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Around the Desk: This is where we at Avory think out loud, challenge narratives, and look for signal through the noise. Each episode, the Avory & Co. team dives into what’s moving markets, how companies are performing, and where opportunities may be forming. We break down earnings, macro trends, and investor sentiment — all from the lens of a concentrated, high-conviction portfolio.
*** The views expressed on Avory Podcast: Around the Desk are those of the hosts and guests and do not constitute investment advice. This podcast is for informational purposes only and should not be relied upon to make investment decisions. All investments involve risk, including potential loss of capital. Avory & Co. may hold positions in the companies discussed.
All right, let's get started.
Blocks Q3 postmortem short and quick.
Uh, I'll be in San Francisco
in a couple weeks at the
investor day, so see you there.
If you're there, ping me.
You know, we can, uh, you
know, grab coffee or something.
So you're listening to Avory's
around the desk podcast, where we
dig into markets, companies, and
ideas shaping what is coming next.
I'm Sean Emory, co-founder and chief
Investment Officer here at Avory.
End company in Miami.
Come check us out.
Quick reminder, though, this conversation
is for informational purposes only.
Should not be considered
investment advice.
We may hold positions in some
of the companies discussed.
Please do your own research before
making any sort of investment decisions.
So we are investors in block just
for disclosure purposes, a little
background there, 2016 to around 2021.
We made our first investment.
Did really well with it.
Uh, sold it, you know, in, in the moments
of frenzy and reengaged with the story
here over the last, you know, right around
these levels in terms of pricing and today
is a postmortem on their Q3 2025 results.
I think some of this setup, um, post
earnings would've envisioned a market
reaction that was incredibly favorable.
Uh, if you think about it
in some context of the why.
You know, block came into
the year somewhere around,
you know, 90 bucks a share.
You know, uh, some momentum in terms
of, uh, perception from the investment
community sold off a little bit.
Uh, post the Q1 to Q2 guide.
Uh, and we're back to that same guide,
meaning numbers have ratcheted up,
uh, except this time I think the
construct of that growth is different.
Growth is now accelerating.
Both on Square and on Cash app.
We have a new name in the mix
or new, uh, you know, ecosystem.
Call it the proto mining
for Bitcoin mining.
Also seeing some revenue growth here.
Uh, but both ecosystems, the core,
you know, cash app and Square, you
know, are showing real momentum again.
And, and this time feels,
you know, fairly durable.
Um, and I'll tell you a little bit why.
So let's start with Cash App Momentum.
Uh, you know, because ultimately I think,
you know, the investment community,
this is the heartbeat of the business.
Uh, in terms of, you know, future
growth, just given the optionality
that I think a digital wallet has.
Um, some of the numbers, you know,
primary banking actives, which is a big
number that they are providing, uh, to
really illustrate, you know, those that
are, uh, you know, a little bit more
entrenched in the ecosystem that hit 8.3
million, growing 18% year over year.
They gave some intra quarter, meaning
some October numbers as well, and
those numbers accelerated once again.
Uh, inflows proactive or transacting
active, you know, up to about
1366, and then gross profit
proactive up 25% year over year.
So very healthy numbers.
Uh, you know, in a, in a
world where people are, you
know, talking about the macro.
You know, being weak or weakening.
Um, and ultimately I think, you know,
the markets in general are very focused
on the macro over the micro focus.
More on some of these more, you
know, again, AI initiatives and we'll
talk a little bit about that, but.
Ultimately, you know, cash
app square block is, you know,
performing pretty well here.
Um, so all of those numbers, they just
gave primary banking, actives, gross
profit, proactive, you know, that's
the compounding we, we do wanna see.
They have their cash app borrow product,
which again, you know, they've been.
Discussing this for, you know, some time
here, which is, uh, expanding that across
the country and doing so in a prudent way
yet, you know, if you look at the numbers,
they're pretty, uh, incredible, you know,
origination volume up 134% year over year.
Uh, and they're, they're keeping
loss rates, you know, sub 3%.
And I think this is important,
and I think am Rita, um, you know,
the CFO, uh, illustrated, the, uh.
Context or importance
of a borrow customer.
And I wrote a little piece on X,
just really articulating why I think.
You know, there's something special here.
Um, you know, borrow users are three
x more engaged, two x more card spend,
uh, and three x higher retention.
