square q2 2016 financial and operating metrics
TRANSCRIPT
Jan Dawson Chief Analyst (408) 744-6244 [email protected] @jandawson
SQUARE Q2 2016
A FREE DECK FROM THE JACKDAW RESEARCH QUARTERLY DECKS SERVICE
2
• This deck is a free sample of the Jackdaw Research Quarterly Company Decks subscription service
• The paid service includes about a dozen similar decks produced each quarter on major consumer tech companies
• The intention is to highlight trends and patterns which are not always obvious when merely looking at a spreadsheet
• Accompanying analysis can often be found on our blog at www.beyonddevic.es
• For more information, please visit: https://jackdawresearch.com/quarterly-company-decks/
INTRODUCTIONJACKDAW RESEARCH QUARTERLY DECKS SERVICE
3
• I’ve previously written several pieces about Square, which should serve as useful context for the charts in this deck:
• Square’s Potential and Its Challenges – Techpinions, October 2015, based on Square’s S-1 IPO filing
• Quick Thoughts on Square’s Q3 2015 Numbers – Beyond Devices, October 2015, based on Square’s amended S-1 filing and its Q3 2015 numbers
• Solid Progress at Square – Beyond Devices, March 2016, based on Q4 2015 results
INTRODUCTIONSQUARE, INC
4 Source: Square financial filings, Jackdaw Research analysis
REVENUEBY SEGMENT, $000
0
100,000
200,000
300,000
400,000
500,000
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Transaction revenueStarbucks transaction revenueSoftware and data product revenueHardware revenue
5 Source: Square financial filings, Jackdaw Research analysis
REVENUEAS % OF TOTAL REVENUE
0%
15%
30%
45%
60%
75%
90%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Transaction revenue Starbucks transaction revenueSoftware and data product revenue Hardware revenue
6 Source: Square financial filings, Jackdaw Research analysis
SOFTWARE AND DATA REVENUEAS % OF TOTAL REVENUE
0%
1%
2%
4%
5%
6%
7%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
7 Source: Square financial filings, Jackdaw Research analysis
COST OF REVENUEBY SEGMENT, $000
0
50,000
100,000
150,000
200,000
250,000
300,000
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Transaction costs Starbucks transaction costsSoftware and data product costs Hardware costsAmortization of acquired technology
8 Source: Square financial filings, Jackdaw Research analysis
MARGINS
-30%
-20%
-10%
0%
10%
20%
30%
40%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Gross margin Adjusted EBITDA marginOperating margin Net margin
9 Source: Square financial filings, Jackdaw Research analysis
PROFIT MEASURES$000
-120,000
-80,000
-40,000
0
40,000
80,000
120,000
160,000
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Gross profitOperating lossNet lossAdjusted EBITDA
10 Source: Square financial filings, Jackdaw Research analysis
GROSS MARGINSBY PRODUCT
-300%
-200%
-100%
0%
100%
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Transactions Starbucks transactions Software and data products Hardware
11 Source: Square financial filings, Jackdaw Research analysis
GROSS MARGINSFOR STARBUCKS AND NON-STARBUCKS TRANSACTIONS
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Starbucks transactions Non-Starbucks transactions
12 Source: Square financial filings, Jackdaw Research analysis
TRANSACTION ECONOMICSSQUARE TRANSACTION REVENUE AND PROFIT AS % OF GROSS PAYMENT VOLUME
0%
1%
2%
3%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Transaction revenue / GPV Transaction profit / GPV
13 Source: Square financial filings, Jackdaw Research analysis
GROSS PROFIT$000, FOR THREE SMALLER SEGMENTS
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
25,000
30,000
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Starbucks transactionsSoftware and data productsHardware
14 Source: Square financial filings, Jackdaw Research analysis
GROSS PAYMENT VOLUME$ MILLIONS
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
15 Source: Square financial filings, Jackdaw Research analysis
GROSS PAYMENT VOLUMEBY SELLER SIZE (PARTIAL DATA SET), EXCLUDING STARBUCKS
0%
25%
50%
75%
100%
Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016
<125k annualized GPV 125k-500k >500k
16 Source: Square financial filings, Jackdaw Research analysis
STARBUCKS TRANSACTIONSAS % OF TOTAL TRANSACTION REVENUE
0%
5%
10%
15%
20%
25%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
17 Source: Square financial filings, Jackdaw Research analysis
ADJUSTED REVENUE$000
“Adjusted revenue” is net revenue minus transaction costs and elimination of Starbucks financials
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
18 Source: Square financial filings, Jackdaw Research analysis
OPERATING EXPENSESCOMPONENTS AS % OF TOTAL OPERATING EXPENSES
0%
25%
50%
75%
100%
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Product developmentSales & marketingGeneral & administrativeTransaction and advance lossesAmortization of acquired customer assetsImpairment of intangible assets
Jan Dawson Chief Analyst (408) 744-6244 [email protected] @jandawson
FOR ANY QUESTIONS, PLEASE CONTACT: