Depending on where you look, it’s been a hectic revenue season for payment providers.
Not so much for Block (formerly Square) which released results on Thursday evening (February 24) that showed increased traction among mid-market sellers, with double-digit percentage gains in card present and card activity. not present – and another Embrace Cash App.
Shares soared 20% out of the gate on Friday morning (February 25).
Buy Now, Pay Later (BNPL), of course, is looming as a tailwind for growth following Block’s acquisition of Afterpay late last month.
Revenue rose 28.1%, hitting the street at $4.1 billion. Gross payment volume (GPV) grew 44.7% to $46.3 billion, and transaction-based revenue grew 41% during the period to $1.3 billion .
The company said that during the quarter, 37% of GPV came from middle market sellers, compared to 30% last year. Mid-market sellers generate over $500,000 in annualized GPV.
Bitcoin, as volatile as it is, actually outpaced transaction-based revenue contribution, accounting for 48% of consolidated sales. Cash App generated $1.96 billion in bitcoin revenue and $46 million in gross bitcoin profit during the fourth quarter of 2021, up 12% and 14% year-over-year.
And BNPL – and its activity within the Cash app for Afterpay customers – was the focus of the conference call with analysts and supplements provided by the company.
In the company’s shareholder letter that accompanied the results, Block said that in the fourth quarter, Cash App generated revenue of $2.6 billion (up 18% year-on-year) gross profit of 518 million dollars, up 37% year-on-year.
Cash App was a key driver of subscription and service-based revenue, which was $772 million in Q4 2021, up 72% year-over-year.
The company also said the payment card reached “significant scale” during the quarter, with more than 13 million monthly payment card assets in December, representing more than 30% of the 44 million active users of the company’s monthly transactions (that number of 44 million is up 22% year-over-year).
Digging deeper into payment card spending, Block said that among its top 250 merchants in the fourth quarter, consumer payment card spending fell to 21% at big-box retailers, 20% at restaurants and 10% in grocery stores.
In a commentary on the earnings call, Chief Financial Officer Amrita Ahuja said inflows (the amount of money customers withdrew from their Cash App accounts) totaled $45 billion in the fourth quarter, which increased year-on-year and quarter-on-quarter, even though most government disbursement programs ended by September. That was over $1,000 per active individual transacting monthly.
“We think we’re still at the beginning of this cross-selling journey, especially when you think about the power of a product like Cash Card, which is still just over an attach rate. 30% to our total active base,” the CFO said.
CEO Jack Dorsey commented that “The strongest and greatest thing about Cash App that we have found is how it creates network effects.” He also noted that Block saw growth in recurring paycheck deposits with volumes doubling year over year in the fourth quarter.
Cement the ecosystem
As for cementing the company’s ecosystem, Square said in its filings that in 2021, 38% of the company’s gross profit came from sellers using four or more of the company’s products, compared to 10% in 2016.
And as a sign of in-store spending, the company noted in its filings that the GPV present with the card increased 56% year over year. CNP growth was up 27% year-over-year, driven primarily by growth in Square Online, Invoices, Virtual Terminal, and eCommerce API. Square Loans (formerly Square Capital) facilitated 103,000 loans during the quarter.
Although Afterpay did not contribute to Block’s fourth quarter results, management detailed the company’s metrics on the call.
Looking first at Afterpay’s growth drivers in the second half of 2021, Gross Merchandise Volume or GMV was up 54% year-over-year. Revenue and gross profit were each up about 53% year over year.
At the end of December, Afterpay had over 122,000 annual active merchants, up 64% year-over-year, and over 19 million annual active consumers, up 47% year-over-year .
Ahuja said Afterpay “saw healthy consumer repayment behavior as 98% of installments were paid on time in the second half of 2021, in line with the first half of 2021.”
On a full-year 2021 basis, Afterpay generated $19.7 billion in GMV, up 74% year-over-year, management said on the call.
Revenue growth was around 71% year-over-year, and gross profit growth was around 75% year-over-year.
Looking ahead, the company said in an update that for January and February, Square GPV is expected to grow 35% year-over-year. r. For February, we expect Afterpay’s GMV to grow between 25% and 30% year-over-year, with revenue growing in what management called “a similar range.”