Square Results Top Analysts' Estimates as Larger Merchants Join

(Bloomberg) -- Square Inc.'s quarterly results topped analysts' projections, helped by larger merchants joining its platform and increasing sales of its business software and services.

Adjusted revenue rose 41 percent to $240 million, compared with the average analyst estimate of $229.5 million, as Square's merchant customers processed more payments and paid the company for services like loans, instant deposits and software to help manage inventory.

The San Francisco-based company also raised full-year sales and profit forecasts, sending shares about 1 percent in extended trading. The stock closed at $26.46 in New York. It's nearly doubled this year on optimism about its all-in-one offering for merchants, aimed at businesses that don't want to stitch together hardware, software and payment services from different vendors. The company is betting customers will pay for a suite of services beyond just payments that make running a business easier. Those more profitable software services are contributing more revenue.

Square said revenue from larger sellers -- those that process at least $125,000 in gross payments annually -- continued to grow in the second quarter. When the company was co-founded by Chief Executive Officer Jack Dorsey, who also runs Twitter Inc., the startup mainly sold smartphone plug-ins that helped individuals, food trucks and farm-stand vendors accept credit cards. Lately, it's attracted larger merchants like multi-location shops and restaurants, while expanding into other products and services like food delivery.

"There's still room to grow," said Jason Deleeuw, an analyst at Piper Jaffray & Co., before the earnings. "They have an attractive offering and that's enabling them to take share when they can layer in other software services." 

In March, the company rolled out its credit card readers and software tools in the U.K., its biggest global expansion to date. For now, less than 5 percent of Square's sales are international.

Adjusted earnings before interest, tax, depreciation and amortization were $36 million, or 7 cents a share, compared with an average analyst estimate of 5 cents a share. For the full year, Square predicted adjusted revenue of as much as $935 million, up from a previous forecast of as much as $910 million.

To contact the reporter on this story: Selina Wang in New York at swang533@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Alistair Barr