Square Inc. announced a double profit surprise on Wednesday when the payment company delivered an unexpected increase in revenue for the second quarter in an issue that came out a day early due to “early external access” to its financial items.
Analysts expected Square’s SQ,
Revenue would decline during the period when the COVID-19 crisis put pressure on the company’s retail customer base, but instead saw Square revenue jump 64% to $ 1
Square shares increased almost 11% in aftermarket trading.
Transaction-based revenues of $ 683 million easily exceeded consensus expectations of $ 533 million, although they decreased by 12% compared to a year earlier, while revenues from subscriptions and services amounted to $ 346 million, an increase of 38% and before the consensus picture of 287 million dollar. Square also posted $ 19 million in hardware revenue and saw a 600% increase in bitcoin to $ 875 million, driven by new active bitcoin customers and increased demand for cryptocurrency. Analysts were looking for $ 278 in bitcoin revenue.
Read: Disney shakes up streaming strategy after losing nearly $ 5 billion due to pandemic
Despite the spike, Square’s bitcoin feature, which allows users of its Cash App mobile wallet to buy and sell bitcoin, is still a fairly low margin operation for the company. It generated $ 17 million in gross profit, although it increased more than 700% from a year ago.
Wedbush analyst Moshe Katri told MarketWatch in an email following the results that Square revenue was flat from a year earlier when bitcoin was excluded. “The market appears to be largely ignoring COVID-related challenges in Square’s Seller segment (approximately 70% of ex-bitcoin revenue), reflecting the company’s high exposure to masons and mortar traders, while focusing on the company’s hyper-growing Cash App segment,” he said. .
Square broke revenue for its sellers and Cash App companies separately for the first time this quarter, revealing $ 723 million in sales revenue and $ 1.2 billion in Cash App revenue, or $ 325 excluding the bitcoin portion of the business. Seller revenue was 17% while Cash App revenue increased 361%, or 140% when excluding bitcoin.
See also: Venmo and Square’s Cash app would do gangbusters before the pandemic – now they are doing even better
More than 30 million Cash App users were involved in a transaction on the service in June, up from 24 million in December, as the mobile wallet saw increased usage during the pandemic. More than seven million people in June used Cash Card, a debit card associated with the wallet, and prepaid card spending increased almost 50% in the second quarter from the March quarter.
Active Cash App customers participated in more than 15 transactions per month on average during the second quarter, an increase of 50% compared to the previous year.
“Although transactions per customer have increased steadily over time, we recognize that engagement in the second quarter also benefited from government funds related to stimulus and unemployment benefits,” Square said in its shareholder letter.
Keefe, Bruyette, & Woods analyst Steven Kwok said a key issue entering Squares’ revenue call, which has been moved to 8 a.m. ET Wednesday morning, will be “the level of benefits the company sees related to the government’s stimulus program and sustainability for future performance measurements” . ”
On the business side of the business, Square saw a 15% gross payout volume from a year earlier to $ 22.8 billion, although the company revealed that trends improved steadily during each month of the quarter as pandemic-related restrictions eased. Furthermore, sales volume increased by 5% in July compared with the previous year, which the company called “a modest improvement” compared to June.
Square posted a second-quarter net loss of $ 11 million, or 3 cents a share. The company said it recognized a profit of $ 21 million related to observable price changes for non-marketable equity investments and that it would have had a net loss of $ 32 million for the quarter, excluding these effects. The company had a net loss of $ 7 million the year before.
Adjusted earnings per share rose to 18 cents for the quarter, down from 21 cents but before the FactSet consensus, which required a loss of 5 cents.
The shares have added 115% over the past three months as the S&P 500 SPX,
has increased by 16%.