By Peter Rudegeair
Jack Dorsey's Square Inc. became a tech darling on the back of its signature white credit-card readers aimed at small businesses. Nowadays, its consumer-focused Cash App digital wallet is stealing the limelight.
Gross profit at Square's Cash App more than doubled in the first three months of 2021, reaching $495 million. The first quarter marked the first time that Cash App's gross profit exceeded gross profit at Square's seller segment, which increased 32% to $468 million. (Gross profit is revenue minus the cost of goods or services sold, excluding taxes and other fixed costs.)
The coronavirus pandemic had a divergent effect on Square's two main business lines. Inflows into Cash App swelled over the past year as many users deposited their stimulus checks into their digital wallets. They then used the proceeds to send money to friends and family instantly over Cash App, purchase things online with their Cash App debit cards and buy bitcoin and stocks through Cash App Investing.
Square books a small fee on each of those transactions. The company counted more than 10 million monthly active users of its Cash Card during the quarter. About seven million customers used their Cash Cards every week in March, on average.
Meanwhile, many of the bricks-and-mortar businesses that make up Square's seller segment saw their sales shrivel during the pandemic thanks to lockdowns and stay-at-home orders. Square also pulled back on lending to small businesses, one of its key growth drivers.
Square's seller business started to rebound more recently after more states and cities fully reopened their economies. Its small-business gross payment volume rose about 5% in January and February from a year earlier. In April, it increased 144%.
Overall, Square reported a first-quarter profit of $39 million, or 8 cents a share, on revenue of $5.06 billion. That compares with a loss of $105.9 million, or 24 cents a share, in last year's first quarter.
Square is looking at ways to tie its Cash App and seller ecosystems more closely together, including through the company's recent acquisition of a majority stake in the music-streaming service Tidal, Mr. Dorsey, Square's CEO, told analysts on a conference call Thursday.
In the first quarter, Square integrated the loyalty program that it manages for small-business customers into Cash App, allowing consumers to view and manage the rewards they rack up for frequently shopping at their favorite stores that use Square's credit-card readers.
Allison Prang contributed to this article.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires