SQ 4th Quarter Earnings


-Total net revenue was $3.16 billion in the fourth quarter of 2020, up 141% year over year

-For the full year of 2020, total net revenue was $9.50 billion, an increase of 101% from the full year of 2019. Excluding bitcoin, total net revenue in the fourth quarter was $1.40 billion, up 23% year over year, and total net revenue for the full year of 2020 was $4.93 billion, up 17% year over year.

Gross Profit of $804 million, up 52% YoY.

-Cash App gross profit up 162% YoY, to $377 million

-Seller Ecosystem up 13% YoY, to $427 million

-In Dec, Cash App had more than 36 million monthly transacting active customers, up more than 50% YoY

-Square also announced today that it has purchased approximately 3,318 bitcoins at an aggregate purchase price of $170 million. Combined with Square’s previous purchase of $50 million in bitcoin, this represents approximately five percent of Square’s total cash, cash equivalents and marketable securities as of December 31, 2020.

Shareholder Letter:



Hi Jeff

I’m not going to comment too much on here but will reflect on a couple of points and share 1 experience.

Overall I found this report complicated. Leaving aside how zero margin bitcoin trading inflates the revenue $s, I found growth pretty asymmetric. Cash App usage and monetisation growth was strong, but the seller ecosystem revenues really slowed massively. Furthermore the Profits line which was a slight advance year on year included a massive ~$43m write down for transaction losses and a 1 time gain of $275m from investments revaluation (door dash). Also their base strength seemed to flip flop between Small to Mid size accounts.

Some reports stated that SQ beat the top line and missed the bottom line and others stated the reverse but not sure if that was Square’s issue or analysts getting their knickers in a twist.

Anyhow the one anecdote that might be of interest to share from Singapore which might be meaningless as I don’t know how Square markets itself/communicates in the US… whilst watching Australian TV via some streaming box I happen to have I care across an advert by Square which seemed to be marketing its POS solutions. (Cash App is still only in US and UK as far as I understand).

Last year’s growth rates together with reports that I have read analysing the TAM for payment wallets/solutions made me want to continue to hold Square (and whilst I don’t own any crypto, I guess it was also giving me exposure on that front). Now I’m getting less inclined to hold and will be reviewing my position. Companies with complicated and messy P&Ls let alone business models increasingly frustrate me. (Perhaps I’m becoming a grump old man in my investing).



The main point I don’t get - why SQ holders are so happy with the report if revenues growing in low 20s ex-Bitcoin. So, what’s the reason for hype? What I’m missing here?


Square can look complex but really, it is simple from investment perspective.

First - there are two businesses who collectively add value to each other. They are Seller eco-system and Cash app eco-system. Remember, this structure - two businesses feeding into each other - has been tremendously successful for Amazon (retail + cloud), Apple (HW + app store), Google (ad + adtech which is invisible to us but has been tremendous driver - see mitch1313’s post yesterday on adtech)… this structure propels company to much higher level… Square has done tremendous job of getting there.

Second - 2020 has been the year of Cash app, 2021 is shaping up to be strong for both Cash app (1st half of the year, with stimulus money and continued bitcoin frenzy) and Seller (2nd half of the year with rapid re-opening)

Third - Measuring business performance - just focus on Gross Profit growth to see it simply… and yes, it has seasonality, so sometimes q/q becomes less useful… as long as you see total gross profit growing on y/y (grew 53% in Q4) basis or TTM basis (44% in 2020), thats what I care about.

BTW - Fintech is another strong revolution going on… you will find that most Fintech companies are little difficult to analyze just because of nature of the business (See AFRM, PYPL… they are all more complex than one line item businesses like smaller SaaS companies)… but it is very sticky businesses… to the point that JP Morgan commented yesterday that its Fintech they are more concerned about than bitcoin

hope this helps!

long SQ with 7% position post today’s drop!! I am holding this through next two quarters for sure


why SQ holders are so happy with the report if revenues growing in low 20s ex-Bitcoin.

What makes you think Square’s holders are so happy with the report? Square’s share price was down 6-7% after-hours yesterday.

So, what’s the reason for hype? What I’m missing here?

Regardless, if you’re referring to the “hype” as Square’s share price appreciation over the past year or so, I’ll attempt to provide a few reasons:

(1) The ability for Cash App to establish itself as a leading financial service ecosystem. In December, Cash App had >36M active transacting customers in December (up 50% YoY), increasing its gross profit 162% YoY. Large financial institutions have been slow to adapt to the rise of digital wallets, and Square is eating their lunch here.

(2) The ability for Seller business to expand its monetization as the economy reopens. The Seller business processed nearly $30B. While its growth was only 13%, the narrative is that this will accelerate as the economy reopens. Square has expanded the suite of products it offers sellers - it is becoming a “one stop shop” with payroll, lending, capital, and other offerings.

(3) Integrating Cash App + Seller business. Square currently incurs billions in transaction expenses that it pays across different layers of its value chains (i.e. all of the middlemen involved in a banking transaction - such as payment processing, authorization, etc). As it continues to grow its Cash App and Seller business respectively, Square will have an opportunity to transact payments directly without the middlemen.

(4) Global expansion in the early stages. Square seems to be focusing on continued growth in the US primarily, and the few international markets its in. There is a massive opportunity for it to continue consolidating its Cash App + Seller ecosystem across new markets.

(5) Bitcoin/crypto cross-selling & expansion. I know its common to exclude Bitcoin revenue from Square’s analysis - but worth paying attention to it regardless. I’ll refrain from expanding on Bitcoin too much to abide by this forum’s rules, but its clearly crossing the chasm and Square is well-positioned to take advantage of its growing popularity.

I encourage you to skim Square’s latest shareholder letter to understand some of these points further: https://squareinc2020ir.q4web.com/files/doc_financials/2020/…

Protect the identity of this board and maximize your learning by reading https://discussion.fool.com/monday-morning-rules-of-the-board-34…… before participating


I held SQ for years but sold it last Friday at the ATH. I always believed in their ability to innovate and I was correct about that. But I am not thrilled with how closely SQ is now tied to the price of BitCoin. It could keep going, for sure, but if there is a massive pullback in BitCoin it will hit not just SQ stock, but their Cash App business hard.

Other headwinds:

  • International expansion will prove challenging. There are lots of regulations that make international finance difficult.
  • Cash App appeals to a rather low-end customer and default rates and other issues could eat up profits. It’s not my favorite target market.
  • Too much competition from PayPal to CoinBase, from Robinhood to Stripe. It’s a crowded space and I have no idea how it will play out long term.

This is still on my watch list and may get back in. But I like to invest in stocks that are under 100B in market cap. Square three years ago was exactly what I look for.


My sentiments are similar to others.

-I sold out of Square today as well, after holding it for the past 18 months or so.

-I loved the cash app story and the likely strong return of the seller ecosystem after the pandemic but my main issue is that I’m not comfortable with a company holding so much bitcoin.

-I like Bitcoin but it is early in the game, with so much regulatory and price uncertainty, it will be a rocky road no doubt

-As others mentioned, the market cap is getting way too big at over 100 Billion