Shares of a financial technology company Square (NYSE: SQ) have climbed about 4% since the company released its first quarter results last week. The bullish trend towards the stock is not surprising, given how the quarter highlighted the company’s accelerated growth.
As investors examine the implications of Square’s first quarter, here are some insightful metrics from the period, including a look at hardware, bitcoin, subscription-based revenue and services from fintech firm, Square Capital, advice, etc.
1. Adjusted revenue jumped 51%
Square’s consistent trend of accelerating revenue growth rates continued into the company’s first quarter, with adjusted revenue (net revenue minus transaction-based costs and bitcoin costs) increasing by 51% d ‘year after year. This is an increase from the 47% year-over-year growth in adjusted revenue in the fourth quarter of 2017.
2. Adjusted EBITDA increased 33% year-on-year
Square’s Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, was $ 36 million, up $ 9 million from its Adjusted EBIDTA of $ 27 million in the prior year quarter.
3. Square’s Adjusted EBITDA margin was 12%
This figure was lower than its adjusted EBITDA margin for the quarter of the previous year. But investors should not take this lower margin as a sign of deterioration in the economy. Instead, management said the lower margin “reflects our reinvestment in the business to drive long-term growth.”
4. Bitcoin revenue was $ 34 million
After launching the ability to buy and sell bitcoin in its Cash app earlier this year, Square quickly began to generate revenue from the new product. Bitcoin’s revenue in the quarter reached $ 34.1 million. But the costs associated with buying bitcoin were just as formidable at $ 33.9 million.
This reaffirms that investors should view Square’s bitcoin activity as unimportant to Square’s business.
5. Cash App remains the # 1 Finance application in the App Store
Square’s Cash app continues to thrive, remaining the most downloaded financial app in the world. Applethe App Store.
6. Revenue from subscriptions and services increased 98%
Square increased its subscription and service-based revenue 98% year-over-year to $ 97 million. The segment is enjoying strong growth in instant deposits, caviar and Square Capital, management said. Instant Deposit’s growth was fueled by a higher volume of its seller base and the Cash app. Additionally, Square’s Cash card “is becoming a more significant contributor to growth in subscription and service-based revenue,” management said.
Subscription-based and service-based revenue now represents 32% of Square’s total adjusted revenue in the first quarter, compared to 24% of adjusted revenue in the previous year’s quarter.
7. Square Capital has facilitated over 50,000 business loans
This is an increase from about 40,000 loans in the quarter of last year. These loans totaled $ 339 million, up 35% year-on-year.
8. Hardware revenue increased by 60%
Still a fairly insignificant amount for Square’s overall revenue, hardware revenue grew 60% year-over-year in the first quarter, reaching $ 14 million. The large increase is due to the launch of Square Register, which began shipping in December of last year, as well as the growth of Square Stand and third-party peripherals.
In particular, hardware costs have grown even faster than Square’s hardware revenue, increasing 56% year-over-year to $ 19.7 million, showing why investors shouldn’t consider the Square’s hardware business as a profit center for the business. The higher hardware costs can easily be explained by the company’s recent launch of its all-new Square Register, which is by far the company’s most comprehensive and expensive hardware product to date.
9. Square expects 2018 adjusted revenue to increase 44%
Investors can expect stronger growth throughout the year, with management estimating adjusted revenue for full-year 2018 to be between $ 1.4 billion and $ 1.43 billion. dollars, up 44% year-on-year based on the midpoint of that forecast range. This is an increase from the previous forecast of adjusted revenue over this period, which is expected to increase by 34% year over year.
Overall, Square’s first quarter served to illustrate the significant drivers of Square’s rapid growth. Of course, investors should also keep in mind that Square Needs to achieve solid results. Along with the 160% gain in its stock over the past year, Square’s valuation is the most expensive. The stock is currently trading at over eight times sales, roughly double its price-to-sell ratio at the same time last year.
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