TL;DR Square announced strong Q2 numbers:
Revenue +44% YOY, Adj. rev. +46% YOY
Subscription rev. +87% YOY
GPV = $26.8b (+25%YOY)
54% of rev. from larger sellers
Adj. EBITDA +54% YOY
Cash app rev. = $260m ($125m from bitcoin)
Caviar sold for $410M to Doordash
Shares are currently down about 7% in AH trading. Why? Because SQ revised its net income loss per share for the full year. Why? 2 reasons…
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Guidance does not yet include impact from sale of Caviar. Acquisition is expected to be completed by the end of the year;
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SQ’s mark-to-market valuation of its investment in Eventbrite.
Raise your hand if your thesis for Square hinged on any of those two factors.
Here’s a look at some revenue and earnings numbers:
Total Net Revenue (millions) Q1 Q2 Q3 Q4
2014 250
2015 374 310 332 374
2016 379 438 439 452
2017 462 552 585 616
2018 669 815 882 933
2019 959 1,170
Adjusted Revenue (millions) Q1 Q2 Q3 Q4
2014 82
2015 89 111 118 135
2016 146 171 178 192
2017 204 240 257 283
2018 307 385 431 464
2019 489 563
Adjusted EBITDA (millions) Q1 Q2 Q3 Q4
2016 13 12 30
2017 27 36 34 41
2018 36 68 71 81
2019 62 105
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) (0.04) (0.04)
2018 (0.06) (0.01) 0.04 (0.07)
2019 (0.09) (0.02)
EPS (Adjusted) Q1 Q2 Q3 Q4
2015 (0.05)
2016 (0.05) 0.02 0.01 0.05
2017 0.05 0.07 0.07 0.08
2018 0.06 0.13 0.13 0.14
2019 0.11 0.21
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 17.4 17.9
2018 17.8 21.4 22.5 23.0
2019 22.6 26.8
Subscription and Services Rev (millions) Q1 Q2 Q3 Q4
2016 35 41
2017 49 59 65 79
2018 97 134 166 194
2019 219 251
Adjusted Revenue Growth (millions)
2018 Q2 TTM Revenue = 1,232
2019 Q2 TTM Revenue = 1,947
YOY TTM Adj Revenue Growth =58%, previous quarter 62.7%
*Remember adjusted revenue is what you want to look at, not total net revenue
EPS Growth (GAAP - diluted)
2018 Q2 TTM Earnings = ($0.15)
2019 Q2 TTM Earnings = ($0.14)
YOY TTM EPS Growth = NA
EPS Growth (Adjusted)
2018 Q2 TTM Earnings = $0.34
2019 Q2 TTM Earnings = $0.59
YOY TTM EPS Growth = 74%, previous quarter 82%
Adjusted P/E (Check Current Price) = 75.44/0.59 = 128
Adjusted P/S ratio = ~16.4
Big news: Sells Caviar to DoorDash for $410M
August 2014: $SQ acquires food delivery service Caviar for $90M in stock.
August 2019: SQ sells Caviar to DoorDash for $410M in cash/preferred stock.
Not a bad return on investment and positions SQ as neutral platform for all food delivery services to participate equally on. Some might say SQ’s stock has appreciated considerably in that time, so not as good investment at first glance. But that ignores the value Caviar brought to SQ during those 5 years. Remember, 26% of SQ’s GPV comes from restaurants, how many of which are now part of SQ’s ecosystem b/c Caviar attracted them as a service in the first place? Plus young companies don’t have cash, they have stock. That’s just reality. Pre-IPO, should SQ have taken out a $90M loan to buy Caviar? Of course not! Issuing stock for a nice tuck-in acquisition like Caviar was definitely the way to go.
Finally, Caviar had outlived its usefulness to Square. When Square acquired Caviar, it was a nice feature it could use to attract restaurants to its payments ecosystem. And it obviously worked, with more than a quarter of all SQ’s GPV coming from food/drink verticals. But since that time 3rd party delivery services have exploded and restaurants need to be on all of them. This made Caviar much less useful within SQ’s ecosystem. SQ saw that it was more valuable for its customers to integrate all 3rd-party delivery apps into its payments ecosystem, not promote its own.
Other quick and dirty highlights:
- Subscription and services-based revenue: $251M, +87% YOY
- Square Capital: Loan volume 78K business loans for $528M, +36% YOY; average loan ~$6800. Since inception in May 2014, SQ Capital facilitated approximately 800,000 loans totaling more than $5 billion.
- Instant Deposit: No figure given, listed as a primary driver of growth for subscription and services-based revenue.
- Cash App revenue reached $260M, $135M excluding bitcoin. Cash App has been the number one free finance app in the U.S. App Store for the past two years, and is consistently top 20 free app.
- Bitcoin contributed $125 million to revenue, $2M in gross profit, benefiting from increased volume as a result of the increase in the price of bitcoin. Bitcoin costs not counted in adjusted revenue numbers.
- Cash Card: In June, approximately 3.5 million customers used Cash Card, typically for everyday purchases at food and grocery, mainstream retailers, and gas and transportation. Cash Boost, the Cash Card’s rewards program, called out for increasing adoption and usage of Cash Card.
- Operating expenses: Non-GAAP operating expenses were $467M, +47% YOY
- Cash/cash equivalents: $1.7B, +80M from previous quarter.
Matt
Long SQ
Phoenix 1 Contributor
BlackLine (BL), MasterCard (MA), Ollie’s (OLLI), PayPal (PYPL), and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx