August 3, 2017 | 9:12 AM by Jaguar |

Square (SQ) – 2Q17 Earnings Recap

Square (SQ) reported 2Q earnings that exceeded analyst expectations from continued delivery of  top-line growth and margin expansion by providing more options to suit customers’ spending needs. Based on their encouraging numbers, management also guided higher for the remainder of FY2017.

By the numbers, the company reported:

  • 2Q EPS ($0.04) versus ($0.05) consensus estimate
  • 2Q Adjusted EPS $0.07 versus ($0.05) consensus estimate
  • 2Q Revenue $552 million versus $536.27 million consensus estimate
  • 2Q Net Loss of $16 million, compared to $27 million loss in 2Q2016
  • 2Q Gross Payment Volume $16.4 billion, 32% YoY growth, 3% above forecast
  • 2Q Gross Payment Volume growth increased 45% YoY from largest sellers

Guidance for 3Q2017 and FY2017 was updated and raised:

  • 3Q Adjusted EPS at $0.04 to $0.05 versus ($0.06) consensus estimate
  • 3Q Revenue at $562 million to $568 million versus $562.32 million consensus estimate
  • FY2017 Adjusted EPS outlook raised from $0.16 – $0.20 to $0.21 – $0.23
  • FY2017 Revenue outlook narrowed to $2.14 billion – $2.16 billion from prior $2.12 billion – $2.16 billion guidance, consensus estimate at $2.15 billion

Square Products and Services

Management was pleased at their continued delivery of top-line growth and margin expansion resulting from their ability in attracting larger sellers and through increased use of their products. For example, commenting on their Square Cash Card, they highlighted faster adoption over the original Square Reader: more units were shipped in its first month of availability than the original version had in its first eight.

Square Capital – Facilitated $318 million in loans, 68% YoY growth and largest quarterly result ever and the company remains optimistic about its growth potential. During 2Q, loans were made out to 49,000 of their sellers and, counting back from May 2014, over $1.5 billion in loans have been made ranging from $500 to $100,000. Square makes repayments very easy and as a member of their services, loan approval is claimed to be a process of just a few clicks. CEO Jack Dorsey thinks the addressable market “is massive” in serving merchants who typically would look to family and friends for their loans.

Square Installments – In June, a pilot launch of Square Installments was initiated which will facilitate Square’s sellers to enable their customers to pay in chunks and installment over the course of several months. This option seems to have been well received so far and the company sees it as a “unique opportunity” and they are “excited to see where it goes”.

Square for Retail – Square for Retail, a platform for sellers that offers a complete package of business tools from building customer profiles to managing inventory is another new product that has seen early success, and with ~450,000 small to medium sized retailers just in the U.S., this segment can be another revenue generator when all gaps in the product have been addressed.

Analyst Commentary

RBC Capital believes that the quarter highlights Square’s continued operating upside from core underlying growth as well as their product mix that should increase exposure to larger merchants. The analyst keeps an Outperform rating given potential upside and above-peer revenue growth, and increased the price target from $24 to $31.


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