Square buys more bitcoins as Cash app users increase revenue

This story has been updated to correct the number of Cash app users who bought or sold bitcoins during 2020.

Square Inc. doubled its stake in bitcoin with a $ 170 million investment in the cryptocurrency, as growing interest in trading among Cash app customers helped revenue double in the fourth quarter.

The company announced its latest bitcoin investment on Tuesday alongside its fourth-quarter earnings report, which showed growing revenue and a growing user base of the Cash app amid increased interest in trading bitcoins and stocks.

Square Shares SQ,
they were down 3.7% in after-hours trading Tuesday.

Square had 36 million monthly users of the Cash app in December. The company revealed that more than one million customers of the Cash app bought bitcoins for the first time in January alone, while more than 3 million bought or sold bitcoins on the app throughout 2020.

The company posted fourth-quarter revenue of $ 3.16 billion in its Tuesday afternoon report, down from $ 1.31 billion a year earlier and above the $ 3.10 billion that analysts surveyed by FactSet had expected. though Wedbush analyst Moshe Katri said in an email to MarketWatch. that “by typical standards, [the] the pace of net sales was relatively small. “More than half of the company’s total quarterly revenue came from bitcoin.

Square’s revenue for the quarter included $ 987 million from its vendor business and $ 2.17 billion from the Cash app, which is where users can send peer-to-peer payments, as well as trade stocks and bitcoins. Bitcoin revenue amounted to $ 1.76 billion, while cash app revenue excluding bitcoin equaled $ 416 million in the quarter. Because bitcoin trading capabilities still have a low margin for Square, the total gross profit from the Cash app increased by a smaller percentage (162%) compared to the revenue from the Cash app (502%).

“Bitcoin’s revenue and gross profit benefited from an increase in bitcoin assets and growth in customer demand, as well as a significant year-over-year increase in the market price of bitcoin,” the company said. in your letter to shareholders.

Square itself bought around 3,318 bitcoins at a total price of about $ 170 million, based on a previous purchase of around $ 50 million in bitcoins and so bitcoin represents about 5% of total cash, cash equivalents and securities. Square negotiable.

Bitcoin “has the potential to be the native currency of the internet” and Square wants to “align our incentives” with cryptocurrency, CFO Amrita Ahuja said in a call with reporters after the report.

A highlight of the report for Rosenblatt Securities analyst Sean Horgan was Square’s revelation that its overall customer acquisition costs for the Cash app were less than $ 5 per user during 2020, which, he said, highlighted the The company’s “efficient marketing and viral network effects”.

Square currently offers users of the Cash app the ability to buy and sell bitcoin, as well as a select group of stocks, which Ahuja said was aligned with the company’s mission of educating investors about trading and making investment. be more accessible and relatable. “While we think about other cryptocurrencies” or other actions that invest in the platform, Square “will be guided first and foremost by the stability and security of our platform,” as well as the interest of the client, he said.

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The payments company generated net income in the fourth quarter of $ 294 million, or 59 cents a share, while Square posted a net income of $ 391 million, or 83 cents a share, a year earlier. After adjusting for share-based compensation and other expenses, Square earned 32 cents a share, down from 23 cents a share a year earlier and above the FactSet consensus of 24 cents.

Square’s gross payment volume, or the value of payments flowing through the company’s platform, increased to $ 32 billion from $ 28.6 billion a year earlier.

The company offered some comment on its performance in January, but declined to give a formal financial outlook. Square’s seller’s gross profit increased 15% from a year earlier in January, the company said in its letter to shareholders, representing “a modest improvement compared to the fourth quarter.” The company also saw its “highest monthly totals of new active customers in transactions for its bitcoin products, stock brokerage and cash cards” during January.

Square shares have gained 23% in the last three months as the S&P 500 SPX,
+ 0.13%
it is up 8%.


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