Square, Inc. (NYSE: SQ) today announced updates to its second
quarter and full year 2018 guidance to reflect the impact of its
acquisition of Weebly, Inc., which closed today, and its recent
issuance of $862.5 million in aggregate principal amount of 0.50%
convertible senior notes due 2023 (“Notes”).
The revisions to Square’s second quarter and full year 2018
guidance, which was previously announced on May 2, 2018, are only a
result of the transactions outlined below.
Square completed its acquisition of Weebly on May 31, 2018.
Based on the transaction:
- Square is raising its guidance for
total net revenue and Adjusted Revenue to reflect the contribution
from Weebly. Total net revenue reflects the impact of the deferred
revenue adjustment related to the purchase accounting of the
acquisition. Adjusted Revenue excludes the impact of the deferred
revenue adjustment.
- Square is revising its guidance for net
income (loss) per share to reflect the estimated effect of the
following items: the amortization of acquisition-related intangible
assets, deferred revenue adjustments related to the purchase
accounting of the acquisition, cash and share-based compensation
expense associated with employee retention, and other
acquisition-related costs.
- Square is maintaining its Adjusted
EBITDA guidance.
Square issued the Notes on May 25, 2018. Based on the
transaction:
- Square is revising its guidance for net
income (loss) per share to reflect the increase in interest expense
associated with the issuance.
New Second Quarter 2018 Prior Guidance for
Guidance Second Quarter 2018 as of May 31, 2018 as of May 2, 2018
Total net revenue $744M to $764M $740M to $760M Adjusted
Revenue $362M to $367M $355M to $360M
Year-over-year Adjusted Revenue growth
(midpoint)
52% 49% Adjusted EBITDA $60M to $64M $60M to $64M
Net income (loss) per share $(0.08) to (0.06) $(0.04) to
$(0.02) Adjusted EPS (diluted) $0.09 to 0.11 $0.09 to $0.11
New Full Year 2018 Prior Guidance for Guidance Full
Year 2018 as of May 31, 2018 as of May 2, 2018 Total net revenue
$3.03B to $3.09B $3.00B to $3.06B Adjusted Revenue $1.45B to
$1.48B $1.40B to $1.43B
Year-over-year Adjusted Revenue growth
(midpoint)
49% 44% Adjusted EBITDA $240M to $250M $240M to $250M
Net income (loss) per share
$(0.28) to (0.24) $(0.04) to $0.00
Adjusted EPS (diluted)
$0.42 to 0.46 $0.44 to $0.48
Adjusted Revenue Guidance
Reconciliation
Three Months Ended Year Ended Jun 30, 2018 Dec 31, 2018
Total net revenue $744M - $764M $3.03B - $3.09B
Less: Transaction-based costs, bitcoin
costs, deferred revenue adjustment
$382M - $397M
$1.58B - $1.61B
Adjusted Revenue $362M - $367M $1.45B - $1.48B
We have not reconciled Adjusted EBITDA and Adjusted EPS guidance
to their GAAP equivalents as a result of the uncertainty regarding,
and the potential variability of, reconciling items such as
share-based compensation expense and weighted-average fully diluted
shares outstanding. Accordingly, a reconciliation of these non-GAAP
guidance metrics to their corresponding GAAP equivalents is not
available without unreasonable effort. It is important to note that
the actual amount of such reconciling items would have a
significant impact if they were included in our Adjusted EBITDA and
Adjusted EPS.
As a reminder, Square will release financial results for the
second quarter of 2018 on August 1, 2018, after market close.
About Square, Inc.
Square, Inc. (NYSE:SQ) creates tools that help sellers start,
run, and grow their businesses. Square enables sellers to accept
card payments and also provides reporting and analytics, next-day
settlement, and chargeback protection. Square’s point-of-sale
software and other business services help sellers manage inventory,
locations, and employees; access financing; engage customers; and
grow sales. The Cash App is an easy way for businesses and
individuals to send and receive money, and Caviar is a
food-ordering service for popular restaurants. Square was founded
in 2009 and is headquartered in San Francisco, with offices in the
United States, Canada, Japan, Australia, Ireland, and the UK.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements within
the meaning of the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. All statements other than statements
of historical fact could be deemed forward-looking, including, but
not limited to, statements regarding the future performance and
expected financial results for future periods of Square, Inc. and
its consolidated subsidiaries (the Company). In some cases,
forward-looking statements can be identified by terms such as
“may,” “will,” “appears,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential,”
or “continue,” or the negative of these words or other similar
terms or expressions that concern our expectations, strategy,
plans, or intentions. Such statements are subject to a number of
known and unknown risks, uncertainties, assumptions, and other
factors that may cause the Company’s actual results, performance,
or achievements to differ materially from results expressed or
implied in this press release Investors are cautioned not to place
undue reliance on these statements.
