Square Makes $37 Million from Bitcoin in Second Quarter of 2018

According to Square’s 2018 shareholder letter, the payment company reported that they have continued to accelerate revenue growth in their second quarter of 2018. Their total net revenue in the second quarter increased by 48 percent year-over-year (YoY), and adjusted revenue increased 60 percent YoY. These figures are large increases compared to the 45 percent and 51 percent of revenue growth respectively, seen in the first quarter of 2018.

Other key figures for the second quarter include $815 million in total net revenue, a 48 percent YoY increase, and a gross payment volume of $21.4 billion which had a 30 percent YoY increase. In terms of profit margin, Square posted a net loss of $6 million, an adjusted revenue of $385 million, with a 60 percent YoY increase, and a $68 million adjusted earnings before interest, tax, depreciation, and Amortization (EBITDA).

The Bitcoin trading feature in Square’s transfer app, Square Cash, earned the company $37 million. While Square’s earning from the Bitcoin made up only approximately 4 percent of the total net revenue, it’s definitely a good start for Bitcoin and other cryptocurrencies.

Square also mentioned in their second quarter of 2018 that they had launched Square for restaurants, a third industry point of sale system. Caviar, Square’s food delivery application has also been growing rapidly. Caviar’s revenue in the second quarter of 2018 increased by more than double YoY.

Square Falls Short of High Expectations

According to Bloomberg, the payments company had, unfortunately, fallen short of investors’ high expectations. When it came down to their earning per share (EPS), Square predicted that it would roughly hit 8 to 10 cents in the third quarter, which fell significantly short of analysts’ average guess of 13 cents.

Square is, therefore, currently under significant pressure from their investors since its stock price has almost doubled this year, placing greater pressure on the company to outperform existing expectations. While they did experience a net loss of $6 million, it was considerably smaller than their net loss of $24 million in the first quarter of 2018, and their net income loss of $16 million in the last quarter of 2017.

Sarah Friar, the chief financial officer of Square mentioned that Square is currently reinvesting their money by placing it back in e-commerce offerings, financial services, and preparing for an international expansion.

“We should be putting dollars back into the business,” said Friar. “We believe if we build remarkable products it will drive momentum on the top line.”

Friar stated that the company missed on the third-quarter guidance because Square was “putting dollars back into the business.”

Square’s Cash App a Major Success

Square’s push into cryptocurrencies was seen as a positive move by Wall Street. Jack Dorsey, the chief executive officer of Square, mentioned that Square will introduce Bitcoin trading for everyone using Square Cash, an app that allows people to transfer money to one another. Square’s shares, as a result, climbed after the positive news.

In June 2018, Square also received a virtual-currency license from the New York Department of Financial Services (NYDFS). Customers in the state of New York could therefore buy and sell Bitcoin. According to Bloomberg, Bitcoin trading has helped to fuel the Square Cash app’s rapid growth. In December 2017, there were more than 7 million monthly active customers.

“Square and the NYDFS share a vision of empowering people with greater access to the financial system and today’s news is an important step in realizing that goal,” said Brian Grassadonia, the head of Square Cash.

Retailers Push Square to Support Bitcoin Retail Payments

After the success of Square’s Cash App, Finder reported that a large number of retailers that use Square for their checkout want a Bitcoin payment option. In a survey conducted by Nomura, 60 percent out of the 100 US merchants surveyed mentioned that they would accept Bitcoin. These merchants were from a variety of different industries and had an annual revenue of at least $100,000. The largest majority came from the 31-40 age group with approximately 40 percent of participants in that category.

While Bitcoin has experienced high fees, extreme volatility, and slow transaction times, merchants appear keen for Square to make Bitcoin a payment option for goods and services.

“This result is surprising, especially amid Bitcoin’s elevated volatility,” said Dan Dolev, a Nomura Instinet analyst, as he wrote in a report on Wednesday.

“Bitcoin, for us, is not stopping at buying and selling,” said Dorsey said on the firm’s fourth-quarter earnings call in February. “We do believe that this is a transformational technology for our industry and we want to learn as quickly as possible.”

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