Looks like a beat on revenue, EPS, and guidance looks good. Shares are currently up about 6% in AH trading, near $16. If it holds that level tomorrow, I am pretty sure it will be all-time highs.
Here’s what the company reported compared to expectations:
— Loss per share: 4 cents a share vs. 9 cents expected, according to Thomson Reuters consensus
— Revenue: $452 million vs. $450 million expected, according to Reuters
— Gross payment volume: $13.7 billion vs. $13.65 billion expected, according to FactSet
— Q1 revenue guidance: Between $440 million and $452 million vs. $449.9 million expected, according to Reuters
Read more at http://www.cnbc.com/2017/02/22/square-earnings-q4-2016.html
But, remember, don’t look at revenue for this company. Look at adjusted revenue. Much more telling. Speaking of numbers…
Revenue (millions) Q1 Q2 Q3 Q4
2014 250
2015 374 310 332 374
2016 379 438 439 451
Adjusted Revenue (millions) Q1 Q2 Q3 Q4
2014 82
2015 89 111 118 135
2016 146 171 178 192
EPS (diluted) Q1 Q2 Q3 Q4
2014 (0.25)
2015 (0.34) (0.20) (0.35) (0.34)
2016 (0.29) (0.08) (0.09) (0.04)
Current (2016 Q4 Earnings):
Revenue Growth (millions)
2015 Q4 TTM Revenue = 1390
2016 Q4 TTM Revenue = 1707
Year Over Year TTM Revenue Growth = 22.8%, previous quarter 28.75%
Adjusted Revenue Growth (millions)
2015 Q4 TTM Revenue = 453
2016 Q4 TTM Revenue = 687
Year Over Year TTM Revenue Growth = 51.7%, previous quarter 57.5%
EPS Growth (diluted)
2015 Q4 TTM Earnings = (1.23)
2016 Q4 TTM Earnings = (0.50)
Year Over Year TTM EPS Growth = NA
P/E (Check Current Price) = NA
1YPEG = NA
Cash/cash equivalents: $539M
I’m reading through the shareholder letter now, and thought I would share a few key excerpts that I really like:
Products launched since 2014, such as Square Capital, Caviar, Invoices, Instant Deposit, APIs, and other services collectively represented over 25% of Adjusted Revenue in the fourth quarter of 2016.
For Square Capital, we facilitated over 40,000 business loans totaling $248 million in the fourth quarter of 2016, an increase of 68% year over year, while maintaining loan default rates at approximately 4%. Additionally, we processed $624 million in Invoices GPV during the fourth quarter of 2016, growing 68% year over year and representing nearly $2.5 billion on an annualized basis.
We’re able to upsell and cross-sell to our base of millions of sellers with minimal incremental cost, largely due to our respected brand and ability to tailor offerings directly to sellers, especially in the context of their usage (e.g., providing an Instant Deposit prompt when sellers receive a payment via Square Invoices, or during a long weekend when settlement would otherwise be delayed by a holiday).
And another one:
Our platform enables fast development: In just two months, we built Virtual Terminal for browser-based payments, and it generated GPV of more than $40 million in January 2017.
Nice!
Also important housekeeping note: Square is renaming its Software and Data Product Revenue segment to subscription and services-based revenue. This is where Square’s most lucrative products it “upsells” to its customers are housed, including Instant Deposit, Square Capital, etc.
Conclusion: They seem to be guiding for flat Q over Q adjusted revenue for Q1, which is about a 30% YOY increase. Q1s in the past, however, showed some sequential growth. They are also providing adjusted EPS, which I don’t think they provided before? And they are guiding for positive EPS for Q1 and for the year. That’s good!
Of course, they are guiding for adjusted EPS of $0.15 to $0.19. At the high end of that guidance, that would give Square an adjusted P/E of 84 at the end of next year if it shows no increase of stock price from what it’s trading at in AH to then. That’s high! Really high! And, again, that’s forward P/E and if it doesn’t increase in price. Based on the high end of the company’s own guidance.
I was looking at other payment companies recently, like GPN, TSS, and FDC, and came away liking GPN. Do I like GPN better than SQ at this valuation? Maybe? I’m still uneasy with Jack Dorsey, but this company is showing it can execute. So those concerns are easing in regard to Square. But it’s the valuation that seems high to me. But I always think that about these companies. So take that for what its worth.
Anyway, very good quarter at first glance.
Matt
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx