The Block Inc (ASX: SQ2) share price is up more than 2% after the payments business revealed a strong 2023 first quarter.
Block is the business that owns Square and Afterpay.
Block’s strong start to FY23
The business reported that in the first three months of 2023, it generated gross profit of $1.71 billion, which was an increase of 32% year on year. Its cash app generated gross profit of $931 million, which was an increase of 49% year on year. Square generated gross profit of $770 million, up 16% year on year.
However, while the cash app gross profit grew from $848 million in the 2022 fourth quarter to $931 million in this quarter. The Square gross profit dropped from $801 million in the 2022 fourth quarter to $770 million in this quarter.
One of the most promising things is that Square’s gross profit is increasingly being generated outside of the US. In the 2023 first quarter, 16% of gross profit was made outside of the US, while it was 13% in the first quarter of 2022.
Block revealed that its adjusted EBITDA (EBITDA explained) rose 89% year on year to $368 million, and up from $281 million in the 2022 fourth quarter. That’s promising for the Block share price.
Its underlying ‘operating income’ was $51 million (up from a loss of $42 million), while the actual operating income was a loss of $6 million (up from a loss of $227 million).
Block said that it’s overall net loss for the quarter was $17 million, up from a loss of $204 million.
In April 2023, its combined company gross profit increased by 24%, implying that the second quarter has started off well.
Final thoughts on the Block share price
The company’s profitability continues to improve when compared to a year ago. It seems like the business can keep growing in 2023 and hopefully beyond. The Block share price recently dropped after a short attack.
More payments are being done digitally and it helps the potential growth of the business that the populations of the countries it operates in (such as the USA and Australia) are growing now that immigration has returned strongly.
But, I’m not sure about the longer-term profitability of Afterpay considering interest rates have risen. So, I think the Square business can keep growing, but there are other ASX growth shares I’m more focused on.
