Square Earnings: Online Transactions, Square Card Spend See Gains

Square posted third-quarter results Thursday (Nov. 5) that showed continued tailwinds in card not present transactions, a continued shift to larger seller contributions to gross payment volumes (GPV) and increasing embrace of Cash App.

Total net revenues of $3 billion were up from $1.9 billion last year — and compared favorably to the $2 billion the Street had expected. The 34 cents a share earned was better than the 16 cents that had been expected.

Gross payment volume, commonly known as GPV, was up to $31.7 billion, growing sequentially from $22.8 billion in the second quarter and from $28.2 billion in the year ago quarter.

Drilling down into the seller ecosystem,  61 percent of the GPV came from larger sellers with volumes of at least $125,000 annually, compared with 53 percent a year ago.

Drilling into separate offerings, the company said that Cash App revenues of $2 billion were up 574 percent year over year.  Stripping out the impact of bitcoin, Square said that CashApp revenues were up 174 percent year on year to $435 million. Overall, in terms of verticals, seller GPV growth improved across the firm’s largest verticals of food and drink, retail, home and repair, professional services, and beauty and personal care.

Commentary from the company in tandem with earnings stated that “While the macroeconomic environment remains uncertain, we continue to believe that our Seller and Cash App ecosystems are well-positioned to benefit from the acceleration of secular shifts, such as omnichannel commerce, contactless payments, and digital wallets for consumers.”

In international markets, according to the data, regional recoveries meant that seller GPV grew 46 percent year over year and represented 11 percent of total seller GPV up from six percent two years ago.

“In the third quarter, we sold more than 70% of our NFC hardware in international markets to sellers new to Square,” said the firm.

Square Card And Card Not Present

Adoption of the Square Card has increased each quarter since it launched and in the third quarter more than $250 million was spent by sellers through Square Card, or roughly 34 percent of these sellers’ GPV. Square said that the transactions were tied to everyday expenses such as at gas stations and retailers.

In commentary from the earnings conference call, Chief Financial Officer Amrita Ahuja said that “in the third quarter daily transacting actives nearly doubled year-over-year and represented nearly a quarter of Cash App’s monthly transacting actives … we saw volume per active peak in July as we benefited from increased inflows into Cash App.”

As to those inflows into Cash App, Ahuja noted that “this is a dynamic we have observed in the past related to seasonal tax refunds, as well as direct deposits of recurring paychecks and far to an even greater extent through July, with the introduction of … stimulus funds.”

At the end of the third quarter of 2020, Cash App customers had more than $1.8 billion in cash balances stored in their accounts, up 180 percent year over year and up 7 percent quarter over quarter.

Card not present GPV was up 24 percent year over year; card present GPV was down 5 percent year over year.

Square Capital continued to trend lower, as revenues from this segment showed the continued impacts of paused flex loan offers — a freeze that lasted till the end of July — and “measured’ originations in August and September. The company said it facilitated about 35,000 loans in the third quarter of 2020, totaling $155 million, down 72 percent year over year.

Hardware revenues were up 25 percent year over year to $27 million, with strong unit sales of contactless devices — in particular Square Register and Square Terminal.

Looking beyond the end of September, the company said that in October, seller GPV was up 8 percent year over year. Seller GPV from card-not-present transactions was up 23 percent year over year in October. Card present transactions also rebounded, up 1 percent year over year in the month of October.