Block Inc CDI (ASX: SQ2) shares tumbled 7.5% to an intraday low of $110.05 apiece after the company released its 3Q FY24 report.
The Block share price opened at $111 and is now sitting at $111.12, down 6.6%.
Let's take a look at the report.
Block shares in the red despite profit growth
Here are the highlights of the report:
- Gross profit of $2.25 billion, up 19% on the previous corresponding period (pcp)
- Adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $807 million, up from $477 million pcp
- Operating income of $323 million, up from a loss of $10 million pcp
- Adjusted operating income of $444 million, up from $90 million pcp
- $10.7 billion in available liquidity, including $9.9 billion in cash, cash equivalents, restricted cash, and investments
What else happened in 3Q FY24?
In its report, Block said the year-over-year improvement in operating income and adjusted operating income was driven by gross profit growth in the Cash App and Square businesses.
Cash App's gross profit was $1.31 billion for 3Q FY24, up 21% year over year. This was driven by a strong performance across the Cash App Card, Cash App Borrow, and the buy now, pay later platforms.
Square delivered a gross profit of $932 million in the third quarter, up 16% year over year. This was driven by strength in the software and integrated payments and banking products.
What did Block management say?
In a letter to shareholders, Block chair Jack Dorsey said:
We believe our approach to lending is unique in the industry. Taken individually, Square Loans, Afterpay, and Cash App Borrow are powerful ideas that work for customers and investors.
Taken together, we believe they provide Block with a lending ecosystem that can increase access to multiple customer types and grow both sides of the counter, all at a scale that's unmatched in the industry.
By leading with technology, transparency, and simplicity, we serve an entirely new market of customers looking to grow.
What's next for Block?
The company said it had increased its 2024 full-year guidance for adjusted EBITDA and adjusted operating income due to its outperformance in 3Q.
For adjusted EBITDA, Block now expects $3 billion, up 34% year over year. This is slightly higher than the previous guidance of $2.9 billion.
For adjusted operating income, Block now expects $1.56 billion, up 18% year over year. This is up from the previous guidance of $1.44 billion.
For the full year, Block continues to expect gross profit of $8.89 billion, up 18% year over year.
Looking ahead to 2025, Block said it expects gross profit growth of at least 15%.
The company said:
We have a number of initiatives recently launched or launching soon, and we expect them to compound through the year, driving stronger growth in the second half of the year compared to the first half.
On profitability, we're committed to expanding margins on an Adjusted Operating Income basis next year, although we expect the pace of expansion to be less than this past year as we invest in growth opportunities with attractive returns, particularly around go-to-market.
Block share price snapshot
Block shares have risen by 40% over the past 12 months compared to a 19% bump for the ASX 200.
