Block Inc. rocketed higher in after-hours trading Thursday after the financial-technology company formerly known as Square offered some upbeat commentary for the year ahead.
Despite growth slowing for consumer Cash App services. SQ stock jumped in extended trading amid updated guidance amid the acquisition of Afterpay.
While shares had been down in after-hours trading following Block’s SQ, +7.07% December-quarter earnings release. The stock turned around in a big way after Chief Financial Officer Amrita Ahuja offered some forward-looking views on the company’s earnings call. The stock was up more than 22% in aftermarket trading at the end of the call.
In late January, Block acquired Afterpay Ltd., an Australia-based fintech company that offers customers the ability to “buy now, pay later” (BNPL). The company plans to integrate Afterpay into both its Square seller ecosystem and Cash App mobile payment app. Block said that it intends to enable Square sellers to offer the BNPL functionality at checkout. It allows Afterpay consumers the ability to manage their installment payments within the Cash App.
Financial Highlights
The company’s Square seller business generated a fourth-quarter gross profit of $657 million. While its Cash App business saw a gross profit of $518 million. Analysts tracked by FactSet were anticipating $631 million in seller gross profit and $503 million in Cash App gross profit.
The company had more than 44 million monthly active transacting users on Cash App during December. Wolfe Research analyst Darrin Peller wrote that he had been expecting 43 million.
Block’s overall gross profit rose to $1.18 billion from $804 million a year earlier, while analysts had been modeling $1.16 billion. Analysts view gross profit as a key metric for Square as it accounts for the fact that some elements of Block’s business, such as the bitcoin-trading feature in the Cash App mobile wallet, are fairly low-margin.
The company posted a net loss of $77 million, or 17 cents a share, whereas it generated net income of $294 million, or 59 cents a share, in the year-prior quarter. After adjusting for stock-based compensation and other expenses. Block earned 27 cents a share, down from 32 cents a share a year earlier but above the FactSet consensus, which was for 23 cents a share.
Square on Jan. 31 closed the acquisition of Australia-based consumer lending startup Afterpay. Announced on Aug. 1, the deal was originally valued at $29 billion. With the big drop in Block stock, the deal was valued at less than $15 billion at closing.
Gross payment volume from merchant customers rose 92% to $46.3 billion, in line with estimates. But gross payment volume growth is expected to slow in the March quarter.
Afterpay competes in the emerging “buy now, pay later” market that encroaches on credit card networks.
Square said earnings before interest, taxes, depreciation, and amortization, known as EBITDA, came in at $184 million vs. estimates of $143 million.
