Personal Finance
SQ

Square Earnings: Growth Accelerates Yet again

An employee and customer interact with the two displays included with Square Register

Financial technology company Square (NYSE: SQ) has been on a roll recently -- and that momentum persisted into the company's second quarter. Square reported its fifth consecutive quarter of year-over-year revenue growth as its second-quarter loss per share narrowed.

The solid quarterly results include lots of interesting trends, from soaring adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) to continued momentum in large sellers. Here's what investors should know.

An employee and customer interact with the two displays included with Square Register

Square Register. Image source: Square.

Square's second-quarter results: The raw numbers

Metric Q2 2018 Q2 2017 Change
Adjusted revenue $385 million $240 million 60%
EBITDA margin 18% 15% N/A
Net loss per share ($0.01) ($0.04) N/A

Data source: Square second-quarter shareholder letter . Adjusted revenue excludes transaction-based costs, bitcoin costs, and the effect of deferred revenue adjustment as a result of purchase accounting. Table by author.

What happened with Square this quarter?

Square's momentum was undeniable in Q2.

  • Square's 60% year-over-year growth in adjusted revenue was up significantly from 51% growth in Q1.
  • Adjusted EBITDA jumped from $36 million in the year-ago quarter to $68 million.
  • Revenue from Square's food delivery service Caviar more than doubled from the year-ago quarter.
  • Spending on Square's Cash App has grown to $3 billion on an annualized run rate -- just one year since the app's launch.
  • Gross payment volume (GPV) increased 48%, to $815 million, during the quarter. This is up from 45% year-over-year growth in Q1.
  • Adjusted revenue from subscription and services-based revenue soared 131% year over year, to $137 million.
  • Hardware revenue shot up 78% year over year, driven by Square Register , Square Stand, and Square Reader.

What management had to say

Management was particularly happy with its continued growth from large sellers. "Half of our GPV came from larger sellers, which are those that generate over $125,000 in annualized GPV," said Square CFO Sarah Friar during Square's second-quarter earnings call. "This is up from 46% in the second quarter of 2017, and highlights how our cohesive ecosystem is resonating with sellers of all sizes."

Square's just-launched platform for restaurants, Square for Restaurants , is doing a great job at attracting these larger sellers, Friar noted. "I think the good is we are seeing it as a push into larger sellers [with Square for Restaurants], as we expected. The average GPV of our Restaurants customer is $650,000."

A restaraunt employee interacts with Square for Restaurants platform

Square for Restaurants. Image source: Square.

Looking forward

Given Square's significant momentum, management increased its guidance for full-year revenue. Square now expects total 2018 revenue between $3.18 billion and $3.22 billion, up from previous guidance for revenue between $3.03 billion and $3.09 billion. Similarly, management raised its guidance for adjusted revenue to a range of $1.52 billion to $1.54 billion, up from a previous forecast for revenue between $1.45 billion and $1.48 billion.

Highlighting Square's momentum, the midpoint of management's guidance range for adjusted revenue represents 55% year-over-year revenue growth, up from a previous forecast for 49% revenue growth. For management's third quarter, Square expects adjusted revenue to climb 59% year over year.

Management continues to expect adjusted EBITDA to be between $240 to $250 million, despite expectations for higher revenue growth. Friar said this reflects Square's decision to "continue to reinvest to drive future growth."

10 stocks we like better than Square

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Square wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

Daniel Sparks owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has the following options: short September 2018 $80 calls on Square and long September 2018 $55 puts on Square. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SQ

Other Topics

Stocks

Latest Personal Finance Videos

    #TradeTalks: The Changing E-Commerce Landscape

    e-Commerce Consultant James Thomson joins Jill Malandrino on Nasdaq #TradeTalks to discuss the changing e-commerce landscape, what consumers should prepare for as we head into shopping season and why you shouldn’t do last minute shipping.

    5 days ago

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More