Square, Inc. revenue jumped on 101% while EBITDA Margin decreased slightly on 1.4 pp from 2.7% to 1.3%
02/23/2021 • About Square, Inc. (
$SQ) • By InTwits
Square, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Square, Inc. is a fast growth stock: 2020 revenue growth was 101%, 5 year revenue CAGR was 49.6% at 2020 ROIC -0.25%
- Square, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 is 2.4%. Average EBITDA Margin for the same period was 0.6%
- Square, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $138m in 2020, $62m in 2019, $61m in 2018, $26m in 2017, $25m in 2016
- The company has unprofitable business model: ROIC is -0.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 101%. Revenue growth showed acceleration in 20Q4 - it increased 140.5% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.4 pp from 2.7% to 1.3% in 2020. During 2016-2020 EBITDA Margin topped in 2019 at 2.7%.
Gross Margin dropped on 11.3 pp from 40.1% to 28.8% in 2020. During 2016-2020 Gross Margin topped in 2019 at 40.1%. SG&A as a % of Revenue decreased on 4.6 pp from 22.2% to 17.6% in 2020. SG&A as a % of Revenue stuck to a declining trend at -1.5 pp per annum in 2016-2020.
Net Income margin decreased on 5.7 pp from 8.0% to 2.2% in 2020. During the last 5 years Net Income margin topped in 2019 at 8.0%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.5% in 2020. Square, Inc. showed almost no change in CAPEX/Revenue from 2017 to 2020. For the last three years the average CAPEX/Revenue was 1.5%. Square, Inc. has spent a lot to CAPEX (109% of EBITDA) to fuel its growth.
Return on investment
The company operates at negative ROIC (-0.2%) and low but positive ROE (9.7%). ROIC decreased slightly on 1.6 pp from 1.3% to -0.25% in 2020. ROE dropped on 16.8 pp from 26.5% to 9.7% in 2020. During 2016-2020 ROIC topped in 2019 at 1.3%. During 2016-2020 ROE topped in 2019 at 26.5%.
Leverage (Debt)
Debt level is -21.4x Net Debt / EBITDA and 3.5x Debt / EBITDA. Debt dropped on 58.9% while cash jumped on 202%.
Square, Inc. has no short term refinancing risk: cash is higher than short term debt (5,987.2%).
Valuation and dividends
Square, Inc.'s trades at EV/EBITDA 750.8x and P/E 460.4x.
Management team
Jack Patrick Dorsey is a the company's CEO. Jack Patrick Dorsey has spent 12 years with the company. Square, Inc.'s CFO is Amrita Ahuja. Amrita Ahuja has 2 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
Square, Inc. ($SQ) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,709 | 2,214 | 3,298 | 4,714 | 9,498 | 101.5% |
| Gross Profit | 576 | 839 | 1,304 | 1,890 | 2,733 | 44.6% |
| SG&A | 426 | 491 | 735 | 1,044 | 1,669 | 59.8% |
| EBITDA | -133 | -17 | 24 | 128 | 127 | -0.9% |
| EBIT | -170 | -54 | -37 | | | |
