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Block (SQ - Free Report) reported second-quarter 2022 adjusted earnings of 18 cents per share, in line with the Zacks Consensus Estimate. The figure declined 63.3% year over year.
Net revenues of $4.4 billion surpassed the Zacks Consensus Estimate of $4.3 billion. The top line decreased 6% from the prior-year quarter.
The year-over-year fall in revenues was primarily attributed to the massive decline in the company’s bitcoin revenues. Weakening momentum across the Cash App ecosystem in the bitcoin space was concerning.
Nevertheless, Block witnessed strong growth in transaction, subscription and hardware revenues. The growing momentum across the buy now, pay later (BNPL) platform, which generated $208 million of revenues, remained a positive.
The company witnessed solid traction across the Square ecosystem, which generated $1.73 billion of revenues, up 32% year over year. Accelerating gross payment volume (GPV) drove the results.
GPV in the second quarter amounted to $52.5 billion, up 23% from the year-ago quarter. This was driven by strength across the Square ecosystem. Notably, Square GPV was $48.3 billion (accounted for 92% of the total GPV) in the second quarter, up 25% year over year.
Cash App, which accounted for $4.2 billion of the overall GPV (8%), remained a positive. The figure increased 3.7% year over year.
Block continued to experience improvement in its card-present volumes in the reported quarter. Card-present GPV was up 29% from the year-ago quarter.
The company’s card-not-present GPV reflected year-over-year growth of 16% in the second quarter.
Top-Line Details
Transaction (33.5% of net revenues): The company generated transaction revenues of $1.5 billion, up 20% year over year. Strong Square ecosystem accounted for $1.4 billion of transaction revenues, up 22% year over year. Further, Cash App contributed $116 million to transaction revenues, up 5% year over year, owing to the rising number of transactions, as well as business accounts.
Subscription and Services (24.9% of net revenues): The company generated $1.1 billion in revenues from the category, jumping 60% from the year-ago quarter. The improvement can be attributed to a strong performance by the Square ecosystem, which contributed $318 million to subscription and services revenues, up 110% year over year. Further, Cash App contributed $720 million to the category’s top line. The figure was up 46% from the year-ago quarter, driven by the well-performing BNPL platform.
Hardware (1.1% of net revenues): Block generated revenues of $48.1 million from the business, up 10% year over year. This was driven by strong unit sales of hardware devices like Square Register and Square Terminal.
Bitcoin (40.5% of net revenues): The company generated revenues of $1.8 billion from the category, down 51% year over year. This was attributed to sluggish consumer demand and a slowdown in trading activities, owing to declining bitcoin prices.
Operating Details
Per management, gross profit grew 29% from the year-ago quarter to $1.5 billion. The gross margin expanded 900 basis points (bps) year over year to 33.4%.
Adjusted EBITDA was $187 million in the reported quarter, down 48.1% year over year.
Operating expenses were $1.7 billion, rising 66% from the prior-year quarter.
Product development expenses were $525 million, up 62% year over year primarily due to rising headcount and personnel costs in engineering, data science and design teams. Also, product development expenses associated with the BNPL platform led to the surge.
General and administrative expenses were $396 million, up 79% from the prior-year quarter. This was primarily caused by finance, legal, compliance and support personnel costs, and expenses associated with the BNPL platform.
Sales and marketing costs were $531 million, up 42% year over year due to an increase in Cash App marketing expenses, and a hike in advertising, personnel and other costs.
The operating loss was $213.8 million against the operating income of $124.9 million in the year-ago quarter.
Balance Sheet
As of Jun 30, 2022, the cash and cash equivalent balance was $4.02 billion, up from $3.99 billion as of Mar 31, 2022.
Short-term investments were $938.9 million for the reported quarter, up from $796.7 million in the previous quarter.
Long-term debt was $4.1 billion compared with $4.6 billion in the first quarter.
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Block (SQ) Q2 Earnings Meet Estimates, Revenues Dip Y/Y
Block (SQ - Free Report) reported second-quarter 2022 adjusted earnings of 18 cents per share, in line with the Zacks Consensus Estimate. The figure declined 63.3% year over year.
