Jack Dorsey did not inspire the market when he took on the leadership position at Square (NYSE: SQ). Analysts were worried that he wouldn’t be able to juggle both Twitter and Square at the same time. But, if the recent performance is an indicator, he does seem to have turned Square around for the better.
Square’s Financials
For the first quarter, Square’s revenues grew 22% over the year to $462 million, ahead of the Street’s expectations of $451 million. Its platform processed $13.6 billion of gross payment volume, recording a 33% growth over the year. Loss per share of $0.04 was also significantly better than the market’s expected loss of $0.08 per share. During the quarter, Square did not generate any revenues from Starbucks, which transitioned away from their infrastructure during the fourth quarter of 2016.
By segment, transaction-based revenue increased 34% to $403 million. Transaction-based revenue as a percentage of GPV was 2.96% in the first quarter of 2017, compared with 2.92% a year ago. Transaction-based profit as a percentage of GPV also increased from 1.03% to 1.07% in the reported quarter. Subscription and services-based revenue increased 106% to $49 million. Hardware revenue in the first quarter of 2017 fell 4% to $9 million.
For the current quarter, Square forecast revenues of $223-$226 million, and EPS of $0.03-$0.05. The market was looking for revenues of $224 million and earnings of $0.05 per share for the quarter. For the full year, Square raised its outlook for revenue to $890-$910 million with an EPS of $0.16-$0.20. Earlier it had forecast revenues to be in the range of $880-$900 million with an EPS of $0.15-$0.19. That is still marginally shy of the revenue consensus of $902 million and EPS of $0.18 per share for the year.
Square’s Market Expansion
Square has been focused on international expansion. It has now gone live in the United Kingdom, and is now available in five countries including the US, Australia, Japan, and Canada. Besides international expansion, the company is also benefiting from the delay that it takes for customers to pay by credit cards containing microchips.
