01—Abstract
Summary
Summary of the 10-K filed February 23, 2021. Cited figures are marked; the original filing is the authoritative source.
Square, Inc. (now Block, Inc.) reported total net revenue of $9.50 billiona for the year ended December 31, 2020, up from $4.71 billion in 2019, with bitcoin revenue of $4.57 billion accounting for the bulk of the increase.
Gross profit was $2.73 billionb, but operating income was a loss of $18.8 million, while net income was $213.1 million, helped by a $295.3 million gain on revaluation of equity investments (including the DoorDash stake). The Seller segment generated $3.53 billion of net revenue and $1.51 billion of gross profit, while the Cash App segment generated $5.97 billion of net revenue and $1.23 billion of gross profit. Gross Payment Volume was $112.3 billion, and Cash App had more than 36 million monthly transacting active customers as of December 2020.
The company's balance sheet strengthened considerably over the year, with cash and cash equivalents of $3.16 billionc and total stockholders' equity of $2.68 billion, compared with $1.05 billion and $1.72 billion at the end of 2019. Long-term debt rose to $2.59 billion, reflecting the March 2020 issuance of $1.0 billion of 2025 convertible notes and the November 2020 issuance of $1.15 billion of 2026 and 2027 convertible notes.
Square also disclosed that it participated in the Paycheck Protection Program, facilitating approximately $857 milliond of PPP loans, and that it purchased $50 million of bitcoin in October 2020 and another $170 million in February 2021. Investors should weigh several risks highlighted in the filing: the COVID-19 pandemic's effect on seller activity, reliance on bitcoin revenue for much of the growth, a dual-class structure in which Class B holders controlled 62.8% of the voting power, pending tax assessments from the Texas Comptroller of $38 million, and the planned opening of Square Financial Services, an industrial loan corporation subject to FDIC conditions.
02—Key points
Key Highlights
- Total net revenue of $9.50 billion for 2020, up from $4.71 billion in 2019; bitcoin revenue of $4.57 billion represented 85% of the increase in total net revenue.
- Operating loss of $18.8 million for 2020 versus operating income of $26.6 million in 2019, while net income was $213.1 million, aided by a $295.3 million gain on revaluation of equity investments.
- Seller segment net revenue of $3.53 billion and gross profit of $1.51 billion; Cash App segment net revenue of $5.97 billion and gross profit of $1.23 billion.
- Gross Payment Volume of $112.3 billion for 2020; Cash App had more than 36 million monthly transacting active customers as of December 2020.
- Cash and cash equivalents of $3.16 billion at year end, and $3.0 billion in aggregate principal of convertible senior notes outstanding, including $2.15 billion issued in 2020.
- Facilitated approximately $857 million of PPP loans in 2020 and, in February 2021, began a second PPP round; purchased $50 million of bitcoin in October 2020 and $170 million in February 2021.
- Dual-class structure: Class B holders held approximately 62.8% of voting power as of December 31, 2020; Texas Comptroller assessment of $38 million including interest and penalties is disputed by the company.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Block kept $0.02.
- Revenue$9.50B100.0%
- Cost of revenue−$6.76B71.2%
- Gross profit$2.73B28.8%
- Operating costs−$2.75B29.0%
- Operating income−$18.8M0.2%
- Interest, other & tax$231.9M2.4%
- Net income$213.1M2.2%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 23, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $9.50B$4.71B | +101.5% |
| Cost of Revenue | $6.76B$2.82B | +139.5% |
| Gross Profit | $2.73B$1.89B | +44.6% |
| R&D Expenses | $881.83M$674.16M | +30.8% |
| Operating Expenses | $2.75B$1.86B | +47.7% |
| Operating Income | -$18.82M$26.56M | −170.8% |
| Interest Expense | $75.20M$44.90M | +67.5% |
| Net Income | $213.10M$375.45M | −43.2% |
| EPS (Basic) | $0.48$0.88 | −45.5% |
| EPS (Diluted) | $0.44$0.81 | −45.7% |
| Shares Outstanding (Basic) | 443.13M425.00M | +4.3% |
| Shares Outstanding (Diluted) | 482.17M466.08M | +3.5% |
05—Questions
Frequently Asked Questions
How did Square's revenue change in 2020?
Total net revenue rose 101% to $9.50 billion from $4.71 billion in 2019. Bitcoin revenue of $4.57 billion drove most of the increase; excluding bitcoin, total net revenue increased by $729.0 million, or 17%, according to the filing.
Did Square report a profit in 2020?
Yes. Net income was $213.1 million for 2020, compared with $375.4 million in 2019. Operating loss was $18.8 million, and the net result was helped by other income of $291.7 million, primarily a gain on the revaluation of equity investments, including the DoorDash investment.
What drove the increase in debt on the balance sheet?
Long-term debt increased to $2.59 billion from $938.8 million, following the issuance of $1.0 billion of 2025 convertible senior notes in March 2020 and $1.15 billion of 2026 and 2027 convertible senior notes in November 2020. The company also drew $464.1 million under the PPP Liquidity Facility.
What is the company's exposure to bitcoin?
The company purchased $50 million of bitcoin in October 2020 and another $170 million in February 2021, recorded as an indefinite-lived intangible asset. Any decline in market value below cost requires an impairment charge, while later price increases cannot be recognized until sale. Bitcoin contributed 48% of total 2020 revenue but only 3.5% of total gross margin, according to the filing.
What are the main risks identified for investors?
Key risks include the ongoing COVID-19 pandemic's effect on seller activity, dependence on card networks and acquiring processors, regulatory scrutiny of money transmission and the planned Square Financial Services industrial bank, volatility of bitcoin prices, and the dual-class share structure that concentrates voting control with Class B holders, who held 62.8% of voting power at December 31, 2020.
06—Continue