^{Source: Predictions based on analysts’ consensus from Visible Alpha}

Block (Square) (SQ) Financial Results: Analysis

Block, Inc. (SQ), which changed its name from Square in December 2021, reported Q4 FY 2021 earnings that beat analyst expectations. Adjusted earnings per share (EPS) exceeded analyst forecasts. Revenue just matched estimates, up 29.1% year over year (YOY). Block’s gross payment volume (GPV) came in at $46.3 billion, surpassing expectations. The company’s shares were down more than 4% in extended trading. Over the past year, Block’s shares have provided a total return of -60.0%, well below the S&P 500’s total return of 9.3%.

SQ Gross Payment Volume

Block’s GPV rose 44.7% compared to the year-ago quarter, marking a slight acceleration from the previous quarter. GPV is a key metric that tracks the total dollar amount, net of refunds, of all card payments processed by sellers using the company’s payments ecosystem. It includes peer-to-peer payments as well as transactions with merchants that use Block’s mobile payments app. Block charges transaction fees on these gross payments, and those fees constitute a major source of revenue. The transaction fees are generally calculated on a percentage of the total transaction amount processed.

The greater the GPV, the more transaction-based revenue Block is able to generate. Block said that its transaction-based revenue was $1.3 billion in Q4 FY 2021, up 41% YOY. Transaction-based gross profit rose 39% YOY to $545 million. Transaction-based revenue accounted for 32% of Block’s total revenue in the fourth quarter. It was the second major source of revenue next to Bitcoin revenue, which accounted for 48% of total revenue. Block’s other sources of revenue include subscription and services-based revenue and hardware revenue.

GPV also provides an indication of how many users the company has on its platform. If Block can attract more users to its main payments ecosystem, then it will be able to direct more traffic to its other businesses, such as operations management software company Stitch Labs, website building platform Weebly, and recently acquired music-streaming service TIDAL. It will also be able to offer its digital payment services to customers of those businesses.

In late January, Block acquired Afterpay Ltd., an Australia-based fintech company that offers customers the ability to “buy now, pay later” (BNPL). The company plans to integrate Afterpay into both its Square seller ecosystem and Cash App mobile payment app. Block said that it intends to enable Square sellers to offer the BNPL functionality at checkout and to allow Afterpay consumers the ability to manage their installment payments within the Cash App.

Block’s next earnings report (for Q1 FY 2022) is expected to be released on May 4, 2022.