Block beats revenue estimates in Q4 22

Block beats revenue estimates in Q4 22

Block’s stock price rose after its revenues grew 14% to $4.65bn in Q4 2022, beating analyst expectations on the back of resilient consumer spending. However, revenues declined across the full year by 1% – to $17.5bn. 

Block revenues rise in Q4, bitcoin revenue share declines
Block quarterly revenues and adjusted EBTIDA margin, 2019-2022

Falling bitcoin prices contributed to a 14% drop in revenues, to $10.6bn, for Cash App, Block’s mobile money offering. Payment processor Square fared better, with a 29% overall revenue rise to $6.7bn.

Block’s gross profit rose 36% to $5.99bn in 2022, with Square’s contribution rising 30% YoY to $3bn while Cash App’s rose 43% to $2.95bn. Meanwhile, Block’s buy now, pay later (BNPL) platform added $811m of revenue and $588m of gross profit in 2022. These profits contributed to a 68% growth across subscription and services revenues, to $4.6bn, which helped offset some of the year’s bitcoin losses, as did a 19% increase in transaction-based revenue to $5.7bn.

Square had the following highlights from the call: 

  • In Q4, Square generated $1.76bn of revenue and $801m of gross profit, up 19% and 22% respectively. This included $1.35bn of transaction-based revenue, which grew 12% due to gains across in-store and online channels, with a lower percentage of transactions being made via debit card compared to Q4 21.
  • Square’s gross payments volume (GPV) in Q4 grew 14% to $48.6bn, while its total GPV for the year rose 22% to $186.5bn. Drivers were growth in card-present and card-not-present GPV, and the company also saw 23% growth in non-US markets.
  • Square is continuing to target mid-market sellers, and said this segment grew twice as fast as total Square gross profit in Q4, excluding BNPL. Mid-market gross profit was up 16% YoY, excluding BNPL.
Block revenue segment share between Square and Cash App
Block yearly revenue, 2018-2022, split between divisions

On Cash App, which saw some mixed results for the year:

  • Q4 revenues rose 12% to $2.86bn, while gross profit grew 64% to $848m. Cash App Card – the free customisable card attached to Cash App – saw a 56% increase in gross profit, to $750m, growing its share of Cash App’s gross profit to 26% in 2022. 
  • Cash App suffered as a result of the bitcoin price decline in 2022. Bitcoin revenues were down 7% in Q4, to $1.83bn, and down 29% over the whole year. However, subscription and services revenue grew significantly (thanks to the BNPL platform), with a 61% rise to $3.05bn.
  • Cash App’s monthly transacting active users rose 16% to 51 million in December, with two out of three users transacting each week on average.

Moving forward, Block hopes to deliver approximately $1.3bn in adjusted EBITDA in 2023, while keeping adjusted operating income losses to approximately $150m. To help with this, the company is reducing its headcount growth from 46% to 10% and sales and marketing growth from 25% to 5-10% in 2023.

How does Cash App compete with other neobanks?

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