to 2023 and 7 points compared to our initial 2024 guide, which is composed of 3 points from growth outperformance and 4 points from margin outperformance. Finally, while we are still in the planning process for next year, we wanted to provide a preliminary view into our expectations for 2025. As we shared previously, we plan to reach Rule of 40 in 2026 with a composition of at least mid-teens gross profit growth and a mid-20% adjusted operating income margin. We expect strong gross profit growth in 2025 of at least 15%, consistent with that target, driven by broad momentum across Block. We have a number of initiatives recently launched or launching soon, and we expect them to compound through the year, driving stronger growth in the second half of the year compared to the first half. We expect GPV growth to improve next year and to end 2025 at a meaningfully higher growth rate than where we exit 2024. On the profitability side, we're committed to expanding margins on an adjusted operating income basis next year, although we expect the pace of expansion to be less than this year as we invest in growth opportunities with attractive returns, particularly around go-to-market. Our guide assumes a stable macro-environment and is based on the momentum we're seeing in our business as we execute on our strategy and scale product innovations for our customers in 2025. We've rolled out Square's order platform and we're leveraging this to bring new features to sellers like pre-authorization. We're currently testing a new and enhanced Square for restaurants' point-of-sale experience with a growing number of sellers and will make this available to all sellers in 2025. We're also rolling out our single app experience to new sellers now and expect to launch that more broadly in 2025. We've seen tangible momentum in partnerships and early signs of success in sales. We grew our Square brand and performance marketing investments more than 20% year-over-year in the third quarter and began ramping sales hiring, including field sales. We will be scaling these and other go-to-market efforts more meaningfully into next year. For Cash App, we're about to transform 24 million Cash App Cards into a better alternative to credit cards when we launch Afterpay on Cash App Card. We're leaning into go-to-market spend to drive paycheck deposit actives in 2025 across performance marketing, brand awareness, and incentives. We've driven performance in 2024 by focusing our strategies and by operating with expense discipline across personnel, structural costs, and corporate overhead costs. We have seen constraints breed creativity and drive continuous improvement in how we serve customers. We intend to build upon our execution in 2025 and beyond. With that, I'll now turn it back to the operator to start the Q&A portion of the call.

Thank you. [Operator Instructions] And your first question comes from the line of Tien-Tsin Huang with J.P. Morgan. Your line is open.

Hi. Thanks. I wanted to ask on the Square side, if you don't mind, really encouraged here to hear that you're expecting growth to accelerate on the GPV front in the U.S. next year. Can you just give us a little bit more on visibility there and the building blocks that are needed to get to that?

Hey, Tien-Tsin. Thanks so much for the question. I'll start on what we're seeing from a GPV perspective. And what leads us to the confidence to say that we expect to see modestly improved growth in the fourth quarter relative to the third quarter and further acceleration in growth from current levels into 2025. So what we saw first of all, just to start in the third quarter was growth at 7.5%, which is a modest -- a moderation of the 7.8% growth we saw in the second quarter. With the U.S. about 4.9% and obviously there we saw some modest impact from weather and hurricanes at the end of September, while international growth was strong in the third quarter at 20%. Now since then, what we've seen has been an improvement. When we look at Square GPV, adjusting for differences in day of the week compared to prior periods, we've seen an improvement in year-over-year Square U.S. GPV growth each month since July. And through October, in the U.S., we've seen year-over-year growth improve by a of couple percentage points compared to that 4.9% growth in Q3. And we've already seen strong growth in international markets also accelerate into October. And we believe this improvement in the U.S. has been driven by same-store growth across our verticals. We're also seeing encouraging trends on customer acquisition, though we know that it's early and we have a lot of room for improvement, which we expect to see as our product innovations and go-to-market initiatives ramp into 2025.

All right. Great. Thank you.

