Square’s revenue up, loss less than expected
In the Ferry Building at lunchtime, the deluge of hungry office workers needing sushi and bento boxes in the Delica cafe can seem endless to manager Madonna Sarmiento. She wants customers to get in and out as fast as they can — which means payments have to be smooth.
Happy customers like Sarmiento are a significant reason that Square announced strong first-quarter earnings Wednesday, surprising Wall Street analysts and sending shares up in after-hours trading.
The San Francisco payments company beat expectations with a loss of 4 cents per share. Analysts had expected double that. Revenue for the first quarter was $462 million, up 22 percent from a year earlier.
Square, which went public in 2014, is in a crowded field and facing stiff competition in its payment-processing market from the likes of Revel Systems and Verifone. Initially known for compact card readers that plugged into smartphones’ audio jacks, Square now sells iPad stands for larger businesses and supports Apple Pay and Android Pay through contactless card devices that also handle chip-card transactions.
Its Square Cash service for person-to-person payments competes with offerings from PayPal, Google, Facebook and others, as well as Zelle, an app backed by a consortium of big banks.
The company’s spending on product development grew 6 percent from the year-ago period to $69 million.
Among its newer software features are the Square Customer Display, an app that runs on an
iPod Touch or iPad attached to a Square Stand. Delica in the Ferry Building uses them so customers can sign for transactions faster, without cashiers having to spin the stand around.
“They’re really good at getting back to us if we have technical difficulties, which is not a lot,” said Sarmiento, the Delica manager. “The downside is they charge a higher credit card fee than other companies, but it’s a fair trade-off because they’re good with customer service.”
Analysts say relationships with businesses are a hallmark of Square’s success and will likely see it through the competitive and crowded payment-processing field. Square, which expanded to the United Kingdom in March, hopes to replicate its success across the Atlantic.
Britain was Square’s largest expansion, said CEO Jack Dorsey in a conference call with analysts Wednesday. It introduced payments, invoices, employee-management software, analytics and customertracking features all at once — a faster rollout than it had in Canada, Australia and Japan.
Dorsey hinted in the call that Square intends to use Britain as a launchpad into the rest of Europe.
Competitors are all seeing a rise in revenue as cashless payments boom, leaving a smaller piece of a growing pie for Square, said Brendan Miller, a principal analyst for Forrester Research.
Momentum is still with the young company in its core market of small businesses and merchants. And the company has its eye on larger stores and chains, despite an ill-fated deal to process payments for Starbucks that both companies terminated last year.
“They’re developing ... new products that aren’t just payment processing, that are helping retailers and business owners run their business,” said Miller.