On January 31, 2022, $Block(SQ)$SQ completed the acquisition of Afterpay Limited, a global “buy now, pay later” (BNPL) platform. The results of Afterpay have been equally allocated to the Square and Cash App segments as management has concluded that Afterpay's BNPL platform will contribute equally to both the Square and Cash App platforms.
From the Q1 2022 shareholder letter, we can see that Afterpay has contributed to both Square and Cash App revenue and gross profit growth. However, exclude Afterpay, Cash App and Square gross profit still growing nicely, 17% and 31% respectively.
The 204mil loss is largely related to Afterpay acquisition which includes: Afterpay-related transaction charges of $42 million of one-time deal and integration-related expenses, $31 million of amortization of acquired intangible assets, and $66 million of one-time accelerated stock-based compensation.
Interestingly, in the 10Q report, it mentioned : “Revenue for the Cash App segment for the three months ended March 31, 2022 decreased by $1.6 billion, or 39%, compared to the three months ended March 31, 2021. The primary driver was a decrease in bitcoin revenue, slightly offset by growth in Cash App Instant Deposit, Cash Card, and Cash for Business.” and “Cost of revenue for the Cash App segment for the three months ended March 31, 2022 decreased by $1.7 billion, or 48%, compared to the three months ended March 31, 2021. The primary driver was a decrease in bitcoin revenue and the associated costs of such revenue, as discussed further above. Excluding $1.7 billion in bitcoin cost of revenue, Cash App cost of revenue increased by approximately $43.2 million, or 40%.”
As part of the effort in driving engagement and to increasing inflows into Cash app ecosystem, in April, SQ announced that U.S. customers can now send and receive bitcoin to anyone with a compatible wallet via the Lightning Network. Also, SQ has announced a new direct deposit feature that allows customers to be paid in bitcoin.
For Square, mid-market sellers (>$ 500K annualised GPV, gross payment volume) continued to show strong momentum in the first quarter, with gross profit up 47% year over year.
Global expansion of Square is accelerated by Afterpay. The total gross profit in markets outside the US was 12% of Square gross profit, excludes Afterpay was 9%.
Both Cash app and Square were performing well amid recovery from pandemic. Integration of Afterpay has proved to be synergistic to both ecosystems.
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