U.S. mobile payments giant Square released a positive earnings report after the U.S. stock market closed Thursday. The report showed that Square’s first-quarter revenue and adjusted earnings per share both far exceeded Wall Street analysts’ expectations, thanks to a surge in bitcoin transactions on its popular Cash App, pushing the company’s shares up more than 2 percent after the bell.
In the quarter ended March 31, Square reported total net revenue of $5.057 billion for the first quarter, up 266 percent from $1.381 billion in the same quarter last year, far exceeding analysts’ average estimate of $3.37 billion; adjusted earnings per share (EPS) were $0.41, compared to adjusted EPS of $0.41 in the same quarter last year, according to the report. Diluted loss was $0.02, which also far exceeded the average analyst estimate of $0.16.
Square’s transaction services revenue increased 27 percent year-over-year to $960 million in the first quarter, well above expectations of $872.5 million. Square said in a shareholder letter Thursday that the company “saw strong growth in customer inflows in the first quarter, driven primarily by government spending, which helped increase participation and adoption of our Cash App ecosystem. “
Notably, however, Square’s fastest-growing business was one of its newest, bitcoin, and Square reported that revenue from bitcoin sales, including the total value of bitcoin traded on the Cash App, soared to $3.51 billion in the first quarter of the year, up more than 10 times from $306 million in the year-ago quarter. However, the gross profit from these bitcoin transactions was just $75 million, reflecting the small profit Square makes from each transaction.
Square’s Cash App has allowed users to buy, sell and hold bitcoin for the past three years, and cryptocurrency-related transactions on the platform have soared in recent quarters as the price of the cryptocurrency has soared. In March of this year, the Cash App began allowing users to send and receive bitcoin to other users for free through the app.
In addition, Square also invested $170 million into bitcoin in February of this year, after the company purchased $50 million in bitcoin in the fourth quarter of 2020. In total, the company now has $472 million in bitcoin, bringing its total investment to $272 million (although the company took a $20 million bitcoin impairment in the quarter and its investment in DoorDash resulted in a $29 million market cap reduction).
In a letter to shareholders, Square wrote: “Bitcoin revenue and gross profit benefited from growth in bitcoin prices, bitcoin activity and customer demand. We recognize that bitcoin revenue may fluctuate in the coming quarters in response to changes in customer demand or the market price of bitcoin.”
Looking ahead to the remainder of 2021, Square said in its earnings report that a two-year compound annual growth rate from 2019 to 2021 will help reflect potential gross profit trends for each ecosystem. In the second quarter of 2021, the company expects its Cash App to deliver strong year-over-year gross profit growth of 167% as the U.S. government begins spending in April 2020.
On the other hand, in the second quarter of 2021, sellers are expected to benefit from gross profit growth given significant regional restrictions in the second quarter of 2020 that impacted face-to-face activity, resulting in a 9% year-over-year decline in gross profit in that quarter.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/squares-q1-revenue-jumped-266-and-the-driving-force-behind-it-was-bitcoin/
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