Block is continuously recording Operating Loss and Net Loss

Block (NYSE: SQ) announced its 2022 Q2 financial results on August 4, 2022. According to the announcement, total net revenue was down 6% (3 months, YoY). Operating loss and net loss were 214 million USD and 209 million USD, respectively. Meanwhile, gross profit was up 29% (3 months, YoY).

Due to Block’s aggressive upfront investment, operating expenses have increased by 66% (3 months, YoY). The increase of the operating expenses was not limited to a particular item but across the broader scope thereof. Such significant increase in operating expenses is behind Block’s operating loss and net loss.

On the other hand, gross profit is on an upward trend and adjusted EBITDA is still 187 million USD. It indicates that earning structures of square and cash app ecosystems are not deteriorated.

Looking at business performance by segment, subscription and services-based revenue was up as much as 60%  (3 months, YoY). Notably, subscription and services-based revenue for Square ecosystem was up 110%.

In this regard, Block’s largest source of revenues is the Cash App ecosystem, which accounts for 60% of total net revenues. However, the Cash App revenue is supported by the lower-profitable Bitcoin-related revenue. Earnings growth in the higher profitable Square ecosystem could improve the Block’s financial structure in near feature.

Net cash provided by operating activities was down 53% (6 months, YoY).  However, net cash provided by investing activities increased significantly in both 2022 Q1 and Q2. This is due to sale and maturities of marketable long-term debt securities. The cash provided from the sale and maturities was used for payments to redeem convertible notes. Along with such financing activities, Block’s shareholders’ equity ratio has recovered to 58% as of the end of Q2 2022. Accordingly, Block’s financial ground has been further strengthened.

Block, Inc. (NYSE: SQ) stock chart

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  1. Watanabe & Brothers’ Investment is holding shares of Block, Inc. 
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