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Block, Inc. (SQ)·Q2 2024 Earnings Summary

Executive Summary

  • Gross profit rose 20% YoY to $2.23B, with Cash App gross profit up 23% YoY and Square up 15% YoY; Adjusted EBITDA nearly doubled YoY to $759M, and Adjusted EPS reached $0.93 .
  • Block raised FY24 guidance: gross profit to $8.89B (from $8.78B), Adjusted EBITDA to $2.90B (from $2.76B), and Adjusted Operating Income to $1.44B (from $1.30B), implying Rule of 35 vs prior 32 .
  • Q3 outlook guides gross profit of $2.22B and margins of 31% Adjusted EBITDA and 14% Adjusted Operating Income, signaling continued profitable growth .
  • Strategic catalysts: centralized sales under Afterpay co-founder Nick Molnar, accelerated product velocity (orders migration, new kiosk, single POS app by year-end), and a new $3B share repurchase authorization on top of the completed $1B program .

What Went Well and What Went Wrong

  • What Went Well
    • Cash App momentum: inflows per active up 10% YoY, monetization rate up 9bps YoY to 1.53%, with Borrow originations >$2B in Q2, nearly 3x YoY .
    • Operating leverage: Adjusted EBITDA up 98% YoY to $759M; Adjusted Operating Income up to $399M vs $25M in Q2’23; non-GAAP OpEx down 1% YoY .
    • Square international growth and banking: Square GPV +8% YoY; international gross profit +34% YoY; banking gross profit +27% YoY; Square Loans originations $1.45B (+32% YoY) .
    • Management quote (strategy): “I think we now have a perfect storm brewing for Square…centralizing sales under Nick…all the pieces are now set” — Jack Dorsey .
  • What Went Wrong
    • Cash App Business GPV down 27% YoY; Cash App transaction-based revenue down 26% YoY, reflecting weaker business P2P and credit-card-funded volumes .
    • Same-store sales moderation and MKE softness: Square noted continued moderation in same-store growth and manual keyed entry volumes down 5% YoY .
    • Loss provisions and bitcoin remeasurement: transaction/loan/consumer receivable losses up 7% YoY to $192M (driven by Borrow growth); $70M bitcoin remeasurement loss impacted net income .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Total Net Revenue ($USD Billions)$5.77 $5.96 $6.16
Revenue ex. Bitcoin ($USD Billions)$3.25 $3.23$3.54
Gross Profit ($USD Billions)$2.03 $2.09 $2.23
Operating Income (Loss) ($USD Millions)-$130.7 $249.7 $306.6
Adjusted Operating Income ($USD Millions)$185.1 $364.3 $399.1
Net Income Attributable to Common ($USD Millions)$178.1 $472.0 $195.3
Diluted EPS ($USD)$0.28 $0.74 $0.31
Adjusted Diluted EPS ($USD)$0.45$0.85 $0.93
Adjusted EBITDA ($USD Millions)$562.2 $705.1 $759.5
Total GPV ($USD Billions)$57.49 $54.43 $61.94

Segment breakdown

MetricQ4 2023Q1 2024Q2 2024
Square Revenue ($USD Billions)$1.81 $1.73 $1.98
Square Gross Profit ($USD Millions)$827.7 $820.3 $922.6
Square GPV ($USD Billions)$53.54 $50.47 $58.37
Cash App Revenue (GAAP) ($USD Billions)$3.91 $4.17 $4.13
Cash App Revenue ex. Bitcoin ($USD Billions)$1.39 $1.44$1.52
Cash App Gross Profit ($USD Billions)$1.18 $1.26 $1.30
Corporate and Other Revenue ($USD Millions)$49.7 $54.2 $47.2
BNPL GMV ($USD Billions)$8.60 $6.98 $7.75
Cash App Business GPV ($USD Billions)$3.95 $3.96 $3.57

KPIs

KPIQ4 2023Q1 2024Q2 2024
Cash App Monthly Transacting Actives (M)56 57 57
Cash App Inflows ($USD Billions)$63 $71 $71
Inflows per Transacting Active ($USD)$1,137 $1,255 $1,243
Monetization Rate (%)1.48% 1.48% 1.53%
Bitcoin Revenue ($USD Billions)$2.52 $2.73 $2.61
Bitcoin Gross Profit ($USD Millions)$65.9 $80.1$67.4
Square Loans Originations ($USD Billions)$1.40 $1.32 $1.45

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Profit ($USD Billions)Q3 2024N/A$2.22; 17% YoY New
Adjusted EBITDA ($USD Millions; % Margin)Q3 2024N/A$695; 31% New
Adjusted Operating Income ($USD Millions; % Margin)Q3 2024N/A$320; 14% New
Gross Profit ($USD Billions)FY 2024$8.78 $8.89 Raised
Adjusted EBITDA ($USD Billions; % Margin)FY 2024$2.76; 31% $2.90; 33% Raised
Adjusted Operating Income ($USD Billions; % Margin)FY 2024$1.30; 15% $1.44; 16% Raised
Rule of 40 (Gross Profit Growth + AOI Margin)FY 2024Rule of 32 Rule of 35 Raised
SBC (commentary)Q3 2024N/AStable YoY on $ basis Maintained
Amortization of Intangibles ($USD Millions)H2 2024$53 per Q3 & Q4 (as of 3/31/24) ~$53 per Q3 & Q4 (as of 6/30/24) Maintained

