Square Inc. (SQ - Free Report) delivered second-quarter 2019 adjusted earnings of 21 cents per share, which beat the Zacks Consensus Estimate by 5 cents and was also higher than management’s guided range of 14-16 cents per share. The figure also soared 61.5% on a year-over-year basis and 90.9% sequentially.
Net revenues of $1.17 billion surpassed the Zacks Consensus Estimate of $1.11 billion and also came ahead of the guided range of $1.09 billion to $1.11 billion. The figure improved 44.1% from the year-ago quarter and 22.4% sequentially.
Per the company, adjusted revenues came in $562.8 million, up 46% year over year and 15.1% from the previous quarter. The figure also comfortably outpaced management’s guided range of $545-$555 million.
The top line was driven by robust performance of Cash App, which contributed 260 million to the net revenues during the second quarter.
Further, Cash Card’s strengthening adoption rate contributed to the results. During the second quarter, 3.5 million customers utilized the product. Further, benefits from Weebly and Zesty acquisitions, which contributed 2% to the net revenues, remains a positive.
Additionally, continued acceleration in gross payment volume (GPV) of the company drove the results.
Notably, shares of the company dropped 6.6% in the after-hours trade on Aug 1 following the weaker-than-expected third-quarter 2019 earnings guidance. Its guidance for net revenues in the current quarter is also lower than the estimates.
Coming to the price performance, shares of Square have returned 23.1% on a year-to-date basis, underperforming the industry’s rally of 23.1%.
Nevertheless, the company’s solid momentum across sellers and strong product portfolio are tailwinds and are likely to continue aiding its performance in the near term.
Gross Payment Volume
Gross Payment Volume in the first quarter came in $26.78 billion missing the Zacks Consensus Estimate of $26.8 billion. Notably, the figure improved 25.3% year over year and 18.6% on a sequential basis.
Year-over-year growth was driven by the company’s continued momentum across the larger sellers.
Square defines larger sellers as those that make more than $125,000 of annualized GPV and mid-market sellers as those with annualized revenues of more than $500,000.
GPV from larger sellers contributed 54% to total GPV, up 34% year over year. Further, Square witnessed strong contributions from mid-market sellers who accounted for 26% of total GPV, up 45% from the year-ago quarter.
This can be attributed to Square’s robust product portfolio and comprehensive ecosystem that aids the company in attracting new sellers to its platform and retaining the existing ones.
Additionally, strong performance of Square for Restaurant, especially in the food and drink vertical, which accounted for 26% of GPV during the reported quarter, aided the results. Further, third-party applications which contribute more than 20% of the GPV remain a key catalyst.
Transaction (66% of net revenues): The company generated transaction revenues of $775.51 million, up 24% year over year. Revenue growth within this category can be attributed to strengthening momentum across sellers and robust Cash App.
Subscription and services (21.4% of revenues): The company generated $251.38 million revenues from this category, soaring 87.1% from the year-ago quarter. This improvement came on the back of strong performance by Cash App. Additionally, robust Caviar and Instant Deposit were major positives. Further, Square Capital, which facilitated $528 million of business loans during the second quarter, up 36% year over year, contributed to the performance.
Hardware (1.9% of revenues): Square generated $22.26 million of revenues from this business, up 21.2% year over year. The top line within this category was primarily driven by Square Terminal and Square Reader.
Bitcoin (10.7% of revenues): Square generated $125.08 million revenues from this category, soaring 237.9% on a year-over-year basis. Square continues to benefit in the bitcoin space on the back of growing momentum of Cash App among users. Further, rise in the price of bitcoins acted as tailwind in accelerating volume.