Uh, they hold direct deposits, you know,
they use cash app card, they trade, you
know, stocks and you know, some of the
Bitcoin stuff and they see, uh, send,
um, you know, pure payment to payment.
Uh, all of which I think
makes it, you know, um.
Much stickier, higher retention.
And so when you, when you take
those nuggets, um, and we know
that, you know, gross profit.
Uh, you know, per active, you know, is
somewhere around 94 bucks, um, you know,
at a loss rate of 3% for the borrow
customers, I think ultimately borrow
customers are net accretive to the, the
entire ecosystem by a, by a, a long shot.
And incrementally, again, activity from a
borrow user far exceeds that 3% loss rate.
And it, instead of it being, you
know, kind of this lending risk
because they have this ecosystem of
other ways to monetize, you know,
it really becomes a growth engine.
Uh, and you can monetize the
customer outside of the loss
rate, which again, is sub 3%.
So they're showing, you know, their
ability to, uh, scale and manage, um, you
know, their loss rates on that product.
So it's, it's great on the square side.
Um, you know, this
continues to accelerate.
You know, GPV came in at 67,
you know, billion dollars, uh,
you know, double digit growth.
Uh, some of the fastest growth
they've seen in quite some time.
Um.
You know, in terms of, you know, that's a
quarter of a trillion of, of, uh, payment
volume going through their ecosystem.
So this is a big player growing
double digits in a, in a macro
economy that people are questioning.
So I'm not sure how the numbers
are showing up there, but
mid-market sellers were up 20%.
So they, they're seeing some of these
larger sellers, sellers, these cohorts.
They landed their largest, um, Canadian
customer, uh, with 80 locations.
Uh, they landed cats, deli, um.
Which is obviously a signature name
and food and beverage, you know, new
volume added, uh, or volume in general.
Like it, it went from 2% growth,
uh, a couple years ago to 30% now.
So again, there's a major
shift happening at Square.
Uh, I think Nick Mullner, who, you
know, came with the acquisition of
Afterpay was on the earnings call.
Um.
Very, very, you know, strong executive.
And he mentioned a couple different facts
that I'll share here real quick, which
is number one, 70% of new volume is still
coming in from self onboarded sellers.
So there's still this like organic,
um, you know, product led motion.
Um, but they are growing their.
They're Salesforce.
So they had, you know,
roughly 90 field sales reps.
So people in the, in the field, you
know, selling to sellers, um, to,
uh, onboard, uh, yet, and, and that
again, that's showing and assisting
in some of the acceleration here.
Uh, but then you have an interesting
nugget that he shared, which
I think is super important.
When we think forward, everyone's
concerned about generative AI and
some of, uh, you know, search going
from, you know, Google search,
traditional search, blue links to.
Uh, more of this generative, uh,
you know, ecosystem where the
answer is essentially given to you.
And, you know, he made the nugget
that, that, um, square ranks number
one for AI related, uh, SMB search
keywords on, on these platforms.
So, uh, I think if you're, if you're
also thinking about future proofing a
sales led or a product led model, um, you
know, they're insulated there as well.
So they have people in the field.
Uh, I think he mentioned that in October,
uh, that, you know, there's already a over
a hundred field sales reps, so, you know,
they've already added, call it 10, 15%
more people, um, to their sales motion.
Uh, now I think some of the story
around AI was totally, uh, non-existent
in this, and I, I expect to see
more here at the investor day,
uh, coming soon, but I, I think.
This was missed.
And I think it's important to understand
how deeply embedded it seems like
AI is, is happening within block.
You know, we're focusing
on the accelerating growth.
I think that matters a lot, but
under the hood, I think there's
a full transformation happening.
You know, block built its own open
source AI operating system called
Goose, and on the call they said.
Every single person at the company
now uses GOOSE in their workflows.
I think that's wild, you know,
to think about, and I would
love to see that in motion.
But it's driving productivity for
the business, real cost leverage.
We see that in the numbers.
It's becoming really an operating
layer for the entire company.
Um.
And we're already seeing
signs of that kind of rollout,
uh, across into the product.
You know, a month ago, square launched,
you know, their AI driven tools across,
you know, restaurant management, you
know, finance in terms of companies
managing their, their business on square.
And retail as well.
You know, really helping, you know,
these owners analyze performance,
automate task and you know, make
ultimately smarter decisions.
And that's how I think they
can scale their software.
