Square Inc. reported lower-than-expected revenue for the third quarter as less volatile pricing for bitcoin impacted demand, though the companys chief financial officer noted strength in volume during October. <\/p>\n
The company posted a break-even third quarter, after earning $37 million, or 7 cents a share, in the year-earlier quarter. On an adjusted basis, Square SQ, -1.99% earned 37 cents a share, up from 34 cents a share a year earlier, while analysts tracked by FactSet were expecting 38 cents a share. The fintech company grew revenue to $3.84 billion from $3.03 billion, while analysts had been modeling $4.39 billion.<\/p>\n
Shares fell roughly 3% in after-hours trading following the release of the report. <\/p>\n
Squares revenue total for the latest quarter consisted of $1.30 billion in transaction-based revenue, $695 million in subscription revenue, $37.3 million in hardware revenue, and $1.82 billion in bitcoin revenue. Analysts tracked by FactSet were expecting $2.6 billion in bitcoin revenue. <\/p>\n
Bitcoin BTCUSD, +1.78% is a relatively low-margin business for Square, and the company incurred $1.77 billion in bitcoin costs during the quarter. <\/p>\n
Bitcoin revenue and gross profit benefited from year-over-year increases in the price of bitcoin and number of bitcoin actives, the company noted in its shareholder letter, though bitcoin revenue and gross profit both declined on a sequential basis, which Square largely attributed to relative stability in the price of bitcoin.<\/p>\n
Chief Financial Officer Amrita Ahuja noted on a call with reporters that as bitcoin prices increased in October, the company saw strength in demand. <\/p>\n
The companys total gross profit for the third quarter came in at $1.13 billion, up from $794 million a year earlier. Analysts had been expecting $1.15 billion. Speaking on the call with reporters, Ahuja argued for the importance of the gross-profit metric as an indicator of Squares performance. <\/p>\n
Squares Cash App mobile wallet generated gross profit of $512 million, whereas analysts tracked by FactSet were looking for $536 million. Wolfe Research analyst Darrin Peller suggested the miss wasnt particularly surprising. <\/p>\n
Heading into the print, we believed Cash App would face waning impacts of government stimulus benefits and lower bitcoin revenues, he wrote in a note to clients. We believe these dynamics were known by most investors, who were expecting ~$510 million in Cash App gross profit.<\/p>\n
The results were unusual for Square, especially given the companys track record of revenue\/earnings beats, Wedbush analyst Moshe Katri told MarketWatch. The results likely reflected the impact of fading stimulus payments, which was a similar theme at other payments names as well, he continued. <\/p>\n
During the third quarter, Square saw a lower portion of transactions take place through debit cards, while average transaction size also fell on a year-over-year basis. Despite the decreases, Square noted in its shareholder letter that these trends remained elevated relative to historical periods partly as a result of changes to consumer behaviors due to COVID-19 and government disbursements, which may not continue in future quarters.<\/p>\n
Square saw gross payment volume of $45.43 billion, up from $31.73 billion a year earlier. The FactSet consensus was for $45.61 billion.<\/p>\n
Square expects seller GPV to be up 42% on a year-over-year basis during October.<\/p>\n
Square has the largest short interest in the data-processing and outsourced services sector with $9.7 billion, according to data from S3 Partners. That short interest has increased by $996 million over the past 30 days. Squares short interest as a percentage of its float stands at 9.81%. <\/p>\n
Shares of Square have declined about 7% over the past three months as the S&P 500 SPX, +0.42% has risen roughly 6%. <\/p>\n
<\/p>\n