Block Q3 Earnings Meet Estimates: Can Strong Guidance Aid the Stock?

Core Insights - Block (SQ) reported third-quarter 2024 adjusted earnings of 88 cents per share, a 76% increase year over year, aligning with the Zacks Consensus Estimate [1] - Net revenues reached $5.98 billion, missing the consensus mark by 3.9%, but showing a 6.4% year-over-year increase [2] - The company provided positive guidance for fourth-quarter 2024 and increased its 2024 guidance for adjusted EBITDA and operating income, indicating potential recovery for SQ shares [3] Financial Performance - Transaction revenues accounted for 28.7% of net revenues, totaling $1.71 billion, up 3.2% year over year, with the Square ecosystem contributing $1.61 billion, a 7% increase [4] - Subscription and Services revenues made up 30.1% of net revenues, amounting to $1.8 billion, reflecting a 20.4% year-over-year growth [5] - Hardware revenues fell 14.1% year over year to $36.4 million, while Bitcoin revenues inched up 0.2% to $2.43 billion [6] Operating Metrics - Gross profit grew 19% year over year to $2.25 billion, with Square generating $932 million and Cash App generating $1.31 billion in gross profit [7] - Adjusted EBITDA reached $807 million, a 69% increase year over year, while operating expenses rose 1% to $1.46 billion [7] - Adjusted operating income was $444 million, with an operating margin of 20%, compared to $90 million in the same quarter last year [8] Balance Sheet and Shareholder Actions - As of September 30, 2024, cash and cash equivalents stood at $9.9 billion, up from $7.8 billion as of June 30, 2024 [9] - Long-term debt remained unchanged at $5.1 billion, and the company repurchased 5.3 million shares for $346 million during the quarter [9] Future Guidance - For the fourth quarter of 2024, Block expects gross profit of $2.31 billion, indicating a 14% year-over-year growth, with adjusted EBITDA anticipated at $725 million [10] - The 2024 guidance for adjusted EBITDA has been increased from $2.90 billion to $3 billion, with an expected adjusted EBITDA margin of 34% [11] - Operating income guidance for 2024 has been revised from $1.44 billion to $1.56 billion, with an expected operating margin of 18% [11]