Square (SQ) earnings Q1 2021

A trader works on the trading floor of the New York Stock Exchange (NYSE) in New York.

Yana Paskova | Bloomberg | Getty Images

Square shares rose as much as 6% after close of trading Thursday after the company posted a profit in the first quarter that exceeded Wall Street’s expectations.

This is how the company did it:

  • Earnings per share: 41 cents, adjusted against 16 cents expected in a refinitive poll of analysts
  • Revenue: $ 5.06 billion versus $ 3.36 billion expected from Refinitiv

First quarter revenue rose 266% year over year to $ 5.06 billion, largely driven by increased Bitcoin revenue. Net income for the quarter was $ 39 million.

Gross income rose 79% year over year to $ 964 million for the quarter ended March 31, according to a statement.

Cash App gross profit was $ 495 million, an increase of 171% year over year. In March, Square’s peer-to-peer competitor Venmo began offering customers the option to send Bitcoin instantly for free.

Square reported Bitcoin sales of $ 3.5 billion, 11 times more than last year. Bitcoin’s gross profit, however, was only $ 75 million, or roughly 2% of sales.

Speaking of the company’s winning bid, Jack Dorsey, CEO, said Square sees Bitcoin as the internet’s potential to have a local currency, and the company wants to “promote that as much as possible.”

“Our focus is primarily on … making Bitcoin our home currency,” said Dorsey. “It removes a lot of friction from our business. And we firmly believe it will create more opportunities for economic empowerment around the world.”

In addition to allowing users to buy and sell Bitcoin in the Cash app, the company has also launched the Cryptocurrency Open Patent Alliance (COPA), an open source foundation for crypto patents to protect the community.

Square itself bought $ 50 million worth of bitcoin in October and another $ 170 million worth of bitcoin in February. The company said it had lost $ 20 million in Bitcoin investments for the quarter as of March 31, even though the fair value of its investment was $ 472 million based on observable market prices.

Speaking of the projections, the company expects gross profit for its seller ecosystem to grow more than 135% year over year in April and around 130% year over year for its cash app in April.

CFO Amrita Ahuja said the company expects moderate year-over-year gross profit growth from April through the remainder of the second quarter as growth comparisons harden in May and June.

“We believe our customers have had greater purchasing power from government funds, which led to an increase in inflows in March,” said Ahuja. “We have since seen a normalization, with inflows down 16% in April compared to March.”

Excluding the after-business movement, Square stock is up about 2.3% year-to-date, while the Nasdaq is up about 5.8% over the same period.

CLOCK: Square or PayPal? #AskHalftime

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