Dorsey-led Block beats operating profit estimates, shares surge 10%

Jack Dorsey, co-founder of Twitter, sits for a portrait during an interview with Reuters in London, Britain, June 11, 2019. REUTERS/Toby Melville

May 5 (Reuters) – Block Inc (SQ.N), the fintech firm led by Twitter (TWTR.N) co-founder Jack Dorsey, said on Thursday it had not seen a decline in overall consumer spending through April, after reporting a first-quarter operating profit that topped Wall Street targets.

Block’s shares rose 10% in extended trading even though the company, formerly known as Square, reported a lower-than-anticipated adjusted profit as demand for bitcoin weakened due to a decline in cryptocurrency prices.

The company, which offers merchant payment services and an app that lets people trade the cryptocurrency, closed its $29 billion acquisition of Australian buy-now-pay-later pioneer Afterpay Ltd during the quarter.

The deal created a transaction giant that competes with banks and tech firms in the financial sector’s fastest-growing business.

Afterpay contributed $92 million to the first quarter’s gross profit, which was recorded under the Square and Cash app units. That helped Cash App – a service that lets individuals send payments including in bitcoin – post a 26% jump in gross profit.

“We expect Cash App and Square to sequentially grow gross profit each quarter throughout the year, even excluding Afterpay, assuming the macroeconomic environment remains stable,” Chief Financial Officer Amrita Ahuja said.

“Through April, we have not yet seen a deterioration in overall consumer spending,” she said, adding that Afterpay’s gross merchandise value – the value of all goods sold – was expected to rise 15% in April.

Block posted operating earnings, known as adjusted EBITDA, of $195 million, ahead of the Wall Street average expectation of $136 million, according to IBES data from Refinitiv.

In the three months ended March 31, revenue fell 22% to $3.96 billion. The company earned an adjusted profit of 18 cents per share, below analysts’ estimates of 21 cents.

The company’s bitcoin revenue halved to $1.73 billion, hit by a drop in interest from retail traders as prices of the cryptocurrency retreated after a sharp rally last year that was fueled by its rising acceptance in the mainstream.

Reporting by Manya Saini, Ankur Banerjee and Niket Nishant in Bengaluru; Editing by Aditya Soni and Subhranshu Sahu

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