UPDATED 21:04 EDT / NOVEMBER 04 2021

APPS

Square shares drop on lower-than-expected third-quarter revenue

Shares in Square Inc. dropped in after-hours trading today after the financial services company reported lower-than-expected revenue in its latest earnings report.

For the quarter ended Sept. 30, Square reported revenue of $3.84 billion, up 27% from $3.03 billion in the same quarter of 2020. Revenue from bitcoin came in at $1.82 billion, up from $1.63 billion year-over-year, while transaction-based revenue grew to $1.3 billion, up from $925 million.

The revenue figure missed expectations of $4.39 billion. MarketWatch reports that analysts expected the bitcoin revenue figure to come in at $2.56 billion and transaction-based revenue to total $1.29 billion.

Adjusted earnings before interest, taxes, depreciation and amortization in the quarter came in at 36 cents per share, up from 34 cents per share a year ago, but below estimates of 38 cents per share. Gross profit increased 43% to $1.13 billion versus estimates of $1.15 billion.

Overall usage of the company’s transaction services saw strong growth in the quarter. Its gross payment volume, a figure that tracks the total dollar amount, net of refunds, of all card payments processed by sellers, rose more than 43% from a year ago, to $45.4 billion.

Highlights in the quarter included Square entering an agreement to acquire Australian “buy now, play later” provider Afterpay Ltd. in a $29 billion deal. Noting that Afterpay has more than 16 million customers and 100,000 merchants, Square said in a letter to shareholders that “through this transaction, we plan to unite two complementary businesses with a shared focus on economic empowerment and financial inclusion. We believe the combination will more deeply connect our Seller and Cash App ecosystems, accelerate our strategic priorities, and allow us to deliver even more compelling products and services for consumers and merchants.”

Square declined to give a forecast for the fourth quarter but provided rough guidance on some of the expected figures.

“Seller GPV is expected to be up 42% year over year in October, and the two-year [compound annual growth rate] is expected to be up 24%, a slight improvement compared to 23% growth in the third quarter on a two-year CAGR basis. GPV growth trends continued to vary by region, product and vertical, depending primarily on differences in the timing and phases of reopenings,” the company stated.

Investors noticed the weaker-than-expected revenue. Shares of Square fell more than 3% in after-hours trading.

Image: Square

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