Risks that contribute to the uncertain nature of the
forward-looking statements include, among others, the Company’s
ability to deal with the substantial and increasingly intense
competition in its industry; changes to the rules and practices of
payment card networks and acquiring processors; the impact of any
acquisitions or divestitures, strategic investments, or entries
into new businesses, including the ability of the Company to retain
the customers and partners of Weebly and to integrate Weebly and
realize the expected synergies of the acquisition in a timely
manner, or at all; the impact of the Company’s convertible senior
note offering, including the conditional conversion feature of the
notes and the accounting method for convertible debt securities
that may be settled in cash; the effect of evolving regulations and
oversight related to the Company’s provision of payments services
and other financial services; the effect of management changes and
business initiatives; and changes in political, business, and
economic conditions; as well as other risks listed or described
from time to time in the Company’s filings with the Securities and
Exchange Commission (the SEC), including the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2018,
which is on file with the SEC and available on the investor
relations page of the Company’s website. All forward-looking
statements are based on information and estimates available to the
Company at the time of this press release and are not guarantees of
future performance. Except as required by law, the Company assumes
no obligation to update any of the statements in this press
release.
KEY OPERATING METRICS AND NON-GAAP FINANCIAL MEASURES
To supplement our financial information presented in accordance
with generally accepted accounting principles in the United States
(GAAP), we consider certain operating and financial measures that
are not prepared in accordance with GAAP, including Gross Payment
Volume, Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted Net Income (Loss), Adjusted EPS, and non-GAAP operating
expenses. We believe these metrics and measures are useful to
facilitate period-to-period comparisons of our business and to
facilitate comparisons of our performance to that of other payments
solution providers. In this press release, we are updating our
previously announced guidance as to Adjusted Revenue, Adjusted
Revenue growth, and Adjusted EPS.
Adjusted Revenue is a non-GAAP financial measure that we define
as our total net revenue less transaction-based costs and bitcoin
costs, and we add back the impact of the acquired deferred revenue
adjustment, which was written down to fair value in purchase
accounting. We believe it is useful to subtract transaction-based
costs and bitcoin costs from total net revenue to derive Adjusted
Revenue as this is a primary metric used by management to measure
our business performance, and it affords greater comparability to
other payments solution providers. Substantially all of the
transaction-based costs are interchange and assessment fees,
processing fees, and bank settlement fees paid to third-party
payment processors and financial institutions. While some payments
solution providers present their revenue in a similar fashion to
us, others present their revenue net of transaction-based costs
because, unlike us, they pass through these costs directly to their
sellers and are not deemed the principal in these arrangements.
Under our standard pricing model, we do not pass through these
costs directly to our sellers. We deduct bitcoin costs because we
consider our role in the bitcoin transactions to be facilitating
customer access to bitcoin. Since we only apply a small margin to
the market cost of bitcoin when we sell bitcoin to customers, and
we have no control over the cost of bitcoin in the market, which
tends to be volatile, we believe deducting bitcoin costs is a
better reflection of the economic benefits as well as the Company's
performance from the bitcoin transactions. We recognize acquired
deferred revenue that was written down for purchase accounting
since we believe that it is correlated with ordinary and ongoing
operations of the acquired company and facilitates analysis of
revenue growth and business trends. Adjusted Revenue has
limitations as a financial measure, should be considered as
supplemental in nature, and is not meant as a substitute for the
related financial information prepared in accordance with GAAP.
Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, and
non-GAAP operating expenses are non-GAAP financial measures that
represent our net loss and net loss per share, adjusted to
eliminate the effect of share-based compensation expenses,
amortization of intangible assets, amortization of debt discount
and issuance costs in connection with our offering of convertible
senior notes in the first quarter of 2017 and in the second quarter
of 2018, the gain or loss on the sale of property and equipment,
and impairment of intangible assets, as applicable. We also exclude
certain costs associated with business acquisitions that are not
normal recurring operating expenses, including amounts paid to
redeem acquirees’ unvested stock-based compensation awards, and
legal, accounting and due diligence costs, and we add back the
impact of the acquired deferred revenue adjustment, which was
written down to fair value in purchase accounting. In addition to
the items above, Adjusted EBITDA and non-GAAP operating expenses
are non-GAAP financial measures that also exclude depreciation,
other cash interest income and expense, other income and expense,
and provision or benefit from income taxes, as applicable. Basic
Adjusted Net Income (Loss) Per Share is computed by dividing the
Adjusted Net Income (Loss) by the weighted-average number of shares
of common stock outstanding during the period. Diluted Adjusted Net
Income Per Share is computed by dividing Adjusted Net Income by the
weighted-average number of shares of common stock outstanding,
adjusted for the dilutive effect of all potential shares of common
stock.
We have included Adjusted EBITDA and Adjusted EPS because they
are key measures used by our management to evaluate our operating
performance, generate future operating plans, and make strategic
decisions, including those relating to operating expenses and the
allocation of internal resources. Accordingly, we believe that
Adjusted EBITDA and Adjusted EPS provide useful information to
investors and others in understanding and evaluating our operating
results in the same manner as our management and board of
directors. In addition, they provide useful measures for
period-to-period comparisons of our business, as they remove the
effect of certain non-cash items and certain variable charges.
Adjusted EBITDA and Adjusted EPS have limitations as financial
measures, should be considered as supplemental in nature, and are
not meant as substitutes for the related financial information
prepared in accordance with GAAP.
These non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. These non-GAAP financial measures
are not based on any standardized methodology prescribed by GAAP
and are not necessarily comparable to similarly titled measures
presented by other companies.
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Square, Inc.Media Contact:press@squareup.comorInvestor
Relations Contact:ir@squareup.com
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