Mobile payment services provider Block Inc. (NYSE: SQ) reported an unexpected swing to profit in the fiscal 2023 fourth quarter. The company’s top line also surpassed estimates on solid revenue generation by Square and Cash App. Block, previously known as Square, also upwardly revised its FY 2024 adjusted EBITDA outlook. The stock of Block ended Friday’s trading session at $78.92, up $10.96, or 16.13%, from the prior close. Excluding the gains made on Friday, the stock’s value has eroded by 16.70% since the start of this year.
The Oakland, California-based company reported fourth-quarter revenues of $5.77 billion, up 24% from $4.65 billion in the similar quarter of fiscal 2022. Excluding Bitcoin (BTC) revenue, Block posted fourth-quarter revenues of $3.25 billion, an increase of 15% on a y-o-y basis.
For the fourth quarter, which ended December 31, 2023, Block posted net income of $178.07 million, or $0.28 per share, compared with a net loss of $113.82 million, or $0.19 per share, in the quarter ended December 31, 2022.
Excluding share-based compensation expense, acquisition-related and integration costs, restructuring and other charges, goodwill impairment, amortization of intangible assets, and amortization of debt discount and issuance costs, among others, Block recorded 4Q 2023 adjusted net income of $285.45 million, or $0.45 per share, an increase from $134.24 million, or $0.22 per share in 4Q 2022.
Analysts surveyed by LSEG anticipated the company to report revenues of $5.70 billion. Earnings estimates are not comparable to reported earnings.
Segment wise:
- Transaction-based revenues were $1.60 billion, up 8.20% on a y-o-y basis.
- Subscription and service-based revenues surged 24.20%y-o-y to $1.62 billion.
- Hardware revenues were $32.46 million, a decrease of 8.90% from last year.
- Bitcoin revenues jumped 34.40% y-o-y to $2.52 billion.
Block, which owns Spiral, Tidal, and TBD, posted a Q4 2023 gross profit of $2.03 billion, an increase of 22% from last year. In the case of Block, Wall Street analysts usually look at gross profit, which reflects the company’s core business performance in an accurate manner.
Furthermore, 4Q 2023 adjusted EBITDA was $562 million, an increase of 100% from $281 million in 4Q 2022 and higher than forecasts of $447 million.
The company ended 4Q 2023 with cash, cash equivalents, restricted cash, and investments in marketable debt securities of $6.90 billion.
The company’s Cash App business posted a gross profit of $1.18 billion, an increase of 25% from the previous year. Also, the number of transacting activities for Cash App was 56 million at the end of December.
Looking ahead, Block forecasts FY24 gross profit of $8.65 billion, implying a growth of 15% on a y-o-y basis.
The company also upwardly revised its adjusted EBITDA forecast to a minimum of $2.63 billion from prior guidance of $2.40 billion. Block also projects an adjusted operating income of $1.15 billion, reflecting a 13% margin.
In October 2023, Block’s board authorized a share repurchase program of $1 billion. Overall, in 2023, the company repurchased 2.50 million shares for $157 million. At the end of the fourth quarter, $843 million remains unspent in the share repurchase program.
The unexpected quarterly profit is expected to keep Block’s stock slightly bullish in the near term.
Technically, the stock of Block has broken the channel formed between $66 and $79. The upper line of the channel is now anticipated to act as support. Additionally, the stock is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate Block’s stock to remain in an uptrend in the near term.
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