Square (SQ) Q1 Earnings & Revenues Top Estimates, Rise Y/Y
Square, Inc. SQ reported first-quarter 2021 adjusted earnings of 41 cents per share, beating the Zacks Consensus Estimate by 156.2%. The bottom line compares favorably with the loss of 2 cents per share reported in the year-ago quarter. Further, the figure rose 28.1% sequentially.
Net revenues of $5.06 billion surpassed the Zacks Consensus Estimate of $3.37 billion. Further, the top line improved 266% and 60.1% from the prior-year quarter and the previous quarter, respectively.
Top-line growth was driven by a strong momentum across the Cash App ecosystem that contributed $4.04 billion to net revenues in the reported quarter, up 666% year over year.
Moreover, solid momentum across Bitcoin was the key catalyst. Without bitcoin revenues, net revenues would amount to $1.5 billion, up 44% year over year.
Additionally, accelerating transaction, subscription and hardware revenues contributed to the results.
Also, Square witnessed solid traction across the seller ecosystem, which generated $1.02 billion of revenues, up 19% year over year. Further, accelerating gross payment volume (GPV) drove the results.
However, uncertainties related to the pandemic remain concerning.
Nevertheless, the company’s strengthening momentum in online channels and growing card-not-present GPV are expected to act as tailwinds in the days ahead.
Square, Inc. Price, Consensus and EPS Surprise
Square, Inc. price-consensus-eps-surprise-chart | Square, Inc. Quote
Gross Payment Volume
GPV in the first quarter amounted to $33.1 billion, up 29% from the year-ago quarter. This was driven by strength across the seller ecosystem. Notably, seller GPV accounted for 90% of the total GPV in the first quarter. Moreover, seller GPV was up 20% year over year.
Further, the robust performance of Cash App, which accounted for $3.4 billion of the overall GPV, remained a positive. The figure increased 227% year over year.
Further, the card-not-present GPV witnessed year-over-year growth of 34% in the first quarter. Robust online channels, including Square Online, Invoices, Virtual Terminal and eCommerce API, contributed to the upside.
Top-Line Details
Transaction (19% of net revenues): The company generated transaction revenues of $959.7 million, up 27% year over year. Strong seller ecosystem accounted for $868 million of transaction revenues, up 19% year over year.
Subscription and services (11% of revenues): The company generated $557.7million in revenues from the category, surging 88% from the year-ago quarter. The improvement can be attributed to a strong performance by Cash App, which contributed $437 million to the category’s top line. The figure was up 125% from the year-ago quarter. Further, seller ecosystem contributed $121 million to subscription and services revenues, up 18% year over year.
Hardware (0.6% of revenues): Square generated revenues of $28.8 million from the business, up 39% year over year. This was driven by strong unit sales of hardware devices. Also, strength in Square Register and Square Terminal contributed well.
Bitcoin (69.4% of revenues): The company generated revenues of $3.5 billion from thecategory, up significantly from $306.1 million. Square continued to benefit from the bitcoin space, driven by the increasing adoption of Cash App.
Operating Details
Per management, gross profit grew 79% from the year-ago quarter to $964 million.
Adjusted EBITDA was $236 million in the reported quarter.
Operating expenses were $896 million, jumping 42% from the prior-year quarter.
Product development expenses were $309 million, up 58% year over year primarily due to rising engineering, data science and design personnel costs.
General and administrative expenses were $196 million, up 51% from the prior-year quarter. This was primarily due to finance, legal and support personnel costs.
Further, sales and marketing costs were $349 million, up 80% year over year due to an increase in Cash App marketing expenses and a hike in advertising, personnel and other costs.
Balance Sheet
As of Mar 31, 2021, the cash and cash equivalents balance was $3.02 billion, down from $3.2 billion as of Dec 31, 2020.
Short-term investments were $644.4 million in the reported quarter, down from $695.1million in the previous quarter.
Long-term debt was $2.9 billion, increasing from $2.6 billion in the previous quarter.
Zacks Rank & Stocks to Consider
Square currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector worth consideration are Agilent Technologies A, Pure Storage PSTG and NVIDIA NVDA. All the stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.
Long-term earnings growth rate of Pure Storage, NVIDIA and Agilent, is pegged at 52.21%, 15.05% and 9%, respectively.
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