Block boosts earnings outlook and says Square marketing efforts are paying off

By Emily Bary

The company is seeing 'some of the strongest returns' on its marketing initiatives, according to the CFO

Block Inc. raised its full-year outlook on key metrics Thursday while outlining changes to its sales strategy.

The company, which runs the Square merchant business, has been seeing "some of the strongest returns" in years from its marketing initiatives, and it plans to step up its efforts there as a way to bolster sales, according to Chief Financial Officer Amrita Ahuja.

That means "brand marketing, growing investments in tactics like trade shows and webinars, as well as going local" by leaning into cities where Block has been growing its field sales program. Additionally, the company has partnerships with companies like U.S. Foods in the food and beverage industry that can help it win customers in that crucial market.

"Ultimately, what it does for us is it helps expand our reach across the restaurant industry," Ahuja said.

The company is also streamlining the sales organization, with Nick Molnar, who currently heads the company's Afterpay buy-now-pay-later unit, adding to his responsibilities with plans to head a centralized sales function within Block.

The announcements come as Block (SQ) beat estimates for gross profit in its latest quarter. That came in at $2.23 billion, up 20% from a year before, while the FactSet consensus was for $2.19 billion.

Block shares are up about 3% in Thursday's extended session.

The Square unit had $923 million in gross profit, while Cash App gross profit amounted to $1.30 billion.

Analysts look at gross profit rather than revenue to gauge Block's top-line performance because the revenue line is skewed by low-margin areas like bitcoin, which users of the Cash App mobile wallet can buy through the platform.

Also within the Cash App business, Block has seen "relative resilience," according to Ahuja, with users of the Cash App debit card spending "at discretionary and non-discretionary locations alike."

She's upbeat about a program that the company offers for teens to get Cash App access, as she thinks that will help broaden the income range that the Cash App serves, and give the company a foothold with "the earners and spenders" of the future.

Adjusted earnings per share came out to 93 cents, while analysts were modeling 84 cents. Block posted $759 million in adjusted earnings before interest, taxes, depreciation and amortization, above the $689 million consensus view.

For the full year, the company now models $2.90 billion in adjusted Ebitda along with $1.44 billion in adjusted operating income. The prior forecast called for $2.76 billion to $1.30 billion. Ahuja said Block raised the outlook by more than the magnitude of its second-quarter beat, relative to the high end of the company's forecast for that quarter.

"We are raising our full-year outlook to reflect outperformance in the second quarter and our improved expectations for the remainder of the year," the company said in its shareholder letter.

The third-quarter outlook calls for $2.22 billion in gross profit, matching what analysts were expecting. Block's adjusted Ebitda forecast models $695 million, ahead of the $679 million that analysts were anticipating.

-Emily Bary

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08-01-24 1620ET

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