Shares of Fintech Block, Inc. (NYSE: XYZ ) cratered after the company reported weaker than expected earnings and slashed guidance . The report is definitely weaker than bulls like myself had hoped for, but it is illustrativeRetail investor researching mostly semiconductors and fintech. Some general macro musings. My goal is to bring you timely and digestible research on the stocks that I cover.Analyst’s Disclosure: I/we have a beneficial long position in the shares of XYZ either through stock ownership, opt ...

Company Performance - Block reported quarterly earnings of $0.56 per share, missing the Zacks Consensus Estimate of $0.88 per share, and down from $0.85 per share a year ago, representing an earnings surprise of -36.36% [1] - The company posted revenues of $5.77 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 6.65%, and down from $5.96 billion year-over-year [2] - Over the last four quarters, Block has surpassed consensus EPS estimates just once and has not beaten consensus revenue estimates [2] Stock Performance - Block shares have lost about 31.2% since the beginning of the year, compared to the S&P 500's decline of -5.3% [3] - The current status of estimate revisions for Block is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the coming quarter is $1 on $6.59 billion in revenues, and $4.12 on $26.06 billion in revenues for the current fiscal year [7] - The outlook for the industry can significantly impact the stock's performance, with the Internet - Software industry currently in the bottom 43% of Zacks industries [8]

Financial Objectives and Performance - Block aims to enhance shareholder returns through disciplined capital return strategy and amplifying the long-term value of its business[9] - The company delivered year-over-year gross profit growth of 9% in Q1[14, 15] - Adjusted Operating Income reached $466 million in Q1, a 28% year-over-year increase[14] - The company expects 12% gross profit growth year-over-year for the full year 2025[13, 82] - The company expects Adjusted Operating Income of $1.90 billion for the full year 2025, with a margin of approximately 19% on gross profit[82] Cash App Performance - Cash App's gross profit per monthly transacting active was $81 in Q1 on an annualized basis, up 9% year-over-year[13] - Cash App gross profit grew 10% year-over-year, driven by Cash App Borrow, Cash App Card, and BNPL[34] - Cash App inflows per transacting active grew 8% year-over-year in Q1[40] - Cash App Card monthly actives have grown as a percentage of overall Cash App actives, reaching 45%[43, 44] Square Performance - Square's gross profit grew 9% year-over-year, driven by banking products, software, and integrated payments[69] - Total Square GPV grew 7.2% in Q1, with U S GPV growing 5 6% and International GPV growing 15%[71] - GPV from mid-market sellers (generating over $500,000 in annualized GPV) accounted for 41% of Square's GPV in Q1[77]

Financial Data and Key Metrics Changes - Total Block gross profit was $2,290 million, up 9% year over year [11] - Adjusted EBITDA was $813 million, up 15% year over year, and adjusted operating income was $466 million, up 28% year over year [14] - Adjusted free cash flow for the trailing twelve months ending in March was $1,530 million compared to $1,070 million a year ago [15] - Adjusted operating income margin is expected to be approximately 19% for the year [21] Business Line Data and Key Metrics Changes - Square's gross profit grew by 9% year over year, driven by GPV growth of 7.2% [12] - Cash App gross profit was up 10% year over year, with gross profit per monthly transacting active reaching $81 [13] - Cash App's growth was impacted by changes in consumer spending behavior, particularly in discretionary spending areas [14] Market Data and Key Metrics Changes - Global GPV growth for April was expected to be 9.6% year over year [20] - High single-digit GPV growth is expected in the second quarter [20] Company Strategy and Development Direction - The company aims to accelerate growth in the second half of the year, focusing on product velocity and market expansion [9] - Plans to expand Cash App's network, particularly targeting teens and families, and increasing marketing spend [9][30] - The company is prioritizing AI automation to enhance productivity and customer engagement [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a more dynamic macro environment and reflected a cautious stance in guidance [15][40] - The company expects gross profit growth of 12% for 2025, with a more cautious approach embedded in the guidance [16][40] - Management expressed confidence in the ability to navigate potential short-term volatility while building for long-term growth [23] Other Important Information - The company received FDIC approval to issue consumer loans for Cash App Borrow nationwide, which is expected to double the number of eligible actives [16][18] - The launch of Cash App Afterpay is anticipated to drive growth and enhance customer engagement [19][50] Q&A Session Summary Question: Insights on macro uncertainty and Cash App performance - Management discussed internal changes and improvements in Square, leading to market share gains, while acknowledging the need for more focus on Cash App's network density [28][30] Question: Changes in consumer behavior and macro assumptions - Management noted a shift in consumer behavior during tax refund season, leading to a more cautious outlook for guidance [39] Question: Cash Card Afterpay functionality and adoption - Management highlighted strong early results from the integration of Cash App and Afterpay, with plans to scale thoughtfully [48][50] Question: Confidence in expanding Borrow and underwriting models - Management expressed confidence in the underwriting models and the ability to manage risk effectively while expanding Borrow [55][56] Question: Expectations for Square GPV growth - Management expects Square GPV growth to accelerate to high single digits in the second quarter, with cautious guidance reflecting broader macro conditions [105]

