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BLOCK, INC.

(SQ)
  Report
Delayed Nyse  -  04:00 2022-09-29 pm EDT
55.90 USD   -5.37%
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Block : Second Quarter 2022 Shareholder Letter

08/04/2022 | 04:34pm EDT

Q2 2022 Shareholder Letter

investors.block.xyz

Q2'22 Highlights

In the second quarter of 2022, we generated gross profit of $1.47 billion, up 29% year over year. Both Square and Cash App grew 29% year over year, as Square generated gross profit of $755 million and Cash App generated gross profit of $705 million.

Second Quarter Financial Metrics

Food and drink has achieved the fastest gross profit growth of any Square vertical on a five-year CAGR basis, and we've continued to see strong success driving acquisition of new sellers: Through the first six months of 2022, GPV from Square for Restaurants more than doubled year over year.

We have reached significant scale and profitable unit economics with Cash App Borrow: In June, there were more than 1 million Cash App Borrow actives.

Gross Profit

Net Income (Loss)*

$1.47 Billion +29% yoy

($208 Million)

$1.47B

$204M

*Attributable to

$1.29B

common stockholders

$1.18B

$1.14B

$1.13B

$0M

($77M)

3yr CAGR

53%

48%

46%

48%

47%

YoY Growth

91%

43%

47%

34%

29%

($204M) ($208M)

Q2

Q3

Q4

Q1

Q2

Q2

Q3

Q4

Q1

Q2

2021

2022

2021

2022

Square Gross Profit

Cash App Gross Profit

Adjusted EBITDA

$755 Million +29% yoy

$705 Million +29% yoy

$187 Million

$755M

$705M

$360M

$585M

$606M

$657M

$661M

$546M

$624M

$512M

$518M

$233M

$184M

$195M

$187M

3yr CAGR

30%

30%

94%

88%

YoY Growth

85%

48%

54%

41%

29%

94%

33%

37%

26%

29%

Q2

Q3

Q4

Q1

Q2

Q2

Q3

Q4

Q1

Q2

Q2

Q3

Q4

Q1

Q2

2021

2022

2021

2022

2021

2022

In the second quarter of 2022, total net revenue was $4.40 billion, down 6% year over year, and, excluding bitcoin revenue, total net revenue was $2.62 billion, up 34% year over year. Excluding bitcoin revenue and revenue from the buy-now-pay-later (BNPL) platform, total net revenue was $2.41 billion, up 23% year over year. The BNPL platform was acquired through the acquisition of Afterpay.

The following items affected net income (loss) during the respective periods. In the second quarter of 2022, we recognized $57 million of amortization of acquired intangible assets, a $36 million bitcoin impairment loss, and $17 million in deal and integration-related expenses. In the first quarter of 2022, we recognized an unrealized gain of $50 million driven by the revaluation of equity investments, as well as Afterpay-related charges of $42 million of deal and integration-related expenses, $31 million of amortization of acquired intangible assets, and $66 million of one-time accelerated stock-based compensation. In the fourth quarter of 2021, we recognized a loss of $6 million driven by the adjustment to the revaluation of equity investments. In the third quarter of 2021, we recognized a loss of $7 million driven by the adjustment to the revaluation of equity investments as well as a $6 million bitcoin impairment loss. In the second quarter of 2021, we recognized a $77 million gain on our equity investments and a $45 million bitcoin impairment loss.

Reconciliations of non-GAAP financial measures used in this letter to their nearest GAAP equivalents are provided at the end of this letter.

The compound annual growth rate (CAGR) is the mean annual growth rate over a specified time period. Given the impacts of the COVID-19 pandemic have lasted for more than two years, ranging from March 2020 through today, we believe using three-year CAGRs from 2019 to 2022 better reflects underlying growth trends through the second quarter of 2022.

block q2 2022 2

ON THE COVER

Barrowby Green, a plant and gardening retailer in Yarra Valley, Australia, uses Square Stand, Square for Retail Plus, Square Loyalty, Square Online, and Afterpay.

CASH APP HIGHLIGHT Cash App Borrow offers customers a short-termloan to send, spend, or invest across our ecosystem.

August 4, 2022

In the second quarter, gross profit was impacted by $18 million of amortization of acquired technology assets, a portion of which was due to the acquisition of the BNPL platform.

The BNPL platform was acquired through the acquisition of Afterpay.

To Our Shareholders

We delivered strong growth at scale during the second quarter of 2022. Gross profit grew 29% year over year to $1.47 billion, up 47% on a three-year compound annual growth rate (CAGR) basis. Excluding our BNPL platform, gross profit was $1.32 billion, up 16% year over year and 42% on a three- year CAGR basis. Our Square ecosystem delivered gross profit of $755 million, an increase of 29% year over year and, excluding our BNPL platform, 16% year over year. Our Cash App ecosystem delivered gross profit of $705 million, an increase of 29% year over year and, excluding our BNPL platform, 15% year over year.

q2 2022 gross profit

As reported

Gross

YoY

3-year

Profit

Growth

CAGR

Block

$1,470M

29%

47%

Square

$755M

29%

30%

Cash App

$705M

29%

88%

Excluding BNPL

Gross

YoY

3-year

Platform

Profit

Growth

CAGR

Block

$1,320M

16%

42%

Square

$681M

16%

25%

Cash App

$630M

15%

82%

block q2 2022 3

Afterpay Gross Merchandise Value or GMV is a measure of the total order value processed on the Afterpay platform.