Net revenues of $4.4 billion surpassed the Zacks Consensus Estimate of $4.3 billion. The top line decreased 6% from the prior-year quarter.
The year-over-year fall in revenues was primarily attributed to the massive decline in the company’s bitcoin revenues. Weakening momentum across the Cash App ecosystem in the bitcoin space was concerning.
Nevertheless, Block witnessed strong growth in transaction, subscription and hardware revenues. The growing momentum across the buy now, pay later (BNPL) platform, which generated $208 million of revenues, remained a positive.
The company witnessed solid traction across the Square ecosystem, which generated $1.73 billion of revenues, up 32% year over year. Accelerating gross payment volume (GPV) drove the results.
Block, Inc. Price, Consensus and EPS Surprise
Block, Inc. price-consensus-eps-surprise-chart | Block, Inc. Quote
GPV
GPV in the second quarter amounted to $52.5 billion, up 23% from the year-ago quarter. This was driven by strength across the Square ecosystem. Notably, Square GPV was $48.3 billion (accounted for 92% of the total GPV) in the second quarter, up 25% year over year.
Cash App, which accounted for $4.2 billion of the overall GPV (8%), remained a positive. The figure increased 3.7% year over year.
Block continued to experience improvement in its card-present volumes in the reported quarter. Card-present GPV was up 29% from the year-ago quarter.
The company’s card-not-present GPV reflected year-over-year growth of 16% in the second quarter.
Top-Line Details
Transaction (33.5% of net revenues): The company generated transaction revenues of $1.5 billion, up 20% year over year. Strong Square ecosystem accounted for $1.4 billion of transaction revenues, up 22% year over year. Further, Cash App contributed $116 million to transaction revenues, up 5% year over year, owing to the rising number of transactions, as well as business accounts.
Subscription and Services (24.9% of net revenues): The company generated $1.1 billion in revenues from the category, jumping 60% from the year-ago quarter. The improvement can be attributed to a strong performance by the Square ecosystem, which contributed $318 million to subscription and services revenues, up 110% year over year. Further, Cash App contributed $720 million to the category’s top line. The figure was up 46% from the year-ago quarter, driven by the well-performing BNPL platform.
Hardware (1.1% of net revenues): Block generated revenues of $48.1 million from the business, up 10% year over year. This was driven by strong unit sales of hardware devices like Square Register and Square Terminal.
Bitcoin (40.5% of net revenues): The company generated revenues of $1.8 billion from the category, down 51% year over year. This was attributed to sluggish consumer demand and a slowdown in trading activities, owing to declining bitcoin prices.
Operating Details
Per management, gross profit grew 29% from the year-ago quarter to $1.5 billion. The gross margin expanded 900 basis points (bps) year over year to 33.4%.
Adjusted EBITDA was $187 million in the reported quarter, down 48.1% year over year.
Operating expenses were $1.7 billion, rising 66% from the prior-year quarter.
Product development expenses were $525 million, up 62% year over year primarily due to rising headcount and personnel costs in engineering, data science and design teams. Also, product development expenses associated with the BNPL platform led to the surge.
General and administrative expenses were $396 million, up 79% from the prior-year quarter. This was primarily caused by finance, legal, compliance and support personnel costs, and expenses associated with the BNPL platform.
Sales and marketing costs were $531 million, up 42% year over year due to an increase in Cash App marketing expenses, and a hike in advertising, personnel and other costs.
The operating loss was $213.8 million against the operating income of $124.9 million in the year-ago quarter.
Balance Sheet
As of Jun 30, 2022, the cash and cash equivalent balance was $4.02 billion, up from $3.99 billion as of Mar 31, 2022.
Short-term investments were $938.9 million for the reported quarter, up from $796.7 million in the previous quarter.
Long-term debt was $4.1 billion compared with $4.6 billion in the first quarter.
Zacks Rank & Stocks to Consider
Currently, Square has a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Keysight Technologies (KEYS - Free Report) , ASE Technology (ASX - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Keysight Technologies has lost 19.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.
ASE technology has lost 24.6% in the year-to-date period. The long-term earnings growth rate for ASX is currently projected at 23.1%.
Asure Software has lost 32.3% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.