Block to Flip 10% of Bitcoin Profit Into Bitcoin Investments

Paige Smith, Bloomberg News

A neon Bitcoin cryptocurrency logo at a crypto exchange kiosk in Warsaw, Poland, on Thursday, March 14, 2024. Bitcoin extended a retreat from its latest record high amid an intensifying debate about whether the bull run in cryptocurrencies is evidence of speculative froth in global markets. Photographer: Damian Lemanski/Bloomberg , Bloomberg

(Bloomberg) -- Block Inc. lifted its full-year profit guidance and revealed plans to invest a portion of its profits from Bitcoin back into the assets, as Jack Dorsey’s company bets big on the currency’s future.

Block will invest 10% of gross profit from Bitcoin products each month into buying Bitcoin for investment, Dorsey said in a letter to shareholders on Thursday. Currently, less than 3% of the company’s resources are focused on Bitcoin projects, he said.

“We believe the world needs an open protocol for money, one that’s not owned or controlled by any single entity,” he said. “We believe Bitcoin is the best and only candidate to be that protocol, and to ultimately become the native currency of the internet.”

Read More: Jack Dorsey’s Block Finishes Development of Bitcoin Mining Chip

The company’s $220 million investment in Bitcoin — which made it one of the first public companies to hold it on its balance sheet according to Dorsey — had grown by about 160% to $573 million as of the end of the first quarter.

Bitcoin prices had surged to new heights amid renewed interest in the assets following US regulator approval of Bitcoin exchange-traded funds. But the cryptocurrency sector is notoriously volatile — with the collapse of Sam Bankman-Fried’s FTX empire underscoring risks lurking in the industry.

“We would check back in on this approach and assess Bitcoin as a percentage of our overall liquidity, and would continue to remain nimble in how we move forward here,” Block Chief Financial Officer Amrita Ahuja said in an interview.

Block said its Ebitda, or adjusted earnings before interest, taxes, depreciation and amortization, was $705 million for the three-month period, nearly doubling from the year prior and beating analyst estimates. Adjusted diluted earnings per share were $0.85, also topping expectations of $0.71.

The firm boosted its outlook for full-year adjusted Ebitda, predicting $2.76 billion, up from $2.63 billion. It also increased its guidance for adjusted operating income to $1.30 billion for the year compared to its earlier forecast of $1.15 billion.

Shares of the company were down 9% for the year through Thursday, and had dropped following reports of Federal prosecutors probing Block’s internal compliance structures and how it handles transactions involving sanctioned countries.

Dorsey said on Thursday during an earnings call that the reports were likely linked to already-disclosed probes and that he believed there were no new ongoing investigations.

Shares in the firm were up 7.4% at 5:25 p.m. in late New York trading.

Block reported first-quarter gross profit of $2.09 billion, fueled by $1.26 billion generated by Cash App. That business, which began by allowing consumers to send money to one another, has expanded to offer the transfer of many instruments —including stocks and Bitcoin — and access to other financial products.

(Updates with further detail, CFO comments from fifth paragraph.)