Block, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Block reports Square and Cash App segments. Comparisons are with Q1 2023, whose results were revised for adoption of crypto-asset accounting guidance.
Financial results and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total net revenue | $5.96 billion | $4.99 billion | +19% |
| Revenue excluding bitcoin | $3.23 billion | $2.83 billion | +14% |
| Gross profit | $2.09 billion | $1.71 billion | +22% |
| Operating income (loss) | $249.7 million | $(6.2) million | Improved |
| Net income attributable to common stockholders | $472.0 million | $98.3 million | +380% |
| Diluted EPS | $0.74 | $0.16 | +363% |
| Operating cash flow | $489.4 million | $294.4 million | +66% |
| Investing cash flow | $1.04 billion | $623.9 million | +67% |
- Revenue mix: Transaction revenue was $1.51 billion (+6%); subscription and services revenue was $1.68 billion (+23%); bitcoin revenue was $2.73 billion (+26%). Bitcoin represented 46% of total revenue but only 4% of gross profit.
- Profitability: Gross margin was approximately 35.2%, versus 34.4% in Q1 2023. Adjusted operating income was $364.3 million versus $51.0 million; Adjusted EBITDA was $705.1 million versus $368.4 million. These are non-GAAP measures.
- Segment gross profit: Cash App generated $1.26 billion (+25%); Square generated $820.3 million (+19%).
- Cash flows: Investing cash flow principally reflected net proceeds from consumer receivables and marketable securities. Financing cash flow was $32.4 million, including $252.1 million of share repurchases and net repayments under warehouse facilities. These flows are affected by receivable and customer-fund activity.
- Liquidity: Reported available liquidity was $8.02 billion, comprising $7.24 billion in cash, restricted cash and marketable debt securities, plus $775 million available under the revolving credit facility. Customer funds are excluded from corporate liquidity. Cash and cash equivalents on the balance sheet were $5.75 billion.
- Debt: Notes had $4.15 billion aggregate principal outstanding; $1.0 billion of 2025 convertible notes was classified current. Warehouse facilities had about $954 million drawn and $0.6 billion available; these borrowings are secured by consumer receivables.
Material changes versus Q1 2023
- Reported revenue growth was boosted by bitcoin sales; excluding bitcoin revenue, growth was 14%. Bitcoin-related revenue carries comparatively little gross profit.
- Net income included a $233.4 million bitcoin investment remeasurement gain, versus $96.1 million in Q1 2023. The gain is non-cash and increases earnings volatility.
- Operating expenses rose 7% to $1.84 billion. Product development increased 15%, while sales and marketing declined 11%. Transaction, loan and consumer receivable losses increased 30% to $165.7 million, primarily reflecting higher loan losses.
- Consumer receivables, net, declined to $1.91 billion from $2.44 billion at year-end. Loans held for sale rose to $892.1 million from $775.4 million.
- Cash and cash equivalents increased from $5.00 billion at year-end; reported available liquidity rose by $304.8 million.
Outlook, commentary, risks and unusual items
- Management described growth across both primary ecosystems and cited strength in Cash App financial services, Square banking products and international markets. The filing provides no numerical revenue or earnings guidance.
- Block intends to keep its employee base below an announced cap of 12,000 and pursue expense discipline through 2024. It reported $121.6 million of cumulative severance and related expenses, including $17.6 million in Q1, and said further near-term restructuring costs may occur.
- The company said existing cash, marketable securities and credit availability should meet working-capital and capital needs for at least the next 12 months. It also noted its non-investment-grade credit ratings and the possibility that a downgrade could impair borrowing costs or access to capital.
- Other unusual expense items included a $32.2 million charge related to TIDAL acquisition purchase consideration. The company repurchased 3.6 million Class A shares for $252.1 million; $591.1 million remained authorized.
- The CFPB is considering whether to recommend legal action concerning Cash App customer complaints and disputes; state Attorneys General have also issued subpoenas. The company cannot predict the outcome; its accrued liability was not material and potential exposure beyond accruals could not be reliably estimated. SEC and DOJ inquiries related to allegations in a 2023 short-seller report also remain unresolved.
- Key risks include bitcoin price volatility, consumer and seller credit losses, BNPL regulation, fraud and cybersecurity, dependence on payment processors and bank partners, competition, and regulatory or litigation outcomes. The company reported no known actual or possible bitcoin safeguarding loss events at quarter-end.
Important facts for investors to verify
- How much of reported earnings growth is attributable to bitcoin remeasurement gains, and how results trend excluding bitcoin revenue and gains.
- Credit quality and loss trends in BNPL receivables, Cash App Borrow and Square Loans, including the $132.3 million of consumer receivables more than 60 days past due.
- Progress and costs of the workforce cap and expense initiatives, including severance and recurring share-based compensation.
- Developments in the CFPB and state inquiries, and the SEC/DOJ inquiries, including any change in estimated exposure or required remediation.
- Debt maturities, warehouse-facility availability and covenants, and the distinction between corporate liquidity and customer or restricted funds.
- Comparability of Q1 2023 figures: adoption of ASU 2023-08 revised prior-period results, including common-stockholder net income from a previously reported loss of $16.8 million to $98.3 million.