But ultimately I think what it
could do as well is drive retention.
Um, as you embed it across,
you know, the ecosystem, it
would make it harder to switch.
Um, so I think that's important.
And it's not just square goose is also.
Possibly, or just AI in general.
I think it's, it's likely gonna
show up here in Cash App soon.
Um, and I say that because there
was a little nugget on the earnings
call where he mentioned that they're
investing in AI capabilities that, you
know, one day could extend into kind
of like investment related product.
So my take on that is, is simple,
as you know, cash App will become
much more of a, you know, portfolio
investment, you know, product.
That's my hope.
Uh, but also, you know, it seems like that
is, you know, potentially on the roadmap.
Again, next week we'll get a
Cash app announcement on product.
Um, so let's see what happens there.
But I expect more, uh, investment
related solutions over the next
three to 12 months in, in Cash app,
which would be pretty powerful.
Um, last couple things here.
You know, I think, uh, execution, uh, is.
Is happening.
It's a subtle shift that I don't
think people are listening to.
Let's say.
Um, I think the clear visibility or the
clear signal here is that Jack took a
backseat on the earnings call Jack Dorsey,
who's, you know, founder, CEO, visionary.
Uh, instead you had, you know, um, Owen
and Nick Molnar, who led the discussion
for the most part and led the q and a.
And ultimately you're taking, you
know, they're visionaries too,
obviously, in their own right.
Um, but they're taking, you know,
a a, a forward facing role and, you
know, they're the ones really on,
on, like executing the day to day.
Uh, so it's a big change.
I think it's a big signal.
Uh, I think while, you know, I actually,
you know, as a multi, you know, two time
investor in, in Square at the First and
Block now, um, have appreciated Jack.
I think he's, you know, one
of the best visionaries and
one of the best entrepreneurs.
You know, out there, period.
Um, but in some ways he gets, you
know, a bad rap from the investment
community for different reasons.
Um, but you know, not from us.
Uh, but ultimately I think bringing
some of the people that are executing
day to day and also visionaries in
their own right, uh, is a smart move.
Now there's also proto and um, um, I
expect to hear more from this on Investor
day, but you know, it generated roughly
29 million in its first quarter ever.
Again.
This is Proto Mining.
They're bitcoin mining rigs,
beautiful devices, you know,
competing against Bitmain, which
is the largest out of China.
You know, we're trying to create
and, um, mine Bitcoin locally in
the us you know, um, clearly, uh.
You know, Purto Mining is set up well,
uh, to be the infrastructure for that.
Um, what's next?
You know, I think Catalyst, you know,
coming up, uh, you know, I articulated
this a little bit in, you know, a
little post here, but Cash App product
announcements are coming next week.
I think.
Uh, this could be, you know,
let's just wait and see, but at
the end of the day, you know,
we're a week away from a Cash app.
Product announcement, again, goes
back to the idea that management.
It is much more focused on articulating
to not the only, the investment
community, but to the, you know,
the community more widely that.
You know, there's a
new, uh, strategy here.
You know, they had their square launch
product, events, cash app launches.
So there's this, uh, incentive or,
you know, initiative to be front
facing on product announcements.
Number two is, uh, investor Day.
So we got new products from Cash App
in a week, and then two weeks from now
we have Investor Day in San Francisco.
I expect, you know, 2026 guidance.
You know, deeper economic, uh,
analysis on whether it's borrow or some
other things, some cohort insights.
Uh, and then I expect some more
stuff on obviously AI, just given
that it's running center today.
And would love to hear something
about proto, see where it is,
you know, how, how do they make
money there, software, hardware.
Uh, but ultimately, look, my
takeaway is, you know, this is
clearly, uh, execution in motion.
Uh, you know, both
ecosystems are accelerating.
AI is being embedded across the stack
internally and externally, and leadership
feels more operational than ever.
Um, they have the vision now you, you
operate, it shows up in the numbers top
line, bottom line, when you connect all
these dots, borrow GOs, self onboarding,
proto mining, you know, you really have
multiple layers of compounding and, you
know, that's how I'm thinking about it.
So.
You know, future, uh,
looks bright for block.
Um, we're on the train.
Uh, so that is it for
around the desk postmortem.
You know, if you haven't checked out, you
know, all our other work, we have other
podcasts on, you know, different things
that are happening across this space.
So see you next time.