Earnings Call Themes & Trends

TopicQ4 2023 (prior)Q1 2024 (prior)Q2 2024 (current)Trend
AI/product velocityLaunched GenAI tool for sales/support efficiency AI-assisted onboarding; resilience upgrades; cross-vertical connectivity Orders migration finishing; Kiosk launch; single POS app targeted before year-end Accelerating execution
Square go-to-marketReorg toward Eng/Product/Design/Sales; upmarket bundles and referrals Sales wins with contracts; franchise/multi-location capabilities Centralized sales under Nick Molnar; partnerships incl. US Foods; marketing ramp Structural shift; broadened distribution
Cash App “bank the base”Frame strategy; overdraft coverage; savings yield rollout Inflows per active +11% YoY; card transaction fees surpass Instant Deposit Inflows per active +10% YoY; monetization +9bps YoY; testing paycheck incentives Engagement rising, monetization improving
Macro/GPVU.S. consumer discretionary softness emerging Weather impacts; MKE softness; constant currency strength U.S. same-store moderation persists; international GPV growth strong Mixed; international offset
Capital returnInitiated $1B buyback in Oct’23 $252M repurchased in Q1 Completed $1B; added $3B authorization Step-up in shareholder returns
Bitcoin/cryptoAdoption of ASU 2023-08; remeasurement gains Remeasurement gain $233M; bitcoin strategy focus $70M remeasurement loss; 8,211 BTC held; bitcoin GP $67M More volatile, but profitable GP

Management Commentary

  • Strategic focus and organization: “We plan to execute this change this month…The new reporting structure does not impact our strategy, road maps or financial goals…move with greater speed, agility and efficiency” — Jack Dorsey .
  • Square product and GTM: “All the pieces are now set…centralizing sales under Nick…perfect storm brewing for Square” — Jack Dorsey .
  • Execution milestones: “Sellers will start to see our single point-of-sale app before year-end” — Amrita Ahuja .
  • Financial posture: “We are now expecting at least $1.44 billion in adjusted operating income in 2024…Step-up in sales and marketing in the back half for both Square and Cash App” — Amrita Ahuja .
  • Shareholder returns: Board approved an additional $3B share repurchase authorization following completion of $1B program .

Q&A Highlights

  • U.S. GPV and macro: Management expects GPV growth stability in H2; moderation driven by same-store growth; strength in software/integrated payments, banking, and international offsets .
  • Partnerships and distribution: Signed U.S. Foods and other food distributors, reaching up to 40% of U.S. restaurants; pursuing vertical, horizontal, and third-party sales partners domestically and bank partnerships internationally .
  • Direct deposit adoption: Strategy across packaging (benefits for $300+ deposits), marketing incentives, and product features (spending insights, statements, BNPL on Cash App Card) to grow paycheck deposit actives .
  • Cash App Pay: Volumes up >7x YoY, +18% QoQ; driven by enterprise sales momentum and merchant additions like Google Play .
  • Product/platform: Orders migration unlocks features (pre-auth, bar tabs) and faster development; onboarding steps reduced to four, enabling quicker product attachment .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 EPS, revenue, and EBITDA were unavailable via GetEstimates in this session; therefore, a beat/miss analysis versus Wall Street consensus cannot be provided here. Management stated Q2 gross profit and profitability outperformed guidance, and FY24 guidance was raised accordingly .
  • Implication: Street models may need to revise upward on FY24 gross profit, AOI, and EBITDA trajectories given raised guidance and Q3 outlook .

Key Takeaways for Investors

  • Cash App monetization is strengthening (1.53% monetization; Borrow originations >$2B), supporting sustained gross profit growth even as actives growth moderates; watch for bank-the-base initiatives and paycheck deposit incentives to lift inflows further .
  • Square’s international and banking products are key growth pillars (international GP +34% YoY; banking GP +27% YoY), with orders migration and centralized sales expected to drive upmarket wins in 2025 .
  • Strong operating leverage: Adjusted EBITDA and AOI expanded sharply; non-GAAP OpEx declined YoY—management still plans incremental H2 sales/marketing investment to accelerate 2025 growth .
  • Capital return accelerates: $3B buyback authorization following completion of $1B program is a material support to EPS and equity value compounding .
  • Q3 guide implies continued margin discipline (31% Adjusted EBITDA margin; 14% AOI margin) with gross profit at $2.22B; execution against GTM/product milestones is the near-term stock driver .
  • Bitcoin remains a volatile GAAP net income swing factor (Q2 remeasurement loss $70M) but contributes positive gross profit ($67M); investors should focus on non-GAAP profitability and segment gross profit trends .
  • Near-term trading: Positive setup from raised FY24 guidance and buyback; monitor macro discretionary trends and Cash App Business GPV pressure; medium-term thesis hinges on Square GTM overhaul and Cash App banking adoption converting to inflow and gross profit uplifts .