Gross Profit at Square Inc,'s Cash App More Than Doubled in the First Quarter
May 06 2021 - 8:03PM
Dow Jones News
By Peter Rudegeair
Jack Dorsey's Square Inc. became a tech darling on the back of
its signature white credit-card readers aimed at small businesses.
Nowadays, its consumer-focused Cash App digital wallet is stealing
the limelight.
Gross profit at Square's Cash App more than doubled in the first
three months of 2021, reaching $495 million. The first quarter
marked the first time that Cash App's gross profit exceeded gross
profit at Square's seller segment, which increased 32% to $468
million. (Gross profit is revenue minus the cost of goods or
services sold, excluding taxes and other fixed costs.)
The coronavirus pandemic had a divergent effect on Square's two
main business lines. Inflows into Cash App swelled over the past
year as many users deposited their stimulus checks into their
digital wallets. They then used the proceeds to send money to
friends and family instantly over Cash App, purchase things online
with their Cash App debit cards and buy bitcoin and stocks through
Cash App Investing.
Square books a small fee on each of those transactions. The
company counted more than 10 million monthly active users of its
Cash Card during the quarter. About seven million customers used
their Cash Cards every week in March, on average.
Meanwhile, many of the bricks-and-mortar businesses that make up
Square's seller segment saw their sales shrivel during the pandemic
thanks to lockdowns and stay-at-home orders. Square also pulled
back on lending to small businesses, one of its key growth
drivers.
Square's seller business started to rebound more recently after
more states and cities fully reopened their economies. Its
small-business gross payment volume rose about 5% in January and
February from a year earlier. In April, it increased 144%.
Overall, Square reported a first-quarter profit of $39 million,
or 8 cents a share, on revenue of $5.06 billion. That compares with
a loss of $105.9 million, or 24 cents a share, in last year's first
quarter.
Square is looking at ways to tie its Cash App and seller
ecosystems more closely together, including through the company's
recent acquisition of a majority stake in the music-streaming
service Tidal, Mr. Dorsey, Square's CEO, told analysts on a
conference call Thursday.
In the first quarter, Square integrated the loyalty program that
it manages for small-business customers into Cash App, allowing
consumers to view and manage the rewards they rack up for
frequently shopping at their favorite stores that use Square's
credit-card readers.
Allison Prang contributed to this article.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
May 06, 2021 19:48 ET (23:48 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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