How Square (Block) Makes Money

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Susan Kelly

Jun 17, 2022

Square's (Block) Financials


Block has rapidly grown to be one of America's most well-known and largest payment services companies since its initial public offering (IPO) in 2015. It has only recently reached profitability. The company's first annual profit was made in FY 2019, four years after it went public. Although the company was again profitable in FY 2020 and FY 2021, its profits have declined since FY 2019.


Block released financial results for Q4 FY 2020 in February. The three-month period ended on December 31, 2021. Block reported a net loss of $76.8million in the fourth quarter due to common shareholders, despite posting annual profits for FY 2021. This was a significant decrease from the net income of $294.0million in the previous quarter. However, Block received a $274,000,000 gain from its equity investments. Quarterly revenue increased 29.1% year-over-year (YOY) to $4.1 billion. The company's gross profit metric rose 47.1% to $1.2 billion YOY.


Block's fourth-quarter revenue came from bitcoin, which grew 11.7% YoY. It accounted for 48%. Block lets users buy bitcoin using its Cash App. The company charges a small margin over the bitcoin price to purchase it. The volatility in bitcoin prices and customer demand will affect how much revenue Bitcoin generates. The company's revenue was 32% transaction-based, with subscription, service-based, and hardware revenue accounting for 19% and 1%, respectively.


Square's (Block) Business Segments


The company has changed its reporting and operating segments effective June 30, 2020. The company used to report as one entity. It now reports as two segments, Cash App and Square. Square was previously known as Seller before the company changed its name to Block. These are the two main ecosystems of the company. TIDAL and some of Block's Bitcoin and blockchain initiatives provide products and services to Block. These segments are not reportable. These operations have no material impact and are presented in general corporate or other categories. We will be focusing on the Square and Cash App segments of the company, where the company gives a breakdown of revenue and gross profit.


Cash App


Users get access to various financial tools via the Cash App component of the Block mobile cash app. It encompasses peer-to-peer transactions, investments in stocks, and bitcoin, in addition to Cash Card-related business. This card allows the user to see their customer balances and make purchases and withdrawals from automated teller machines (ATMs).


Cash App's Q4 FY 2021 saw a 37.4% increase in its gross profit to $517.6 million, compared to the previous quarter. The segment's profit accounted for about 44% of the company's gross profit. Cash app revenue increased 17.5% YoY to $2.6 Billion in Q4 FY 2021. This accounts for approximately 63% of total revenue.



Square


Hardware, software solutions, and managed payment services are the three components that make up Square's category. It does not apply to services that make use of the Cash App. A gross profit of $657.3million was created by the Square segment during the fourth quarter of the fiscal year 2021, representing a growth of 53.9 percent as compared to the previous quarter. This particular division is accountable for 56% of the overall gross profit generated by the organization. Square's revenue increased by 49.0 percent year over year, reaching $1.5 billion. This represents around 37 percent of Square's overall income.


Square's (Block) Recent Developments


Afterpay Ltd. is a financial technology (fintech) firm established in Australia that provides a "Purchase Now, Pay Later" service. On January 31, 2022, Block announced that it had completed its acquisition of Afterpay Ltd. (BNPL). Block announced that it had agreed to buy Afterpay in August of 2021. The transaction was estimated to be worth around $29 billion. Afterpay can now provide its BNPL services using the payments environment provided by Square.


How Square (Block) Reports Diversity and Inclusiveness



We offer investors a peek into Block's transparency and commitment to diversity, inclusion, and social responsibility as part of our efforts to raise awareness about the importance of diversity within companies. Block's data is available to assist readers in making educated buying and investing decisions. We have examined the information it releases.


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