Block, Inc. (formerly Square, Inc.) — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; this is an annual filing, not a standalone fourth-quarter report. Block operates the Square seller ecosystem and Cash App, alongside TIDAL and bitcoin-focused initiatives. It changed its corporate name from Square to Block in December 2021.
Financial and operating performance
- Revenue: $17.66 billion, up 86% year over year. Bitcoin sales contributed $10.01 billion, or 57% of revenue; excluding bitcoin, revenue increased 55% to approximately $7.65 billion.
- Profit and margins: Gross profit was $4.42 billion, up 62%; reported gross margin was approximately 25%, heavily affected by bitcoin revenue recorded gross. Operating income was $161 million versus an $19 million operating loss in 2020. Net income was $159 million versus $213 million; net income attributable to common stockholders was $166 million versus $213 million. GAAP diluted EPS was $0.33 versus $0.44. Adjusted EBITDA, a non-GAAP measure, was $1.01 billion versus $474 million.
- Segments: Square revenue was $5.19 billion (+47%) and gross profit $2.32 billion (+54%). Cash App revenue was $12.32 billion (+106%) and gross profit $2.07 billion (+69%). Bitcoin contributed only 4.9% of total gross profit despite its large revenue share. Cash App had more than 44 million monthly transacting actives in December; Square processed $152.8 billion of GPV in 2021.
- Cash flow: Operating cash flow was $848 million, up from $173 million. Investing used $1.31 billion; financing provided $2.65 billion. The cash flow presentation was revised to classify changes in customer funds as financing, and prior periods were adjusted.
- Liquidity: Year-end cash and cash equivalents were $4.44 billion; short- and long-term marketable debt securities totaled $2.40 billion. Management reported approximately $6.9 billion of liquidity excluding customer funds, plus $500 million available on its revolver at year-end. Customer funds are restricted for customer obligations, not corporate use. Management said available funds should cover needs for at least 12 months.
- Debt: Notes had $4.61 billion aggregate principal outstanding at year-end (approximately $4.56 billion carrying value), including $2.0 billion of senior notes issued in 2021. Separately, $498 million of PPP Liquidity Facility advances were outstanding and generally collateralized by PPP loans.
Changes and notable items
- Revenue growth reflected higher GPV, reopening-related seller activity, Cash App usage, and bitcoin customer demand and market prices. Bitcoin revenue rose 119%; the filing cautions that bitcoin revenue may not indicate underlying engagement or future performance.
- 2020 included a $292 million net other-income benefit, primarily the DoorDash investment gain; the corresponding 2021 net benefit was $29 million. This helps explain why net income declined despite the return to operating profitability.
- Operating expenses rose: product development +58%, sales and marketing +46%, and general and administrative +70%. Share-based compensation totaled $608 million, up from $398 million.
- Block recorded $71 million of bitcoin impairment losses. Its bitcoin investment had a $371 million fair value against a $149 million carrying value; accounting rules do not permit recognition of unrealized increases until sale.
- Afterpay was acquired on January 31, 2022, after the reporting date, for 113.4 million Block Class A shares valued at $13.9 billion. Its results are not included in FY2021. TIDAL was acquired in April 2021 for approximately $233 million; its operations were included from acquisition and were not material to consolidated results.
Outlook, risks, and contingencies
- The filing provides no specific numerical revenue or earnings guidance. Management described results and its outlook as positive, while noting uncertainty around COVID-19 variants, inflation, and the broader economic recovery.
- Key risks include bitcoin price volatility and dependence of reported revenue on bitcoin trading; competition and slowing customer or seller growth; acquisition execution and Afterpay integration; BNPL repayment and funding risks; credit, fraud, chargeback, and loan losses; cybersecurity and service interruptions; regulation of payments, banking, investing, and cryptocurrency; and hardware chip shortages and supply-chain costs.
- Block was cooperating with CFPB and state Attorneys General inquiries into Cash App customer complaints and disputes; it recorded a non-material reserve but could not estimate potential exposure. H&R Block sued over Block’s name and Cash App Taxes branding; Block said it believes the claim is without merit.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions. TIDAL was excluded from management’s internal-control assessment.
Important facts for investors to verify
- How much of reported growth and future comparisons is attributable to bitcoin’s gross-revenue accounting, market price, and customer demand, versus growth in underlying payment and subscription activity.
- Afterpay’s final purchase accounting, outstanding convertible notes and potential redemption, integration costs, dilution, and the economics of BNPL receivables and funding.
- The sustainability of Cash App and Square growth as stimulus effects fade, and the trajectory of gross profit relative to rising operating expenses and share-based compensation.
- Corporate liquidity after excluding customer funds and restricted cash, debt maturities and conversion terms, and the obligations associated with Square Financial Services.
- Developments in the CFPB and state investigations, H&R Block litigation, PPP loan forgiveness, and material tax or regulatory exposures.