This story has been updated to correct the number of Cash App users who bought or sold bitcoins during 2020.
Square Inc. doubled in bitcoin with a $ 170 million investment in cryptocurrency, as the increased interest in trades among Cash App customers helped revenue more than double in the fourth quarter.
The company announced its newest investment in bitcoin on Tuesday in conjunction with its fourth-quarter earnings report, which showed growing revenues and a growing cash app user base amid rising interest in bitcoin and stock trading.
Square shares SQ,
fell 3.7% on Tuesday’s trading session.
Square had 36 million monthly Cash App users in December. The company reported that more than one million Cash App customers first bought bitcoin in January alone, while more than 3 million bought or sold bitcoin in the app throughout the year 2020.
The company recorded revenue of $ 3.16 billion in the fourth quarter in its Tuesday afternoon report, up from $ 1.31 billion a year earlier and ahead of the $ 3.10 billion that analysts surveyed by FactSet expected, although Wedbush analyst Moshe Katri said in an email to MarketWatch that “by typical standards, [the] The drop in 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 seller business and $ 2.17 billion from the Cash App, which is where users can send peer-to-peer payments, as well as commercial and bitcoin shares. Bitcoin revenue reached $ 1.76 billion, while Cash App revenue excluding bitcoin was $ 416 million in the quarter. As bitcoin trading resources still have a narrow margin for Square, the overall gross profit from the Cash App increased by a smaller percentage (162%) compared to the revenue from the Cash App (502%).
“Bitcoin 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 bitcoin market price,” the company said in its letter to shareholders.
Square itself bought about 3,318 bitcoins at an aggregate price of around $ 170 million, based on a previous purchase of about $ 50 million in bitcoin and making bitcoin represent approximately 5% of Square’s total money , cash equivalents and marketable securities.
Bitcoin “has the potential to be the Internet’s native currency” and Square wants to “align our incentives” with cryptocurrency, said CFO Amrita Ahuja in a call with reporters after the report.
A highlight of the report for Rosenblatt Securities analyst Sean Horgan was Square’s disclosure that its overall customer acquisition costs for the Cash App were less than $ 5 per user during 2020, which he said highlighted “marketing efficient and viral network effects “.
Square currently offers Cash App users the ability to buy and sell bitcoin, as well as a select group of shares, which Ahuja said is aligned with the company’s mission to educate investors on how to trade and make investments more accessible and relatable. . “As we think of other cryptocurrencies” or other actions that invest in the platform, Square “will be guided mainly by the stability and security of our platform”, as well as by the interest of the client, she said.
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The payments company generated fourth quarter net income of $ 294 million, or 59 cents per share, while Square reported net income of $ 391 million, or 83 cents per share, a year earlier. After adjusting for share-based compensation and other expenses, Square earned 32 cents per share, up from the previous year’s 23 cents per share and above FactSet’s 24-cent consensus.
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 comments on its January performance, but declined to give a formal financial forecast. Square 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 customers active in transactions for its bitcoin, stockbroker and credit card products” during January.
Square’s shares have gained 23% over the past three months as the S&P 500 SPX,
increased by 8%.