Is This Earnings Report the Turning Point for Square?

By Chris Lange Updated Jan 13, 4:57AM EST · Published Aug 3, 4:37PM EDT

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Is This Earnings Report the Turning Point for Square? — © Thinkstock

Square, Inc. (NYSE: SQ) reported second-quarter financial results after the markets closed on Wednesday. The mobile-payments company posted incredible results for the quarter and shareholders were quick to applaud these numbers, initially sending the stock up over 10% in the after-hours. This should certainly help turn the tide on the 20% loss that this company has seen thus far in 2016.

The company said that it had a net loss of $0.08 per share on $439 million in revenue. The consensus estimates from Thomson Reuters called for a net loss of $0.11 per share on $405.7 million in revenue. The same period from the previous year had $0.20 in EPS on $310 million in revenue.

Gross Payment Volume (GPV) for the second quarter was $12.5 billion, up 42% year over year. New seller growth made up the majority of the GPV increase, while positive dollar-based retention from existing sellers also had a meaningful impact. At the same time, transaction revenue as a percentage of GPV was 2.93%.

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Adjusted revenue totaled $171 million, up 54% from last year, also exceeding the high end of previously issued guidance. Starbucks transaction revenue totaled $32.87 million.

In terms of segment GPV growth (over the past 12 months) the company reported:

Retail GPV grew by 21%.
Food Related GPV grew by 18%.
Services GPV grew by 16%.
Contractors, Repair, and Leisure GPV grew by 13%.
Health and Beauty GPV grew by 11%.
Individuals and Other GPV grew by 7%.
Health Services GPV grew by 7%.
Charities and Education GPV grew by 4%.
Transportation GPV grew by 3%.

In terms of guidance for the third quarter, Square expects to have revenues in the range of $410 million to $420 million, with adjusted revenue in the range of $167 million to $171 million. There are consensus estimates calling for a net loss of $0.10 per share on $415 million in revenue for the third quarter.

Jack Dorsey, CEO, and Sarah Friar, CFO, detailed in the earnings report:

In the second quarter, we continued to innovate, launching several new products including Scheduled Invoices, Recurring Invoices, and Card on File, which allows a seller to save a buyer’s card for future billing… As of the second quarter, 140,000 active sellers use Invoices, representing 122% growth since the second quarter of 2015. Additionally, we have reached $2.3 billion of cumulative GPV from Invoices since the product launched in June 2014, with $542 million processed in the second quarter of 2016.

On the books, cash, cash equivalents, and short-term investments totaled $403.4 million at the end of the quarter, versus $470.8 million at the end of 2015.

Shares of Square closed Wednesday up nearly 4% at $10.44, with a consensus analyst price target of $12.25 and a 52-week trading range of $8.06 to $15.91. Following the release of the earnings report, the stock was trading up 9% at $11.39 in Wednesday’s after-hours trading session.

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.