Key Takeaways

  • Gross payment volume surpassed analysts' expectations.
  • Gross payment volume measures the total dollar amount of card payments processed by sellers on Square's payment ecosystem.
  • Square's bitcoin revenue rose 1,047% compared to the year-ago quarter.
Square Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Beat $0.41 $0.15
Revenue Beat $5.1B $3.4B
Gross Payment Volume Beat $33.1B $30.0B

Source: Predictions based on analysts' consensus from Visible Alpha

Square (SQ) Financial Results: Analysis

Square, Inc. (SQ) reported Q1 FY 2021 earnings that dramatically beat analyst expectations. Adjusted earnings per share (EPS) exceeded analyst forecasts by a wide margin. Revenue also came in well above analyst estimates, up 266.2% year over year (YOY). Square's gross payment volume (GPV) came in at $33.1 billion, surpassing expectations. The company's shares rose nearly 2% in after-hours trading. Over the past year, Square's shares have provided a total return of 229.2%, well above the S&P 500's total return of 47.5%.

SQ Gross Payment Volume

Gross payment volume (GPV) is a key metric that tracks the total dollar amount, net of refunds, of all card payments processed by sellers using the company's payments ecosystem. It includes peer-to-peer payments as well as transactions with merchants that use Square's mobile payments app. Square generates revenue through transaction fees that are charged on payments. The greater the GPV, the more transaction-based revenue Square is able to generate. But GPV is also positively correlated with the number of users on Square's platform, users the company can direct to some of its other businesses.

Square's GPV rose 28.7% compared to the year-ago quarter. The majority, or about 90%, of GPV was generated by Square's Seller ecosystem, a suite of financial products and services to help merchants manage the financial side of their business operations. The Seller ecosystem generated $868 million in transaction-based revenue, up 19% YOY. The other 10% of GPV came from the Cash App business, Square's ecosystem that offers financial products and services to individuals in order to help them manage their money. Cash App generated about $92 million in transaction-based revenue. However, Cash App brought in about $495 million in gross profit, while the Seller ecosystem generated slightly less at approximately $468 million.

SQ Bitcoin Revenue

The big boost to Square's total revenue came from its bitcoin revenue, which rose 1,047.0%. At $3.5 billion, bitcoin revenue comprised about 69% of companywide revenue for the first quarter. Square allows its customers to purchase bitcoin through its Cash App. Bitcoin revenue refers to the total amount of bitcoin sold to customers. Bitcoin costs, which were $3.4 billion, refers to the total amount of bitcoin Square purchases to facilitate its customers' access to the cryptocurrency. Square generated $75 million in bitcoin gross profit for the quarter.

Square also invests some of its own cash in bitcoin. In the final quarter of FY 2020, Square invested $50 million in bitcoin and then another $170 million during the first quarter of FY 2021. However, the company recognized a bitcoin impairment loss of $20 million on those investments. The fair value of Square's total investment in bitcoin was $472 million based on observable market prices, as of March 31, 2021.

The company did not offer any forward earnings or revenue guidance in its earnings press release. Square's next earnings report (for Q2 FY 2021) is estimated to be released on Aug. 2, 2021.