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Jack Dorsey co-founded Block and remains its chairman, but is no longer CEO.
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Block said on Thursday that Bitcoin revenue in its Cash App unit is down 34% in the second quarter, but the fintech, co-founded by Jack Dorsey, still managed to beat Wall Street estimates by 2 cents. .
In aftermarket trading, shares fell more than 7%.
Block reported a second quarter loss attributable to common shareholders of $208 million, or 36 cents per diluted share, for the three months ended June 30. This compares to $204 million in profit attributable to common shareholders, or 40 cents per diluted share, for the same period in 2021.
On an adjusted basis, Block reported second quarter net income of approximately $110.7 million, or 18 cents per diluted share for the quarter. This compares to $256 million, or 40 cents per diluted share, for the same period in 2021.
Analysts polled by FactSet expected Block to post a profit of 16 cents for the second quarter.
Total revenue fell about 6% to $4.4 billion for the quarter, slightly ahead of Wall Street’s expectations of $4.3 billion. Excluding Bitcoin revenue, total net sales were $2.62 billion, up 34% year over year, according to a statement.
Block shares fell 44% this year.
Founded in 2009, Block’s two main companies are Cash App, a finance company that offers peer-to-peer payments, among other financial services, and
Square
,
its merchant payment provider that sells terminals and accepts and processes payments.
Formerly known as “Seller,” Square also offers software and financial services to merchants. In February, Block completed a $29 billion acquisition of buy-now, pay-later app Afterpay. (Afterpay is not its own business unit, but the platform is used by Square and Cash App.)
Block said total gross profit rose 29% to $1.47 billion. This included $755 million from Square and $705 million from Cash App.
Cash App was impacted by the volatility in the crypto markets. The unit generated $1.79 billion in Bitcoin revenue, a 34% year-over-year decline, while Bitcoin profit fell 24% to $41 million. The fintech said it had a $36 million impairment loss on Bitcoin.
Block said the decline in sales and gross profit was “mainly driven by a decline in consumer demand and the price of Bitcoin, in part related to the broader uncertainty surrounding crypto assets, which favored volatility in Bitcoin’s price during the quarter. then compensated. ,” said a shareholder letter.
In June, Block said there were 47 million accounts transacting on Cash App and more than a million monthly active users, or MAUs, for his Cash App Borrow. The 47 million was lower than the 48 million expected by Darrin Peller, an analyst at Wolfe Research.
“We believed that a minor miss in the Square segment was possible; however, we believe that the underperformance of Cash App’s organic gross profit (vs. buy-side expectations) coupled with lower MAUs than expected may raise concerns about lower-income consumer exposure of SQ, heading for a downturn,” Peller said in a note Thursday. He has an Outperform rating and a price target of $85 for the stock.
Gross payment volume – the dollar value of transactions going through a platform – was $52.5 billion in the second quarter, up from $42.8 million in the second quarter of 2021. The $52.5 billion includes $4.2 billion for Cash App and $48.3 billion for Square.
During a call to discuss Block’s earnings, CFO Amrita Ahuja said the fintech would reduce its planned investment by $250 million for the full year 2022. “In total, we have now reduced our non-GAAP operating expense plans by a total of $450 million since the beginning of the year, which is 20% of what we initially anticipated for the 2022 upgrade,” said Ahuja.
Block plans to increase its non-GAAP operating expenses by $1.85 billion compared to 2021, she said.
Dan Dolev, an analyst with Mizuho Securities, said Block’s Q2 results were “somewhat unfortunate,” according to a Thursday note. Dolev said he saw “silver edges in the continued strong July trends in Seller and nice progress in cash/payday loan borrowing with more than a million monthly active users.” Dolev has a buy rating for the stock and a price target of $135.
Write to Luisa Beltran at [email protected]
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