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Block’s focus on streamlining has paid off, with parent company Square posting a surprise profit in its latest quarter.
Shares rose more than 7% in extended trading Thursday.
The company on Thursday reported fourth-quarter net income of $10 million, or 2 cents a share, compared with a loss of $541 million, or 93 cents a share, a year earlier. Analysts tracked by FactSet had expected a loss of 1 cent per share.
Block on an adjusted basis
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Earnings per share were 45 cents, below the FactSet consensus of 58 cents per share. However, Block also reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $562 million, above the consensus view of $448 million.
“The driving force is the continued growth of our large scale business,” Chief Financial Officer Amrita Ahuja told MarketWatch. The company has achieved “consistent growth” in both its Square and Cash App ecosystems, while striving to streamline its operations by reducing headcount to fewer than 12,000 employees.
As the block refocuses its strategy on both sides of the business, the constraints are “becoming clearer for us,” Ahuja said. Last quarter, the company outlined its strategy for its Square seller business to investors, including a push to more localize its go-to-market approach and better incorporate artificial intelligence.
This time, the company focused on Cash App in a letter to shareholders, outlining its goal to involve more customers in its banking services.
“We believe there is an opportunity to advance and build key banking relationships with these customers,” Ahuja said. The company’s Cash App debit card could act as a “gateway” to encourage users to try the company’s other banking services, with Block introducing the card early in the onboarding process for new users. Did.
The “holy grail” for many financial services companies is to receive direct deposits from consumers. That’s a priority for Brock as well.
The company says, “We see a significant increase in value and engagement when our customers choose to deposit their paychecks with us. Active Cash App Card users who deposit at least $2,000 in paychecks each month receive Cash App Card users who don’t deposit spend almost six times as much as active users.” “Using the Cash App,” according to the letter to shareholders.
Overall, Cash App had 56 million monthly active users transacting in December, an increase of 9% year over year. Total inflows in the fourth quarter were $63 billion, up 18% year-over-year and 2% sequentially.
Cash App posted gross profit of $1.18 billion, up 25% year over year.Analysts are focusing on the gross profit rather than the revenue of Block’s business because it generates a large amount of Bitcoin.
BTCUSD
With almost no profit margins, it is a revenue that obscures growth trends in other regions.
Square’s Seller business posted gross profit of $828 million in the fourth quarter, an 18% increase.
Overall gross profit increased 22% to $2.03 billion, slightly above the FactSet consensus of $1.97 billion. Revenue was $5.77 billion, compared to analysts’ expectations of $5.7 billion.
Looking at the first quarter, Block modeled gross profit at $2 billion to $2.02 billion, while analysts expected it to be $2.01 billion. The company also expects adjusted EBITDA of $570 million to $590 million, above the consensus estimate of $520 million.
The company’s “initial” guidance calls for full-year gross profit of at least $8.65 billion and adjusted EBITDA of at least $2.63 billion. Analysts had expected sales of $8.75 billion and $2.4 billion, respectively.
“This outlook does not assume further macroeconomic deterioration that could impact our results,” Block said in a letter to shareholders.
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