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Block (SQ) Q4 Earnings Miss Estimates, Revenues Rise Y/Y
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Block (SQ - Free Report) delivered fourth-quarter 2023 adjusted earnings of 45 cents per share, which improved 104.5% year over year. However, the figure missed the Zacks Consensus Estimate by 22.4%.
Net revenues of $5.77 billion surpassed the Zacks Consensus Estimate of $5.69 billion. The top line increased 24% from the prior-year quarter.
Year-over-year revenue growth was driven by strong momentum across the Cash App ecosystem, which contributed $3.91 billion to net revenues for the reported quarter, up 31% year over year. Strength across the BNPL platform benefited the Cash App performance. BNPL contributed $325 million of revenues to Cash App, up 23.1% year over year.
Block witnessed solid traction across the Square ecosystem, generating $1.81 billion in revenues, up 12% year over year.
The company witnessed strong growth in transaction and subscription revenues. Accelerating bitcoin revenues was positive.
Its growing gross payment volume (GPV) drove the results.
GPV in the fourth quarter amounted to $57.5 billion, up 8% from the year-ago quarter. The figure lagged the Zacks Consensus Estimate of $58.85 billion.
GPV growth was driven by strength across the Square ecosystem. Square’s GPV was $53.54 billion (93.1% of the total GPV) in the fourth quarter, up 10% year over year.
Cash App accounted for $3.95 billion of the overall GPV (6.9%), which was a positive. The figure decreased 13% year over year.
Block continued to experience improvements in its card-present volumes in the reported quarter. The card-present GPV was up 13% from the year-ago quarter.
The company’s card-not-present GPV reflected year-over-year growth of 4% in the fourth quarter.
Top-Line Details
Transaction (27.6% of net revenues): The company generated transaction revenues of $1.59 billion, up 8% year over year. The figure lagged the consensus mark of $1.61 billion.
Strong Square ecosystem accounted for $1.49 billion in transaction revenues, up 10% year over year. Cash App contributed $109 million to transaction revenues, down 11% year over year.
Subscription and Services (28.1% of net revenues): The company generated $1.62 billion in revenues from this category, jumping 24% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.55 billion.
The year-over-year improvement can be attributed to the Square ecosystem’s strong performance, which contributed $293 million to subscription and service revenues, up 24% year over year. Cash App contributed $1.28 billion to the category’s top line. The figure was up 24% from the year-ago quarter. A well-performing BNPL platform contributed well.
Hardware (0.6% of net revenues): Block generated revenues of $32.5 million from the business, which fell 9% year over year. The figure missed the consensus mark of $39.5 million.
Bitcoin (43.7% of net revenues): The company generated revenues of $2.52 billion from the category, up 37.4% year over year. The figure beat the consensus mark of $2.48 billion.
Operating Details
Per management, gross profit grew 22% from the year-ago quarter to $2.03 billion. The gross margin contracted 60 basis points year over year to 35.1%.
Adjusted EBITDA was $562 million in the reported quarter, up 100% year over year.
Operating expenses were $2.16 billion, up 20% from the prior-year quarter.
Product development expenses were $685 million, up 13% year over year primarily due to rising headcount and personnel costs in the engineering teams.
General and administrative expenses were $746 million, up 65% from the prior-year quarter.
Sales and marketing costs were $506 million, down 6% year over year due to a decrease in Cash App marketing expenses.
The adjusted operating income was $185 million in the reported quarter against an operating loss of $32 million in the year-ago quarter.
Balance Sheet
As of Dec 31, 2023, the cash and cash equivalent balance was $4.99 billion, down from $5.1 billion as of Sep 30, 2023.
Short-term investments were $851.9 million for the reported quarter, down from $1.16 billion in the previous quarter.
Long-term debt was $4.12 billion compared with $4.118 billion in the prior quarter.
Guidance
For the first quarter of 2023, Block expects gross profit between $2.00 billion and $2.02 billion, suggesting year-over-year growth of 17%.
Adjusted EBITDA for the first quarter is anticipated between $570 million and $590 million.
Adjusted operating income for the first quarter is expected between $225 million and $245 million.
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Block (SQ) Q4 Earnings Miss Estimates, Revenues Rise Y/Y
Block (SQ - Free Report) delivered fourth-quarter 2023 adjusted earnings of 45 cents per share, which improved 104.5% year over year. However, the figure missed the Zacks Consensus Estimate by 22.4%.
