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Can Square Keep Up the Pace in the Fastest-Growing Division?

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Jan. 28 2019, Updated 9:00 a.m. ET

Subscription and Services revenue rose 155%

Square (SQ) operates three main business divisions: Transaction, Subscription and Services, and Hardware. The Subscription and Services division has been the company’s fastest-growing division. Revenue in the division rose 155% YoY (year-over-year) in the third quarter of 2018, outpacing the 29% YoY growth in the Transaction division and the 74% YoY growth in the Hardware division in the same period.

Revenue growth in the Subscription and Services division accelerated from 127% YoY in the second quarter and 98% in the first quarter.

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Division houses several operations

Square’s Subscription and Services division houses several operations. Included in this division are restaurant food delivery service Caviar, credit service Square Capital, and peer-to-peer money transfer service Cash App. Square Capital is Square’s business-lending arm. Square competes in this space with the likes of PayPal (PYPL) and OnDeck Capital (ONDK), whose revenues rose 14% and 45% YoY, respectively, in the third quarter. Last year, Square secured a deal to lend to eBay (EBAY) sellers.

$15.5 billion opportunity in food delivery

There’s a huge growth opportunity ahead for Square’s restaurant food delivery service, Caviar. According to data from Pentallect, the third-party restaurant meal delivery market in the United States alone is on track to almost double to $15.5 billion by 2022 from $8.5 billion in 2017. Square’s Caviar is competing for this revenue opportunity with GrubHub (GRUB), whose revenue rose 52% YoY in the third quarter. Former Square CFO Sarah Friar told CNBC last year that Caviar was growing at a rate of 100% annually.

Last year, Square acquired corporate catering provider Zesty and website builder Weebly to strengthen its Subscription and Services division.

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