| Tax | 2 | 0 | 2 | | | |
| Net Income | -172 | -63 | -38 | 375 | 213 | -43.2% |
| Stock Based Compensation | 139 | 156 | 217 | | | |
Balance Sheet
|
|---|
| Cash | 452 | 696 | 583 | 1,047 | 3,158 | 201.6% |
| Accounts Payable | 13 | 17 | | | | |
| Short Term Debt | 1 | 3 | 5 | 30 | 53 | 77.5% |
| Long Term Debt | 1 | 362 | 902 | 1,048 | 390 | -62.8% |
Cash flow
|
|---|
| Capex | 25 | 26 | 61 | 62 | 138 | 121.5% |
| Acquisitions | 1 | 2 | 112 | | | |
Ratios
|
|---|
| Revenue growth | 34.9% | 29.6% | 49.0% | 42.9% | 101.5% | |
| EBITDA growth | -9.6% | -87.2% | -243.8% | 426.5% | -0.9% | |
|
|---|
| Gross Margin | 33.7% | 37.9% | 39.5% | 40.1% | 28.8% | -11.3% |
| EBITDA Margin | -7.8% | -0.8% | 0.7% | 2.7% | 1.3% | -1.4% |
| EBIT Margin | -10.0% | -2.4% | -1.1% | | |
| SG&A, % of revenue | 24.9% | 22.2% | 22.3% | 22.2% | 17.6% | -4.6% |
| SBC, % of revenue | 8.1% | 7.0% | 6.6% | | |
| Net Income Margin | -10.0% | -2.8% | -1.2% | 8.0% | 2.2% | -5.7% |
| CAPEX, % of revenue | 1.5% | 1.2% | 1.9% | 1.3% | 1.5% | 0.1% |
|
|---|
| ROIC | -31.4% | -6.3% | -2.3% | 1.3% | -0.2% | -1.6% |
| ROE | -31.7% | -9.2% | -4.0% | 26.5% | 9.7% | -16.8% |
| Net Debt/EBITDA | | | 13.3x | 0.2x | -21.4x | -21.6x |
People
|
|---|
| Insider ownership | 0.8% | 0.8% | 0.8% | | | |
| Employees | 1,853 | 2,338 | 3,349 | | | |
| Revenue/Employee, th. $ | 922 | 947 | 985 | | | |
Square, Inc. ($SQ) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,381 | 1,924 | 3,034 | 3,159 | | 44.0% | 63.8% | 139.6% | 140.5% |
| EBITDA | -57 | 13 | 86 | 85 | | -1,662.3% | -48.7% | 50.4% | 101.0% |
| Net Income | -106 | -11 | 37 | 294 | | - | - | 24.2% | -24.8% |
Balance Sheet
|
|---|
| Cash | 1,962 | 1,973 | 2,119 | 3,158 | | 276.2% | 219.6% | 246.2% | 201.6% |
| Short Term Debt | 39 | 44 | 51 | 53 | | 44.6% | 61.0% | 90.2% | 77.5% |
| Long Term Debt | 2,110 | 2,163 | 2,144 | 390 | | 106.0% | 110.3% | 106.6% | -62.8% |
Ratios
|
|---|
| Gross Margin | 39.0% | 31.0% | 26.2% | 25.4% | | -2.4% | -8.6% | -13.3% | -14.7% |
| EBITDA Margin | -4.1% | 0.7% | 2.8% | 2.7% | | -4.5% | -1.5% | -1.7% | -0.5% |
| Net Income Margin | -7.7% | -0.6% | 1.2% | 9.3% | | -3.7% | -0.0% | -1.1% | -20.5% |
Peers in Data Processing & Outsourced Services
Below you can find Square, Inc. benchmarking vs. other companies in Data Processing & Outsourced Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Global Payments Inc. ($GPN) | - | 37.2% | -15.3% | 45.9% | 51.1% |
| Fiserv, Inc. ($FISV) | - | 3.5% | 2.2% | 74.9% | 45.8% |
| NIC Inc. ($EGOV) | - | 5.8% | 2.5% | 2.7% | 30.0% |
| StoneCo Ltd ($STNE) | - | 74.3% | 106.0% | 63.1% | 28.9% |
| Fidelity National Information Services, Inc. ($FIS) | - | -1.8% | -2.8% | 22.7% | 21.5% |
| |
|---|
