Square Earnings: Adjusted Revenue Jumps 46%

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Square (NYSE: SQ) reported its second-quarter results after the market closed on Thursday. The digital payments and point-of-sale solutions company posted strong revenue growth, a sharp increase in adjusted EBITDA, and a huge jump in its Cash App volume — the total dollar amount of the app’s peer-to-peer, Cash Card, and Cash for Business transactions.” data-reactid=”11″>Square (NYSE: SQ) reported its second-quarter results after the market closed on Thursday. The digital payments and point-of-sale solutions company posted strong revenue growth, a sharp increase in adjusted EBITDA, and a huge jump in its Cash App volume — the total dollar amount of the app’s peer-to-peer, Cash Card, and Cash for Business transactions.

Beyond the quarterly update, Square also announced on Thursday that it is selling its food-ordering platform, Caviar, to DoorDash in a deal valued at $410 million.

Here’s a closer look at the results, as well as details of the pending sale of Caviar.

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Square Register. Image source: Square.

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Square’s second-quarter results: The raw numbers” data-reactid=”26″>Square’s second-quarter results: The raw numbers

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="EBITDA = earnings before interest, taxes, depreciation, and amortization. Data source: Square second-quarter shareholder letter.&nbsp;” data-reactid=”29″>EBITDA = earnings before interest, taxes, depreciation, and amortization. Data source: Square second-quarter shareholder letter. 

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="What happened with Square this quarter?” data-reactid=”30″>What happened with Square this quarter?

Square’s second-quarter revenue jumped 44% year over year to $1.17 billion. Adjusted revenue (net revenue less transaction-based costs, bitcoin costs, and the impact of deferred revenue adjustment related to purchase accounting) increased 46% year over year to $563 million. The figure exceeded management’s guidance range for adjusted revenue to be between $545 million and $555 million.

Helping drive growth during the quarter was an 87% year over year increase in subscription and services-based revenue.

Adjusted EBITDA soared 54% year over year to $105 million as Square continues to balance growth with investments in its business.

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="What management had to say” data-reactid=”34″>What management had to say

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Management once again drew attention to its fast-growing peer-to-peer payments mobile application called Cash App.” data-reactid=”35″>Management once again drew attention to its fast-growing peer-to-peer payments mobile application called Cash App.

“Our Cash App ecosystem has reached significant scale, generating $260 million in total net revenue in the second quarter of 2019. Excluding bitcoin, Cash App revenue was $135 million,” the company said in its second-quarter shareholder letter.

The company also provided some useful context on its subscription and services-based revenue, noting that its “growth was driven primarily by Cash App, Square Capital, Caviar, and Instant Deposit for sellers.”

In a separate press release on Thursday, management explained why the company is selling Caviar to DoorDash. 

“We are increasing our focus on and investment in our two large, growing ecosystems — one for businesses and one for individuals,” explained Square CEO Jack Dorsey. “This transaction furthers that effort, and we believe partnering with DoorDash provides valuable and strategic opportunities for Square.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The two companies also said they will expand their partnership, which currently includes a Door Dash integration with the Square for Restaurants platform.” data-reactid=”40″>The two companies also said they will expand their partnership, which currently includes a Door Dash integration with the Square for Restaurants platform.

Subject to customary closing conditions and regulatory approval, the $410 million deal is expected to close sometime this year. The $410 million is comprised of a combination of cash and preferred DoorDash stock.

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Looking forward” data-reactid=”42″>Looking forward

Square maintained its guidance for full-year adjusted revenue between $2.25 billion and $2.28 billion. The midpoint of this guidance range would represent 43% year-over-year growth.

For its third quarter, Square said it expected adjusted revenue between $590 million to $600 million. The midpoint of this range represents 38% growth. Management expects third-quarter adjusted earnings per share for the period to be between $0.18 and 0.20, up from $0.13 in the second quarter of 2018. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" More From The Motley Fool ” data-reactid=”45″> More From The Motley Fool

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Daniel Sparks owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has the following options: short September 2019 $70 puts on Square. The Motley Fool has a disclosure policy.” data-reactid=”53″>Daniel Sparks owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has the following options: short September 2019 $70 puts on Square. The Motley Fool has a disclosure policy.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article was originally published on Fool.com” data-reactid=”54″>This article was originally published on Fool.com

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