Square Inc. reported better-than-expected financial results Wednesday, but shares were nearly flat in after-hours trading after the company’s third-quarter earnings forecast missed expectations.
The company reported adjusted second-quarter earnings of 13 cents a share on revenue of $815 million. Analysts were expecting 11 cents in EPS and revenue of $774.6 million. On an adjusted basis, net of transaction and bitcoin costs, the company posted revenue of $385 million. The company processed $21.4 billion in gross volume during the second quarter.
Shares were volatile in after-hours trading, at one point down about 2.5%[1], and were most recently down 0.8%.
The portion of volume that came from larger sellers accelerated from the first quarter. Square SQ, +3.42%[2] said volume from larger sellers, which it defines as those doing more than $125,000 in annual sales, accounted for 50% of overall volume in the second quarter. In the previous quarter, larger sellers made up 47% of overall volume.
For the third quarter, Square said to expect $407 million to $412 million in adjusted revenue and 8 cents to 10 cents a share in adjusted EPS. Analysts were expecting 13 cents in adjusted EPS.
Speaking with reporters prior to the company’s earnings call, Chief Financial Officer Sarah Friar said that the company continues to make investments across its three main focus areas: omnichannel commerce, financial services and international expansion. Square is “being front-footed on investing for growth but doing that with financial discipline,” Friar said.
She commented that Square maintained its full-year Ebitda (earnings before interest, taxes, depreciation and amortization) outlook of $240 million to $250 million and said Square faces “typical seasonality” in the third quarter. Square also left its full-year EPS forecast of 42 cents to 46 cents unchanged.
Instinet analyst Dan Dolev wasn’t phased by the outlook, writing in a note to clients: “Should investors be worried? We doubt it, since management’s focus deliberately remains to maximize the terminal value via investments and innovation.” He rates the stock a buy with an $82 price target.
International expansion remains a focus for Square, which offers its products in the U.S., Canada, the U.K., Japan, and Australia. Friar said Square is building awareness for its products overseas and also doing market development as it tries to convince businesses that they should begin accepting card-based payments. The U.K. is a “particular focus area” for Square’s international initiatives, she said.
She also discussed the company’s Cash app, which saw increasing usage during the quarter. Customers spent $250 million on prepaid Cash cards during the second quarter, and Friar said the product is a “typical prepaid card in terms of economics” and interchange fees.
The company said it generated $37 million in bitcoin revenue during the quarter and incurred $36.6 million...