Net revenues of $5.77 billion surpassed the Zacks Consensus Estimate of $5.69 billion. The top line increased 24% from the prior-year quarter.
Year-over-year revenue growth was driven by strong momentum across the Cash App ecosystem, which contributed $3.91 billion to net revenues for the reported quarter, up 31% year over year. Strength across the BNPL platform benefited the Cash App performance. BNPL contributed $325 million of revenues to Cash App, up 23.1% year over year.
Block witnessed solid traction across the Square ecosystem, generating $1.81 billion in revenues, up 12% year over year.
The company witnessed strong growth in transaction and subscription revenues. Accelerating bitcoin revenues was positive.
Its growing 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 fourth quarter amounted to $57.5 billion, up 8% from the year-ago quarter. The figure lagged the Zacks Consensus Estimate of $58.85 billion.
GPV growth was driven by strength across the Square ecosystem. Square’s GPV was $53.54 billion (93.1% of the total GPV) in the fourth quarter, up 10% year over year.
Cash App accounted for $3.95 billion of the overall GPV (6.9%), which was a positive. The figure decreased 13% year over year.
Block continued to experience improvements in its card-present volumes in the reported quarter. The card-present GPV was up 13% from the year-ago quarter.
The company’s card-not-present GPV reflected year-over-year growth of 4% in the fourth quarter.
Top-Line Details
Transaction (27.6% of net revenues): The company generated transaction revenues of $1.59 billion, up 8% year over year. The figure lagged the consensus mark of $1.61 billion.
Strong Square ecosystem accounted for $1.49 billion in transaction revenues, up 10% year over year. Cash App contributed $109 million to transaction revenues, down 11% year over year.
Subscription and Services (28.1% of net revenues): The company generated $1.62 billion in revenues from this category, jumping 24% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.55 billion.
The year-over-year improvement can be attributed to the Square ecosystem’s strong performance, which contributed $293 million to subscription and service revenues, up 24% year over year. Cash App contributed $1.28 billion to the category’s top line. The figure was up 24% from the year-ago quarter. A well-performing BNPL platform contributed well.
Hardware (0.6% of net revenues): Block generated revenues of $32.5 million from the business, which fell 9% year over year. The figure missed the consensus mark of $39.5 million.
Bitcoin (43.7% of net revenues): The company generated revenues of $2.52 billion from the category, up 37.4% year over year. The figure beat the consensus mark of $2.48 billion.
Operating Details
Per management, gross profit grew 22% from the year-ago quarter to $2.03 billion. The gross margin contracted 60 basis points year over year to 35.1%.
Adjusted EBITDA was $562 million in the reported quarter, up 100% year over year.
Operating expenses were $2.16 billion, up 20% from the prior-year quarter.
Product development expenses were $685 million, up 13% year over year primarily due to rising headcount and personnel costs in the engineering teams.
General and administrative expenses were $746 million, up 65% from the prior-year quarter.
Sales and marketing costs were $506 million, down 6% year over year due to a decrease in Cash App marketing expenses.
The adjusted operating income was $185 million in the reported quarter against an operating loss of $32 million in the year-ago quarter.
Balance Sheet
As of Dec 31, 2023, the cash and cash equivalent balance was $4.99 billion, down from $5.1 billion as of Sep 30, 2023.
Short-term investments were $851.9 million for the reported quarter, down from $1.16 billion in the previous quarter.
Long-term debt was $4.12 billion compared with $4.118 billion in the prior quarter.
Guidance
For the first quarter of 2023, Block expects gross profit between $2.00 billion and $2.02 billion, suggesting year-over-year growth of 17%.
Adjusted EBITDA for the first quarter is anticipated between $570 million and $590 million.
Adjusted operating income for the first quarter is expected between $225 million and $245 million.
Zacks Rank & Other Stocks to Consider
Currently, Block has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Agilent Technologies (A - Free Report) , ACM Research (ACMR - Free Report) and Bandwidth (BAND - 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.
Agilent Technologies shares have declined 2.7% year to date. The company is scheduled to release first-quarter 2024 results on Feb 27.
ACM Research shares have declined 2.1% year to date. ACMR is set to report its fourth-quarter 2023 results on Feb 28.
Bandwidth shares have declined 8.2% year to date. BAND is set to report its fourth-quarter 2023 results on Feb 28.