Posting Growth, Fair and Square

In a bit of earnings theater in the round and in its first earnings report as a publicly traded company, Square had some decent results. Investors, who had bid the stock up, well-off recent lows, breathed sighs of relief and took the shares up another 3 percent in extended trading, to about $12.40, before settling down to be roughly flat from the 4 p.m. close. At a recent $12, shares are well-off lows of $8, yet quite a bit lower than its peak level of $14.78.

The numbers: $374 million in revenues was a sight better in the fourth quarter of 2015 than a year ago, with 49 percent growth year to year and nicely above The Street, which was at $344 million. The net loss of about $0.20 per share was worse than the consensus of roughly $0.10, but clearly, eyes were on the top line and a loss is to be, and was, expected on continued investment in the firm’s operations. The actual red ink was $48 million, up from $37 million last year.

More numbers: The firm said that it could post adjusted earnings of $12 million for the year (which strips out non-recurring items) and that is better than the $7 million projected by The Street. Underpinning that growth expectation is a shift from the payment vessels of credit cards to a model where payments are made with the mobile device as conduit – and, in the process, more use of the Square reader, built to work across mobile offerings, apps and, of course, chip cards. New equipment pre-orders seem decent, at 350,000 at quarter’s end.

Square’s revenues from Starbucks payments came in at $47.1 million, up 29 percent year over year.

On payments themselves: The company processed $10.2 billion in global payments, which was up 47 percent from last year, and made $299 million from that core business, which was up almost lockstep in terms of percentage growth year over year, to 45 percent. But it may the “other” businesses that garnered the most attention. They seemed to be fine and, in some cases, better than fine, with software and services businesses up more than triple the levels seen last year, though off an admittedly lower base, at $22 million for a fourth quarter top-line contribution.

Those businesses include add-ons to the core processing business and include Caviar (food delivery), Appointments and Payroll. CEO Jack Dorsey called out the ancillary services on the call, stating that the fees charged on transactions actually take a backseat to other considerations, namely that “it’s the suite of services and cohesion that matter a whole lot more,” as the company seeks to position itself as a more end-to-end solution beyond just transactions.

Square Capital made headway as well, with $150 million in cash advances made in the quarter (the firm earns a fixed fee from each cash advance). CFO Sarah Friar said on the call that the firm made 70,000 cash advances in 2015 and that 90 percent of those customers wind up taking out another advance.