Very few companies are as synonymous with their industry as Square Inc. (NYSE: SQ) is with mobile payments. This emerging tech juggernaut is transforming the way people and businesses exchange money, and in the process has helped millions of sellers accept credit card payments at non-traditional point-of-sale locations. Along the way, it has made a huge pivot into cryptocurrency, making it one of the most important blockchain companies in the world.

 

Square Masters Fintech

Quarterly revenues have quadrupled over the past five years, culminating in the $882.11 million haul in the quarter ended Sept. 30, 2018.

The marriage between finance and technology was supposed to make life easier by boosting efficiency, lowering costs, and allowing businesses to better serve their customers. The smartphone revolution has made fintech a mobile paradigm as trading apps, payment services and even lending solutions migrated to handheld devices. Square was founded by Jack Dorsey in 2009 just as the mobile revolution was beginning to take off. A decade later, Square has become a multi-billion-dollar company that is publicly traded on the New York Stock Exchange.

Although things happen very quickly in the tech world, Square’s growth trajectory is off the charts. Quarterly revenues have quadrupled over the past five years, culminating in the $882.11 million haul in the quarter ended Sept. 30, 2018.

Square Quarterly Net Revenues

Source: Company Filings

Annual revenues have increased by at least 29% going all the way back to 2015.

YearAnnual RevenueAnnual Revenue Growth (%)
2018$2.98 bn45.44%
2017$2.21 bn29.59%
2016$1.709 bn34.85%
2015$1.267 bn49.04%

Source: Macrotrends.net

Square makes money through:

  • Payment and POS services – hardware and software solutions that enable merchants to accept payments.
  • Financial services – funding for sellers to grow their business.
  • Marketing services – advertising and outreach campaigns to help businesses boost sales.

The September quarter marked its sixth consecutive reporting period of accelerating revenue growth. This included a 155% year-over-year growth in subscription and service-based revenue. Per-share earnings were reported at $0.13, better than the $0.11 expected by analysts.

The company has 90 million unique customer profiles and more than two million merchant customers. Square’s Cash App is now the second most popular app on the Apple Store, and has more than 33 million downloads across all platforms.

 

Blockchain: Square Comes Full Circle

Square’s dominance in the mobile payment arena has expedited its entry into another emerging technology: blockchain and cryptocurrency. Jack Dorsey firmly believes that bitcoin will become the native currency of the internet in ten years’ time. In light of that bold prediction, Square’s Cash App allows users to buy and sell bitcoin using their existing balance. The growth of the Cash App has gone against the grain of the crypto bear market, which culminated in December with bitcoin sliding to $3,100. In the most recent quarter alone, Square processed $43 million worth of bitcoin trades.  

Cash App is only the tip of the iceberg for Square’s crypto venture. Last August, the U.S. Patent and Trademark Office confirmed that the company had secured a patent for a cryptocurrency payment network that would allow merchants to start accepting bitcoin alongside conventional currencies.

The following is an excerpt from the patent (and it’s certainly a mouthful):

The disclosed technology addresses the need in the art for a payment service capable of accepting a greater diversity of currencies… Specifically, the payment service described herein can facilitate real-time (or substantially real-time) transactions, allowing a customer to pay in any currency of their choice, while the merchant can receive payment in a currency of their choice.U.S. Patent and Trademark Office

SQ shares are trading at more than six times the IPO price, but at $75, there’s still plenty of room for upside. This is especially true for investors who want to play the blockchain revolution without actually having to buy cryptocurrencies.

Square Stock Price Jan 2016-Feb 2019

Source: Yahoo Finance

Square’s core business is no slouch, either. The global contactless payment market is expected to top $27 billion by 2023 compared with $8.7 billion in 2017. Square is ideally positioned to capitalize on that growth.