The “adjusted revenue” piece is one reason I give SQ an asterisk on its PS ratio of 22. Their adjusted revenue is the difference between transaction revenue and transaction costs. So what’s left is 100% gross margin revenue. You won’t find that anywhere else. This Q:
Trans Rev: 625,228,000
Trans Cost: 395,349,000
So the difference was 230m of their 385m adj rev. (60% of total revenue)
But it was also 230m of their 315m gross profit. (73% of gross profit!)
When some high-margin companies grow revenue by $1m, gross profit grows by $750,000 or $800,000. When Square grows adjusted transaction revenue by $1m, Square’s gross profit grows by $1m.
I’ve made a bigger deal about the high margin and incredibly fast growing services revenue than anyone – and it’s growing incredibly fast, and is awesome. But don’t snooze on the transaction revenue story.
Square is truly firing on all cylinders. (My girl Sarah Friar gets things done.)
Bear