Shares seem to be basically flat in AH trading, so we’ll see what tomorrow brings. But, at first glance, it looks like another really strong quarter. The shareholder letter begins by talking a lot about Square Capital, Square’s loan platform for small businesses:
In the second quarter, our top-line results reflect our continued ability to attract larger sellers and increase product usage through cross-selling. Total GPV grew 32% year over year, and GPV from larger sellers grew 45% year over year. Transaction-based revenue increased 32% year over year — the same rate as GPV, which is a result of our ability to maintain transaction revenue margin. Subscription and services-based revenue nearly doubled year over year. Strong top-line growth, lower risk loss rates, and ongoing operating expense leverage drove another quarter of significant EBITDA and margin improvement.
We grew Square Capital loan volume 68% year over year and further diversified our investor base.
In the second quarter, Square Capital facilitated over 49,000 business loans totaling $318 million, an increase of 68% year over year. We are further expanding access to financing by adding tools to the Square Capital product suite that help our sellers grow their businesses. In June, we launched a pilot of Square Installments, an integration with Square Invoices that allows a seller’s customers to finance large purchases over the course of several months. Typically, only larger businesses have the ability to offer purchase financing—Square Installments provides smaller businesses access to this growth tool as well.
The shareholder letter is available for download on Square’s IR page ( https://squareup.com/about/investors ).
Here are the numbers I track:
Total Net Revenue (millions) Q1 Q2 Q3 Q4 2014 250 2015 374 310 332 374 2016 379 438 439 451 2017 462 552 Adjusted Revenue (millions) Q1 Q2 Q3 Q4 2014 82 2015 89 111 118 135 2016 146 171 178 192 2017 204 240 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) 2017 (0.04) (0.04) EPS (Adjusted) Q1 Q2 Q3 Q4 2015 (0.05) 2016 (0.05) 0.02 0.01 0.05 2017 0.05 0.07 GPV (billions) Q1 Q2 Q3 Q4 2015 7.1 8.8 9.5 10.2 2016 10.3 12.5 13.2 13.7 2017 13.6 16.4
2017 Q2 Earnings:
Adjusted Revenue Growth (millions)
2016 Q2 TTM Revenue = 570
2017 Q2 TTM Revenue = 814
YOY TTM Adj Revenue Growth = 43%, previous quarter 46%
*Remember adjusted revenue is what you want to look at, not total net revenue, for Square
EPS Growth (GAAP - diluted)
2016 Q2 TTM Earnings = - 1.06
2017 Q2 TTM Earnings = -0.21
YOY TTM EPS Growth = NA
EPS Growth (Adjusted)
2016 Q2 TTM Earnings = NA
2017 Q2 TTM Earnings = 0.18
YOY TTM EPS Growth = NA
Adjusted P/E (Check Current Price) = 26.46/0.18 = 147
Other quick and dirty highlights:
Square Capital: Loan volume +68% YOY, 49K business loans for $318M
90M customer profiles with associated email or phone #s, data used to build CRM tools
Take rate: 2.94% (once again pretty good!)
Subscription and services-based revenue: $59M, +99% YOY
Cash/cash equivalents: $1.1B, previous quarter $990M
I’ll be back in a day or two (hopefully) to share notes from the conference call.
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx