Square's bitcoin billions catapult Cash App revenue to new heights

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Crypto played a key role in Square's 140% year-over-year growth in revenue for the third quarter — and 212% growth in gross profit for the Cash App alone.

Square Cash debuted in 2013 as a P2P service and has added many experimental features over the years — including bitcoin trading for all users in January 2018. Bitcoin transactions accounted for $1.63 billion, or 79%, of Cash App’s $2.065 billion revenue in the third quarter of this year.

The bitcoin-based volume provided $32 million in third-quarter gross profit for Square, 15 times more than it did a year earlier. Cash App also generated $354 million in subscription and service-based revenue, up 154% year-over-year; and $81 million in transaction-based revenue during the quarter, up 320% year-over-year.

Square's total company revenue was $3.03 billion for the third quarter, up 140% (148% excluding its Caviar delivery service, which it sold last August) from $1.27 billion in the same period one year earlier. Square earned $37 million in net income for the third quarter, up 27% from the $29 million one year earlier.

During the third quarter, Square announced a $100 million investment in support of minority and underserved communities and ending racial injustice; and a $50 million investment into bitcoin.

Square predicts that bitcoin "will be the native currency of the internet and help people around the world better participate and thrive in the economy," said Jack Dorsey, co-founder and CEO of Square during the company’s earnings call.

Even though Cash App was developed originally to be a bare-bones P2P payment system, Dorsey says the company has been able to graduate those users to services that provide other ways to spend, send, store and invest their money.

Cash App users who adopted two or more products were considered to be highly engaged during the third quarter, making three to four times the number of transactions and generating three to four times the gross profit compared to users who only used the P2P functionality.

Through the stock brokerage functionality of the Cash App, more than 2.5 million users have purchased stocks since the feature’s launch less than one year ago, and billions of dollars had been traded by the end of the third quarter, Dorsey said.

At the end of the third quarter, Cash App customers had more than $1.8 billion in cash balances stored in their accounts, up 180% year-over-year.

Square’s other major line of business, the Seller ecosystem, reported modest gains for the third quarter — generating $965 million of revenue and $409 million of gross profit, up 5% and 12% year-over- year, respectively.

Seller gross payment volume (GPV) during the quarter was $28.8 billion, up 4% from the third quarter of 2019’s figure of $22 billion. There was a noticeable shift in Seller payments mix, as the company increasingly targeted larger businesses.

Small businesses with less than $125,000 in annual gross payment volume represented 39% of Square’s Seller GPV in the third quarter, down from 47% a year earlier. Mid-sized businesses with $125,000-$500,000 in annual GPV moved up to a 30% share from 29% a year earlier, while large businesses with more than $500,000 in annual GPV accounted for 31% of Square’s Seller volume in the third quarter, up from 24% a year earlier.

The international segment for the Seller ecosystem experienced strong growth, as it now represents 11% of total Seller GPV, up from 6% two years ago, due to the growth in online commerce.

“The focus on providing sellers with fast and flexible access to their funds, which has proven to be especially important this year,” noted Dorsey “Square Card, our business debit card, which we launched last year, provides sellers with a way to immediately access and spend earned funds without setting up a bank account. Adoption of Square Card has increased each quarter since launch, and in the third quarter sellers spent more than $250 million on their cards.”

This bright spot in the Seller ecosystem, Square Card, now is on track to achieve an annualized payment volume run rate of $1 billion, having been launched only in the first quarter of 2019.

Dorsey noted that two new features for Square Payroll launched during the quarter — instant payments and on-demand pay. The instant payments feature allows merchants to pay employees using earned funds next business day with direct deposit, or instantly when employees use the Cash App. The on-demand pay feature allows employees to transfer $200 of earned wages into their Cash App accounts before the payroll pay date.

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Earnings Bitcoin Square P-to-P payments Mobile payments Alternative acquirers