Square Cash App Volumes Up 2.5x In FY Q2

The Street focused on estimates and guidance, sending shares down when Square announced results for the fiscal second quarter. Drilling down into results, though, the firm found continued traction with larger sellers at 51 percent of GPV, while the firm’s Cash App showed triple-digital gains.

Square (Cash App) reported earnings results — and guidance — for its fiscal Q2, sending shares down 5 percent in after-hours trading. Beyond the headline numbers, the company showed continued traction with larger sellers across its traditional point-of-sale (POS) products, and in newer offerings spanning debit cards and lending.

The payment firm’s adjusted earnings per share was $.11, better than the expected $.08. Revenues grew by 59 percent on an adjusted basis to $489 million, a favorable number against the $478 million consensus. Square forecast $545 million to $555 million for the current period, a bit below the $557 million expected by the Street.

The company said that gross payment volume (GPV) surged 27 percent to $22.6 billion, which, according to at least some estimates on the Street, was a little short, and where sell-side consensus was $22.8 billion. Square Capital logged 50 percent growth, with $508 million in lending activity during the Q2 across 70,000 loans, and for a cumulative tally of $4.8 billion.

Getting a bit more granular, Square CFO Amrita Ahuja noted on the conference call with analysts that 51 percent of the company’s gross payment volume came from larger sellers, which the company has traditionally noted as doing annual volumes of at least $125,000. That percentage was the same as had been seen in the fourth quarter, though the volume itself (in terms of absolute numbers) had increased.

Square Invoices Spotlighted — Cash App, Too

Ahuja said the larger sellers have been using mobile app-based invoice offerings, too. Invoicing, noted Ahuja and CEO Jack Dorsey, represents a $1 trillion addressable market, and Square’s invoicing GPV topped $5 billion through the past 12 months across 350,000 active sellers (the company defines active sellers as having taken at least five payments in the past 12 months). More than half of Square Invoices sellers process the majority of their payments through invoices, and the transaction size is about $250, said the company.

Of particular mention was the Cash App — management said that volume surged by 2.5x year over year, spanning peer-to-peer (P2P), Cash Card and Cash for Business transactions. P2P payments were up 150 percent, and at year-end, the tally was 15 million users. Ahuja said the Cash App is seeing uptake, and “we are growing the engagement” for each user.

Dorsey said the cash applications helped push subscriptions and services, as measured by revenues, to $219 million, up 126 percent. Ahuja added that the business demonstrates scale and “outsized growth” for the top line, even as the company is spending on marketing efforts.

Reflecting on the business cash (debit) card offerings from Square, Dorsey noted that the Square Card offers sellers “faster access to funds,” and users do not “have to make a trip to the bank.” Management said active sellers with the cards — 40 percent of whom previously did not have dedicated cards for their firms — are spending 20 percent of their GPV through those (Mastercard) debit cards. Those debit cards, said Dorsey during the call, “[allow business owners] to segment their funds.”

The company said in its shareholder letter that revenues tied to hardware in Q1 2019 were $18 million, up 26 percent year over year. That amount was driven primarily by Square Terminal, which started shipping at the end of last year, as well as by growth from Square Reader and Square Stand for contactless and chip, and by third-party peripherals.

The company highlighted newer initiatives in Japan, where offerings such as Square Reader and Square Stand have become available. The company said only 20 percent of transactions in Japan are conducted with card payments, “which presents a compelling opportunity for Square, as there are over 3.8 million small and medium-[sized] businesses,” according to its report.