Financial Data and Key Metrics Changes - Total Block gross profit was $2,290,000,000, up 9% year over year [9] - Adjusted EBITDA was $813,000,000, up 15% year over year [12] - Adjusted operating income was $466,000,000, up 28% year over year [12] - Adjusted free cash flow for the trailing twelve months ending in March was $1,530,000,000 compared to $1,070,000,000 a year ago [13] - The company expects gross profit growth of 12% for 2025, with 9.5% in Q2 and low double digits in Q3 [14] Business Line Data and Key Metrics Changes - Square gross profit grew by 9% year over year, driven by GPV growth of 7.2% [10] - Cash App gross profit was up 10% year over year, with gross profit per monthly transacting active reaching $81 [11] - The company saw a pronounced shift in consumer spending behavior, impacting Cash App inflows [12] Market Data and Key Metrics Changes - Global GPV growth for April was expected to be 9.6% year over year [18] - The company expects high single-digit GPV growth in Q2 [18] Company Strategy and Development Direction - The company is focused on product velocity and go-to-market strategies to gain market share [7] - Plans to expand Cash App's network, particularly targeting teens and families [7] - The company aims to leverage AI automation to enhance seller engagement and product offerings [7][30] - The launch of Cash App Afterpay is expected to drive growth in the second half of the year [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a more dynamic macro environment and reflected a cautious stance in guidance [14] - The company is prepared to navigate potential short-term volatility while focusing on long-term growth [21] - Management expressed confidence in the growth drivers for the second half of the year, including the expansion of Cash App Borrow [15] Other Important Information - The company has repurchased approximately $600,000,000 in stock so far this year [13] - The first product release event is scheduled to showcase over 100 new products and features [10] Q&A Session Questions and Answers Question: Can you provide more insight into the company's outlook given macro uncertainties? - Management highlighted internal changes and improvements in systems that are starting to yield results, particularly in Square [25][26] Question: What changed in consumer behavior during the tax refund season? - Management noted a change in Cash App customer behavior, impacting inflows, and reflected this in their guidance [36] Question: Can you elaborate on the Cash Card Afterpay functionality and its early results? - Management expressed excitement about the integration of Afterpay with Cash App, noting strong early adoption and plans for further rollout [44][46] Question: How does the company plan to expand its Borrow product? - Management indicated that the expansion of Borrow is tied to the capabilities of Square Financial Services, allowing for broader access and improved unit economics [51][88] Question: What are the key drivers behind Square's gross profit acceleration this year? - Management pointed to product innovation and enhancements in go-to-market strategies as key drivers for growth [68][70]