I'll just add, I'll just add one thing Tien-Tsin. We as you -- as you know, like we completed our orders migration and this was the biggest unlock for us to really go after all the table stakes features that have been holding us back with respect to our -- with respect to our biggest competitors. So excited about that. That came in on time and that means we can move much faster to build out these features and then build out new features and ideally new products. But the area that I would point to for 2025 that I believe is going to be the most interesting is around Cash App Local. We're one of the few companies that have both sides of the counter. And we have this -- now a unique ability to drive store traffic and drive orders and drive sales to our merchants in a compelling way on the Cash App platform itself. And the experience we've been testing is a -- is pretty great because it allows for people to walk into a store and discover this, but also over time discover it from Cash App itself, which really amounts to sort of a network for the neighborhood where we can actually drive new traffic to these merchants. We can allow merchants to capitalize and build loyalty for the customers they already have through Cash App. And do things that others haven't been able to do, which is things like real-time cashback, which is a tool for a merchant that they've just not had access to in the past. And we think it will be a great network effect feature that provides a new foundation both for Cash App and also for Square. But on the Square side, like everything that we're looking at after this migration is making sure that we get to the table stakes and we unblock ourselves from competitors and then get back to building new features. And really focus on that in-store experience and how people think about omnichannel and spanning multiple, multiple verticals at once, which is one of the reasons they choose Square in the first place.

And your next question comes from the line of Tim Chioto with UBS. Your line is open.

Great. Thank you for taking the question. Somewhat aligned with Jack, what you were just talking about finishing the orders migration. And then, Amrita, you mentioned this in your prepared remarks, but we noticed on the job posting site that you did begin hiring some of the local end-market sales folks. So we noticed specifically that the job description stated that these people will be selling 80% of the time face-to-face, so very much local in-market salespeople. And while the job postings number didn't seem overall large, we gather this is more sort of the initial team. So want to see if you could talk a little bit about, one, that initial team. And then two, the plans for expansion. And then, of course, just more broadly across the hybrid approach. There is lots of distribution partnerships announced and in the shareholder letter, you even mentioned an ISO outside the U.S., so would appreciate any of that context. Thank you.

Hey, Tim. Thanks for the question. I can get us started here on our broader sort of sales strategy for Square, which we're pretty encouraged about. There is really obviously two key pieces of this. One is how we drive acquisition of new sellers and volumes from new sellers. And then the second is how we drive lifetime value and retention from our existing sellers and we see opportunities on both sides. With respect to new sellers, obviously ramping our field, hiring is a key piece of that, as you know, also driving productivity with our existing sales team is a big opportunity for us, one that we've made some traction on, but we see that we have even more opportunity on. With respect to field sales hiring, we do have our first group of dedicated field sales reps in market now and we plan to continue hiring here in the fourth quarter and into next year. We think that by putting resources, by putting people on the ground in local markets that helps not only support our brand perception but also some of this partnership and broader marketing motion that I'll come back to in a moment. On the productivity point for our existing sales team, we've seen about a 10% to 20% improvement in per-rep productivity year-to-date and we believe we can increase that even further. We think that this team is generating hundreds of millions of dollars in lifetime value per annual cohort with healthy payback periods and with even more opportunity as we lean into marketing and partnerships to drive more efficient lead generation as we see these product investments that we're making enable us to serve more upmarket sellers and drive larger deal sizes. And then from a sales enablement standpoint with greater tooling and incentives, things like contracts that have really driven higher retention for us with numerous sellers. From an existing seller standpoint, this is a really key piece as well because our account management team has done a really great job in driving enhanced lifetime value. So we're investing here as well to drive retention and cross-sell across these cohorts. We've seen that cohorts of sellers that come through our account management team have a 40% increase in net promoter score. So that gives us the confidence to invest more. And that's on the back of, as you know, much broader strategy that involves marketing and partnerships. We just obviously announced in our shareholder letter today that we've got partnerships with T-Mobile in the U.S. as well as SalonCentric. And we've got a much more diversified strategy in how we go to market across these partners when you look at our international markets as well, where we see a tremendous opportunity to innovate and to test different ways of going to market.

Thank you, Amrita.

And your next question comes from the line of Darrin Peller with Wolfe Research. Your line is open.

Thanks guys. Look, just given the backdrop of all the regulation going on around fintech banks in particular in the industry. Maybe you could just touch on how -- it may or may not be impacting you guys, what you're doing around compliance and addressing capacity around these -- the banking infrastructure? And then I guess, it's really good to see the outlook for '25 at that 15% gross profit level. Maybe it seems like this, whatever it is friction-wise, isn't impacting your ability to grow. So help us understand if there is any implications and maybe even on a sub-segment level, do you see Cash App sustaining strong growth into '25 too? Thanks, guys.

I'll just start by saying, I mean, obviously, there was just an election and we have no idea what's going to happen with the broader regulatory. So we're focused on what we can control and making sure that we continue to build stronger systems as the horizon evolves and as more and more people come onto the financial network. We're thinking about this by applying better technology. A big reason we functionalize the company and really focus on engineering is we would see opportunity to really leverage technology a lot more in our approach and make sure that we're way ahead of the regulatory asks and everything happening with compliance and risk. This is something that we've made a strong discipline from day one of the company. It's the only reason we exist as a company is because of this focus. And I think that will only increase. And then we just have to see what the variables are as the year goes on and how we react to it. But I think the most important thing is to really focus on the control, what we control, and make sure that we're doing all the right things by building better technology and leading with technology instead of just purely a human-based approach.

And I'll add to that, Darrin, too, to just say with that backdrop of an evolving regulatory environment, we feel well-positioned. We've got a significant scale. We've got strength and diversity in our partnerships. And we have the ability, as Jack noted, to truly innovate and invest in our compliance programs and broader technology machine-learning programs that support all of these efforts. We also longer-term, if you think about the banking as a service model, have great optionality with our internal bank with Square Financial Services. And we have strong partners across the full stack of our payment products and banking products. And one of the things, as Jack noted, that we look to control is how we build redundancy across our business. And this year, we've onboarded a number of new partners as we're building resilience and redundancy across key parts of our platform. So I think that's a key piece of how we focus on an evolving regulatory environment. I want to come back to your other question about 2025 and our preliminary guidance there. So first, what I'd say, obviously, we are committed to achieving Rule of 40 in 2026 and sustaining it beyond that. And as I noted, we expect to see that as a mix of at least mid-teens gross profit growth, mid-20% adjusted OI margin. So our preliminary guidance for 2025 of at least 15% gross profit growth is consistent with that longer-term gross profit expectation. We're also committed to expanding our margins next year. And a lot of this comes down to the efforts that we're making across -- you heard so far on the call across go-to-market and product velocity from both the Square and Cash App perspective and the drumbeat of build for that throughout the year. And as a result of that, we'd expect to see each of those innovations and improvements compound and benefit growth as we progress through 2025 with more of the improvement coming in the second half of 2025.

Great. Thanks, guys.

And your next question comes from the line of Ramsey El-Assal with Barclays. Your line is open.

Hi, Jack and Amrita. Thanks for taking my question this evening. Amrita, you mentioned some timing-related impacts to Q4 gross profit. Can you give us a little more color on what those items are? And also any thoughts about when they might flow in more precisely next year?

Sure. Happy to take that, Ramsey. So first, on the specific items that shifted out of 20 (ph) of Q4 and we now expect to materialize in 2025, there's really kind of two key pieces to it. First, on the Square side, there is some partner benefits that we had expected to land in Q4 that would benefit our transaction costs and we now expect them to land during 2025. From a Cash App perspective, secondly, we've shifted the expansion of Cash App Borrow to new customer segments into 2025. One example of this sort of expansion that we're talking about is that we're planning to use Borrow as an incentive to drive paycheck deposit adoption, which we'll now expect to scale during the year and next year. We're super excited about the potential here. We started some early testing on it. We've also delayed some expansion around underwriting criteria. As you saw in Jack's letter, lending has tremendous value to the broader ecosystem by driving engagement and retention, and product adoption. So we're excited about the opportunities with Borrow, some of which we had previously expected to materialize in Q4, but now we expect to see from a timing perspective in 2025. Just to level up briefly on the overall Q4 guide, we're raising the bottom-line guidance and that's even as we expect to continue ramping our go-to-market spend to drive growth into 2025. And we see underlying some sort of healthy trends and momentum across each of the ecosystems based on what we're seeing so far in October with Square's strong signals as noted earlier in GPV growth. With Cash App, healthy year-over-year growth in inflows per active through October, which we expect to continue through Q4, and encouraging momentum around paycheck direct deposit actives as well. And then as you've heard execution across a number of different new product launches, whether it's Square pre-authorization or enhanced restaurant point-of-sale with more to come, things like Afterpay on the Cash App Card in our single app within Square, all of which we expect to grow -- support our growth into next year. So some healthy underlying momentum that we're seeing even in early Q4.

Great. Thanks, Amrita.

And your next question comes from the line of Will Nance with Goldman Sachs. Your line is open.

Hey, appreciate you taking the question today. I wanted to ask just on some of the trends in Cash App and just how you guys are thinking about balancing the user growth algorithm versus the ARPU expansion. And maybe you can kind of talk through some of the trends you saw this quarter, I think MAUs were relatively stable. What's sort of the expectation over the next year or so?

Hey. Well, I can get us started on this. So what we saw from an MAU standpoint was 57 million monthly actives, relatively consistent with the end of the second quarter, up 3% year-over-year. Maybe let's just talk about some of the drivers for that and where we are seeing real growth from an engagement perspective. So first, we think longer-term, there is a significant opportunity to continue to drive growth with actives. We've got room to grow around our digital native audiences, millennials and Gen

Great. I appreciate you taking the questions tonight.

And your next question comes from the line of Dan Dolev with Mizuho. Your line is open.

Hey, guys. Good evening. Thanks for taking my question. I want to ask like a bigger strategic question, Jack. Like I saw the shareholder letter, it looks like a lot of nice returns on the lending products. Can we touch on it a little bit long-term as you think about how these different lending products are enhancing the entire ecosystem as you continue to scale? Thank you.

Yeah. Absolutely. I think this is one of the things that will ultimately set both Square and Cash App apart. It certainly did per Square in the early days when we launched what we called back as Square Capital. Just having an easy option for sellers to potentially increase their sales by getting an appropriately sized loan right to their e-mail inbox and an invite to opt into it. And then paying back through just making sales to their customers really took off. And it kind of guides how we think about all of our lending products. We want to lead with technology and that means that we have a deep understanding of our sellers, our Cash App customers, our Afterpay customers, and merchants. And we want to make it very transparent and upfront, so they know exactly what they're going to pay. There is no hidden fees and everything is visible. So they know what they're taking part -- in part of. And then and then finally is simplicity. And specifically around the payback experience, that's where it really matters. Because with a simple payback experience, it doesn't really feel like a loan. It feels like something that you can use right in time to do whatever you need to do, whether it'd be, buy a new salon chair to double your sales or just hold you over for the week before your paycheck in the Cash App case. So this will be a reason that people stay and that's traditionally one of the big reasons why people do is because they have access to something like this built right into the point-of-sale, built right into their app that they started with peer-to-peer and have moved on to banking and using the Cash App Card. I think the most exciting thing for us is putting Afterpay on the Cash App Card and then just how that extends the potential. And obviously, the scale of the Cash App Card is meaningful enough that like it really changes the game for our customers and obviously our business as well. And we think these are great options for investors in these products, but we have a lot of flexibility in the future, including SFS as we think about these products and as we move forward. But in terms of the ecosystem, today it's really focused on retaining through providing entirely new utility, which is extremely useful for these customer bases. And then little by little, as people understand the benefits, I think it becomes an acquisition channel for us, a reason why people want to download Cash App and use it. A reason why people want to download Square as a point-of-sale and use it for their business, whether that'd be one location or multiple. So it's banking as a category is a huge differentiator for us and something that we'll continue to invest in. But it also is a complement to everything else. We need to lead with all the other features that provide other utility and other revenue streams for us. We think there is a lot there, both on the Cash App side and also on the Square side, especially since we completed our orders migration, we can get back to building new things and new innovations for our sellers, whether that be software, hardware, or services. And we've looked very deeply across our entire ecosystem for those connection points, which had even more utility and entirely new network effects like Cash App to Square merchants.

Thank you so much.

And your next question comes from the line of Alex Markgraff with KBCM. Your line is open.

Hey, everyone. Thanks for taking my question. Earlier in the year, you all had indicated marketing around Cash App incentives would start in the back-half. Just sort of curious to what extent this has started and some of the early learning so far considering that the bank -- the base efforts. And then, Amrita, maybe just bring it all together for us with your earlier comments around activity levels that you're seeing among the active space more recently. Thanks.

I'm happy to get us started here. I think what we're seeing from our bank-to-base strategy is really sort of coming together. First, from a product perspective, we believe the suite of tools, financial tools that we've built is compelling relative to what's out there with traditional banks. And we're intending to increase our investment behind go-to-market to bring awareness around that. And maybe just to unpack kind of what's going on in here, we've got benefits that help drive paycheck direct deposit acquisition and improve retention, a number which are enumerated in the shareholder letter and which we've been building upon throughout the year and continue to build upon. We recently rolled out free paper money deposits as new benefit. And as I mentioned earlier, we're testing access to Borrow as a way to drive direct deposit -- paycheck direct deposit actives, encouraging signs still early. We're also bringing greater visibility to these benefits in the app. We started rolling out a new in-app experience, a new version of our money tab within Cash App in October that makes our direct deposit offering and all these sort of related benefits way more visible. We're only obviously a few weeks into this, but we're seeing high engagement and uplift in customers setting up direct deposit through that. And Cash App Card is, I think, another key piece of bringing visibility to our broader set of banking offerings and ultimately direct deposit. Obviously, as you've heard, we have a lot of excitement about bringing Afterpay to the Cash App Card and we see that as an opportunity to drive engagement and ultimately attach to our banking products and direct deposit. Specifically within go-to-market, our focus is on scaling several channels, including performance marketing, incentives, referrals, and brand marketing. And you'll see us do that in the fourth quarter included in our guide is a step-up in marketing related to that. And into 2025 with the intent of ultimately building trust and awareness around all of these financial services products. So we're pretty excited about what we're seeing. As you noted earlier, strong engagement even so far without driving a step-up in marketing, but with now bringing it all together from an awareness standpoint, we're excited to see what lies ahead.

Thanks.

And your next question comes from the line of Jeff Cantwell with Seaport Research. Your line is open.

Hey, thank you very much. Question is for Jack. Your company has been focused on Bitcoin for many years. I want to pivot a little bit away from Square and Cash App and ask about that because at the moment, increasingly sounding like there is potential opportunities for greater regulatory clarity on crypto in the U.S. So first off, do you agree with that statement? And can you maybe talk a little bit about Block's Bitcoin strategy and how you might capitalize on that development? Also, can you remind us how much BDC you have on the balance sheet and talk about whether you might be adding to that in the future? And then lastly, I'll ask online upfront. Can you just give us your thoughts on what greater regulatory clarity might mean for crypto in general? Does that kind of open up the possibility for more acceptance and usage here in the U.S. and globally? Thanks.

Yeah. I think greater clarity will definitely be extremely helpful because it allows us to move much faster because we know what the rules are and what the common understanding is, especially in the U.S. So I think this is generally a net positive for the industry. We're only focused on Bitcoin and we're only focused on Bitcoin because we want the Internet to have a native currency. And the reason we want that is because we want to accelerate our business. If we have a native currency for the Internet, it means we can move money much faster and we can offer Cash App products and Square products in every single market instead of the market-by-market push that we have to -- we have to do today. So what we're focused on in terms of our strategy overall on Bitcoin is making it more accessible, making sure that more people can access Bitcoin, buy, sell it, obviously, but also send it peer-to-peer. We want to make it more secure. Our manifestation of this is around [indiscernible] and making sure that we help in every way possible to better secure the network. Mining and our mining initiative is a big part of this. And ultimately, we want to make it usable every day. This is a longer-term strategy. This is where we get into actual payments on the Internet and having an open protocol for payments on the Internet, which it needs and it's going to happen at some point. It's just a matter of time. And Bitcoin has the strongest adoption. It has the strongest belief system and it has all the attributes necessary to trust it as a currency, including having no security issues, never being down, and having a significant developer community behind it that makes it stronger and more secure, and faster every day. If there are two areas I'd point you to in terms of manifestation of Bitcoin, it would probably be the Cash App exchange, number one, because it's the starting point for people participating in this future currency. And then second is mining. Mining is, we think going to be pretty large for us because we've been developing ASICs for quite some time. Because a specialized version of an ASIC, our competitors. There's only one main competitor here and a lot of the -- a lot of mining folks just one another option. I believe it at that, but they want another option that is reliable, that is configurable, that they can customize to their needs and whether that'd be buying the chip or the dashboard or even an entire system, having other options out there is significant. And you probably saw our announcement of one of those deals and there are more to come because there's a huge gap in the market in terms of quality of these machines and also focus on it. And we have a team that can do both, fortunately. So we will continue to look at the space and continue to work on products and features that help across those three things, accessibility, making more secure, and making it more usable every day.

And Jeff, just on your question about Bitcoin on the balance sheet, we have just over 8,300 Bitcoin on the balance sheet, which as at the end of the quarter was worth $530 million, and obviously, current trading values is worth about $100 million more than that.

Great. Thanks for all that. Appreciate it.

[Operator Instructions] And your next question comes from the line of Harshita Rawat with Bernstein. Your line is open.

Hi. Good afternoon. I want to ask about OpEx. This year you exceeded your objectives here and also came in below consent -- the constraints you place with yourself. Amrita, how do you think about further efficiency gains here from kind of streamlining resources, which you've been doing? And how does that balance against some of your go-to-market investments in Square and also marketing spend on Cash App? Thank you.

Sure, Harshita. What I would say is that we still see significant opportunity across building leverage and in multiple areas of our operating expense base. Maybe it's three key areas to call out, so that we can make room for our go-to-market initiatives where we are seeing high returns in which we do expect to accrete in terms of long-term profitable growth. But those three key areas being personnel expenses, structural costs, and corporate overhead. From a personnel perspective, we've got a people cap in place. We believe that sort of a constraint affords us creativity around and prioritization around how we focus our efforts against our strategies against delivering value to customers. And with 19% growth this quarter, 15% growth, at least 15% growth next year, you see a tremendous amount of leverage on that fixed expense base as we remain under our people cap. Secondly, from a structural cost perspective, we see further opportunities around unit costs when we look at how we operate our products, whether in partnership with others or as we run our machine-learning models from an underwriting and risk loss perspective. And then third, corporate overhead. It's a multi-year effort to examine each of our sort of key pieces around corporate overhead from T&E to professional services to cloud to software and to travel and entertainment. And we think that there is more opportunity for us to ensure that we can put as many of our investment dollars towards our customers as possible. And we also, as noted in the shareholder letter, make decisions against our own progress and hold ourselves accountable to a high bar. And as a relative of that, have made some recent decisions with respect to some of our emerging initiatives where we are reducing our team size on title and winding down our TBD efforts. But in an effort to be able to put more investment against the areas that are working that have found product market fit like our Bitcoin mining initiative, as you heard from Jack, where we have a healthy pipeline of demand or things like our self-custody wallet for Bitcoin, Bitkey, which was recently named to one of the best inventions of 2024 by time. And -- so we are continuously evaluating ourselves, our performance, and holding ourselves to a high bar and I think that's how we expect to drive further margin improvement next year.

Thank you.

And your next question comes from the line of Andrew Bausch with Wells Fargo. Your line is open.

Hey. Thank you for taking the question. I know it's been asked before, but just wanted to hone in on GPV again. And you said that growth was double-digit in October, but we're only expecting kind of a modest improvement in fourth quarter versus third quarter. So maybe you can kind of just help us understand why only a modest instead of something more robust.

Yeah. Well, look, we're still in the early days of November. So we'll know more obviously as we get through November and December. November and December typically are months that are more impacted by holiday and seasonal spending, which we don't yet have a view on, and maybe more discretionary verticals is related to that. So obviously update you as we know more. But what we did see in October is, as I noted, a couple of percentage points of improvement in the U.S. off that 4.9% year-over-year growth in Q3 and also improvement even on the international growth, which was obviously already strong at 20% year-over-year in the third quarter. And we think that there is even more opportunity as we look to 2025 and our own execution in terms of customer acquisition, in terms of all these product initiatives coming to bear.

Great. Thank you, Amrita.

And your next question comes from the line of Trevor Williams with Jefferies. Your line is open.

Great. Thanks a lot. I wanted to go back to Afterpay on Cash Card if you're able to share anything more specific in terms of timing for a broader rollout? And then any early learnings just from the more limited launch that you've done to date around how it's complementing the existing debit spend on Cash Card, anything just in terms of what kind of uplift you're seeing. Thanks very much.

Yeah. Nothing specific on the date. We want to make sure that we get the whole experience correct. But the results have been very, very encouraging from our customers. And we see that this is a meaningful opportunity for us that we're going to roll out and scale over the next short time. But the scale of the Cash App card and the functionality of Buy Now Pay Later and making sure that people can easily access and not have to think too much about it, just using their Cash App Card. And going back to what I said about our lending ecosystem, like the focus here is on technology to make sure that like we are able to offer this to as many people as possible, the transparency that they'll be able to see and trust it more because of that. And then also the simplicity and specifically where the simplicity matters is around the payback. So we're really excited about it and can't wait to continue to roll it out.

And Trevor, I'd just add, similar to what you've seen us do with our other lending products and more recently with Cash App Borrow, is that we're going to be pretty careful and methodical in terms of how we ramp the product. As you heard from Jack, we're super excited here, but we want to make sure that we're ramping, iterating, learning as we test. What we'd expect to see is initially millions of monthly actives of our Cash App Card monthly actives should be eligible next year. Obviously, a subset of them will actually convert to using the product. And that over time, we expect to grow both eligibility and do things to try to drive conversion, higher conversion over time as well. We're going to start first with the retroactive offer, which is you can effectively after you make a purchase retroactively pay in for. And then we'll expand to allow customers to turn on Afterpay before they make a purchase. So we're being deliberate both in terms of the use cases that we roll out. The number of customers that we make eligible and then looking to see how that conversion plays out over time with an eye towards ramping eligibility and conversion as we go through our time.

And we will now take our final question from the line of Andrew Jeffrey with William Blair. Your line is open.

Hi. Appreciate you sneaking me in here at the end. Amrita I wanted to ask about Cash App monetization and kind of how we think about progressing. I think first of all, just kind of what the composition of that looks like today between different drivers --interchange in particular. And whether interchange becomes a greater contributor with direct deposit. I imagine it will, but I'm just trying to dimensionalize that and think about trends and monetization.

Sure. What I would say is that we see health across -- a healthy trends across a number of different products for Cash App. When we look at what's driving the strong performance, gross profit up 21% year-over-year in the third quarter, inflow is up 13% year-over-year, monetization rate active is all growing as well. What we see is Cash App Card Borrow, our Buy Now Pay Later platform, Cash App Pay, each of these products driving meaningful growth. Cash App Card is our largest gross profit revenue stream, our primary driver of growth with both actives and spend per active growing on a year-over-year basis. It's now become a daily utility for our monthly actives. We're seeing an average of six times transactions in terms of transactions per week. And we're doing -- there's more that we can do here, drive -- putting more marketing dollars behind driving Cash App Card actives. As this is really an entry point as I was noting earlier for our customers and how they look at our broader suite of financial services products. Borrow also with strong momentum, gross profit growth up more than two times year-over-year in the third quarter. And Buy Now Pay Later, inclusive of our ads -- burgeoning ads revenue stream on that platform with 29% gross profit growth in the third quarter, 23% GMV growth, both those rates stronger than where we were in the prior quarter. So an improvement in growth. And then with Cash App Pay, we've seen tremendous momentum here. Cash App Pay monthly actives have actually now surpassed Afterpay's North American active. We're adding more and more partnerships, new enterprise merchants. We recently launched -- announced our partnership with Lyft, which has more than 23 million active riders in North America. And seeing rapid, again adoption with minimal marketing spend behind it, and we will be leaning into marketing. We just started some in the third quarter to activate some marketing campaigns and drive awareness of Cash App Pay. So again, I think we see multiple levers for continued growth and ramping of our existing products and then with new products to come like Afterpay and Cash App Card, we see further opportunity around driving engagement, monetization rate into the future.

Thank you.