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Is Jack Dorsey a Liability to Square's Long-Term Future?

By Neil Rozenbaum – Nov 5, 2021 at 11:30AM

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A big miss on revenue and Dorsey's Bitcoin relationship hurt the company's quarter.

In this video, I will go over Square's (SQ 2.67%) Q3 earnings report. I expected more from this quarter, as I mentioned in my Q3 preview piece, but it's not all doom and gloom. You can find the video below, but here are some of the highlights.

Earnings summary

The company reported total net revenue of $3.84 billion in the third quarter of 2021, up 27% year over year (YOY) and missing estimates of $4.48 billion.

  • Excluding Bitcoin, total net revenue in the third quarter was $2.03 billion, up 45% YOY.
  • Bitcoin revenue was $1.81 billion, up just 11% YOY, and Bitcoin gross profit was only $42 million, which was surprising since Bitcoin reached new all-time highs. On the call, Jack Dorsey reiterated that Square will not add any other cryptocurrencies to Cash App, which in shareholders' eyes might be a big red flag.
  • Gross profit was $1.13 billion, up 43% YOY and up 51% on a two-year CAGR basis (which is a better comparison to show how the long-term trend will continue). 
  • Seller gross profit grew 48% YOY to $606 million and 29% on a two-year CAGR basis. 
  • Cash App gross profit grew 33% YOY but was down quarter over quarter to $512 million and 104% on a two-year CAGR basis. 
  • Teens can now use Cash App with their parents' or guardians' consent. This audience represents 20 million people in the US. 
  • In 2022, Square will continue to expand its product offering and expand into new markets as well as approach larger sellers. 
  • The Afterpay acquisition is expected to close in Q1 of 2022.

As of now, long-term investors have nothing to fear. But we should keep a close eye on Dorsey's Bitcoin-maximalist views because he might turn Square into Twitter and fail to monetize its users enough. 

For the full insights, do watch the video below, and consider subscribing. 

*Stock prices used were the closing prices of Nov. 4, 2021. The video was published on Nov. 5, 2021.

Neil Rozenbaum owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policyNeil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

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