Financial Performance - In Q1 2025, the company generated gross profit of $2.3 billion, a 9% increase year over year, with Cash App contributing $1.4 billion (up 10%) and Square contributing $897.9 million (up 9%) to this growth [124]. - Total net revenue for Q1 2025 was $5.77 billion, a decrease of $185.3 million (3%) compared to Q1 2024, primarily due to a $429.7 million (16%) decline in bitcoin revenue [130]. - Excluding bitcoin revenue, total net revenue increased by $244.4 million (8%) in Q1 2025 compared to Q1 2024 [130]. - Operating income for Q1 2025 was $329.3 million, up from $249.7 million in Q1 2024, while net income attributable to common stockholders was $189.9 million, down from $472.0 million in the prior year [125]. - Adjusted Operating Income for Q1 2025 was $466.3 million, compared to $364.3 million in Q1 2024, reflecting a 28% growth [164]. - Adjusted EBITDA for Q1 2025 was $812.8 million, an increase of 15% from $705.1 million in Q1 2024 [164]. - Basic Adjusted Net Income Per Share increased to $0.57 in Q1 2025 from $0.49 in Q1 2024 [165]. - Net income for the three months ended March 31, 2025, was $188.7 million, influenced by non-cash expenses totaling $689.3 million [181]. Revenue Breakdown - Subscription and services-based revenue increased by $208.7 million (12%) in Q1 2025, primarily due to growth in Cash App's financial services products [132]. - Transaction-based revenue rose by $39.5 million (3%) in Q1 2025, supported by a 4% increase in Gross Payment Volume (GPV) [131]. - Square segment net revenue increased by $122.1 million, or 7%, to $1.85 billion for the three months ended March 31, 2025, compared to $1.73 billion in 2024 [146][147]. - Cash App segment net revenue decreased by $293.9 million, or 7%, to $3.88 billion for the three months ended March 31, 2025, compared to $4.17 billion in 2024 [149][150]. - Excluding bitcoin revenue, Cash App revenue increased by $135.8 million, or 9%, for the three months ended March 31, 2025 [151]. Expenses and Costs - Total operating expenses for Q1 2025 increased by $115.6 million (6%) to $1.96 billion, driven by higher product development and sales and marketing expenses [138]. - The company recorded $66.9 million in severance and other expenses related to cost efficiency initiatives during Q1 2025 [127]. - Interest expense for the three months ended March 31, 2025, was $17.2 million, a $35.988 million increase, or 192%, compared to a net interest income of $18.7 million in 2024 [143]. - Amortization of customer and other acquired intangible assets decreased by $9.6 million, or 22%, for the three months ended March 31, 2025, compared to the same period in 2024 [142]. Cash and Liquidity - The company ended Q1 2025 with $9.2 billion in available liquidity, a decrease of $1.5 billion from December 31, 2024, mainly due to a $1.0 billion cash payment for convertible notes and $445.3 million in share repurchases [128]. - Total liquidity as of March 31, 2025, was approximately $9.2 billion, down from $10.7 billion as of December 31, 2024 [168]. - Cash and cash equivalents decreased to $7.1 billion as of March 31, 2025, from $8.1 billion as of December 31, 2024 [168]. - The company experienced significant fluctuations in cash and cash equivalents due to timing of period end and daily GPV variations [179]. Investments and Debt - The company has $5.2 billion in total debt, including $1.0 billion in senior unsecured notes maturing in 2026 and 2031 [171]. - The company held approximately 8,584 bitcoins valued at $708.5 million as of March 31, 2025, with a remeasurement loss of $93.4 million in Q1 2025 [169]. - The fair value of the company's bitcoin investment as of March 31, 2025, was $708.5 million, with a remeasurement loss of $93.4 million recognized during the period [190]. Share Repurchase and Capital Management - The board authorized a total share repurchase program of up to $4 billion, with $1.8 billion repurchased as of March 31, 2025, including $445.3 million in Q1 2025 [129]. Cash Flow Activities - For the three months ended March 31, 2025, net cash provided by operating activities was $133.3 million, a decrease from $489.4 million in the same period of 2024 [180][182]. - Cash provided by investing activities for the three months ended March 31, 2025, was $914.7 million, compared to $1.0 billion in the same period of 2024 [183][184]. - Cash used in financing activities for the three months ended March 31, 2025, was $1.2 billion, significantly higher than the $32.4 million provided in the same period of 2024 [185][186]. - Customer funds obligations increased by $1.1 billion during the three months ended March 31, 2025 [185].

