The digital shift has been firmly cemented in the wake of the pandemic, and merchants are meeting the challenge by meeting consumers where they want to shop — across brick-and-mortar and online channels.
To that end, Square posted earnings that reflected growth in cross-channel efforts, a healthy uptake in Cash app — and of course, some bitcoin buying too.
In terms of headline numbers, revenues were just under $3.1 billion, slightly lower than the Street at $3.2 billion. Adjusted earnings per share came in at 32 cents per share, beating consensus estimates of 24 cents per share.
The company said that gross payments volume came in at $32 billion in the fourth quarter, up from $28.6 billion last year; 8 percent of the total GPV came from Cash App Business.
As detailed on the earnings call, larger sellers represented 60 percent of GPV, up from 52 percent last year.
Cash App activity included $1.8 in bitcoin-related revenues.
The company said in its release that in December, it had 36 million acting, transacting customers, up more than 50 percent year over year. Peer-to-peer payments remained a primary driver of acquisition activity, the company said. Square said gross profit per monthly active transacting customer was $41 per customer, up 70 percent year on year. Boost, the instant rewards program, helped propel growth, where Boost actives spent about twice the amount that other Cash Card customers did.
Cash App Beyond P2P
As CEO Jack Dorsey said on the call: “We saw customers increase their usage of products beyond peer-to-peer transactions, including use of our Visa Cash Card, Cash Boost and Bitcoin.” Cash App gross profits were up 164 percent in January, management said on the call; early trends in February indicate growth on that metric of around 130 percent. Growth decelerated a bit based on normalization of government stimulus disbursements.
CFO Amrita Ahuja noted on the call that back in 2019, Cash App had only one revenue stream with $100 million in gross profit; that tally stands at four revenue streams currently.
In the quarter, the company spent $170 million to buy bitcoin, where the firm spent roughly $51,000 per coin acquired. Square said that in all of 2020, more than 3 million customers purchased or sold bitcoin via Cash App, and in January 2021, more than 1 million customers bought bitcoin for the first time.
As Dorsey said on the earnings call, the purchases Square has been making have come as “we believe the Internet needs a native currency, and we believe bitcoin is it.”
Omnichannel efforts continued to gain traction. Online channels generated more than 50 percent growth in the quarter, noted the CFO, saying, “omnichannel and online sellers represented more than half of Seller GPV in the fourth quarter, which is up from a third two years ago. Our mid-market category, which consists of sellers with more than $0.5 million in annual GPV is where we see our largest market opportunity for the seller business and a focus area for our acquisition effort.”
Dorsey said that, looking ahead, for Cash App, “we’re going to focus on increasing the transaction limits across the ecosystem, expand our deposit capabilities and increase the quality of our customer service.”
During the Q and A with analysts, management estimated that Square’s TAM stands at around $160 billion. “With Cash App, we’ve seen a 6x ROI over three years on the back of efficient acquisition at less than $5 per customer, again calling upon our network effects,” said Ahuja.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More