Square, Inc. (NYSE: SQ), co-founded by Twitter CEO Jack Dorsey, reported a strong finish for Q3 2019 during its investor call last Wednesday, Nov. 6.
The company reported growth in its total net revenue and adjusted revenue by 44% and 40% year over year, respectively. Their seller ecosystem achieved strong profitability with an expected adjusted EBITDA margin (earnings before interest, taxes, depreciation and amortization) of about 30% for the whole year.
Meanwhile, the total net revenue for Cash App was $307 million. A redesign of the Cash App user interface is credited for helping increase product adoption of bitcoin and Cash Card.
Square, Inc. is green for the first quarter this year, with a net income of $29 million. Gross Payment Volume (GPV) for the third quarter is $28.2 billion, 25% higher than last year's performance during the same quarter. The GPV from larger sellers makes up 55% of the total GPV. GPV from larger sells grew by 34% year over year.
Breaking down their total net revenue of $1.27 billion sees 64% of it coming from transactional revenue. Subscription and service-based revenue posted $280 million, with hardware revenue posting $22 million. Subscription and service-based revenue increased by 68% year on year. $159 million of the subscription revenue came from Cash App, with bitcoin revenue contributing $2 million towards Q3 gross profits.
Square, Inc. met expectations from Wall Street. For Q3, Wall Street put expected earnings to be 25 cents a share, with revenue of $621.24 million. Square Inc.'s earnings guidance for Q3 put the figure between 19 cents to 21 cents a share with revenue between $585 and $595 million. Square's non-GAAP earnings clocked at 25 cents a share on revenue of $602 million, up 40% from last year.
Square, Inc. completed its sale of Caviar on October 31 to Doordash. Caviar was Square, Inc.'s food ordering platform. Removing Caviar's contributions, total net revenue, and adjusted revenue grew by 45% and 43% year over year, respectively.
During Q3, Square, Inc. increased its international presence. They expanded their customer base outside of the US by launching Square Terminal in Australia, Canada, and the UK. The company believes that there is a strong product-market fit between the Square Terminal and these regions.
Points of Action
Moving forward, Square, Inc. will increase efforts towards marketing, both to increase awareness and to encourage sign-ups on their platforms. To drive continued growth, Square, Inc. will be increasing investments in go-to-market initiatives.
For Cash App, Square, Inc. will be launching features to allow customers to buy fractional shares of stocks. This aims to lower the barrier to entry in stock investments, and thus transforming equity investing. This feature is also hoping to capitalize on a nascent market: only half of US residents own stocks. Customers will be able to buy fractional shares of stocks for as low as $1.00, with no commission fees by using the app. They will also be able to cash out their shares easily without delay.