Block Inc. delivered a full-year profit forecast Thursday that matched expectations, but shares of the payment-technology company were falling in aftermarket action after the company fell short on an earnings metric for its most recent quarter.
The company reported a fourth-quarter net loss of $114 million, or 19 cents a share, whereas it posted a net loss of $77 million in the year-prior quarter.
On an adjusted basis, Block
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earned 22 cents a share, down from $1.05 a share a year before, whereas analysts were modeling 30 cents a share.
Shares of Block, the company formerly known as Square, were off about 2% in after-hours trading Thursday.
Block’s revenue increased to $4.65 billion, up 14% from a year before, whereas the FactSet consensus was for $4.63 billion. With Block, however, analysts generally look at the company’s gross profit as a proxy for revenue as the true top line includes large contributions from a bitcoin-trading feature on the Cash App mobile wallet that carries minimal profit.
Overall gross profit came in at $1.66 billion in the fourth quarter, up 40% from a year before, while analysts were modeling $1.63 billion. Gross profit for the Square seller business was $801 million, while gross profit for the Cash App business was $848 million.
The Cash App had 51 million monthly active transacting users in December, and inflows per active user for the fourth quarter topped $1,000. Chief Financial Officer Amrita Ahuja told MarketWatch that this marked relatively stable inflow performance despite a lack of government disbursements and taking into account “how dynamic the macro environment is.”
Block is focused on augmenting the inflow experience for users by offering multiple ways for customers to load money into their Cash App accounts and through efforts to increase limits, Ahuja said.
“There are ways as we get to know the customer and understand more about their financial profile where we can increase those limits over time,” she said.
Within the Square seller business, Block witnessed moderation in growth rates toward the middle of the quarter in discretionary areas like food and beverage and retail, while the company saw stability in growth rates for service-oriented areas.
Ahuja deemed this part of the “broader shift in retail to services,” adding that since Block works “across multiple categories, there’s less of a pronounced impact when you look at broader ecosystem we serve.”
For the full year, executives at Block anticipate $1.3 billion in adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), which was in line with the FactSet consensus. The company is also targeting gross profit of 25% for the combined company, versus 22% in the fourth quarter of 2022.
Block rolled out a new “investment framework” under which the company will target gross-profit retention of at least 100% for each ecosystem and for the broader company. It is also aiming to be a “rule of 40” company based on gross profit growth and adjusted operating margin.
“We’re not there today, taking steps in terms of investments for long-term, durable, profitable growth,” Ahuja said. “Our goal is to compound profitable growth over time as we ultimately support customers and their success.”
