The Block Inc Share Price Declines Following Disappointing Q2 Update

Shares in The Block Inc (ASX: SQ2) have fallen by over 10% to $104 in morning trade, as the company released its second-quarter update for 2023, which didn't meet investor expectations. This dip occurred on a day when the S&P/ASX 200 Index (ASX: XJO) is up by 0.1%.

Underwhelming Q2 Performance

The company's Q2 2023 update presented mixed results. Here's a breakdown of the key figures:

• Gross payment volume increased by 12% year over year to US$59 billion.
• Gross profit rose by 27% year over year to US$1.87 billion.
• Adjusted operating income reached $25 million, marking a $128 million year-over-year increase but a $26 million decrease quarter over quarter.
• Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) saw a 105% year-over-year increase and a 4% quarter-over-quarter increase, totaling US$384 million.
• Net loss amounted to US$123 million, up from US$208 million in 2022, but a deterioration from the US$17 million in the 2021 first quarter.
• Gross profit growth for July 2023 stood at 21%.

Performance Breakdown

During the quarter, the company witnessed overall growth in gross profit. However, Square's gross profit only increased by 10% to US$888 million, while the cash app gross profit surged by 37% to US$968 million.

Square's banking products reported strong momentum, with gross profit year-over-year growth of 24%

to US$167 million, mainly driven by Square Loans, Instant Transfer, and Square Debit Card.

Global Expansion

The Block highlighted its continued rapid growth outside of the United States. In Q2, non-US markets experienced a 23% gross profit increase, representing 16% of Square's total gross profit.

Outlook and Upgrades

Despite the share price drop, the company revised its 2023 outlook upwards. Previously, it expected adjusted EBITDA of US$1.36 billion and an adjusted operating loss of US$115 million. It has now projected adjusted EBITDA of US$1.5 billion and adjusted operating income of US$25 million for 2023. For the first half of 2023, it achieved adjusted EBITDA of US$752.7 million.

Investors will be watching closely to see if The Block Inc can meet these upgraded targets and turn the tide on its share price performance.

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