At Square, it’s getting hard to separate bitcoin from dollars. The company’s fourth-quarter financials reported on Tuesday (Feb. 23) were overshadowed by details about the usage of the cryptocurrency and its own announcement that it is investing $170 million more in it on top of its recent $50 million investment in October.
“Why are we doing this?” CEO Jack Dorsey asked the company’s audience on its earnings call. “We believe the internet is a native currency. We believe that has the highest probability of empowering more people in the economy in a fair way. We’re doing a lot to ensure this from a product standpoint, open-source development and open patent perspective. And by us owning bitcoin, our incentives are aligned with skin in the game.”
A lot of that skin has been provided by Square’s users. In 2020, more than three million customers purchased or sold bitcoin on Cash App, and, in January 2021, one million purchased bitcoin for the first time. The company has 36 million consumers currently using Cash App. In Q4 2020, bitcoin volumes per customer were up more than 2.5 times over 2019. And while most of the questions posed to Dorsey regarding bitcoin were asked by Wall Street analysts, a particularly telling one was posed by one of the company’s retail customers. What, he asked, will Square do to provide more transparency regarding bitcoin usage?
“We plan on adding more educational resources,” Dorsey said. “We need to make sure that the people have the information available to them to make informed decisions. And we’ve done this recently by putting news articles right in the app so you’ll be able to see all the latest Bitcoin news or all the latest news on any particular stock that you visit. We think there’s a lot of opportunity to do even more within the product and also, we will look at improving our customer service.”
Cash App generated $1.76 billion of bitcoin revenue and $41 million of bitcoin gross
profit during the fourth quarter of 2020, up 10 times and 13 times over the same period in 2019. For the full year of 2020, Cash App generated $4.57 billion of bitcoin revenue and $97 million of bitcoin gross profit, up 9 times and 12 times year over year, respectively.
In other numbers, Q4 saw Square achieve a gross profit of $804 million, up 52 percent over 2019. Cash App delivered gross profit up 162 percent year over year, to $377 million. The companies merchant ecosystem generated a gross profit of $427 million, up 13 percent year over year.
The company also reported results for Boost, the rewards program embedded within the Cash Card product. According to the earnings report, in Q4 new Cash Card customers adopted Boost at a higher rate and spent approximately twice more than other Cash Card customers. In the fourth quarter, it launched a new feature that allows customers to earn bitcoin instantly on Cash Card purchases.
Outside of bitcoin, the company is also realigning with the digital-first economy. During the fourth quarter, gross revenue from omnichannel and online sellers represented more than half of the category’s total, up from one-third in 2018. It supported merchants, restaurants in particular, with QR codes that sync directly with a seller’s backend systems. It also launched Square Invoices in 2020, which “generated $100 million in gross profit by enabling a range of use cases to help existing and new sellers adapt, including contractors, food caterers, and retailers fulfilling wholesale orders.”
The digital-first element of the call was also notable for a focus on card not present transactions.
“We saw a lot of this momentum with COVID, as people open their eyes towards the rest of our platform and we quickly [prioritized] a lot of our efforts to make sure that we could support that growth, and then we could enable more of it,” Dorsey said. “But I don’t think that [digital-first] behavior is necessarily going away. I think before COVID there were a lot of merchants who were hesitant to try new things. But it was a forcing function that got people to open their eyes to more, and they found a lot more efficiency and they found a lot more sales. So we’re gonna continue watching and learning.”
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