The Block Inc (ASX: SQ2) share price is down more than 10% to $104 in morning trade after the payments company announced a quarterly update that disappointed investors.
This decline is happening on a day when the S&P/ASX 200 Index (ASX: XJO) is currently up by 0.1%.
Why is the Block share price falling?
Some shareholders have been pushing the sell button after seeing the payment company's 2023 second-quarter update. Here's how it performed year over year, with some relevant statistics showing a quarter-over-quarter decline:
- Gross payment volume up 12% year over year to US$59 billion
- Gross profit up 27% year over year to US$1.87 billion
- Adjusted operating income of $25 million, up US$128 million year over year, but down US$26 million quarter over quarter
- Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) up 105% year over year, and up 4% quarter over quarter, to US$384 million
- Net loss of US$123 million, up from US$208 million in 2022, but a deterioration from the US$17 million in the 2021 first quarter
- July 2023 gross profit growth was 21%
What happened during the quarter?
While total gross profit increased by 27% year over year to US$1.87 billion, the Square gross profit grew by 10% to US$888 million, and the cash app gross profit increased by 37% to US$968 million.
Management revealed that Square's banking products had "strong momentum", with gross profit year-over-year growth of 24% to US$167 million, "driven primarily" by Square Loans, Instant Transfer and Square Debit Card.
Block told investors that it's still growing quickly outside of the United States. In the second quarter, non-US markets saw gross profit growth of 23%, and it represented 16% of Square's gross profit.
What's the outlook?
The Block share price has fallen despite the company increasing its 2023 outlook.
Previously, in 2023 it was expecting adjusted EBITDA of US$1.36 billion and an adjusted operating loss of US$115 million.
It has upgraded its expectations, guiding that it now expects to make adjusted EBITDA of US$1.5 billion and adjusted operating income of US$25 million for 2023. For the half year to June 2023, it made adjusted EBITDA of US$752.7 million.
