Square posted results that topped the Street amid a diversifying model that saw traction not just in gross payment volumes with its traditional enterprise point of sale business and Square Capital, but in consumer-focused initiatives as well, including its Cash App.
The headline numbers were thus: Adjusted earnings per share for the quarter came in at eight cents per share, a penny better than the Street. Adjusted revenues grew by 47 percent year over year to $283 million, better than the $266.3 million analysts had estimated (and is defined as total net revenue less transaction-based costs). Growth accelerated from the 45 percent seen in the third quarter.
Gross payments volume gathered steam, up 31 percent in the fourth quarter from last year to $17.9 billion. Of that, said Square, larger sellers (with volumes above $125,000) stood out, with GPV from that growing 44 percent year over year and representing 47 percent of the payments volume.
Beyond the consolidated top line and the bottom line beats, granular detail showed traction in the core business and beyond.
Subscription and service-based revenues were $79 million in the fourth quarter, which was 95 percent higher than a year ago. Drivers included Instant Deposit, Caviar and Square Capital. For the year, the subscription and services line stood at $253 million. Sellers are, said CFO Sarah Friar on the conference call with analysts, showing a growing adoption of what she called the “full ecosystem.” As sellers use more than one product, they become stickier in their relationships with the company.
Within that services segment, Cash App posted strong growth as consumers armed with Cash Card spent about $90 million in December alone. Cash App sported seven million monthly active customers.
As for lending, the company said there were 47,000 business loans outstanding at the end of the latest quarter, worth a total of $305 million and up 23 percent from last year. Friar said the company had lent a cumulative $2.5 billion.
Of note is the shift to higher-margin products. Square said in its shareholder letter for the quarter that transaction-based profit as a percentage of gross payment volumes was 1.07 percent versus 1.04 percent a year ago. That metric, said Square, is being driven by a boost in Invoices, Virtual Terminal and eCommerce API payments – all offerings that the company stated have higher margins than those seen with the typical card present transactions.
Oh, yes: Bitcoin. The company illuminated that bitcoin can be bought and sold through Cash App. Management said on the call that the cryptocurrency is rather immaterial to results, though Friar did mention that a “small amount” is held on the balance sheet for liquidity and facilitating those transactions.
Looking ahead, the company said that focus will be on three areas, including omnichannel commerce (through messaging channels, websites, apps and digital marketplaces); boosting financial services; and expanding international presence, especially in Australia, Japan, the U.K. and Canada.
In the question-and-answer session with analysts, Friar noted that Virtual Terminal’s growth “came out of nowhere,” having launched in late 2016 to become the fastest-growing line to cross a billion dollars in GPV. Instant Deposit has also grown as “speed in getting your money” for both businesses and individuals has become important, as Friar noted, with $2 billion in GPV processed in Q2 of last year.
Cash App users are using the cards both online and offline, said the CFO, and CEO Jack Dorsey said “we are serving an underserved, underbanked audience … people are using the Cash Card at places like Walmart, at McDonald’s, at Uber, Lyft, Netflix and Spotify … everyday activities you would expect someone to use a card for.” In addition, he said, activity notably picks up on Fridays – as people are getting paid, they are sending and receiving money from friends and family.
Guidance for the current year looks toward $1.3 billion in adjusted sales, with earnings in the range of 43 cents to 47 cents, bracketing consensus of 45 cents.