No. of Recommendations: 63
TL;DR -- Another great report. Robust revenue and adj EBITDA growth, and strong evidence that innovation continues to fuel both SQ's seller ecosystem and rapidly growing Cash app ecosystem. Shares trading up about 2.5% AH.

Quick glance at the quarter:

Revenue +44% YOY, Adj. rev. +40% YOY
Subscription rev. +68% YOY
GPV = $28.2B, +25% YOY
55% of rev. from larger sellers
Adj. EBITDA +85% YOY
Cash app rev. = $307M ($148M from bitcoin)

I'm most impressed by that strong adj EBITDA growth! The business model is really beginning to show its potential to be profitable:

In the third quarter of 2019, our Seller ecosystem generated $918 million of total net revenue and $364 million of gross profit, which increased 27% and 26% year over year, respectively. We have also maintained strong cohort economics with positive revenue retention, which has enabled us to drive toward an expected Adjusted EBITDA margin of nearly 30% for full year 2019. We have achieved these results while scaling both our Seller and Cash App ecosystems across new products and new markets, demonstrating the strength of our business model. Given this profitability, the significant market opportunity, and our efficient payback period of 3 to 4 quarters, we are increasing our investment in go-to-market initiatives to drive continued growth with attractive returns, some of which are outlined below.

Here's a deeper look at the numbers we track...

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 1,266

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 489 563 602

Adjusted EBITDA (millions) Q1 Q2 Q3 Q4
2016 13 12 30
2017 27 36 34 41
2018 36 68 71 81
2019 62 105 131

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) 0.06

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 0.25

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 28.2

Subscription and Services Rev (millions) Q1 Q2 Q3 Q4
2016 35 41
2017 49 59 65 79
2018 97 134 166 194
2019 219 251 280

2019 Q3 Earnings:

Adjusted Revenue Growth (millions)
2018 Q3 TTM Revenue = 1,406
2019 Q3 TTM Revenue = 2,118
YOY TTM Adj Revenue Growth =50.6%, previous quarter 58%
*Remember adjusted revenue is what you want to look at, not total net revenue

EPS Growth (Adjusted)
2018 Q3 TTM Earnings = $0.40
2019 Q3 TTM Earnings = $0.71
YOY TTM EPS Growth = 77.5%, previous quarter 74%

Adjusted P/E (Check Current Price) = 80

Adjusted P/S ratio = ~14.1

Quick and dirty highlights:

Subscription and services-based revenue: $280M, +68% YOY

Square Capital: Loan volume 85K business loans for $563M, +39% YOY; average loan ~$6623.

Since inception in May 2014, SQ Capital facilitated approximately 885,000 loans totaling more than $5.5 billion.

Instant Deposit: No figure given, Instant Deposit for sellers was listed as a primary driver of growth for subscription and services-based revenue.

Cash App revenue reached total $307M, $159M excluding bitcoin, +115% YOY. Cash App’s ecosystem of differentiated products is growing, allowing customers to send, spend, store, and now invest money. Customers can buy fractional shares of stocks for as little as $1.00, with no commission fees. Additionally, after selling a stock, customers have immediate access to their funds, eliminating the uncertainty of when funds will be available for other spending.

Redesigned Cash App’s customer interface to make the broad portfolio of products more discoverable. This improved layout has driven increased product adoption of Bitcoin and Cash Card: First-time bitcoin buyers have approximately doubled and Cash Card orders have seen a meaningful uplift.

Bitcoin contributed $148M to revenue, $2M in gross profit, benefiting from increased volume as a result of Cash App redesign.

Cash Card: Meaningful uplift in orders due to app redesign

Cash Boost, the Cash Card's rewards program, called out for increasing adoption and usage of Cash Card. Launched new Boost functionality for Cash Card customers: Location-based Boosts and Boosts that are enabled by customers meeting specific requirements (such as a certain number of Cash Card transactions).

Operating expenses: Non-GAAP operating expenses were $372M, +29% YOY, 29% of total revenue on non-GAAP basis

Cash/cash equivalents: $1.8B, +80M from previous quarter.

This was a good update on Square's international efforts from the quarterly shareholder letter:

We are bringing more products to our markets outside the U.S. This quarter we launched Square Terminal in Australia, Canada, and the United Kingdom. There is strong product-market fit for Square Terminal in these regions because it provides a portable, all-in-one payments solution for dip and tap payments (which, unlike in the U.S., have been prevalent for years). In the third quarter, sales of Square Terminal outside the U.S. represented more than one-third of sales even though these are much smaller markets. Furthermore, PIN is the dominant form of authentication in these markets, and buyers can conduct the entire checkout process on Square Terminal without having to be at the checkout counter. For example, in many markets outside the U.S., tableside payments in restaurants are both common and expected by buyers. Additionally, we launched Square Loyalty in Canada and Australia as it provides sellers with an easyto-use tool to attract and retain customers.

Read the whole thing at https://s21.q4cdn.com/114365585/files/doc_financials/2019/Q3...

Questions/comments/concerns?

Matt
Long SQ
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.
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