Square Reports Advances With Larger Merchants And Double-Digit Growth in Key Metrics

Square Inc. reported a strong first quarter late Wednesday, but you wouldn’t know it on Wall Street, where its shares were trading down slightly Thursday morning at just over $47. It closed at $48.70 Wednesday.

Despite double-digit increases year-over-year in gross payment volume and net and adjusted revenue, the San Francisco fintech logged a $24 million net loss, 60% higher than the first-quarter loss in 2017 and 50% more than in the three succeeding quarters as spending grew to support the company’s expansion into larger merchants and international markets.

Still, the company reported solid advances in key strategies and also disclosed some new details about its venture into supporting Bitcoin for its Cash App users.

In this regard, the company’s new Square Register point-of-sale hardware, which it introduced last year, is proving key to penetrating a base of larger merchants. This market is important to Square because it tends to generate more revenue than Square’s traditional base of small sellers. More than half of larger sellers use multiple Square products, the company says.

Merchants signing up for Register average $300,000 in annual payment volume, and one-third of them are new to Square, company officials said on a conference call with equity analysts Wednesday. “The product is resonating with larger sellers,” said Sarah Friar, Square’s chief financial officer, according to a Seeking Alpha transcript of the call. “So that’s actually opening up a whole new front door for us.”

Sellers with $500,000 or more of annual gross payment volume now account for 20% of Square’s total volume, compared to 16% a year ago and 13% in the first quarter of 2016, according to numbers Square released Wednesday.

Another key to penetrating a larger—and net new—client base is Square’s acquisition of Weebly Inc., which builds transactional Web sites. The deal, announced last week, is expected to help Square expand into the e-commerce market while adding to its merchant base overseas, where 40% of Weebly’s paid subscribers are. Square has been providing gateway services to Weebly, along with other payments providers.

“Our intention is to become one place, so [merchants] don’t have to think about brick and mortar or online, all they have to think about is what they are selling and how they attract more customers,” Square chief executive Jack Dorsey said on the call. “So, we recognized an opportunity with Weebly through our partnership over the years to bring these two things together.”

As for Bitcoin, Square disclosed it bought $33.9 million of the digital currency in the first quarter on behalf of users of Cash App, its peer-to-peer payments service, and sold the coins for $34.1 million. The app does not allow users to buy products or services with Bitcoin, but does facilitate purchases of the currency. The Bitcoin feature was introduced in November.

Overall, Square reported $17.8 billion in gross payment volume, up 31% year-over-year. Net revenue totaled $669 million, up 45%. Adjusted revenue, which is total net revenue less transaction costs and the costs of Bitcoin, came to $307 million, a 51% increase over the first quarter last year