Block, Inc. · NYSE:XYZ
Block — Investor Day (May 2022)
61 slides from Block's investor day presentation, May 2022
Slide 1: Business Model
Investor Day 2022 Business Model → Amrita Ahuja INVESTOR DAY 2022
Slide 2: Forward looking statements
BLOCK BUSINESS MODEL → 2 Forward looking statements During the course of this Investor Day, the executive team of Block, Inc. (the “Company”, “we”, or “our”) will make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Secur
Slide 3: Powerful business model driving growth at scale
BLOCK COHORT ECONOMICS & GROWTH → 3 Powerful business model → → → Driving Compelling Attractive growth unit structural at scale economics profitability INVESTOR DAY 2022
Slide 4: Cohort Economics and Growth
BLOCK COHORT ECONOMICS & GROWTH → Financials Cohort Economics and Growth INVESTOR DAY 2022
Slide 5: Strong growth at scale
BLOCK COHORT ECONOMICS & GROWTH 5 Strong growth at scale Driven by compelling unit Gross Profit economics across our Square and Cash App ecosystems =) Efficient acquisition of new customers S Increase of >12x since our IPO, >5x since our last Investor Day (2017) Strong gross profit retention of exis
Slide 6: Gaining share relative to the broader industry
BLOCK COHORT ECONOMICS & GROWTH 6 Gaining share relative to the broader industry Growth indexed from 2021 vs. 2017 3.0x U.S. GDP Global GDP U.S. Card Volume Global Card Square U.S. Square Global Volume Gross Profit Gross Profit Growth for each benchmark calculated as a multiplier of 2021 compared to
Slide 7: Gaining share relative to the broader industry
BLOCK COHORT ECONOMICS & GROWTH 7 Gaining share relative to the broader industry Growth indexed from 2021 vs. 2017 44x 2.8x 3.0x 1.2x 1.2x 1.5x 1.5x Es as | U.S. GDP Global GDP US. Card Global Card Square U.S. Square Global Cash App U.S. Cash App Global Volume Volume Gross Profit Gross Profit Gross
Slide 8: Square Ecosystem
BLOCK Financials Square Ecosystem Cohort Economics and Growth
Slide 9: Initial quarterly sales and marketing spend to acquire a cohort
BLOCK COHORT ECONOMICS & GROWTH 9 Initial quarterly sales and marketing spend to acquire a cohort of customers $ D" 7 in initial sales and $ 4 5 in initial sales and 2 2017 coh M marketing investment Q2 2015 Cohort M marketing investment Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q2 2017 Q3 2017 Q4 201
Slide 10: Profit exceeded initial sales and marketing spend in four quarters
BLOCK COHORT ECONOMICS & GROWTH Profit exceeded initial sales and marketing spend in four quarters $32 in cumulative gross M profit in four quarters Q2 2015 Cohort (27M) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 $52 in cumulative gross M _ profit in four quarters Q2 2017 Cohort ($45M) Q2 2017 Q3 2017
Slide 11: Continued to grow with cohorts becoming larger
BLOCK COHORT ECONOMICS & GROWTH .. and continued to grow with cohorts becoming larger $1 BI m insarwetve srs $202 m eumenegress profit in four years profit in four years $202M $139M ($27M) ($45M) Q2 Q4 Q2 Q4 Q2 Q4 Q2 4 Q2 Q2 a4 Q2 4 Q2 4 Q2 Q4 Q2 2015 2015 2016=S 2016 = 2017 2017-2018 = 2018 = 2019
Slide 12: Strong returns on go-to-market spend
BLOCK COHORT ECONOMICS & GROWTH 12 We have seen strong returns on investments on our go-to-market spend 10x 8x 6x 4x 2x Q2 2017 returns over @ a22015 4 years Ox For definition of “return on investment (RO!)" please see Appendix beginning on slide 53. 3x benchmark based on pacing of existing cohorts.
Slide 13: Efficient paybacks and positive retention drive lifetime value and ROI
BLOCK COHORT ECONOMICS & GROWTH — Efficient paybacks and positive retention have driven strong customer lifetime value and return on investment 20x 15x 10x 5x returns over 10 years ox For definition of “return on investment (RO!)” please see Appendix. Each line represents quarterly cohorts from Q2 2
Slide 14: Positive dollar-based retention has led to recurring revenue streams
BLOCK COHORT ECONOMICS & GROWTH — Positive dollar-based retention has led to recurring revenue streams Gross Profit by Cohort Positive gross profit retention for each annual cohort from 2012 to 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021 Cohort 2020 Cohort 2019 Cohort 2018 Cohort 201
Slide 15: Remarkable products drive strong retention relative to benchmarks
BLOCK COHORT ECONOMICS & GROWTH — 15 Remarkable products drive strong retention relative to industry benchmarks Annual average retention 2019 - 2021 10% -20% Merchant Acquirers Public SaaS Square Average Median Sources: The Strawhecker Group's (TSG) Acquiring Industry Metrics (AIM) analytics platfor
Slide 16: Product adoption can enhance cohort economics
BLOCK COHORT ECONOMICS & GROWTH Product adoption can enhance cohort economics Gross profit increased by 3.5x as seller adopted more products, expanded into new channels Seller example: Gross profit opportunity for an individual seller. Retail seller with $500,000 in annual GPV across two locations a
Slide 17: Evolving mix to software, integrated payments, and financial services
BLOCK COHORT ECONOMICS & GROWTH — Evolving mix to software, integrated payments, and financial services $2.4B $14B pF @ international $0.8B PT @ vs Banking $0.48 U.S. Software & ——— EE Integrated Payments U.S. Sidecar Payments 2015 2017 2019 2021 Square gross profit mix excludes hardware gross profi
Slide 18: Gross profit per seller has increased
BLOCK COHORT ECONOMICS & GROWTH — 18 Gross profit per seller has increased with an expanding ecosystem and growth upmarket Gross profit per seller 2015 2017 2019 2021 Square gross profit mix excludes hardware gross profit losses, and 2015 excludes Starbucks gross profit. Gross profit per seller repr
Slide 19: Cash App Ecosystem
BLOCK COHORT ECONOMICS & GROWTH → Financials Cash App Ecosystem → Cohort Economics and Growth INVESTOR DAY 2022
Slide 20: Monthly actives increased 3x over the past 3 years
BLOCK COHORT ECONOMICS & GROWTH 20 Our network of monthly actives has increased 3x over the past 3 years Monthly Transacting Actives Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 For definition of Cash App “transacting active" or “active” please see Appendix beginning on slide 53
Slide 21: Efficient acquisition of new actives
BLOCK COHORT ECONOMICS & GROWTH → 21 CASH APP With efficient acquisition of new actives Our acquisition spend includes: 10 → Referrals and incentives $ ~ → Brand awareness and social marketing → Paid marketing channels Acquisition cost in 2021 For definition of Cash App “acquisition spend” please see
Slide 22: Cash App sales and marketing includes acquisition spend
BLOCK COHORT ECONOMICS & GROWTH 22 Cash App sales and marketing includes acquisition spend Cash App sales and and various non-discretionary marketing expense (2021) expenses 2 8 % Acquisition spend (e) we use to calculate our $10 cost of acquisition @ vtre [ ) Acquisition Spend 63% P2P expenses O we
Slide 23: Initial monthly acquisition spend to acquire a cohort of actives
BLOCK COHORT ECONOMICS & GROWTH — 23 CASH APP Initial monthly acquisition spend to acquire a cohort of actives S] Let imecourts Tuy 2007 Conor $B Ou meccurc 1. M_ in acquisition spend . M_inacquisition spend uly 2019 Cohort July Sept Nov Jan Mar May July july Sept Nov Jan Mar May july 2017 2018 2019
Slide 24: Profit exceeded acquisition spend in less than a year
BLOCK COHORT ECONOMICS & GROWTH — 24 Profit exceeded acquisition spend in less than 12 months $ in cumulative gross $ in cumulative gross rofit net of P2P rofit net of P2P 2 1 M P . July 2017 Cohort M P . July 2019 Cohort . expenses in one year . expenses in one year $11.2M $2.1M ($1.4M) ($3.9M) Jul
Slide 25: Continued to grow with cohorts becoming larger
BLOCK COHORT ECONOMICS & GROWTH — 25 .. and continued to grow with cohorts becoming larger in cumulative gross in cumulative gross $6.5 yq Botact ote °B3.3 meee ie e expenses in two years e expenses in two years $33.3M $6.5M 1.4M ($1.4M) ($3.9M) July Nov Mar July Nov Mar July July Oct Jan Apr July O
Slide 26: Strong returns on acquisition spend
BLOCK COHORT ECONOMICS & GROWTH 26 We have seen strong returns on investments on our acquisition spend 20x 15x 1ox 5x e July 2019 returns over 3 years ox July 2017 For definitions of Cash App “return on investment (ROI)" please see Appendix beginning on slide 53.
Slide 27: Efficient paybacks and positive retention drive lifetime value and ROI
BLOCK COHORT ECONOMICS & GROWTH 27 Efficient paybacks and positive retention have driven strong customer lifetime value and return on investment 12x 10x 8x @ 221 & @ 2020 4x e 2019 2x @ 208 returns over 3 years Ox 2017 For definitions of Cash App “return on investment (ROl)” please see Appendix begi
Slide 28: Strong gross profit retention has led to recurring revenue
BLOCK COHORT ECONOMICS & GROWTH 28 Strong gross profit retention has led to recurring revenue streams Gross Profit by Cohort >125% gross profit retention for each annual cohort over the past four years 2021 2020 2019 2018 | 2017 Pre-2017 2017 2018 2019 2020 2021 For definition of Cash App “gross pro
Slide 29: Greater weekly and daily engagement
BLOCK COHORT ECONOMICS & GROWTH — 29 CID We have driven greater weekly and daily engagement @ Monthly Actives @ weekly actives Daily Actives 2015 2016 2017 2018 2019 2020 2021 -46m monthly actives on average in March 2022 -27 “Ts weekly actives in March 2022 (~2 in 3 monthly actives) daily actives i
Slide 30: Gross profit per active has increased 4x since 2017
BLOCK COHORT ECONOMICS & GROWTH — 30 Gross profit per active has increased 4x since 2017 Annual gross profit lz i) 7 a ' | per active Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q4 2021 For definition of Cash App “active” please see Appendix. Gross profit per monthly transacting active is calculated bas
Slide 31: Product adoption can enhance cohort economics
BLOCK COHORT ECONOMICS & GROWTH — 31 Product adoption can enhance Annual gross profit for an ideal Cash App active cohort economics $250 Gross profit increased by >10x as active adopted more products and expanded share of wallet $200 $150 $225 $100 Illustrative Cash App active example: | | Gross pro
Slide 32: Product adoption has driven greater inflows and monetization
BLOCK COHORT ECONOMICS & GROWTH — 32 Product adoption has driven greater inflows and monetization 8x Inflows multiplier by product ac’ ex 4x Ox | Peer-to-peer Stock Cash App Taxes Borrow Direct only Trading Card Deposit For definition of Cash App “active” please see Appendix. Represents monthly acti
Slide 33: Levers to grow and monetize inflows (2017-2019)
BLOCK COHORT ECONOMICS & GROWTH 33 With a number of levers to grow and monetize inflows From 2017 to 2019, gross profit was driven primarily by growth in actives 2019 Monetization Rate ‘on Inflows Inflows per Active Actives Cash App Gross Profit For definition of Cash App “active” please see Appendi
Slide 34: Levers to grow and monetize inflows (2019-2021)
BLOCK COHORT ECONOMICS & GROWTH — 34 With a number of levers to grow and monetize inflows From 2019 to 2021, inflows per active becamethe primary = | _qiaiatitueeteee —- — nnn driver of gross profit growth $2,071M e Monetization Rate on Inflows e Inflows per Active von @ actives a od Cash App Gross
Slide 35: Growth across a diversity of services and revenue streams
BLOCK COHORT ECONOMICS & GROWTH — 35 We have driven growth across a diversity of services and revenue streams Gross profit by category Bitcoin (Consumer Trading) Financial Services (Cash App Card) @ community (P2P) 2017 2018 2019 2020 2021 Community (P2P) equals gross profit from Instant Deposit, bu
Slide 36: Afterpay
BLOCK COHORT ECONOMICS & GROWTH Afterpay Cohort Economics and Growth
Slide 37: Afterpay complements Square with strong merchant retention
BLOCK COHORT ECONOMICS & GROWTH 37 Afterpay complements Square with strong merchant retention Gross Merchandise Volume (GMV) by Afterpay Seller Cohort Positive Afterpay seller GMV retention for each annual cohort from @ 221 2016 to 2021 C ) 2020 @ 2019 po Pre-2018 Cohort 2018 2019 2020 2021 Afterpay
Slide 38: Afterpay complements Cash App with strong consumer retention
BLOCK COHORT ECONOMICS & GROWTH — 38 Afterpay complements Cash App with strong consumer retention Consumer GMV by Cohort Positive Afterpay consumer GMV retention for each annual cohort from 2016 to 2021 2018 2019 2020 2021 2021 2020 2019 2018 Pre-2018 Cohort Afterpay Gross Merchandise Value or GMV i
Slide 39: Strong and healthy balance sheet provides optionality around funding
BLOCK COHORT ECONOMICS & GROWTH 39 FINANCIALS Strong and healthy balance sheet provides optionality around funding Free Cash Flow in available liquidity on Ga our balance sheet 2015 2017 2019 2021 For definition of “free cash flow" please see Appendix.
Slide 40: Balance sheet and funding by product
BLOCK COHORT ECONOMICS & GROWTH → 40 FINANCIALS Strong and healthy balance sheet provides optionality around funding Product Performance attributes Near-term funding Longer-term intent Duration Loss rates Sell majority of loans to Sell majority of loans to Square Loans <12 month <4% loss rate third-
Slide 41: Investments & Profitability
BLOCK INVESTMENTS & PROFITABILITY → Financials Investments & Profitability INVESTOR DAY 2022
Slide 42: Ecosystems inform organizational structure and investment decisions
BLOCK INVESTMENTS & PROFITABILITY → 42 FINANCIALS Our ecosystems inform our organizational structure and investment decisions TBD Spiral Bitcoin Wallet Square TIDAL Emerging Bitcoin Cash App Initiatives Mining INVESTOR DAY 2022
Slide 43: We evaluate each ecosystem independently
BLOCK INVESTMENTS & PROFITABILITY → 43 FINANCIALS We evaluate each of our ecosystems independently, which enables us to be dynamic and move quickly Square Cash App → Unified product, go-to-market, and strategy within each ecosystem TBD → Independent investment decisions Spiral Bitcoin Wallet → Distin
Slide 44: Largest ecosystems have achieved strong profitability
BLOCK INVESTMENTS & PROFITABILITY → 44 FINANCIALS Our largest ecosystems have achieved strong profitability 2021 Adjusted Fully- Burdened Profit Margin (as % of Gross Profit) 34 % 12 % Square Cash App For these purposes, corporate overhead is allocated by cost center to each ecosystem based on a driver
Slide 45: Attractive structural profitability
BLOCK INVESTMENTS & PROFITABILITY → 45 FINANCIALS And benefit from attractive structural profitability Fixed Costs Variable Costs Product investments: Acquisition and growth: → Engineering, data science, → Marketing expenses and design teams → Sales teams → Software and data Corporate overhead: Ongoin
Slide 46: Square has benefited from high structural margins
BLOCK INVESTMENTS & PROFITABILITY — 46 FINANCIALS Square has benefited from high structural margins, which have remained relatively stable over time Structural Margin 80% 1- (variable costs as a % of gross profit) 60% % 40% 20% Structural margins in the 60% to 70% range from 0% 2021 2018 through 202
Slide 47: Cash App has achieved strong structural margins
BLOCK INVESTMENTS & PROFITABILITY — a7 FINANCIALS Cash App has also achieved strong structural margins, which have improved significantly in recent years Structural Margin 40% 1- (variable costs as a % of gross profit) 30% 20% 10% Structural margin sh expansion over time from 0% : : 2021 4% in 2018
Slide 48: Leverage from fixed expenses
BLOCK INVESTMENTS & PROFITABILITY — 48 While for our overall company, we have driven leverage from our fixed expenses Block Fixed Costs (as a % of gross profit) 80% 60% oe — — 0% 2015 2017 2019 2021 Please see Appendix on slide 53 for a reconciliation and information on expense categories.Fixed expe
Slide 49: Building and scaling new, emerging ecosystems
BLOCK INVESTMENTS & PROFITABILITY → 49 FINANCIALS We’re also focused on building and scaling new, emerging ecosystems for new customer audiences Creators Consumers Bitcoin Developers Bitcoin Bitcoin TIDAL TBD Spiral Wallet Mining INVESTOR DAY 2022
Slide 50: Discipline around investments in TIDAL and bitcoin ecosystems
BLOCK INVESTMENTS & PROFITABILITY → 50 FINANCIALS Maintaining discipline around our investments into our emerging TIDAL and bitcoin ecosystems 3 % Evaluating investments based on: < → Team and strategy → Product roadmap of 2022 non-GAAP → Business model and growth potential operating expenses Repres
Slide 51: Less than 3% penetrated of ~$190 billion addressable market
BLOCK INVESTMENTS & PROFITABILITY → 51 FINANCIALS Less than 3% penetrated of ~$190 billion addressable market ~ 190 + B < 3 % Opportunity Penetration Penetration is calculated based on 2021 company gross profit as a percentage of the overall estimated market opportunity for Square and Cash App, which
Slide 52: Investment thesis
BLOCK INVESTMENTS & PROFITABILITY → 52 FINANCIALS Investment thesis → Each ecosystem with multiple vectors for growth → Differentiated ecosystem of ecosystems approach → Strong cohort economics driving attractive long-term returns → Operating model built to drive continued innovation INVESTOR DAY 20
Slide 53: Appendix
BLOCK BUSINESS MODEL → Business Model Appendix INVESTOR DAY 2022
Slide 54: Appendix: definitions
BLOCK BUSINESS MODEL → 54 Appendix Slide 12 Slide 15 Slide 21 “Return on investment (ROI)” measures the effectiveness of Merchant Acquirers Average is calculated as an average of Cash App “acquisition spend” includes paid marketing, sales and marketing spend. ROI is calculated by dividing annual net
Slide 55: Appendix: definitions
BLOCK BUSINESS MODEL → 55 Appendix Slide 28 Slide 40 Cash App “gross profit retention” is calculated as the “Turnover”, or “turnover of receivables”, or “accounts year-over-year gross profit growth of an annual Cash App receivable turnover” is the number of times per year that customer cohort, excludi
Slide 56: Cash App Margins - Reconciliation to GAAP
BLOCK BUSINESS MODEL → 56 Cash App Margins - Reconciliation to GAAP Variable expenses are investments that we incur to drive the next dollar of gross profit growth, and these typically scale with gross profit. These include discretionary expenses such as sales & marketing investments and teams, custom
Slide 57: Square Margins - Reconciliation to GAAP
BLOCK BUSINESS MODEL → 57 Square Margins - Reconciliation to GAAP Variable expenses are investments that we incur to drive the next dollar of gross profit growth, and these typically scale with gross profit. These include discretionary expenses such as sales & marketing investments and teams, customer
Slide 58: Fixed Expenses
BLOCK BUSINESS MODEL → 58 Fixed Expenses Variable expenses are investments that we incur to drive the next dollar of gross profit growth, and these typically scale with gross profit. These include discretionary expenses such as sales & marketing investments and teams, customer success teams, as well a
Slide 59: Gross Profit excluding Caviar - Reconciliation to GAAP
BLOCK BUSINESS MODEL → 59 Gross Profit excluding Caviar - Reconciliation to GAAP ($ in thousands, unaudited) 2015 2016 2017 2018 2019 2020 2021 Total gross profit 345,195 576,038 839,306 1,303,700 1,889,685 2,733,409 4,419,823 Less: Caviar contribution to total gross profit (462) 6,967 15,578 36,369 41
Slide 60: Square Gross Profit - Reconciliation to GAAP
BLOCK BUSINESS MODEL → 60 Square Gross Profit - Reconciliation to GAAP ($ in thousands, unaudited) 2015 2016 2017 2018 2019 2020 2021 Square gross profit 345,283 564,022 776,633 1,072,496 1,390,427 1,507,831 2,316,671 Less: Hardware contribution to Square gross profit (14,497) (24,255) (20,978) (25,611
Slide 61: Free Cash Flow - Reconciliation to GAAP
BLOCK BUSINESS MODEL → 61 Free Cash Flow - Reconciliation to GAAP We define free cash flow as net cash provided by (used in) operating activities adjusted to eliminate for the effects of settlements receivables, customers payable, settlements payable, and PPP loans less purchase of property and equipm