Square Cash App Users Grow 60 Pct YOY

Square has posted Q4 earnings results, showing continued evolution from the firm’s roots 11 years ago as a point-of-sale payments processor with on-site card readers toward — what management described as — an “ecosystem” tying sellers and consumers together across a digital platform that includes capital loans and payment apps.

In terms of headline numbers, revenues surged to $1.3 billion, up 42 percent, while analysts had expected $1.2 billion. Adjusted earnings per share came in at $.23, two pennies better than the Street had expected. Drilling down a bit, gross payment volume (GPV) was $28.6 billion in Q4, up from $22.6 billion a year ago.

Among the closely watched metrics, supplemental materials from the company broke down merchant “size” of GPV, and showed that larger sellers represented a majority of the mix at 55 percent — that tally had been 47 percent two years ago. With a bit more granularity, sellers with annualized volumes above $500,000 were at 27 percent, while another 27 percent came from sellers with annualized volumes of between $125,000 and $500,000. The remaining 45 percent came in at volumes below $125,000.

The company said that Square Capital saw loan originations topping $671 million across 97,000 originations, representing 42 percent growth year over year. Total loans to date have come to a cumulative $6 billion across more than 300,000 sellers.

Square CFO Amrita Ahuja said on the earnings conference call that newer sellers have been a key contributor to growth, with marketing efforts having paid off for the firm. The supplementals noted that web traffic has been up by 30 percent year over year, leading to greater self-onboarding and lead generations. Updated data models, she said, have helped the capital business keep loss rates below 4 percent.

In addition, she noted, international sales remain a key opportunity, though a relatively small portion of the business has grown year over year by 52 percent in Q4.

“International is compounding at roughly two times the sellers’ blended growth rate, and has now delivered two consecutive quarters of faster year-over-year growth,” she said.


Management noted on the conference call with analysts that a pricing change, which took effect at the end of the year, helped drive margins. That pricing change — focused on the U.S. markets and card-present transactions (tapped, dipped and swiped transactions) — equated to a rate of 2.6 percent, plus $.10. Transaction-based gross profit on GPV was 1.09 percent, boosted by the pricing change, where the charge had previously been 2.75 percent on the transactions, with no attendant $.10 fee.

Square Cash App

The Square Cash App garnered attention, and a call out — in results — on the conference call. Cash App growth showed that total net revenue was up 147 percent, with a user base of 24 million monthly active customers, up 60 percent at the end of the year. Peer-to-peer (P2P) transfers were a key driver, noted management. Usage remains strong, as daily active customers were up 80 percent, outpacing monthly active users.

For Cash App, total revenues in Q4 were $361 million, and gross profits were $144 million. When excluding bitcoin, Cash App revenues were $183 million, up 96 percent year over year, with the remaining tied to bitcoin at $178 million.

Ahuja noted on the earnings call that Cash App generated revenues of more than $30 per active customer, up 25 percent year over year, excluding bitcoin. The Cash Card, said CEO Jack Dorsey, was used by more than 20 percent of monthly active users — PYMNTS notes that this would imply at least 4.8 million Cash Card users, where that tally had been 3.5 million in the June quarter.

Cash App’s sustained growth, said Ahuja, has led to a “shift” in the company’s overall gross profit, with the cash business accounting for 27 percent of gross profit in Q4, compared to 19 percent a year ago.

The Cash Card has remained a driver, and is at scale, according to Dorsey. He added that P2P payments for the segment have been “our best acquisition channel,” and that users have been discovering new applications, such as bitcoin. Ahuja said that users of bitcoin tend to generate more revenues than other users.

During the Q&A session on the earnings call with analysts, a Square seller asked if there might be local delivery functionality offered by the company. Dorsey said that is something the company would be open to considering.

Hardware sales in Q4 were $22 million, up 23 percent year over year, driven by Square Terminal and Square Reader for contactless and chip.


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