Square buys $170 million more in bitcoin, sees revenue more than double

February 23, 2021

Surging interest in bitcoin and equities trading among Cash App customers helped Square Inc. more than double revenue for its latest quarter, while the company doubled down on its own interest in bitcoin by announcing a new $170 million purchase of the cryptocurrency.

Square shares

were off 4.9% in after-hours trading Tuesday.

The company posted fourth-quarter revenue of $3.16 billion 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 had been expecting.

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 trade equities and bitcoin. Bitcoin revenue came out to $1.76 billion while Cash App revenue excluding bitcoin equated to $416 million in the quarter, but because bitcoin trading capabilities still carry a slim margin for Square, the Cash App’s overall gross profit rose by a smaller percentage (162%) compared with Cash App revenue (502%).

“Bitcoin revenue and gross profit benefited from an increase in bitcoin actives and growth in customer demand, as well as a significant year-over-year increase in the market price of bitcoin,” the company said in its shareholder letter. Square disclosed that during 2020, more than 4 million customers purchased or sold bitcoin on the Cash App.

Square itself bought about 3,318 bitcoins at an aggregate price of roughly $170 million, building on a previous purchase of about $50 million worth of bitcoin and making it so bitcoin represents approximately 5% of Square’s total cash, cash equivalents, and marketable securities.

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

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

The company offered some commentary on its January performance but declined to give a formal financial outlook. Square’s seller gross profit was up 15% from a year prior in January, the company said in its shareholder letter, representing “a modest improvement compared to the fourth quarter.” The company also saw its “highest monthly totals of new transacting active customers for its bitcoin, stock brokerage, and Cash Card products” during January.

Shares of Square have gained 23% over the past three months as the S&P 500

has risen 8%.