Shares of financial services and digital payments company Block were up 10 percent in extended trading on Thursday after reporting its first-quarter earnings results that beat Wall Street estimates.
Block, formerly known as Square, also noted that it had not seen a decline in overall consumer spending through April. The company, however, reported adjusted profit which fell below estimates as the demand for Bitcoin dropped due to the fluctuations in the prices of cryptocurrency.
For the first quarter, Block reported operating earnings also known as adjusted EBITDA, of $195 million which surpassed Wall Street’s estimate of $136 million, according to Refinitiv. In the quarter ended March, Revenue suffered a decline of 22 percent YoY to $3.96 billion. Adjusted profit came in at 18 cents per share for the quarter falling short of analysts’ estimate of 21 cents per share. The company also saw its Bitcoin revenue cut down to $1.73 billion. This revenue was hit by a decline in interest from retail traders as Bitcoin prices fell after a sharp rally last year. It is pertinent to know that this rally was directly related to the acceptance of cryptocurrency.
Block closed its $29 billion acquisition deal of Australian buy-now-pay-later startup AfterPay during the quarter. Block which offers merchant payments services as well as crypto-trading services is looking to lead in the booming buy-now-pay-later market. Thanks to the deal, Block can compete with other fintechs and even traditional banks in what is the financial sector’s fastest-growing business.
The company revealed that AfterPay contributed $92 million to its first-quarter gross profit. Gross profit was recorded under Square and its subsidiary business which lets people send payments and Bitcoin CashApp. In the quarter, CashApp saw a 26 percent jump in gross profit.
Chief Financial Officer Amrita Ahuja said that “We expect Cash App and Square to sequentially grow gross profit each quarter throughout the year, even excluding Afterpay, assuming the macroeconomic environment remains stable. Through April, we have not yet seen a deterioration in overall consumer spending.”
The CFO also added that AfterPay’s gross merchandise value is expected to grow by 15 percent in April.