Exhibit 99.1 Q1 2025 Shareholder Letter investors.block.xyz To Our Shareholders Our growth in the first half of this year does not meet our bar, and we remain confident in our ability to accelerate Block's gross profit growth in the second half of 2025 and beyond. Cash App gross profit growth came in below our expectations, largely driven by softer inflows and Cash App Card spend than we had forecasted. We saw changes to consumer spending as the quarter progressed that we believe drove the majority of our f ...

Core Insights - Square has launched new banking tools aimed at providing sellers with instant access to their funds, allowing business owners to sign up for both a Square payments account and a free Square Checking account through a single application [1] - The updated savings account now offers personalized savings recommendations based on cash flow data and industry insights, helping merchants manage their funds more effectively [2] - Traditional banking services often introduce high costs and complexities for small businesses, making it challenging for them to maintain healthy cash flow and access capital [3] Industry Context - Small and medium-sized businesses (SMBs) are under increasing pressure, with nearly 20% expressing pessimism about their survival over the next five years, particularly in light of tariffs [4] - The need for high-growth businesses to adapt and thrive in an uncertain economy has been emphasized, with embedded options in payments being identified as a significant opportunity [4] - Many SMBs are shifting away from international sourcing to domestic suppliers, despite the higher costs, although this strategy may not be feasible for all businesses [5]

Core Insights - JR Research is recognized as a top analyst in technology, software, and internet sectors, focusing on growth and GARP strategies [1] - The investment approach emphasizes identifying attractive risk/reward opportunities with robust price action to generate alpha above the S&P 500 [1][2] - The investment group Ultimate Growth Investing specializes in high-potential opportunities across various sectors with a focus on strong growth potential and contrarian plays [3] Investment Strategy - The strategy combines sharp price action analysis with fundamentals investing, avoiding overhyped stocks while targeting battered stocks with recovery potential [2] - The investment outlook is typically 18 to 24 months for the thesis to materialize, aiming for robust fundamentals and attractive valuations [3] Target Audience - The group is designed for investors looking to capitalize on growth stocks with strong fundamentals, buying momentum, and turnaround plays [3]

Core Viewpoint - Block is expected to report first-quarter 2025 results on April 30, with revenue estimates of $6.18 billion, reflecting a year-over-year growth of 3.81% and earnings per share (EPS) of 88 cents, indicating a 3.53% increase from the previous year [1][2]. Financial Performance - The Zacks Consensus Estimate indicates that Block's earnings have beaten expectations in two of the last four quarters, with an average earnings surprise of 11.25% [2]. - Gross Payment Volume (GPV) for Block reached $61.95 billion in Q4 2024, marking a 7.8% year-over-year increase, driven by strong performance in the Square ecosystem [3]. - Gross profit is anticipated to grow 11% year-over-year to $2.32 billion, with adjusted operating income expected at $430 million and an adjusted operating margin of 19% [4]. Market Conditions - Block shares have declined 31% year-to-date, underperforming the Zacks Computer & Technology sector's decline of 11.1% and the Zacks Internet Software industry's fall of 6.2% [6]. - The company faces challenges from a difficult macroeconomic environment, including the risk of recession due to higher tariffs [6]. Competitive Position - Block's stock is currently trading at a Price/Cash Flow ratio of 21.84X, which is higher than the sector average of 18.75X and competitors like PayPal at 8.84X [10]. - The company is expanding its product offerings, including a new Square POS app that integrates various functionalities for different industries [14][15]. Strategic Initiatives - Cash App's partnership with Google Play enhances its payment options, and the Afterpay division has seen significant consumer engagement, with over $72 billion spent since its acquisition [16]. - Block's comprehensive commerce ecosystem supports sellers by combining software, hardware, and payment services, which is expected to sustain momentum [13]. Investment Outlook - Despite strong product offerings and a growing partner base, challenging macroeconomic conditions and sluggish consumer spending trends raise concerns [18]. - Block's shares are currently trading below their 50-day and 200-day moving averages, indicating a bearish trend [18].