Earnings

Large Merchants Drive 47 Percent Of Square’s GPV In Q1

Bitcoin, subscriptions and services all played a part in Square’s 45 percent year-over-year total revenue growth in the first quarter of 2018. But the company’s stock price fell in after-hours trading after Square’s new forecast for 2018 earnings came in below analyst expectations.

Total net revenue reached $669 million in the first quarter. Adjusted revenue in the first quarter hit $307 million, beating analyst expectations of $293 million. Adjusted revenue excludes transaction-based costs and bitcoin costs, according to Square.

Square’s total net revenue in the first quarter includes $34 million from the buying and selling of bitcoin. In January, Square launched bitcoin transactions in its Cash App service. Subscription and services-based revenue reached $97 million, up 98% year over year.

“Growth was driven primarily by Instant Deposit, Caviar, and Square Capital,” Square said in its first quarter shareholder letter. Square Capital, for instance, facilitated more than 50,000 business loans for a total of $339 million, a year-over-year increase of 35 percent.

Square also is benefiting from consumer loyalty among its larger customers, CEO Jack Dorsey said during the post-earning conference call Wednesday (May 2).

More than half of Square’s larger sellers — that is, customers that generate at least $125,000 in annualized gross payment volume — use two or more Square products. In the first quarter of 2018, total net revenue from those customers increased 47 percent year over year. “As (they) use more products, we deepen our relationship with them,” Dorsey said of those customers.

Gross payment volume, meanwhile, increased 31 percent year over year, hitting $17.8 billion. Transaction-based revenue as a percentage of GPV was 2.93% in the first quarter of 2018, down from 2.96% in the first quarter of 2017.

Much of the time on Wednesday’s call was devoted to Square’s acquisition of Weebly, a company that provides tools to build a professional website or online store. Square expects the approximately $365 million deal to close in the second quarter and provide sellers with integrated services. The deal reflects Square’s 2018 emphasis on “omnichannel commerce.”

Asked by an analyst how Weebly would fit with Square’s existing business, Dorsey said “we don’t see a lot of overlap in our seller base. Anything you sell we have an offering for, and Weebly enables that on the online side,” he said.

Square also recently bought some assets of Zesty to boost the Caviar food-ordering platform, and that deal is one reason why Square issued new financial guidance Wednesday.

Second quarter adjusted revenue will come in between $335 million and $360 million, above analyst estimates of $334 million, a year-over-year increase of 44 percent. Full year adjusted revenue will be between $1.40 billion and $1.43 billion, a 44 percent year-over-year increase. Square had estimated a 34 percent year-over-year revenue increase for 2018.

Earnings per share will range between 9 cents and 11 cents, Square said. That’s below analyst estimates of 12 cents. Full year guidance does not include any impacts from the Weebly acquisition.

“Given the significant market opportunity ahead of us, we will continue to reinvest in our business to drive future growth,” Square said.

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