Block Inc., the digital payments company run by Jack Dorsey, raised its outlook for a measure of full-year profit after use of its Cash App product jumped in the first three months of the year.
(Bloomberg) — Block Inc., the digital payments company run by Jack Dorsey, raised its outlook for a measure of full-year profit after use of its Cash App product jumped in the first three months of the year.
Gross profit tied to Cash App jumped 49% from a year earlier to $931 million in the first quarter, Block said Thursday in a statement. That topped the $871 million average estimate of 22 analysts compiled by Bloomberg.
Cash App allows users to send money between friends and access different financial products. Its profit surge was fueled by an increase in active users as well as higher average spending on the debit cards tied to the app, Block said.
The company said it now expects adjusted earnings before interest, taxes, depreciation and amortization to rise to $1.36 billion. That’s higher than the $1.3 billion it previously forecast, and in line with analysts’ current expectations.
The company’s Square business also saw gross profits rise higher than expected, to $770 million. That platform has long been known for offering a variety of credit card readers and the company has sought to add larger enterprise customers in recent quarters as well as expand into new international markets.
Taken together, first-quarter gross profit — a measure of earnings before subtracting some costs like product development and marketing — was $1.71 billion, compared with the $1.65 billion average analyst estimate.
“That combination of our gross profit growth momentum and discipline in the operating expense base is what leads us to the higher outlook,” Chief Financial Officer Amrita Ahuja said.
During the quarter, Block said it would be exploring legal action against the short seller Hindenburg Research after the firm issued a report alleging the payments company facilitated fraudsters. In its report, the company said it found that Block’s wildly popular Cash App was likely facilitating scammers taking advantage of government-stimulus programs during the pandemic.
In response, Block said while its difficult to offer definitive estimates of fraud and illicit activity on its platform, its compliance and risk teams placed just 2.4% of Cash App accounts on a watch list last year. Block can stop customers on the list from sending and receiving funds using a Cash App Card, buying stocks or Bitcoin, or taking out a loan.
Block shares have declined 17% since the Hindenburg report was published in March. They gained 1.9% to $60.43 Thursday in New York trading.
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