Block said on Thursday that bitcoin revenue at its Cash App unit fell 34% in the second quarter, but the Jack Dorsey co-founded fintech still managed to beat Wall Street estimates by 2 cents.
Shares fell more than 7% in after-market trading.
Block reported a second-quarter loss attributable to common stockholders of $208 million, or 36 cents per diluted share, for the three months ended June 30. That compares with $204 million in profit attributable to shareholders, or 40 cents per share, for the same period of 2021.
On an adjusted basis, Block reported second-quarter net income of about $110.7 million, or 18 cents per diluted share for the quarter. That compares with $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 more than Wall Street expectations of $4.3 billion. Excluding bitcoin revenue, total net revenue was $2.62 billion, up 34% year over year, according to a statement.
Block shares are down 44% this year.
Founded in 2009, Block’s two main businesses are Cash App, a financial company offering peer-to-peer payments, among other financial services, and
its merchant payment provider, which sells terminals and accepts and processes payments.
Square, formerly known as “Seller”, also offers software and financial services to merchants. In February Blok completed its $29 billion acquisition of the Buy Now Pay Later Afterpay app. (Afterpay is not its own business unit, but the platform is used by Square and Cash App.)
Block said total gross profit rose 29 percent to $1.47 billion. That includes $755 million from Square and $705 million from Cash App.
The Cash app was affected by the volatility in the crypto markets. The division generated $1.79 billion in bitcoin revenue, down 34% year-on-year, while bitcoin profit fell 24% to $41 million. The fintech said it took a $36 million impairment loss on bitcoin.
Block said the decline in revenue and gross profit “was primarily due to a decline in consumer demand and the price of bitcoin, related in part to broader uncertainty surrounding crypto assets, which more than offset the benefit of bitcoin price volatility in the quarter.” according to a shareholder letter.
In June, Block said it had 47 million accounts that were transacting on the Cash App and more than one million monthly active users, or MAUs, for its Cash App Borrow. The 47 million was below the 48 million expected by Darin Peller, an analyst at Wolfe Research.
“We believed that a slight gap in the Square segment was possible; however, we believe that the underperformance of organic Cash App gross profit (relative to buyer expectations) combined with lower MAU than expected could raise concerns about lower-income SQ consumer exposure heading lower,” Peller said in a note on Thursday. He has an outperform rating and a $85 price target on the stock.
Gross payment volume – the dollar value of transactions that flow through a given platform – was $52.5 billion in the second quarter, up from $42.8 million in the second quarter of 2021. The $52.5 billion included 4.2 billion dollars for Cash App and $48.3 billion for Square.
On a call to discuss Block’s earnings, CFO Amrita Ahuja said the fintech is reducing its planned investment for the full year of 2022 by $250 million. “Overall, we have now reduced our non-GAAP operating expense plans by a total of $450 million year-to-date, which is 20% of what we originally targeted for the increase in 2022,” Ahuja said.
Block plans to increase its non-GAAP operating expenses by $1.85 billion compared to 2021, she said.
Dan Dolev, an analyst at Mizuho Securities, said Block’s second-quarter results were “somewhat underwhelming,” according to a Thursday note. Dolev said he sees “silver linings in continued strong July trends in Seller and good progress in Cash App Borrow / payday loans with more than one million monthly active users.” Dolev has a Buy rating and a $135 target price on the stock.
Write to Luisa Beltran at [email protected]