Square (SQ) stock is in major rally mode. In this column we discuss what we see as metrics driving the bullishness. The expectations for the future of the company are bright.
Square accelerated top-line growth at significant scale in the fourth quarter of 2017. Total net revenue was $616 million, up 36% year over year, and Adjusted Revenue was $283 million, up 47% year over year. This is an increase from the third quarter of 2017, when total net revenue and Adjusted Revenue grew 33% and 45%, respectively, year over year.
Gross Payment Volume (GPV) was $17.9 billion, up 31% year over year. We continue to see strength in larger sellers, with GPV from this segment growing 44% year over year and representing 47% of total GPV. Net loss in the fourth quarter was $16 million, essentially flat on a year-over-year basis. Square achieved fourth-quarter Adjusted EBITDA of $41 million, representing an improvement of $11 million year over year and an Adjusted EBITDA margin of 15%.
Square’s 2017 results set the stage for strong momentum in 2018. Three focus areas will drive its strategy and investment this year:
These are omnichannel commerce, financial services, and current international markets.
These areas provide meaningful value to sellers and individuals and significantly increase the addressable market opportunity for Square. • Strengthen omnichannel commerce: Square is enabling sellers to engage with buyers wherever they are, which includes in person, messaging channels, websites and apps, and digital marketplaces.
• Expand financial services: Square has an opportunity to provide more financial services to sellers and individuals, particularly those who have been underserved by the traditional financial system.
• Grow current international markets: Square will focus our international efforts this year on gaining share in its current markets of Australia, Canada, Japan, and the UK.
Square will strengthen our go-to-market strategy, improve automated onboarding, and expand our overall product offering. We continue to create meaningful vectors of growth: In the fourth quarter of 2017, revenue from products launched since 2014 was 22% of total net revenue and 36% of Adjusted Revenue, up from 14% and 25%, respectively, in the prior year period.
While those plans are all fine and dandy, the company’s financials matter. Net loss was $16 million in the fourth quarter of 2017, compared to $15 million in the fourth quarter of 2016, essentially flat on a year-over-year basis. Net loss per share was $0.04 on both a basic and diluted basis for the fourth quarter of 2017, and flat compared to the fourth quarter of 2016. Square had 390 million weighted-average shares as of the fourth quarter of 2017. For the full year, net loss per share was $0.17 based on 379 million weighted-average shares, compared to $0.50 for the full year of 2016.
Adjusted EBITDA was $41 million in the fourth quarter of 2017, compared to $30 million in the fourth quarter of 2016, an improvement of 38% year over year. Adjusted EBITDA margin was 15% in the fourth quarter of 2017, compared to 16% in the fourth quarter of 2016, reflecting our decision to invest in the business for ongoing growth. For the full year of 2017, Adjusted EBITDA was $139 million, compared to $45 million for the full year of 2016.
Adjusted earnings per share was $0.08 based on 451 million weighted-average diluted shares for the fourth quarter of 2017. For the full year of 2017, Adjusted EPS was $0.27, compared to $0.04 for the full year of 2016. There were 427 million weighted-average diluted shares for the full year of 2017.
Looking ahead we remain bullish on the Square App as well as the bitcoin and blockchain initiatives. The stock is a speculative buy.
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