On August 4, fintech and digital payment giant Block (formerly Square) announced its second-quarter results. The data shows that Block’s total revenue for the quarter fell 6% to $4.4 billion, of which bitcoin-related revenue fell 34% to $1.79 billion. Excluding bitcoin-related income, net income was $2.62 billion. Revenue fell 6.6 percent from the second quarter of last year due to lower bitcoin revenue, the company said.
Overall, the company’s overall revenue fell as a result of lower bitcoin-related revenue, largely due to lower consumer demand and bitcoin prices, and in part due to broader uncertainty around the crypto asset.
Public information shows that Tesla sold about 75% of its bitcoin holdings in the second quarter, but Block held its bitcoin. As a result, it took a $36 million write-down on the value of its bitcoin holdings.
Block, Inc. is known to create tools that enable businesses, sellers and individuals to participate in the economy. Founded in 2009, Block has offices around the world. After adopting a distributed work model in 2021, the company no longer specifies the location of its headquarters.
Block consists of two parts that require reporting, Square and Cash App. Square is a cohesive commerce ecosystem that helps sellers start, run, and grow their businesses, including enabling sellers to accept credit card payments, providing reporting and analytics, and next-day settlement.
Square’s point-of-sale software and other commerce services can help sellers manage inventory, locations and employees; access financing; attract buyers; build a website or online store; and grow sales. Cash App is an ecosystem of financial products and services that helps individuals manage their money by providing financial tools that allow individuals to store, send, receive, spend and invest their money. Cash App attempts to redefine the relationship between the world and money, making it closer, more immediate, and more accessible.
On January 31, 2022, the Company completed the acquisition of Afterpay Limited (“Afterpay”) to strengthen its position to better offer attractive financial products and services, expand access to more consumers and provide Incremental revenue for merchants of all sizes.
Block mentioned in the earnings report that we believe that cryptocurrency is an economic empowerment tool that is consistent with our corporate purpose. We expect to hold these investments for the long term, but will continue to reassess our investment in Bitcoin against our balance sheet. Since Bitcoin is considered an intangible asset with an indefinite duration, under the accounting policy for such assets, we are required to recognise any fall in market price below book value as an impairment charge.
As of June 30, 2022, our cumulative investment in Bitcoin was $220 million. As of June 30, 2022, the cumulative impairment charge to date was $107.1 million. Based on observable market prices, an impairment charge of $36 million related to our investment in Bitcoin was recorded for the three months ended June 30, 2022, in the three months ended March 31, 2022 There are no impairment charges. As of June 30, 2022, our cumulative impairment charge to date was $107.1 million as the market price of Bitcoin was lower than the book value of our Bitcoin investments during the relevant period.
As of June 30, 2022, the fair value of our investment in Bitcoin was $160 million, which was $47.1 million higher than the company’s book value of $112.9 million after recording impairment charges. Any decline in the book value of Bitcoin investments is recorded in operating expenses in the Condensed Consolidated Statement of Operations. Assuming a 10% increase or decrease in the Bitcoin market price would not have a material impact on our financial results.
We bought $50 million in bitcoin in October 2020 and another $170 million in February 2021, and we may buy more in the future. The price of Bitcoin is highly volatile and may continue to fluctuate in the future, including due to various associated risks and uncertainties. For example, the popularity of Bitcoin is a relatively new trend, and its long-term adoption by investors, consumers and businesses remains uncertain. Bitcoin’s lack of physical form, its reliance on technology for creation, existence, and transaction verification, and decentralization could make its integrity vulnerable to malicious attacks and technological obsolescence. If the market value of our Bitcoin holdings continues to decline relative to the purchase price, our investment in Bitcoin is subject to market price fluctuations, impairment and other risks of loss.
In addition, under applicable accounting rules, Bitcoin is currently considered an intangible asset of indefinite duration, meaning that at any time after its acquisition, its market value is less than any decline in our carrying value for such an asset, We will be required to recognize impairment charges, and we may not make upward revisions to any market price increases prior to the sale, which could adversely affect our results of operations in any period in which such impairment occurs. We have recorded several such impairment charges. Future changes to applicable accounting rules that require us to change the way we account for Bitcoin could materially and adversely affect our financial results and the market price of our Class A common stock.
Block’s description of the risks associated with Bitcoin investments is also somewhat predictable. Block shares fell 6.5 percent to $83.83 in after-hours trading last week, data showed. The stock is down nearly 45% year to date.
It is worth mentioning that although its overall revenue declined due to the decrease in Bitcoin revenue. But its development still exceeded expectations. Analysts had expected adjusted earnings per share of 16 cents, and the current price of 18 cents beat analysts’ average forecast.
With the release of the financial report, according to Reuters news, Block has announced that it will slow down the pace of recruitment, and will also cut its investment target for 2022 by 1/4 (about 250 million US dollars). Block CFO Amrita Ahuja explained that while Block’s gross profit trend has been healthy for the past seven months, the market is now entering a potentially uncertain situation, which will slow hiring and cut investment targets.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/btc-related-revenue-drops-34-digital-payment-giant-blocks-overall-revenue-declines/
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