Square Inc. reported lower-than-expected revenue for the third quarter as less volatile pricing for the cryptocurrency relative to the second quarter impacted demand, though the company’s chief financial officer noted “strength” in volume during October.
The company posted a breakeven third quarter, whereas it earned $37 million, or 7 cents a share, in the year-earlier quarter. On an adjusted basis, Square
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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.
Square’s 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 $2.60 billion in bitcoin revenue.
Bitcoin
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is a relatively low-margin business for Square and the company incurred $1.77 billion in bitcoin costs during the quarter.
“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.”
Chief Financial Officer Amrita Ahuja noted on a call with reporters that as bitcoin prices increased in October, the company “saw strength” in demand.
The company’s 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 Square’s performance.
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.”
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.
Square expects seller GPV to be up 42% on a year-over-year basis during October.
Shares of Square have declined about 7% over the past three months as the S&P 500
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has risen roughly 6%.
This post was originally published on Market Watch
