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What to Expect as Square Gears Up to Report Its Q2 Results

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Square (SQ) plans to release its second-quarter earnings results on August 1. What’s in the cards? Back in May, Square shared an outlook that showed its expectations for the second quarter. In that outlook, Square predicted that its net revenue for the second quarter would come in at $1.10 billion–$1.11 billion. Further, Square guided for adjusted revenue of $545 million–$555 million for the quarter. At the midpoint, both Square’s net revenue and adjusted revenue estimates point at growth of 43% YoY (year-over-year). Wall Street expects Square to report adjusted revenue of $557.4 million in its second-quarter results.

As for its bottom line, Square has predicted adjusted EPS of $0.14–$0.16 for the second quarter. Wall Street expects adjusted EPS of $0.16 from Square’s second-quarter results.

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How did Square fare in the second quarter of 2018?

In the second quarter of 2018, Square delivered net revenue of $815 million, a rise of 48% YoY. The company had net revenue of $740 million–$760 million in the quarter. Therefore, Square’s actual revenue for the quarter topped the high end of its prediction. Likewise, its adjusted second-quarter revenue exceeded the high end of its internal target. Its adjusted revenue for the second quarter of 2018 came in at $385 million compared to its prediction of $355 million–$360 million.

Square’s adjusted revenue for the second quarter of 2018 not only increased YoY but also surpassed Wall Street’s expectations. The consensus estimate called for Square to report adjusted revenue of $368 million in the second quarter of 2018.

Square reported adjusted EPS of $0.13 in the second quarter of 2018. Its adjusted EPS also came in above its top internal target of $0.11 and exceeded the consensus estimate by $0.02.

How did Square fare in the most recent quarter?

Square’s most recently reported results are its first-quarter results. In the period, it delivered net revenue of $959 million, which increased 43% YoY. Square had expected its first-quarter revenue to come in the range of $918 million–$938 million. Its reported revenue actually topped the high end of that internal target. As for adjusted revenue, Square reported $489 million in the first quarter. Likewise, its actual adjusted revenue exceeded its internal target, which called for adjusted revenue of $472 million–$482 million.

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Square reported adjusted EPS of $0.11 in the first quarter of 2019, topping its internal target, which called for adjusted EPS of $0.06–$0.08. Similarly, its reported adjusted EPS for the first quarter surpassed the consensus estimate by $0.03. Square has had a clean track record of beating internal performance targets and consensus estimates since at least 2017.

Square acquired Eloquent Labs

In May, Square announced that it had acquired Eloquent Labs, a specialist in AI-powered customer service chat software. Although Square didn’t disclose the financial terms of the deal, it clearly stated its goal for the move. Square acquired Eloquent Labs to help its merchants improve their customer service. The company said that with Eloquent’s technology, it would provide merchants of all sizes with an efficient way to interact with their customers.

Broadly, the Eloquent acquisition fits into Square’s goal of providing merchants with tools to make running their businesses easier. Square has focused on providing tools that save merchants time, help them better serve customers, and—above all—make more sales.

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Eloquent is the third company Square has bought since 2018, Crunchbase data shows. Square has turned to buying startups with strategic products and talents as it tries to expand and diversify its business. Besides Eloquent, Square’s other acquisition that made headlines was Weebly, which operates a platform for building websites and digital stores. Square paid $365 million to acquire Weebly.

Square teamed up with Postmates for on-demand delivery

In June, Square announced a broad partnership with on-demand delivery services, including Postmates. In addition to Postmates, its other partners include DoorDash and Chowly. Square partnered with these delivery providers to simplify the process of accepting and fulfilling orders for its restaurant clients. For example, when a customer places an order through the Postmates or DoorDash app, the order appears directly on a restaurant’s point-of-sale system. Both Postmates and DoorDash are among the top third-party restaurant-delivery services in the US, according to data from Second Measure. The other major providers in this space are GrubHub and UberEats.

For Square, Postmates is a big part of its efforts to bring on-demand delivery capability to businesses of all sizes. Postmates operates across 3,500 cities, and its on-demand delivery service now covers 70% of US households.

Square has an in-house on-demand delivery service called Caviar, which delivers foods for its restaurant clients. Therefore, the addition of Postmates, DoorDash, and Chowly will see Square extend on-demand delivery to more restaurants.

Square is facing tightening competition

Square is facing tightening competition in the business of processing payments for small businesses. Shopify (SHOP) recently refreshed its line of point-of-sale devices aimed at small businesses. Shopify’s goal is to take market share from Square when it comes to providing tools that allow small traders to accept credit card payments. PayPal has also acquired iZettle to expand into the business of selling credit card readers for small businesses.

When Square reports its second-quarter results, investors will be looking for updates and clues on how it plans to stay competitive.

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