Square Inc Shares Rise After Solid Earnings Report, Increased Outlook

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Square released its third quarter earnings report after closing bell tonight, posting losses of 9 cents per share on $439 million in revenue or $178 million in adjusted revenue. Analysts had been expecting adjusted losses of 11 cents per share on $172.6 million in revenue. In last year’s third quarter, the payments processing firm reported $332 million in net revenue, $118 million in adjusted revenue, and 35 cents per share in losses. Adjusted revenue excludes revenue from the Starbucks partnership.

Square’s results improve

Net losses improved to $32 million from $54 million in net losses in the year-ago quarter. Adjusted EBITDA grew to $12 million with a 7% margin from -$16 million with a -13% margin in last year’s third quarter. Gross payment volume grew 39% to $13.2 billion from $9.5 billion in last year’s third quarter. Gross purchase volume among larger sellers increased 55% year over year and now makes up 43% of total gross purchase volume.

Software and data product revenue jumped 140% year over year to $35 million, while hardware revenue grew 94% to $8 million. Starbucks transaction revenue amounted to $7 million, while transaction profits were $3 million as a result of the renegotiated processing rates. Square’s partnership with Starbucks was set to end in the third quarter, although the company said in its second quarter earnings report that it was negotiating an extension of the agreement. It also said that the talks were taking longer than it had expected.

Square raises guidance again

The company said it has raised its full-year guidance for the third quarter in a row. Square now expects total fourth quarter revenue of $438 million to $443 million and full-year revenue of $1.695 billion to $1.7 billion. The previous outlook was $1.63 billion to $1.67 billion. The company expects fourth quarter adjusted revenue to be between $182 million and $185 million and full-year adjusted revenue to be between $677 million and $680 million.

The previous outlook was $655 million to $670 million. Square projects fourth quarter adjusted EBITDA of between $16 million and $18 million and full-year adjusted EBITDA of between $31 million and $33 million, compared to the previous full-year outlook of $18 million to $24 million.

Shares of Square surged in after-hours trades, climbing by as much as 2.26% to $11.32.

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