Square Exceeds Growth Expectations

by Raymond Pucci 0

 What a difference a year makes—for Square that is. The mobile payments and services company just announced better than expected quarterly financial results as well as measurable progress on its expanded services delivery goals, as the following article reports.


Payments company Square Inc (SQ.N), reported a better-than-expected 26 percent jump in quarterly revenue on Wednesday, as larger businesses used its technology to process transactions and it expanded the range of financial products it offers.

The San Francisco-based company, led by Twitter Inc (TWTR.N) Chief Executive Jack Dorsey, posted a loss of 4 cents per share on revenue of $551.51 million. Analysts on average had expected a loss of 5 cents per share on revenue of $536.27 million, according to Thomson Reuters I/B/E/S. Square’s flagship technology enables small businesses to accept credit card payments through mobile devices. Its product has grown in popularity because it allows smaller merchants to process credit card transactions without a cash register or expensive systems.

The company, which went public in 2015, has been seeking to diversify its revenue stream by attracting larger merchants and offering more diverse services to its clients, ranging from loans to payment cards. The company’s gross payment volume – the total dollar amount of all card payments processed by sellers – jumped 33 percent to $16.4 billion. Payments from its largest merchants, those processing more than $500,000 in transactions annually, grew 61 percent year over year, making up 19 percent of total processed, up from 14 percent a year ago.

The company has been launching products better suited for large sellers, expanding its sales and support teams and raising awareness among bigger businesses, Chief Financial Officer Sarah Friar said on a conference call. Square Capital, the company’s business which offers loans to customers in exchange for a fixed percentage of their daily card sales, originated $318 million in loans the second quarter, up 68 percent from a year earlier. The company uses data on the payments it processes for its merchants to assess their credit-worthiness.

While Square was always loved on Main Street, it had been spurned on Wall Street, not too long after going IPO in 2015. Analysts were grumbling about lack of large businesses in its merchant base plus its forays into the higher-risk small business lending market. Now many doubters have become believers. Square is closer to a stock market darling now that its share price has more than doubled in the last 12 months. However, Square is not yet turning a profit given high marketing and product development costs that come with the early stages of company growth. But Square believes its money making days are not that far away, and it seems that they are definitely on the right launch angle.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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