Square Posts a Strong Quarter As Larger Sellers And Bitcoin Play a More Prominent Role

An influx of larger merchants helped drive first-quarter payment volume for Square Inc., while on the consumer side the company’s Cash App benefited from a runup in value for Bitcoin as well as increasing adoption by business users.

Sellers’ gross payment volume totaled $29.8 billion in the quarter, up 21% from the same period last year and 35% from 2019, Square reported Thursday afternoon. But small sellers’ dollar share of that pie remained more or less constant over the past year, at $11.6 billion, while merchants doing at least $125,000 in annual volume saw their share grow to 61% from 54% a year ago.

Overall, “existing cohorts of sellers were nearly back to 2019 levels,” chief financial officer Amrita Ahuja told equity analysts during a conference call late Thursday to discuss the San Francisco-based company’s results.

Square saw growth on both the card-not-present and card-present sides of its business. CNP volume grew 34% year-over-year, benefiting from jumps in a wide range of services, including Square Online, Invoices, Virtual Terminal, and its e-commerce API, the company reported, without releasing dollar figures. Card-present volume was up 13%, with growth dependent on regional decisions regarding reopening in the wake of Covid-19.

But while Square for years has been thought of as a provider of high-tech hardware and software for mom-and-pop merchants, it’s now the consumer side of its business that has assumed center stage. Its Cash App, which allows users to transfer funds and facilitates trades in stocks and purchases of Bitcoin, saw its gross profit soar 171% in the quarter year-over-year, to $495 million. 

For the first time, the app tops the gross profit Square sees on the seller side of its business, which came it at $468 million, up 32%. And that momentum didn’t let up after March 31. Indeed, for the month of April, Cash App’s gross profit exceeded a growth rate of 130%, Ahuja estimated.

Cash Card, a debit card launched in 2017 to enable Cash App users to access funds they’ve stored in the app, reached 10 million monthly active users in March. Weekly actives came to 7 million on average during the quarter, almost doubling the number of a year ago. “Direct deposit remains a top priority for the Cash App team,” said cofounder and chief executive Jack Dorsey during the call.

But it’s Bitcoin that carries the most weight in Cash App. The app’s revenue for the quarter was fully $4.04 billion, but just $529 million after subtracting revenue for the digital currency. Still, that more modest number represented a 139% increase year-over-year. “Bitcoin revenue and gross profit benefited from a year-over-year increase in the price of bitcoin, bitcoin actives, and growth in customer demand,” the company says in a shareholder letter released Thursday. Bitcoin’s price has increased roughly seven-fold in the past year, standing at more than $57,000 Friday morning.

Dorsey left no doubt about Square’s commitment to Bitcoin—and only Bitcoin among all cryptocurrencies. “We see Bitcoin as holding potential for the Internet to have a native currency,” he told an analyst who asked whether Square might support other tokens. “This is going to be a long-term priority. We feel Bitcoin is the important one to focus on.”

Another key business, Square Capital, logged $923 million in loans during the quarter, including $531 million directed to 57,000 businesses through the federal government’s Paycheck Protection Program. The company in March opened its industrial loan corporation, Square Financial Services, in Utah. It won federal and state approvals for the bank in March 2020 despite strong opposition from banking groups, especially the Independent Community Bankers of America.

For the quarter, Square reported $5.06 billion in revenue, more than triple the $1.38 billion it logged in the year-ago period, largely on the strength of a runup in Bitcoin’s value. Bitcoin revenue, at $3.51 billion, was up about tenfold.