Square Ecosystem

We continue to focus on our three strategic priorities: omnichannel, growing upmarket, and expanding globally.

Enhancing our ecosystem of products During the second quarter, we continued to build upon our cohesive suite of products across channels, enabling sellers to meet their customers wherever they choose to do business - which is an integral part of our omnichannel strategy. In May, we enabled in-person buy-now-pay-later (BNPL) with Afterpay for sellers in the U.S. and Australia. These in-personcapabilities build upon our online integration, creating a truly omnichannel BNPL experience for buyers. We believe this will be impactful for our sellers as historically, Afterpay omnichannel consumers have transacted more frequently and spent 3x more than single-channelconsumers in 2021.

Afterpay also recently announced a new omnichannel BNPL partnership with prestige beauty retailer Sephora. The health and beauty vertical accounted for 11% of total Afterpay GMV over the last twelve months and has seen some of the strongest engagement, with customers completing an order with Afterpay every two seconds on average.

Growing upmarket

During the second quarter, we experienced strong growth from mid-market sellers, with gross profit from these sellers up 24% year over year. Mid- market sellers often have vertical-specific needs, and we have continued to innovate on tailored solutions. We've seen strong success driving acquisition in the food and drink vertical, which has been our fastest-growing vertical on a gross profit basis for the last five years. Square for Restaurants has experienced significant growth as our software resonates with these more complex sellers: Through the first six months of 2022, GPV from Square for Restaurants sellers more than doubled compared to the same period a year ago.

3x

omnichannel consumers have transacted more frequently, and spent 3x more than single channel consumers in 2021.

square gpv mix by seller size

$48.3B

$38.8B

$18.6B

>$500K

Annualized GPV

$13.7B

$20.9B

$14.1B

$125K-$500K

$5.6B

$11.6B

Annualized GPV

$6.3B

$15.6B

<$125K

$13.4B

$9.0B

Annualized GPV

27%

35%

39%

Percent Mid-market

Sellers

2020

2021

2022

Q2

Q2

Q2

We determine seller size based on annualized GPV during the applicable quarter. A mid-market seller generates more than $500,000 in annualized GPV. GPV does not include contributions from the BNPL platform because GPV is related only to transaction-based revenue and not to subscription and services-based revenue.

block q2 2022 4

Our Square for Restaurants solution is differentiated by having both first- and third- party integrations for sellers, letting restaurants power all aspects of their operations from point of sale to delivery orders to team management. In the second quarter, we expanded our product suite with a new mobile point-of-sale software solution that enables restaurants to seamlessly take orders and payments from tableside or queues, and launched a third-party marketplace to allow menu import and automated menu creation. Across our ecosystem we continued to see strong product adoption by Square

for Restaurants sellers who used an average of four products during the second quarter, twice as much as the average Square seller.

Expanding globally

During the second quarter, we improved product parity in several of our newest markets by launching Square Register in Ireland and France, as well as Square for Retail in France and Spain. As we look to grow upmarket around the world, we introduced Square Appointments in Japan to help more complex sellers accept online bookings, take payments, attract new customers, and manage their teams. We also continued to expand our seller banking products during the second quarter by bringing Instant Transfers to Australia. We launched 44 products across our international markets in the first half of 2022, making significant progress on closing product parity gaps while also launching in new markets.

gross profit in markets outside the u.s.

$98M

$48M

$10M

$18M

$17M

4%

5%

6%

8%

13%

% of Square

Gross Profit

2018

2019

2020

2021

2022

Q2

Q2

Q2

Q2

Q2

Square gross profit in markets outside the U.S. includes contributions from the BNPL platform during the second quarter of 2022. Excluding the BNPL platform, Square gross profit in markets outside the U.S. was $67 million, representing 10% of Square gross profit.

block q2 2022 5

Disclaimer

Block Inc. published this content on 04 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2022 20:29:51 UTC.


© Publicnow 2022
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Financials (USD)
Sales 2022 17 564 M - -
Net income 2022 -699 M - -
Net cash 2022 1 243 M - -
P/E ratio 2022 -43,8x
Yield 2022 -
Capitalization 33 306 M 33 306 M -
EV / Sales 2022 1,83x
EV / Sales 2023 1,50x
Nbr of Employees 8 521
Free-Float 88,6%
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Number of Analysts 42
Last Close Price 55,90 $
Average target price 111,20 $
Spread / Average Target 98,9%
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Managers and Directors
Jack Patrick Dorsey Chairman & Chief Executive Officer
Amrita Ahuja Chief Financial Officer & Treasurer
Emily C. Chiu Chief Operating Officer
James Morgan McKelvey Independent Director
Lawrence Henry Summers Independent Director
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