Jack Dorsey, CEO of Twitter, speaks to students on November 12, 2018 during a town hall at the Indian Institute of Technology (IIT) in New Delhi, India.
Anushree Fadnavis | Reuters
Square's shares rose Tuesday night after posting better-than-expected quarterly results and strong growth in its consumer payment app.
The San Francisco-based company generated net sales of $ 1.92 billion in the second quarter, an increase of 64% year over year. Adjusted earnings per share, at 18 cents, were well above the 5 cent loss analyst surveyed by Refinitiv. Square's net loss for the quarter was $ 11 million under GAAP.
The stock rose up to 11% in after-hours trading and more than doubled this year as consumers flock to digital payments during the pandemic.
The Peer-to-Peer Cash app, a competitor to PayPal's Venmo, helped boost Square's performance in the second quarter. Gross profit for the app increased 167% year over year to $ 281 million. Saved funds or the amount of money customers keep in the app grew 86% from the previous quarter. The app had 30 million users in June, up from 26 million at the end of last year, the company said.
Cash App saw "significant uplift" from its users filing government economic checks, CFO Amrita Ahuja said on a call to reporters on Tuesday evening. Unemployment checks and tax refunds were also a "tailwind" that got the cash app going. But there is still "uncertainty" about continued incentives, and these trends could "normalize" as a result, Ahuja said.
Despite the growth in Cash App, the company is strongly tied to small businesses such as coffee shops and restaurants through its personal payment terminals. Many of these stationary companies were forced to close their doors amid the pandemic. Gross profit for Square's core business with sellers decreased 9% year-over-year to $ 316 million. Square's gross payment volume decreased 15% year over year in the second quarter.
Payment trends improved every month in the quarter as Covid-19 shutdowns eased and sellers adjusted to contactless trading, Square said.
Most of the sellers also went online. Square's payment volume through online channels increased 50% year over year. Online accounted for over a quarter of the seller's payment volume, down from 14% a year ago.
Square Capital, Square's credit arm, saw a significant drop in sales after the interruption of most new loans for the quarter. Square Capital's lending volume was instead determined by the Paycheck Protection Program (PPP). Square said it had enabled more than 80,000 PPP loans totaling $ 873 million.
The company was supposed to report earnings after the bell on Wednesday, but announced its numbers a day earlier after Bloomberg News reported the numbers early.