| Median (39 companies) | 6.7% | 10.1% | 7.4% | 8.9% | -3.3% |
|---|
| Square, Inc. ($SQ) | - | 29.6% | 49.0% | 42.9% | 101.5% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Verra Mobility Corp ($VRRM) | - | 97.4% | 97.5% | 95.7% | 91.5% |
| EVO Payments, Inc. ($EVOP) | - | - | - | 80.2% | 80.8% |
| StoneCo Ltd ($STNE) | 69.7% | 70.8% | 79.5% | 83.4% | 76.8% |
| WEX Inc. ($WEX) | 54.7% | 58.8% | 63.3% | 61.7% | 56.8% |
| Sabre Corporation ($SABR) | 32.2% | 30.1% | 27.8% | 56.6% | 56.6% |
| |
|---|
| Median (31 companies) | 39.5% | 39.5% | 41.0% | 41.7% | 36.7% |
|---|
| Square, Inc. ($SQ) | 33.7% | 37.9% | 39.5% | 40.1% | 28.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Visa Inc. ($V) | 55.6% | 69.2% | 65.8% | 68.1% | 68.5% |
| Mastercard Incorporated ($MA) | 56.9% | 56.5% | 51.8% | 60.9% | 56.6% |
| FleetCor Technologies, Inc. ($FLT) | 52.0% | 50.8% | 55.9% | 57.6% | 52.2% |
| StoneCo Ltd ($STNE) | 31.4% | 26.0% | 53.0% | 62.4% | 52.1% |
| Black Knight, Inc. ($BKI) | 43.0% | 44.6% | 43.3% | 46.0% | 44.9% |
| |
|---|
| Median (38 companies) | 21.3% | 21.1% | 19.4% | 22.2% | 19.1% |
|---|
| Square, Inc. ($SQ) | -7.8% | -0.8% | 0.7% | 2.7% | 1.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| PagSeguro Digital Ltd. ($PAGS) | 6.4% | 4.3% | 1.4% | 5.8% | 22.3% |
| StoneCo Ltd ($STNE) | 7.2% | 18.4% | 8.9% | 12.9% | 11.2% |
| Cardtronics plc ($CATM) | 9.9% | 9.6% | 8.0% | 9.3% | 8.3% |
| Verra Mobility Corp ($VRRM) | - | 11.5% | 7.2% | 6.6% | 6.2% |
| Fiserv, Inc. ($FISV) | 5.3% | 5.0% | 6.2% | 7.1% | 6.1% |
| |
|---|
| Median (38 companies) | 3.2% | 2.9% | 3.2% | 3.3% | 3.1% |
|---|
| Square, Inc. ($SQ) | 1.5% | 1.2% | 1.9% | 1.3% | 1.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Mastercard Incorporated ($MA) | 57.5% | 60.6% | 64.7% | 72.7% | 47.6% |
| International Money Express, Inc. ($IMXI) | -1.3% | -1.4% | 12.1% | 36.0% | 31.4% |
| NIC Inc. ($EGOV) | 63.1% | 52.1% | 39.3% | 26.5% | 30.8% |
| Visa Inc. ($V) | 18.1% | 21.9% | 23.0% | 27.2% | 23.2% |
| Western Union Company (The) ($WU) | 10.7% | 11.9% | 27.8% | 21.5% | 22.1% |
| |
|---|
| Median (39 companies) | 11.7% | 10.7% | 12.1% | 8.3% | 6.4% |
|---|
| Square, Inc. ($SQ) | -31.4% | -6.3% | -2.3% | 1.3% | -0.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| WEX Inc. ($WEX) | 6.7x | 4.4x | 3.1x | 3.4x | 12.1x |
| Exela Technologies Inc ($XELAU) | 8.1x | - | 9.7x | - | 10.7x |
| Alliance Data Systems Corporation ($ADS) | 10.7x | 10.1x | 9.0x | 11.7x | 9.2x |
| Verra Mobility Corp ($VRRM) | - | 10.7x | 6.9x | 3.5x | 4.7x |
| GreenSky, Inc. ($GSKY) | -1.5x | -1.5x | 0.5x | 1.5x | 4.6x |
| |
|---|
| Median (35 companies) | 1.4x | 2.3x | 2.0x | 2.3x | 2.1x |
|---|
| Square, Inc. ($SQ) | - | - | 13.3x | 0.2x | -21.4x |
