Block reports revenue, profit topping expectations amid bitcoin drag

by James · February 23, 2023

Payments company Block ( SQ ) reported fourth-quarter results after Thursday’s close that beat Wall Street expectations on the top line but missed earnings.

Consumer spending for the company remained resilient in the face of a slowing economy, the company said.

After earnings, shares of Block, formerly known as Square, rose more than 5% in after-hours trading.

Here are the headlines for the company’s quarter, against data from Bloomberg:

Revenue: $4.65 billion vs. $4.57 billion expected
Adjusted earnings per share: $0.22 vs. expected $0.28
Gross profit: vs. $1.66 billion expected $1.63 billion

“Over the past year, our ecosystem model has helped increase resilience as we continued to serve a diverse base of global customers across a wide range of verticals, complementary products and use cases,” said Block.

Block’s point-of-sale business, Square, reported gross profit of $801 million, up 22% from a year earlier, but was surpassed for the first time since early 2021 by Cash App.

With $848 million in gross profit, the company’s consumer-facing Cash App business topped analysts’ forecasts of $799, up 64% year over year.

Monthly active users for Block’s Cash app rose to 51 million, meeting Wall Street expectations.

“As we look ahead to 2023 and beyond, we are focused on balancing growth and efficiency and will prioritize speed, agility and accountability. This framework will ensure we remain customer-led while building a disciplined and sustainable business for the long term,” Block added in the release.

In the fourth quarter, bitcoin gross profit was $35 million on $1.83 billion in revenue, a narrower margin on higher revenue than Wall Street expected. Bitcoin revenue represents the amount of bitcoin the company sold to customers during the quarter.

For the full year 2022, Cash App generated $10.6 billion in revenue and $2.95 billion in gross profit, down 14% and up 43%, respectively, year over year.

The company said the decline in revenue was driven by a decline in the total dollar amount of bitcoin sold to customers, which it recognizes as bitcoin revenue. Bitcoin’s gross profit was 2% of bitcoin revenue in the quarter.

Afterpay contributed $196 million in gross profit to Block’s bottom line, up from $150 million in the third quarter. Block acquired the BNPL operator for $29 billion in the summer of 2021. For the full year, Afterpay generated $588 million in gross profit.

After the earnings release, Block published a note showing that delays for Aftrerpay rose 31% to a total amortized cost of $2 billion through the fourth quarter. Rising defaults suggest Afterpay may need to tighten credit to customers, reducing the division’s revenue in future quarters.

During the earnings call, Block co-founder and CEO Jack Dorsey announced that CFO Amrita Ahuja will assume the role of CEO in a broader consolidation of the company’s enterprise team into a single organization.

CFO Ahuja said in the coming year, Block expects to slow hiring, increasing headcount by 10% compared to 46% growth in 2022.