Square Inc founded by Jack Dorsey is a well-known company for everyone. We would have used their payments software atleast once in our life. Square was started in 2009 to enable businesses to accept card payments and process them. From there, Square has evolved into a more cohesive comprehensive commerce system that helps sellers start, run and grow their businesses. Their CFO Sarah Frair and CEO Jack Dorsey deserve the pat for continuously innovating and expanding on to the new verticals of existing business. They started by selling payments related software and hardware to enable sellers to turn mobile and computing devices into powerful payment and point-of-sale solutions. Square is rapidly and silently evolving as a comprehensive managed payment solutions offering hardware, software, API built platform, Cash App, Square capital and Caviar.
Customers Profile: Their sellers represent a diverse range of industries, including retail, services, and food-related businesses. They serve sellers of various sizes, ranging from a single vendor at a farmers’ market to multi-location businesses. These sellers also span geographies including the United States, Canada, Japan, Australia, and the United Kingdom. GPV from larger sellers (which they qualify as greater than $125,000 represented 48% of total GPV in the fourth quarter of 2017 , up from 43% in the fourth quarter of 2016 and 39% in the fourth quarter of 2015.
Strategic analysis of Business segments Square operates in:
Operating loss post tax in 2017 was (54) Mn. R&D adjustments – Assuming 100% of product development cost $322 Mn to be capitalized and adjusted upward.This would bring Adjusted Operating profits After Tax to $270 Mn. Assuming discount rate of 8%, Enterprise value of business would arrive at a value of $3.4 Bn.
Market capitalization of Square is valued at $26 Bn witha debt of $1 Bn. This is certainly intriguing to see if Square can keep up its 30-35% revenue growth. And more importantly if this kind of growth is really creating value considering they are still not fetching commensurate returns on invested capital. Lending businesses especially to SMB gets first impacted when there is an economic downturn which is a risk to be tracked. But one thing for sure, Psyments adoptions, subscription growth led by Square Capital and Caviar are things to be watched out for in the next 3 years.
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